Digital DIY - getting the prep work right has slowed down Home Depot's digital do-over, admits CEO

In the US retail market, digital transformation progress in the home improvement sector has a particular angle of its own as the market is dominated by two main players, Home Depot and Lowe’s Stores.

Both have announced major digital investment programs, both have chalked up some successes and both have recently run into some problems as their makeovers slip off schedule.

Home Depot, the gorilla in this DIY market, grabbed attention last year when it announced it would pump $11.1 billion into a three year transformation program called One Home Depot. As well improvements to websites, mobile apps and back office systems, this would also involve hiring more than 1000 new in-house IT staffers, on top of the 2,800 it already employed. This was to be a DIY digital push rather than depending on third parties.

Flash forward two years and there have been deliverables that have emerged from this, but such is the scale of the ambition on view here, it’s perhaps not surprising that there have been challenges, most notably around the firm’s B2B contractor website. That’s a particularly important part of the wider plan as the Pro market is one that’s fiercely contested between Home Depot and Lowe’s.

For CEO Craig Menear, the progress to date has been good, but he admits that the schedule has slipped, largely due to the point of tech departure rather then its destination. As with all successful home improvement work, getting the foundations right - stripping back the old wallpaper, sanding down the walls etc - is the bit that slows things down. Menear says:

Our rollout is largely on track and we're realizing benefits. It's just taking a little longer than our original assumptions. We have foundational IT work streams supporting many of our strategic initiatives that will significantly enhance our ability to serve our customers in an interconnected way. Much of this IT work requires unwinding our legacy systems and that has proven to be more complex than originally anticipated.

The B2B website is the prime case in point:

Our investments in a personalized B2B website experience is a significant component of the unique value proposition we're creating for our Pros. As you would expect, the most engaged customer cohort is [made up of] 135,000 Pros that we on-boarded at the beginning of the year. And we're seeing meaningful lift in spend as these customers become more familiar with the new experience. The rollout of the B2B site experience itself is on track. But underlying IT work must be completed before turning on additional elements of personalization and functionality for our larger Pro customers.

Stores and successes 

There are other successes to point to, he adds, such as HomeDepot.com, which has seen a year-on-year sales growth of 22% as well as an uptick in conversion rates.  New features and functions have been added, such as a Buy It Again capability to make return orders easier. New user registration has also become automatic so that as new users sign up to the existing Pro platform, they get migrated onto the new B2B version.  Menear says:

Customers continue to respond to the ongoing investments and enhancements we're making to drive a frictionless, interconnected experience, including faster fulfillment options. We also continue to leverage our digital platforms to drive incremental growth from adjacent categories like HD Home, Cool and Workwear and are seeing good traction across all of these categories.

As with any good omni-channel retail strategy, physical stores have not been forgotten and Menear is pleased with the synergy between the online and offline worlds:

Online shoppers continue to see the relevance of our stores as more than 50% of our online US orders were picked up in our stores, a testament to the power of our inter-connected retail strategy.

The introduction of automated lockers to support click-and-collect has proven popular with customers:

To date, approximately 1,300 stores have lockers. And we've been very pleased with the customer response. Approximately 95% of customers rating their locker experience pickup give us a five out of five stars. We fundamentally believe that when a customer comes to one of our stores it has to be a great experience. Over 60% of our US stores have a new look and feel and customer response has been very positive. Customer service scores in the category of neat and clean have increased to 120 basis points versus last year. While scores for check-out times satisfaction have increased over 280 basis points versus last year.

All told, despite delays to certain parts of the program rollout, Menear says that as the firm enters the final year of the plan, it’s in a good place:

We have even more conviction today that we're making the right, long-term investments for the business to extend our competitive advantage in the marketplace. As with any transformation, the work we're doing is complex and I'm proud of the way our team is consistently up for the challenge. Our associates continue to focus on what's most important in our business, our customers…we're definitely confident that we will continue to see some momentum build through the investments that we're making.

In part two of this article, challenger retailer Lowe’s own digital transformation plans are slowed down by e-commerce complexity.