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As it sells more online to contractors and other small businesses as well as consumers, the home improvement retailer is sharply expanding its network of distribution centers dedicated to online sales. It’s also engaging B2B as well as B2C customers on mobile apps and expanding pick-up-in-store programs and piloting a deliver-from-store project.
When a construction contractor buys new hammers online from The Home Depot Inc. these days, he will see images of related product, the kind of cross-selling display typical of a consumer-facing e-commerce sites. That increases the chance the contractor will also buy nails, saws and other tools and materials he needs to complete the job, says Kevin Hoffman, senior vice president of online.
That’s great for Home Depot’s total sales—“pro” customers, Home Depot’s term for its business customers, account for 30% of total sales, Hoffman says. But the 50% year-over-year growth in total online sales has stressed the capacity of its two existing distribution centers dedicated to online orders, Hoffman and other Home Depot executives said during the official opening Monday of the company’s newest distribution center, a 1.1-million-square-foot facility in Locust Grove, GA, about 30 miles south of Atlanta.
The Locust Grove facility, which will primarily handle online orders shipped to customers in the southeastern United States, is the first of three distribution centers slated to open within the next year or so, adding a combined total of close to 4 million square feet of warehouse space dedicated to online orders. A second facility is slated to open later this year in California, handling orders shipping to the western U.S. The third facility, covering orders throughout the Midwest, is slated to open next year in Ohio. Each new distribution center will have the capacity to handle up to 100,000 SKUs.
The capacity of the new distribution centers compares with space for up to 80,000 SKUs in each of the company's existing distribution centers for the online channel in Mexico, MO, and Hagerstown, MD, says Scott Spata, vice president, supply chain direct fulfillment, who led a tour of the Locust Grove facility Monday. The company, which also relies drop shipping by suppliers, has more than 600,000 SKUs available through its e-commerce site at HomeDepot.com and about 35,000 SKUs in a typical Home Depot store, a spokeswoman notes.
But the expanded network of e-commerce distribution centers is designed to do more than just hold more items and spread inventory more evenly throughout the country, Spata says. The new centers are also designed with new features customized for online orders that were not built into the Missouri and Maryland facilities, he adds. Applying what Home Depot has learned about handling online orders, the new centers are designed to be more flexible than the older centers and better able to handle large numbers of small as well bulky items, from paint brushes that ship in small packages to power generators shipped via freight.
As customers like contractors order a wider variety of items from multiple product lines in a single order, for example, systems such as a new “put to light” inventory-picking system directs warehouse employees to move the right mix of products from multiple categories from bins on conveyor belts to the correct tote headed for a final packing and shipping station. In other areas of the Locust Grove facility designed to handle orders from single product categories, warehouse workers wear headsets that deliver voice-activated instructions for what to pick from shelves and place into cartons also head for packing and shipping.
For orders of the largest items, other sections of the Locust Grove facility use specially configured rows of racks serviced by employee-driven forklifts designed to move bulky products. For now, bulky products shipped via freight account for about 60% of the space, but only about 10% or more of the number of SKUs, Spata says. But if customer demand changes and Home Depot needs to dedicate more warehouse space to smaller items, the Locust Grove facility, along with the two other new distribution centers, will have the flexibility to adjust how it allocates space between small and large items, Spata says.
Home Depot is also taking other steps to better engage its business as well as consumer customers. Its extended network of online channel distribution centers will allow the retailer to offer additional fulfillment options. These include ordering online for in-store pickup, including placing an online order to ship to a store an item not available in a shopper’s local Home Depot. In addition, the retailer is planning to test this year delivering online orders from in-store stock at about 50 or 60 Home Depot stores across the United States.
It recently launched a mobile Pro App, which, among other things, lets contractors store electronic receipts, reorder materials purchased in past projects, view available in-store inventory, and connect with a service rep at an in-store Pro Desk.
Home Depot is No. 46 in the Internet Retailer 2013 Top 500 Guide, which ranks merchants on their annual web sales.
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