Few bricks-and-mortars companies have been able to seamlessly mesh their physical presence with e-commerce and make it look so easy.
What's the secret? Home Depot's Chief Marketing Officer Kevin Hofmann says the basic idea is simple — meet customers where they want to shop, whether it's in-store, online using a phone or computer or with the Home Depot app. Typically, a customer will use at lease three of those shopping methods, which underlines Hofmann's premise, with the ultimate goal of landing them at Home Depot and shopping 1000s of goods.
"First, let me say, we're certainly not done. It's really been about 15 years that we've been at what we call interconnected retail," said Hofmann. "We know that customers aren't going to respect any one channel."
Last year, Home Depot also joined with Action Alerts Plus holding Alphabet Inc. (GOOGL - Get Report) to offer Google Home or Google Express, a shopping and shipping service also used by Walmart Inc. (WMT - Get Report) , Target Corp. (TGT - Get Report) and Costco Wholesale Corp. (COST - Get Report) .
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According to analyst Robin Diedrich of Edward Jones, whose firm rates Home Depot a buy, the company has been successful because its strategy is, and always has been, very integrated between stores and digital. "Its e-commerce sales are now over 6% of their overall sales. The most impressive thing has been that there's not been a deterioration of their profit margins. Customers use the store for shipping, customer service and returns, which has really enhanced the online business and brought down costs. What it has done, which is a challenge for other retailers, is that it has kept the profits of online sales at a high level."
Along those lines, one smart move has been to save shipping costs by giving the customers the option of having their orders sent to a nearby store at no cost to them. That's proven popular with customers, because it's generally convenient. Home Depot has 2,200 stores in the United States.
While most investors may think of Home Depot as the go-to for DIY projects, it caters to the professional contractor through its Pro platform. Contractors can find what they need on Home Depot's app and have them delivered to the job site in a matter of hours during the workday. At the stores, contractors have separate checkouts and pickups and dedicated parking. Added Hofmann, "They live on their mobile devices and they eat in their trucks [at lunchtime]. We make sure they can see inventory levels on their mobile. For contractors, if we have saved them a trip, we have saved them money. And time is money."
That strategy has paid off this quarter, in which big-ticket baskets, at $900 or more, are up almost 10%.
In December, this company launched an augmented reality experience on its app using Action Alerts Plus holding Apple Inc.'s (AAPL - Get Report) ARKit platform for interior products. Using it, customers can visualize more than 7,000 products in their home, including decorative items, vanities, faucets and lighting. Again, meeting customers where they want to shop. This time at home.
Home Depot paired up in February with another tech company, Telsa Inc. (TSLA - Get Report) , when it began selling residential rooftop solar panels and its rechargeable battery system Powerwall at Tesla kiosks within its stores.
Finally, millennials have played into Home Depot's plans — it was that generation's app habits that convinced the company to beef up its mobile offerings some five years ago, said Hofmann. This demographic group is a big part of Home Depot's future. CFO Carol Tome told TheStreet in an earlier interview that first-time home buyers are back, and buying fixer-uppers. They, of course, need lots of home improvement supplies and advice, all of which Home Depot delivers in spades. Some of those first-timers with fixer-uppers are millennials, and it's a very big group. Home Depot is ready for them.
Shares closed down at $186.71 on Tuesday.