Digital DIY – Home Depot and Lowe's CEOs pitch 2020 as the year of building on omni-channel transformation benefits
Digital DIY – Home Depot and Lowe’s CEOs pitch 2020 as the year of building on omni-channel transformation benefits
Tue, 03/03/2020 – 03:47
- Last year’s digital delays are in the past it seems as DIY rivals Home Depot and Lowe’s name 2020 as a year of omni-channel transformation delivery.
Late last year the two gorillas in the US home improvement retail market, Home Depot and Loweâ€™s, admitted that their high-profile digital transformation programs were proving more onerous than had been anticipated. Or as Home Depot CEO Craig Menear put it:
It’s just taking a little longer than our original assumptions.
Meanwhile his counterpart at challenger Loweâ€™s, Marvin Ellison had his own confession to make:
I would say the only thing that we probably underestimated, [in terms of] the level of complexity, was the e-commerce business.
Flash forward a few months and both men are now claiming more success, with Menear arguing that Home Depotâ€™s vision of â€œthe blending of our physical andÂ digitalÂ platforms into a more seamless interconnected experienceâ€� is bearing fruit. Online sales are up 21.4% year-on-year and around half of those digital sales are fulfiled by the customer picking up the ordered goods in a physical store. This, says Menear, is how interconnected retail works in practice, pointing to a number of exemplars of digital/physical integration:
For example, our chain-wide rollout ofÂ digitalÂ appliance labels connecting ratings from theÂ digitalÂ world to the physical world, enhancing the in-store shopping experience. Additionally, homedepot.com continues to be an engine for growth for our overall business, driving increased traffic online and additional footsteps to our stores, because of this, we continue to invest in search functionality, category presentations, product content and enhance fulfillment options to remove friction from the online shopping experience. Weâ€™ve also expanded ourÂ digitalÂ capabilities by investing in B2B website experience tailored specifically for the needs of our Pro customers. We have now onboarded over oneÂ million Pro customers.
While customers are still coming to the store to pick up purchases, Home Depot has also rolled out new delivery and fulfilment channels:
We have opened a dozen Market Delivery Operations – or MDOs – that have enabled us to transition 20% of our clientsâ€™ deliveries from an outsourced model to one in which we control more of the customer experience. This is translated to meaningful improvements in our customer satisfaction scores for appliance deliveries. Our supply chain build-out will continue to ramp from here with the largest number of new facilities coming online in 2021 and 2022.
Weâ€™re excited about our e-commerce business as part of a whole interconnected retail strategyâ€¦.most of our customer shopping experience actually starts in theÂ digitalÂ world even if it finishes in the physical worldâ€¦So we think that ourÂ digitalÂ business continues to be an engine for growth, both in theÂ digitalÂ world and in the physical world.
The same belief system is in place at Lowes, where CEO Ellison argues:
A lot of home improvement transactions begin online. They may not consummate online, but they begin online. So on one hand it is a true omni-channel environment, where research and product education happens online and then it drives traffic to the store.
Thatâ€™s why digital investment matters so much, he adds:
If you have limitations online, not only does it hurt your dot-com sales, it actually hurts your brick-and-mortar sales, because it limits the amount of traffic where people will show up after having quality efficient research and decide to buy. So we think itâ€™s part and parcel that Lowes.com has to improve and when that improves its lists the entire company from an e-commerce standpoint, from an omni-channel standpoint, and from a bricks-and-mortar perspective.
The biggest project underway is Loweâ€™s re-platforming away from a decade-old legacy infrastructure and onto Google Cloud. This is due to be completed around mid-year, with benefits and improved online functionality coming through in the second half of the year. The scale of the move has meant that Loweâ€™s has, as Ellison pitches it. â€œtemporarily slowed our dot-com growthâ€�, but itâ€™s a necessary price to pay, he argues, as the current digital capability is too limited.
