The Home Depot is in the midst of a customer-centric makeover and opening a series of new direct fulfillment centers to accelerate its omnichannel initiatives.
In a January 2014 interview with Retail TouchPoints, Mark Holifield, SVP of Supply Chain for The Home Depot pointed to same-day shipping as the next stage in helping the retailer achieve omnichannel excellence.
Several months later and the home improvement retailer has opened a new direct fulfillment center (DFC) in Locust Grove, Ga. It is the first of three new DFCs to open across the U.S. over the next two years. The move represents the Home Depot’s ongoing dedication to creating a brand experience crafted from customer wants and needs.
“We’ve made a real concerted effort in our supply chain,” said Scott Spata, VP of Supply Chain Development at The Home Depot, in an interview with Retail TouchPoints. “A few years ago we could’ve built out the capabilities we thought were needed in the marketplace, and could have dictated to our customers: ‘If you want to shop online, this is how you will have to do it.’”
Instead, The Home Depot started by talking to consumers, listening to them on social media, holding focus groups and participating in live chat sessions.
“All signs pointed to the fact that consumers wanted different options,” Spata said. “They want to shop how they want to shop and when they want to shop. We identified the need instead and give them the experience they asked for.”
The regional DFCs will help get customers closer to the products they order online, especially larger, bulkier pieces, according to Spata. “Being able to ship a product in two or three days with same-day order processing is what we’re building out now.”
Spata added that the primary value for customers is “having the ability to take an order by a cut-off time, and get it picked, packed and shipped that evening, so they only need to wait for the delivery time it takes to get the order.” With the new DFCs, more than 90% of all U.S. ZIP codes will be serviced within 48 hours. “That’s going to be a great speed to deliver to the customer, which will enhance our service.”
A greater breadth and depth of products also will be more readily available to customers. While each store carries approximately 35,000 SKUs, the new DFCs will help The Home Depot “go deeper into those categories,” with each carrying approximately 100,000 SKUs, Spata noted. “We have a great geographic reach so we can service regionally rather than nationally,” which helps accelerate speed of delivery and decrease out of stocks in nearby stores.
The new DFCs also will help The Home Depot test new products in-stores, without necessarily devoting a specific number of SKUs to each location. Instead, the DFCs can hold a specific number of products, and then they can be tested in a few stores and expand accordingly.
The Killer Bs
Over the years, The Home Depot has met these demands be establishing a series of more flexible product ordering and pickup processes. Spata refers to this strategy as “the killer Bs”: Buy online, return to store; buy online, pickup in store; buy online, ship to store; and now, buy online, deliver from store.
Although the buy online, deliver from store option will continue to be piloted during the 2014 fiscal year, the other order fulfillment offerings have added great value to The Home Depot business, as well as consumers.
In fact, up to 90% of customers now make online returns to nearby stores, rather than shipping them back, Spata noted. Buy online, pickup in-store option also “has been a home run for us,” he said. “The convenience of starting the experience online, completing a transaction and being able to pick up the purchase at one of our 2,000-plus locations at their leisure is very valuable.”
The buy online, ship to store offering helps The Home Depot maximize assortment via an extended aisle concept. With approximately 600,000 SKUs now available online, consumers can either buy a product online and have it delivered to their homes, or buy online and ship it to a store.
The Home Depot also offers a variety of delivery speeds based on the wants and needs of shoppers. Although the retailer offers next-day delivery, “we recognize that’s a very small, niche customer group. If you want free shipping or lower shipping fees, we have other delivery options and the infrastructure in place to do that.”
Flexibility is central to effective order fulfillment and delivery strategies. In the age of customer-centricity, retailers need to let their shoppers do the talking and then develop a strategy to provide the offerings they crave.
“We let customers choose what they want rather than just dictating the only way they can get items,” Spata said. “We want to make sure they have the decision in their hands. We built our systems and DFCs around those capabilities.”