Thursday, April 27, 2006

Home Depot's Web Improvement

Article Title: Home Depot's Web Improvement

Handymen & women worldwide-- Home Depot announced on April 25th, 2006 that “it will acquire Home Decorators Collection, an online and catalog retailer of furniture, rugs, and lighting.” As the world’s No. 1 big-box home-improvement retailer, Home Depot has decided to make this move as means to place an increasing emphasis on the Web. While the retailer did not provide figures regarding this matter, it claimed that “Internet sales doubled in 2005 after it expanded the assortment of products sold online that aren’t available in all of its stores to include electronics and furniture.”

Having launched two speciality catalogs (10 Crescent Lane and Paces Trading) last year, Home Depot has shown its efforts of "cozying up to the Web." These catalogs, which are targeted at affluent women both have their own respective Web sites as well. Beginning in the summer of 2006, Home Depot will continue its stride towards Web improvement by offering “streaming video of online commercials from vendors such as LG electronic as well as customer reviews of products."

Bob Nardelli, Home Depot’s CEO, states that “the goal is to achieve $1 billion in Internet sales by 2010.” In response to Nardelli’s comment, Harvey Seegers, president of Home Depot Direct (the division that handles online and catalog sales) claims that “based on the size and momentum I see today, we will not only be able to achieve but exceed the ambitious goal set by our CEO.” Additionally, Seegers feels “that the online market for home-goods shoppers is big—and likely to get bigger.” This rests in the fact that nearly 60% of U.S. households are set-up with broadband Internet capability and that “home décor Internet and catalog sales in the U.S. amount to some $18 billion annually, with 20% annual growth expected.”

Having become aggressive with regards to Internet sales within the last year (12 to 18 months), Nardaelli says “we really embraced that technology in a meaningful way,” and is eager to get its share of the annual growth. But for now, only 3% of the overall home-improvement market accounts for online sales. This is primarily due to the fact that “many of the products are bulky and difficult to perceive online,” as stated by senior analyst at Jupiter Research, Vikram Sehgal. He also added that "people like to figure out how a furniture looks or how a certain color would look in person." More often than not, home-improvement consumers prefer "hand-holding, advice, and knowledge offered by sales associates at retailers such a Home Depot and Lowes."

There is talk, however, that if Home Depot were to implement an in-store pick-up model (used by electronic companies such as Circuit City and Best Buy) that business will boost; especially since “sales of housewares and appliances on the Internet grew 38% last year.” There are critics though, who aren’t as optimistic towards Home Depot, such as Research firm Mintel Intl. who claims “that rising interest rates and the concurrent slowdown in home sales will affect overall home-improvement sales.” Similarly, David Strasser, an analyst at Bank of America, “estimates that online sales make up less than 1% of Home Depot sales.”

To end on a better note, “Home Depot’s latest acquisition will not only add 65,000 new products to its Web sties, but it will also give the retailer new technology that will help it run its own business.” Home Depot's use of the web as a promotion delivery channel, is an excellent “pipeline for delivering marketing promotions to target audiences” (according to the text). On a similar note, the book continues by stating “companies use the Internet to create buzz, encouraging word-of-mouth communications whereby consumers communicate among themselves about products.” Home Depot has most certainly created a buzz, as it made headlines in Business Week. I personally am not sure how I feel regarding Home Depot’s web motives, I personally wouldn’t order anything off the web from this particular company, but I can see how it would be useful to research products prior to entering the store. Therefore, I would more or less prefer the in-store pick up model which would provide an excellent service to customers. In general, I feel Home Depot has done a good job Integrating Marketing Communication (IMC) which according to the text “requires a planned, coordinated, integrated campaign with more than one promotion tool that has one voice, one look, and one feel.” Their main communication message at this time is: “You can do it. We can help.” I look forward to seeing Home Depot’s advancement and the outcome of their new web improvements.

Best of luck to Home Depot and handymen & women worldwide!

Photo Source: Home Depot


At 11:50 AM, Blogger Claire Callahan said...

The CEO of Home Depot is very optimistic about the online sales of their products. I think I might agree with him that the potential for internet sales is definably out there. I know that my dad practically lives at a Home Depot and would use the internet to find exactly what he needs before he comes in to the store. I think Home Depots best bet would be the in-store pick-up model. I could see someone like me needing something but not know where to start in their huge stores. I would be able to find it online and have it ready for me when I get to the store. I think the internet sales for Home Depot could be high enough to meet the expectations of their CEO!

At 1:12 AM, Blogger Yukiko K said...

I wonder whether it can be accomplished that the CEO of Home Depot says about online shopping. I am not a big fan of Home Depot, so I seldom go there. But I guess that customers want to go to an actual store and to get the advice from a worker. The advisement and service would be their sales point, which I wonder whether to change it. In addition, Home Depot is everywhere and customers can visit the store, so I think they should do more like in-store pick-up model. When picking up a product ordered online, customers are able to talk to the worker. Also, many people might want to see and touch product for home decollation by themselves because, for example, the color often looks different from seeing on the screen of a computer. So, in my opinion, they should consider about too much focus on online shopping.

At 2:49 PM, Blogger dschulte said...

I think this is a great move for Home Depot and its customers. Already a giant in the home improvement industry, the advantage of having their products online is priceless. Even if not for purchase, customers can do their research online, figure out what exactly it is they want, then go to the store and buy it. I also like the idea of a in-store pick up because it saves the customer shipping costs as well as giving the customer the opportunity to check and make sure the right product is being delivered. Home Depot already has an excellent reputation for selling high quality products, now by expanding online; they have made it more convenient for their customers.

At 1:43 AM, Blogger Michel said...

One of the major reasons for the increase in online purchasing has been the convenience and security of the shopping cart feature which is available on almost every e-commerce site. The virtual interface of putting things into a 'cart' has a comfortable familiarity to offline shopping.


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