Savvy Top 500 chain retailers use stores to grow online

April 22, 2014 10:01 AM

For a sales channel that runs on networks and computers, e-commerce at The Home Depot Inc. (No. 16) sure involves lots of stores and personnel decked out in orange aprons.

In 2013, e-commerce was Home Depot’s fastest-growing channel, increasing 53.6% to $2.75 billion in web sales from $1.79 billion in 2012. Home Depot’s online sales increased eight times faster than the retailer’s comparable-store sales growth of 6.8%. Home Depot is one of 159 chain retailers ranked in Internet Retailer’s newly published 2014 Top 500 Guide.

Much of the growth came from involving the chain’s 2,000 stores more closely in e-commerce and figuring out new ways to use the web to encourage shoppers to buy more once they set foot in stores, says senior vice president and president of online Kevin Hofmann.

The 2013 growth stems from Home Depot’s ambitious steps to grow e-commerce over the past three years. In January 2014 the company completed its acquisition of online window treatments retailer for an undisclosed price, and opened an e-commerce warehouse in Locust Grove, GA, a suburb of Atlanta, the first of three such facilities in the works. The chain also plans to open warehouses in California and Ohio over the next two years to handle online orders. Home Depot intends to focus more on same-day shipping of web orders and enabling online consumers to have products delivered from stores—all part of a $300 million investment plan to boost e-retail, warehouse and supply chain capabilities.

Central to Home Depot’s e-commerce expansion is using its big national network of stores to facilitate more online transactions and generate more in-store purchases from web shoppers. “If we didn’t use our 2,000 stores as a strategic asset we wouldn’t have the e-commerce growth and program we have today,” Hofmann says. “When it comes to the web and the stores we look at this as interconnected retail.”

As a big chain retailer Home Depot focuses on how best to use its stores to boost e-commerce, Hofmann says. And Home Depot isn’t alone. Data from the Internet Retailer 2014 Top 500 Guide show many of the retail chains growing the fastest online are the ones doing the most to tie together their stores and web sites in hopes of maximizing convenience for shoppers—and providing services an online-only retailer like Inc. (No. 1) can’t.

Of the 159 chain retailers ranked in the 2014 Top 500 Guide, the 24 chains that used their bricks-and-mortar locations to offer such services as buy online and pick up in store, ship to store and return to store increased their combined annual web sales 27.0% to $23.84 billion from $18.77 billion. That’s twice as fast as the remaining 135 chains that offered only limited or no store-based shipping options. Those chains increased their collective web sales 13.4% to $64.91 billion from $57.25 billion.

Best Buy (No. 15) offers all three store shipping options, and credits those programs with helping web sales increase 19.7% to $3.04 billion in 2013 from $2.54 billion a year earlier. About 40% of Best Buy’s web customers choose to pick up their purchases in a store, says chief financial officer Sharon McCollam. And 20% of customers who pick up in stores also make additional purchases, raising average order values by 40%, the retailer says.

“We think store pick-up is an enormous competitive advantage, because the customer wants it now, and no matter what the online competitors do, they cannot deliver it ‘now,’” McCollam told Wall Street analysts on a 2013 earnings call.

For more information on how to order the 2014 edition of Internet Retailer's Top 500 Guide click here.




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