How Home Depot Is Mastering the Multichannel Sell Strategy
The home improvement warehouse's growth may not hinge quite as much on the housing market as it appears. Here's why.
Though the latest National Housing Trend Report from realtor.com hints of a greater balance of supply and demand in the housing market based on September 2013 data, opportunity remains for the housing recovery to continue well into next year, to the benefit of retailers like Home Depot (NYSE:HD). But, the home improvement warehouse's growth may not hinge quite as much on the housing market as it appears. Here's why.
Though Ellen Haberle, real estate economist for the technology-powered real estate brokerage Redfin, predicts that next year's home price appreciation is unlikely to see the double-digit gains of 2013, she says the situation is "ripe for growth" for home-improvement retailers. "Home sellers are becoming savvier about how to fetch the highest price; home upgrades are a key part of that strategy. As more homeowners finally escape negative equity, more will list their homes for sale. As more Americans purchase a home, they're likely to take on do-it-yourself projects to make their new home their own," says Haberle.
Though home-improvement competitor Lowe's (NYSE:LOW) has also benefitted from the housing market this year (shares reached record highs this fall, and the company announced plans to open/acquire more than 80 new stores this fiscal year), Home Depot is the clear leader in the space. But is it all thanks to the housing recovery, or does is it have more to do with Home Depot's focus on multichannel retailing?
Home Improvement Warehouse, or Tech Company?
Regardless of what type of products they're looking to buy, customers have become multichannel (also called omnichannel) shoppers. A customer may browse online using a tablet device, but open promotional emails from retailers on a smartphone. Consumers may visit brick-and-mortar stores to see a product in person, but buy it from home on a desktop computer from whatever retailer offers it at the best price and with the fastest and most affordable shipping option. Multichannel customers also expect that e-commerce shopping carts created in the browsing process are saved and updated according to pricing and inventory changes for possible future use.
Recent research by GfK reveals that 57% of consumers use a multichannel approach when shopping for home appliances; 64% of those surveyed said that they visit a brick-and-mortar retailer to "see and feel products" and to "get product sooner." Home Depot has successfully met these customers where they are by acting more like a multichannel retailer and less like a home-improvement warehouse.
When Wal-Mart (NYSE:WMT) announced its "Pick Up Today" service -- the branded name for its "buy online, pick up in store" business model -- nationwide in March 2011, it was one of the first major retailers to bridge the gap between online and in-store shopping. Home Depot followed suit in August 2011, rolling out its own "buy online, pick up -- and return -- in store" policy. According to Home Depot's CEO and Chairman Frank Blake, the strategy has worked. At the Goldman Sachs Twentieth Annual Global Retailing Conference held in September (transcript provided courtesy of Seeking Alpha), he shared that "one out of every three of Home Depot's online transactions is actually fulfilled in the store." He went on to explain that the benefit isn't just leveraging it's online presence and customer convenience; "buy online, pick up in store" customers tend to buy more items once they're in the store.
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