Home Depot Lays a Foundation for Online Growth

Over the last few years, Home Depot (HD) has expanded its retail stores aggressively, adding more than 200 outlets annually. However, the firm has recently embarked on a $1.1 billion program aimed at improving its Web presence while planning to dramatically reduce the number of new store openings to around 10 in 2011. Home Depot is the world's largest retailer in the home improvement products space with over to 2,240 stores in the U.S., Canada, Mexico and China, and it hopes that by beefing up its online sales, it can distance itself from competitors like Lowe's (LOW) and Sears (SHLD) as well as fend off competition from pure play online retailers like Amazon (AMZN).

We have a price estimate of near $36.50
, which is about 5% ahead of the current market price.


Home Improvement Shopping Goes Online

Home Depot expects the investments in technology to help deliver 4% to 7% of its overall sales through the online channel. Currently, Internet retail sales comprise less than 1% of its revenues, and the company sees the Web as becoming increasingly important in influencing customer purchasing decisions. As customers are looking for more home improvement products and ideas online vs. relying on in-store professionals, Home Depot can better cater to these customers. Citing Forrester Research, an article in industry magazine Internet Retailer, expects that around 48% of retail sales will be influenced by the Internet in 2011 and projects this to rise to 53% by 2014.

Home Depot aims to build on this trend through an online sales service and an "order online and pick up in store" service. So, in effect, instead of substituting for in-store sales, these online services will complement Home Depot's ability to drive customers to its 2,244 retail stores. The launch of its inventory-check feature in January 2011 allows shoppers to check for the availability of their products in local stores and underlines the concept of using online services to boost the in-store customer experience.

Pick-up Services Help Fend Off Amazon

The pick-up service enables buyers to order online and collect their purchases from the stores. This service caters to those who shop mostly online and helps Home Depot save shipping costs and compete against other pure online retailers like Amazon, which do not operate retail outlets.

Many retail chains find that multichannel shoppers who alternate between online and in-store purchases are more profitable than single channel shoppers. Efforts to tap into these tech-savvy consumers have led retail chains to provide several additional services such as online inventory checks and bar-code reading apps on iPads and mobile phones, and appear likely to usher in more technology to home improvement shopping.

See our full analysis for Home Depot

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16 Comments

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madddddddddddddd

I HATE HOME DEPOT...BUT I DO SHOP THERE,,BECAsue there is no lowes around..

June 23 2011 at 3:56 PM Report abuse rate up rate down Reply
harlanlopez123

The first step in determining the worth of a conventional mortgage refinance is to estimate the property value and the borrowers' equity in the home, use the "123 Mortgage Refinancing" to qualify for refinance

June 23 2011 at 6:47 AM Report abuse rate up rate down Reply
wiredvoice

Personally, I support my local hardware store that's been loyal to my community for years. They'll even order lumber and anything else if they don't happen to have it in stock. They have no political agenda, have received no bail-outs, and don't have a dumb and blind loyalty to any party---AND they tell the truth.

June 23 2011 at 5:47 AM Report abuse rate up rate down Reply
pwrwalt

I no longer shop Home Depot because of their support of the homosexual agenda. In our area Lowes have much better stores.

June 22 2011 at 3:59 PM Report abuse -1 rate up rate down Reply
1 reply to pwrwalt's comment
LEE Resolution

what does Home Depot's views on gay rights have to do with how they run their business ? Gays have as much right to work there as anyone else does. Home Depot took off like a rocket and it's been up hill ever since.

June 22 2011 at 6:50 PM Report abuse rate up rate down Reply
1 reply to LEE Resolution's comment
wiredvoice

HD didn't 'take off like a rocket'. It's been in the red for many years and was on the verge of bankruptsy plus shuttered many of its stores.

June 23 2011 at 5:43 AM Report abuse rate up rate down
ROBINHOOD

HOME DEPOT IS A MAJOR SUPPORTER OF THE GAY AGENDA.

June 22 2011 at 3:52 PM Report abuse +3 rate up rate down Reply
Garfield Whittak

jstthinkaboutitt, not only added revenues from impulse buying but also profit growth from additional secondary buying that flows from gaining more insightful advice (from floor workers) on a given primary desired product!

June 22 2011 at 2:01 PM Report abuse +1 rate up rate down Reply
jstthinkaboutitt

When are these stores going to understand that online shopping hurts them much more then it helps them. As a risk managment specialist I have proven over and over again through numerous charts and numbers that when you offer online shopping your overall profit goes down. The biggest reason for this is when you don't have people in the stores walking the isles they don't "impulse" buy. I'm sure I don't have to explain "impulse" buying to anyone. HERE'S YOUR WAKE UP CALL FOR ALL YOU RETAIL GIANTS THAT THINK THIS IS THE ANSWER TO MAKING MORE MONEY!

June 22 2011 at 12:42 PM Report abuse +3 rate up rate down Reply
Garfield Whittak

isdis4reelwtf, whether or not their is (as you put it) a "Muslim" in the White House the primary goal of corporations (everywhere) is profits over labor costs (re: jobs) hence the desire to employ automation in order to lower cost/speed up production/boost profits.......the irony though being that profits ultimately flow from an employed population/income earning labor. The common sense here being that capitalism (as practiced) is unsustainable as the system is putting the profit cart (for a wealthy few) before the jobs cart (for the majority of the population)! Food for thought?????

June 22 2011 at 11:50 AM Report abuse rate up rate down Reply
1 reply to Garfield Whittak's comment
evd10

Henry Ford realized this 80 years ago and he raised his production workers wages to levels unheard of in industry, because he knew no on could buy his cars if they had no money.

June 22 2011 at 3:57 PM Report abuse rate up rate down Reply
miscojohn

I have been on Home Depot's site many times and have always come away frustrated by how slow it is....it takes forever to change pages. I'm sure they have many people using it, but they simply have to get more and faster computers before they do anything else.

June 22 2011 at 11:42 AM Report abuse +2 rate up rate down Reply
rdnorton

I see this as a good way to avoid shopping in a Home Depot store. On a recent visit to my local HD when I finally found someone to ask about a product I couldn't locate, I was told "it's special order, no one stocks this any more." I went to Lowes which is nearby, purchased what I was looking for and headed for home, a satisfied Lowes customer and a further disillusioned Home Depot customer.

June 22 2011 at 9:25 AM Report abuse +1 rate up rate down Reply