Home Depot Goes to Work on E-Commerce

Home Depot (HD Quote) threw open the doors of its online store to customers Tuesday, hoping a gradual, measured approach is the best way to win in e-commerce.

As TheStreet.com reported in June, Home Depot is beginning its push into e-tailing with limited service in one market, Las Vegas. The company has recently tested the service -- which will offer all of the 40,000-plus products available in the typical Home Depot store, along with a range of delivery options -- and will expand to the entire Las Vegas market over the next few weeks.

By the fourth quarter, customers in San Antonio and Austin, Texas, will also be able to use the service through their local stores, Jeff Cohen, president of Home Depot's direct marketing business, said on a conference call with investors. The company wouldn't say when e-commerce would be available in all the markets served by Home Depot stores.

Home Depot will use ZIP codes to provide customers with an up-to-date picture of the merchandise available at their local stores. That way, customers will have the option to pick up orders at the store, take same-day delivery at home, or get the order via United Parcel Service. Because all the inventory comes from the stores themselves, there's no need for the sort of warehouse model used by other e-tailers. Returns are easier, and store managers don't get testy about Web purchases eating into their own sales figures. And because sales are made through local stores, incremental Web sales will boost same-store sales, making the whole company look good -- not just its Web unit.

"We're adding bandwidth to the business and giving the customer flexibility," said Ron Griffin, Home Depot's chief information officer.

Home Depot's strategy would seem to dovetail nicely with the latest conventional wisdom about e-commerce: Customers want to be able to shop as seamlessly as possible at retail stores, over the phone and over the Internet. In fact, a Jupiter Communications report out Tuesday said that retailers that are able to track customers' activity across sales channels can expect spending by their multichannel customers to outstrip that of their single-channel counterparts by 30%. Jupiter previously reported that in 2005, U.S. online consumers will spend in excess of $632 billion in off-line channels as a direct result of research that they conduct on the Web, while spending just $199 billion on the Internet.

"We expect this to be driving traffic into our stores," said Griffin.