At the end of the day success is all about the customer experience, Kevin Hofmann, President of the The Home Depot's Online business, told Goldman Sachs dotCommerce conference last week. That means understanding what the delivery options are that best suit individuals:
Do they want it dropped off at the kerb side, do they want it brought into their house, do they want White Glove delivery, do they want it in one day, two days or are they willing to wait five to seven days? So if we start first solving around what the customer wants, then we'll figure out optimal inventory deployment, optimal inventory flow and cost of transport. We think there's certainly inventory opportunity there. We think there is absolutely cost of delivery, cost of transportation benefits, but those are only after we solve for the customer experience.
Home Depot’s value proposition to customers is also based around the long term nature of the engagement that they will have with the products purchased. With that in mind, customers need to be sure of their buying decisions or their perception of Home Depot will be indirectly tainted by poor choices. So Home Depot needs to be in a position to assist, both offline and online. Hoffman argued:
You’re not here to just buy items from us, you’re going to buy things that are going to live with you figuratively for 10 years or 20 years. New flooring for your home, new appliance for your kitchen, perhaps it's a full kitchen remodel, perhaps it’s a full bathroom models. Those things tend to be something that you want other opinions on. You want somebody you can trust, somebody with specific knowhow and expertise in that category. So of course we bring that to the table with over 300,000 associates in our store.
We have built out and augmented those associates in the store with centralized associates in our contact centers, thousands and thousands of chat sessions and email sessions a day with our customers, very specific in categories and domain discipline in categories like bath, like flooring, like appliances, to give the customer the same expectation of knowhow that they might want in the physical aisle they should come to expect that from us in the physical aisle or in the virtual aisle.
Now in addition to that, a lot of things that we sell are not a two second transaction in the shopping cart. It’s a project that we’ll spend multiple weekends for the customer. It’s a kitchen you’re designing, it’s a bathroom you’re remodelling, it’s a whole landscape project you’re doing in your backyard. So we try very hard to make sure that we’re with that customer through the whole journey, with our design specialist, with our consultants and our contact centres.
He expanded on his point with some key statistics to support his case:
At any given time Home Depot will be in 7,000 to 8,000 homes today helping you with your projects and in that case we call those customers to Do-It For-Me customers, while we have a heritage and you think about Home Depot as a do-it-yourself type of company. There is a big part of the US population that wants a Do-It-For-Me solution.
So when a customer wants a turnkey Do-It-For-Me solution, they are looking for quality workmanship, guaranteed results, backed up by a great brand and they want convenience. We have leaned into that in a heavy way online to make sure when a customer is starting their journey on that turnkey solution that we’re presenting all of our service offerings online where typically the customer start.
You wake up this morning and there is no hot water. Your water heater is broken. Most people are going to go to Google and try to find a plumber, right? We’re going to be there with you saying, 'We’ve already picked the plumber in your market, we’ll 100% stand behind that plumber and they will be in your house today to replace your water heater what nobody else can do'. So online lead generation, connecting you to the right service providers, making sure there is good communication back and forth between the customer and Home Depot, we are really shooting that services business with a shot of adrenaline.
This is a major competitive differentiator, he posited:
Only we can offer the customer those options Let’s say you are looking at your hardwood floors and you're not happy with them and you're thinking about replacing them. When you come to Home Depot, of course we’ll sell you a whole bunch of hardwood floor. We also have a pool rental offer, we’ll help you rent the floor sander if you want to take on sanding your floors and refinishing your floors. We have a whole turnkey solution too. We’ll get a service provider in your home tomorrow to do a turnkey solution for you. So we’ll sell you a product, we’ll sell you options to do it yourself or we’ll sell you a turnkey solution and we can do that all online.
Millennials and professionals
While Home Depot plays well to its existing customer demographic, the firm is also conscious that the millennial generation is moving into home ownership and may have different expectations. Hoffman believes there's still an appetite for home improvement there, but analysis of data suggests it may take a different form:
Home improvement definitionally is a little bit different for the millennials. But we believe it's just a delay. They aspire for home ownership, they aspire to have a place to live of their own that they are proud of. Absolutely the on ramps are changing, where they do engage more heavily online. What we find is they actually engage in value, This is something that they really love. They need knowhow maybe more than the previous generations, they need expertise maybe more than the previous generations.
The millennials value time as a currency, it is very valuable to them. So [it's about] some of the turnkey offerings, giving the millennials more turnkey offerings, giving the millennials a rental option for either a space that they are renting or a rental option where they don't have to procure the goods, that they can just use them for the time they need them.
As well as the amateur home improvement customer, Home Depot also has another demographic to accommodate, the professional contractor. These are a different breed, according to Hoffman:
The pro is quickly migrating online, but we haven’t seen them penetrate as heavily online as we have seen them in the store.
It is just the adoption curve, I mean we see very nice heavy penetration the smartphone usage in the professional contractor. But honestly the professional contractor is in our store so frequently. When they do get exposed to the stuff like buy online pick up in store, they love it because they say, 'We like to be at home playing with my kids tonight and I can plug in my order to Home Depot and they will have it ready and picked for me and staged for me the next morning. That's fantastic, you just saved me a half an hour every morning'.
So I think the only thing holding us back is just the adoption curve. They've been a little bit slower to adopt. There's a burden on us to communicate to them more surgically and make them aware of the offerings that we have.
A lot of effort at targeting the professional market centers around the firm's Pro Xtra loyalty program. Hoffman explained:
This is a program that we have now literally millions of members of. This is about driving more relevancy to those contractors. So they use us more than just we'd say tongue and cheek as a 7/11 as a convenience store. We want to grow from transactional to being very relational with them. Our loyalty program is our attempt to do that. There will be elements of that loyalty program that I want light up online, giving the pro customer access to their full purchase history, all their receipts, being able to organize those receipts by job, being able to enable the professional contractor’s runners to come pick up product from our stores. Those are all things that we look to enable and provide a better customer experience to drive share of wallet of that Pro.