|Can Home Depot Lumber On?|
When it comes to the e-commerce threat, Home Depot would seem to be in a better position than other retailers, given that lumber isn’t flying off of Amazon.com delivery trucks. In terms of being Amazon-proof, Home Depot is better positioned than many of its retail peers, which is one reason its stock is up 19% over the last 12 months. The stock has risen at an annualized 19% over the last five years, nearly double the S&P 500’s gain.
But even Home Depot can’t rest on its in-store laurels. “Becoming a best-in-class interconnected retailer” is how Home Depot talks about its e-commerce strategy near the top of its latest annual report.
On Tuesday, the company provided an update, saying that online sales were up 20% in the first quarter, outpacing the overall sales growth of 4.4%.
(Home Depot’s total sales for the quarter were $24.9 billion, slightly below analysts’ forecast. Earnings were a hair above estimates. The stock fell 1.6% on the day.)
The so-called interconnected retail strategy was one of the first things that CEO Craig Menear talked about on Tuesday’s conference call with investors. New this quarter was the ability to add installation services to product purchases. Menear used the example of buying a faucet online, and adding the installation at checkout. “We continue to invest in interconnected shopping experience and see a positive response from our customers in the form of improved customer satisfaction scores, better conversion, and increased sales.”
As trite as “interconnected” sounds, the company may be onto something with the choice of words. “In many, many cases, the experience starts in the digital world,” Menear said. “It may finish in the physical world. Over 45% of our orders, the customer chooses to pick up in one of our stores.”
That’s another big difference from Amazon, of course, which has only begun to build out the bricks-and-mortar presence that enables in-store pickup. With 2300 retail stores, Home Depot has a clear advantage over Amazon.
It turns out that even lumber is popular online, according to Home Depot executives, at least as a starting point for searches.
“Things like the lumber department pages or building material pages are some of our most active pages, because the pros are looking at price and the inventory availability,” Edward Decker, Home Depot’s executive vice president for merchandising, said today. “So while they’re not transacting as much online in those departments, we have great traffic on those pages.”
Out of curiosity, I did a search for Amazon and lumber. Google autofilled the search to Amazon Lumberyard. But there’s no wood at the site. Instead, Amazon Lumberyard is a free, cloud-enabled platform for building video games.
Lumber might be one good reason to still have stores.