New features and functions will be phased in iteratively, he adds, citing a couple of examples to illustrate his point:
Today we don’t have the ability to shop by collection. As an example, if you’re purchasing patio furniture, it’s a very cumbersome process where customers will have to shop on one screen for their table. They have to toggle to another screen for the umbrella, another screen for the chairs. It is not very customer friendly. Weâ€™ll be able to get that done in the first part of the second half of the year. Believe it or not, with our market leading position in appliances, it’s still difficult to schedule a delivery date with the precision that most customers are accustomed to and so weâ€™ll have that up and going by the second half.
So theyâ€™ll be just fundamental things in addition to one-click checkout, in addition to dynamic home page, in addition to navigation and search functionality thatâ€™s more modernized. And so the reason why we’re optimistic that this platform is going to be accretive starting the second half is because we can look at the project timeline and see all of these things coming online over the course of the year.
Alongside the Google Cloud program, there has been significant tech investment elsewhere, including the nationwide rollout of a new customer-centric scheduling system,Â which the firm says allows it to align payroll hours of peak customer traffic and customize that allocation at the store and department level. Joe McFarland, Loweâ€™s Vice President of Stores, explains:
Under the previous system, a DIY-heavy store in Dayton, Ohio had the same payroll scheduling framework as a Pro-heavy store in Brooklyn. Our customer-centric scheduling system allocates more associate hours to the weekend in the Dayton, Ohio store, while allocating more hours to pro centric departments on weekdays in Brooklyn, allowing us to provide better customer service, while driving payroll efficiency.
Other in-store digital upgrades include deploying smartphones to staff on the shop floor, he adds:
Throughout the year we added applications to the devices, such as standardized performance scorecards, store-walk applications, and most recently a new pricing application. This functionality made our associates more efficient and ultimately allow them to spend more time interacting with customers.
All of this is paying off in terms of improved customer experience, he says:
We began 2019 with 60% of our payroll hours spent on tasking and 40% spent on service. We ended the year with 48% of payroll hours spent on tasking and 52% serving the customer. This represents a significant step forward in putting associate time back in front of the customers.
Next up is a new point-of-sale system, McFarland says:
Our previous point-of-sale systems were extremely outdated with an old green screen that was very difficult to navigate. Additionally, our associates had to toggle between multiple systems to sell product. For example, if an associate sold an appliance with home delivery and an extended protection plan, they previously had to interact with as many as six systems to complete that transaction. Our new point-of-sale system has a user friendly touch screen interface the will bring multiple systems together in one screen. This will greatly simplify the work of our cashiers, driving payroll efficiency by reducing training time and allowing for a much improved customer experience at check out.
From Ellisonâ€™s point-of-view, 2020 will be the year when the digital transformation benefits begin to be seen:
We expect to capitalize on a supportive macroeconomic environment by executing on our four strategic areas of focus: driving merchandising excellence, transforming our supply chain, delivering operational efficiency and intensifying customer engagement by focusing on the Pro. Our improved Lowes.com platform will allow these four strategic areas of focus to create a true omni-channel ecosystem for Loweâ€™s, so we can efficiently serve our customers any way they choose to shop.
As for those â€˜bumps in the roadâ€™ at the end of 2019, thatâ€™s behind Loweâ€™s now, he suggests, albeit leaving himself some wiggle-room:
There is always going to be execution issues no matter how good you are at the business. What I can tell you is, one year into this multi-year transformation, I feel great about this team, I feel great about what weâ€™ve accomplished, I feel great about 2019, and we have a significant amount of confidence going into 2020. But yeah, there will be an execution risk, weâ€™ll always hold ourselves to high standard, but I feel really good about how we executed throughout the quarter, even though it wasn’t perfection.
If the confidence expressed by both CEOs is taken at face value, then the necessary digital prep work is now complete and the tech renovation can begin in earnest in 2020. As weâ€™ve noted before, Loweâ€™s is the challenger brand here and the ambition it has for its Google Cloud move is a commendable pitch at digital catch-up. Home Depotâ€™s work with Salesforce dating back several years has given it a head start on some of the omni-channel capabilities that Loweâ€™s aspires to, but Menearâ€™s vision of interconnected retail remains itself a work-in-progress. This story still has a way to run.
Image credit – Lowe’s/Home Depot
Disclosure – At time of writing, Salesforce is a premier partner of diginomica.