In the last 18 months Home Depot has invested significantly in its interconnected retail store, with customers responding positively. The retailer will continue to experiment and bridge the interconnection between stores and online. Some of this is a matter of technology and formal function in the real and virtual world.
"We're experimenting with kiosks with Skype-type virtual services in-store and with new functionalities on our apps and mobile website," said Frank Blake Home Depot CEO on a recent call with analysts. "Our focus is on making physical assets and associates a comparative advantage. So far the bridges that we have built: buy online return in-store, buy online pickup in-store, buy online ship to store and appliance kiosks have been successful. But we're only at the start of this process. We will continue and actually increase the pace of our experiments [we] will be objective of making the customer experience online and in our stores more engaging and simple."
The interconnected concept is easier to explain than to carry out. The retailer must get the different parts of the business to think through the customers' interconnected experience. Thus far, the organizational muscle memory is all based on physical retail, which was greatly underestimated by the company, "this is not going to be fixed overnight, but as a leadership team, we are all focused on how we develop new patterns for our associates to work in an interconnected way through training tools and strategic alignment."
A great opportunity for Home Depot is the shift to mobile technology, however customers are making the shift more quickly than the retailer can adjust to. Now, the retailer will play catch up, making mobile a major focus and investment in 2014. Also in 2014, is a planned rollout of a new solution for buy online deliver from store. "We know last mile delivery is an important confidence for us to have. We deliver from store now, but it is not connected to our online presence and it's not optimized for our customers or associates," noted Blake.
Among Home Depot executives, smartphones are referred to as a store in a pocket – much like a physical store, the virtual store requires constant upgrading and improvement, only at a much quicker pace. "We've made significant progress over the last 18 months, but this is a process that will never end," said Blake. "The ongoing objective is to keep improving the ease of use personalization and connected-ness of our online experience."
Improving the delivery process has taken longer and involved more complex issues within the store than anticipated, but the retailer is confident about its ability to bring this to life next year. According to Blake, "we'll see benefits not only in customer service but also in the efficiency of our supply chain."
For Home Depot, the journey on product authority began with a fundamental restructuring of its supply chain. "It's difficult to claim private place on product authority if you don't have best-in-class capabilities for getting product into the customers' hands."
Over the last several years, the retailer has developed a new supply-chain network with Rapid Deployment Centers (RDCs). The RDC strategy along with improvements in stocking and bulk DCs allowed the retailer to improve in-stock rates and customer service. The next step is for a new DC network for the dot-com business as well as a new platform for store delivery processing for the last mile delivery rollout.
Along with supply-chain improvements, the IT team has put in place the competencies that the retailer refers to as "merchandising transformation." Developing these capabilities and assortment planning, allocation and pricing has been an important part of establishing product authority.
"We're now at a point where the tools are largely in place and we can begin to use them to create value for our customers, associates and shareholders," said Blake.
These developments are the enablers for the larger portfolio strategy. The focus of the merchandising strategy remains the same – Home Depot must improve value, innovation and speed-to-market though some of the tactics will change. "We need to adjust to account for some of the differences created by interconnected retail," continued Blake. "Differences such as increased pricing transparency, demand for enhanced delivery options and the balance between long-tailed demand and product duration."
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