COVID's digital DIY boom - how Home Depot and Lowe's omni-channel retail prep rode out the pandemic crisis

In a previous article Kingfisher Group’s digital transformation ambitions, it was noted that the European home improvement retailer could find inspiration and example from the omni-channel success of US counterparts, Lowe’s and Home Depot. The two firms essentially control the majority of the domestic US DIY retail market and both have benefited of late from the upsurge in business coming from stir crazy shoppers in lockdown who decide it’s time to get that long-postponed home project underway.

Both retailers have also seen dividends from their prior multi-year omni-channel transformation efforts as online transactions rose.  For example, sales via lowes.com first picked up in March, then accelerated in April with a large ramp mid month as lockdowns kicked in.

There’s a degree of good luck at play here for Lowe's.The firm had previously suffered a horrendous outage during the peak Holidays season in the US in 2018, which led to an urgent replatforming effort to ensure the website could cope with surges in demand. As CEO Marvin Ellison observes:

We’re just pleased that the work we’ve put into stabilizing and modernizing lowe's.com is starting to pay dividends. The entire dot-com site was on a decade-old platform, so we’re in the process of transitioning that to Google Cloud…That allowed us to take on the demand, and what we’re seeing is that customers simply want to shop the way that they choose to. In the past, we couldn’t accommodate that.

And being able to respond in a volatile environment has been critical, he adds, noting that the spread of COVID-19 put Lowe's  on a different operating footing:

As a company, our focus shifted from running a business to achieve our financial plan to functioning as an essential retailer operating in a pandemic.

What customers were looking for during a public health scare from the retailer changed and Lowe's had to respond quickly and again it was prior tech thinking that enabled this:

When we started to get requests from customers for curbside [pick-up], we got that up and going in three days. This time last year it would have been impossible to do that because we didn’t have the infrastructure.

As for the stores themselves, Lowe's has turned to data analytics to develop the kind of social distancing policies and procedures that will be an essential part of the physical aspect of omni-channel retail in the foreseeable future. This has involved tracking historical customer traffic patterns and identifying areas where customers tend to congregate, such as point-of-sale checkout, outside garden, and the paint desk. Joe McFarland, Executive Vice President, Stores, explains:

We began with an immediate assessment of how to best facilitate social distancing in our operations and then quickly acted to implement the following: additional signage and floor markers, adding social distancing ambassadors to manage customer traffic flow, leveraging new technology available on handheld smart devices to monitor store traffic, helping store managers to limit customers based on the store footprint in line with regulatory requirements, and removing product from our stores to help free up additional space for our customers, especially in high traffic areas.

Upgraded tech has also been deployed in-store to create a COVID age operating environment:

As online demand increased, smart devices allowed associates to fulfil Buy Online, Pick-up in Store and parcel shipping orders more efficiently….Our new customer-centric scheduling system and scheduling effectiveness tools also allowed us to monitor store traffic versus associate availability and deliver customized tiered sets of priorities for stores based on their capacity level.

Overall, he concludes, the tech investments of 2018 and 2019 have been critical to enabling an 80% rise in online sales over the past three months.

Meanwhile at Home Depot...

It’s the same story at Home Depot, where CEO Craig Menear points to the same percentage growth rate, the result of early investment in the interconnected One Home Depot strategy, the firm’s own omni-channel transformation push:

Investments we have made over the years in our stores, market-leading digital assets, flexible supply chain, and a world class merchandising organization have allowed us to quickly adapt to shifts in customer needs, preferences, and behaviors. Our interconnected retail strategy and underlying technology infrastructure have supported record level web traffic for several weeks without disruption. 

More than 60% of the time, our customers opted to pick up their orders at a store…We were able to extend our in-store focus capabilities to curbside pick-up in the US in a matter of days offering customers an additional choice with respect to fulfilment. In the case of our Ontario stores in Canada, this curbside capability was turned on essentially overnight when it became the only option to remain open and operational with those stores operating under these circumstances for more than a month.

As with main rival Lowe's, the uptick in online activity came sharply. Ted Decker, EVP Merchandising, recalls:

The shelter-in-place orders rolled out across the country in mid to late March. We saw our digital businesses accelerate from approximately 30% growth in early March to triple-digit growth by the end of April. In fact, the daily traffic to homedepot.com reached new records towards the end of the quarter. During the last three weeks of the quarter, traffic to homedepot.com was consistently above Black Friday levels and as a result of our continued investment in our digital infrastructure and with the great work of our technology teams, we have provided continuous service to our customers and our conversion rate continued to increase.

Growth has come across nearly all categories, he adds, and the crisis has brought new business in:

What’s particularly encouraging is the number of new customers and the opportunity in the future. We more than doubled our number of customers when we look at our customers - repeat customers, 6 to 12 months, less than 12 months, 12 to 24, reactivated over 24 months, brand new customers - every one of those segments was healthy and effectively doubled. The engagement with e-mail and My Account sign-ups tripled the normal run rate…Our app downloads nearly doubled from their normal quarterly and weekly run rate. So, just terrific engagement across the business….we’re very encouraged with this new and re-energized online customer base to work with these folks and contact them, engage with them in the future.

My take

Two prime examples of retailers whose omni-channel transformation efforts have paid off during a crisis that was never factored into the long-term strategic planning. The market dominance of Lowe's  and Home Depot was already well-established, but as it remains to be seen how smaller competitors without the digital arsenal at their command will emerge from the pandemic, that stranglehold on the sector could yet become tighter and more than justify that tech outlay over the years.