According to Forrester’s July 2019 report, "How The Home Depot Became A Digital Powerhouse,” The Home Depot was “the top Leader in The Forrester Retail Wave™: US Mobile Apps, Q1 2019.” Rightly so, given the significant digital innovations coming out of The Home Depot and the resulting business outcomes: The Home Depot’s Q2 2019 fiscal performance shows a 20 percent increase in online sales with ~50 percent of U.S. online orders being picked up in-store.
So, the question for other retailers—or any business facing a need to digitally transform—is how did they do it? This post will cover the need for mastering an omnichannel experience in retail, for investing in the right technologies to operate like a software company, and for taking a customer-centric approach to design.
The Retail Omni-Channel Imperative: Integrating Digital with Core Business
We are accustomed to an unprecedented level of consumer choice, personalization, and speed of fulfillment. It wasn’t that long ago when we had to go into actual stores to buy things. These days we can acquire almost anything as long as there is an internet connection. Perhaps not surprisingly, the experience of shopping online versus in-store can be strikingly disparate. I can speed through my shopping list of back-to-school gear, a power drill, and even groceries in a matter of minutes on my smartphone. This would take hours to do the old fashioned way.
There are times when going into a physical store is essential—even fun! Browsing books, choosing houseplants and testing the ergonomics of a kitchen faucet are simply better in person. Despite the ubiquity of e-commerce, brick-and-mortar shops are still where the majority of shoppers spend money. The advent of omnichannel in retail gives consumers the best of both digital and in-person shopping experiences—and appears to be a crowd-pleasing combination. According to Forrester, in the $3.7 trillion US retail market, 14 percent of all sales take place directly online—far behind the 39 percent of all retail sales that take place offline but are influenced by digital. Even so, there’s no question that e-commerce will continue to grow its slice of market share: From 2008-2018, the share of online retail sales in the US increased from $142 billion to over $517 billion.
This leaves retailers with an ultimatum: develop omnichannel capabilities that offer a seamless buying experience, or risk losing customers. Omnichannel will only become more important as consumers come to expect a highly efficient and personalized experience, regardless of how and where they shop. In this new omnichannel world, retailers like The Home Depot and DICK’s Sporting Goods stand out for leveraging digital to build user-centered solutions that improve the in-store customer experience and directly impact sales.
DICK’s worked with Pivotal Labs to develop new applications used in-store such as MerchSearch, which provides a data-rich experience including inventory availability and related product recommendations in real-time. DICK’s Q2 2019 earnings show the company’s strongest quarterly comp sales gain since 2016 with a 3.2 percent increase in consolidated same-store sales and a 21 percent increase in e-commerce channels. (You can read more about DICK’s digital transformation and watch a webinar replay on DICK's application modernization efforts).
The Home Depot mobile app is a shining example of how digital can be used to create an efficient shopping experience without losing the fun factor that comes with being at a physical store (i.e. browsing the hardware cubbies of nails, bolts, and screws in every imaginable size). Using voice search, chat, AI and augmented reality, The Home Depot’s mobile app helps consumers find and purchase products quickly in a variety of ways. It is packed with robust and useful features including image-based product search, and navigation that helps shoppers locate specific items when visiting a store.
Operating Like a Software Company: Investing In Technology
So what does it take for a home-improvement retailer selling hardware and two-by-fours to be dubbed a digital powerhouse? How did The Home Depot grow into a company that embraces building software as a means to sell more hammers? The Forrester report highlights tactics that worked for The Home Depot. These include investing in the technology “needed to operate like a software company and attract developers.” The report also notes The Home Depot’s decision to engage with Pivotal Labs:
“Recognizing the strength of agility, the retailer took part in Pivotal Labs to spread modern delivery practices across the company.”
Marrying modern development processes with technology that enables fast feedback loops allows The Home Depot to take risks they might not have taken if they weren’t set-up to iterate quickly. In a podcast interview, The Home Depot’s Anthony McCulley shared that, “[Pivotal Platform] was really cool for empowering all of our developers, and they loved it, and they could choose the languages they wanted to work in, and I guess they enjoyed the way that we ran the platform.”
Ultimately, these tools and practices nourish a culture of creativity, experimentation and allow for fast changes and tight feedback loops. McCulley reported that The Home Depot has “4,000 apps or services in production” on Pivotal Platform with “17 billion HTTP requests in production [and] we're still around 400 to 500 production changes a week in production [sic]. And the changes made from incidents is at less than 1 percent. If you look at those 400 to 500 production changes each week, 0.06 percent of those are due to incidents,” he said. That volume and velocity of changes in production reflect an intense pace of innovation and development at The Home Depot, as well as the importance of user feedback to their development process. It also demonstrates the ability to make changes quickly when something isn’t working. “If you're doing these fast feedback loops, I think what we need to celebrate more often is the things that we didn't invest in; what we learned was the wrong thing to do,” McCulley said.
The Home Depot mobile app in the App Store
Fast feedback loops and iteration is an important capability for practicing user-centered design, a pillar of Pivotal Labs methodology. The Home Depot’s mobile team has embraced this practice along with pair programming and lean management. As the Forrester report noted, “Mobile teams obsess over the customer journey rather than point-in-time experiences. These teams get out of the building and follow customers along the entire process to provide the best experience.” This helps explain why The Home Depot mobile app has so many interesting features that are truly useful to shoppers.
All in all, the Forrester report finds The Home Depot’s approach successful and the company to be “a destination [for developers] by showcasing its modern software tools, tech, and processes, such as pair programming and speedy iterations.” Investing in technology, hiring experts to teach their organizations to “think digital and act agile,” combined with a highly visible digital strategy, and creative ways to upskill talent is a proven way to drive digital success.
The Forrester blog, A Blueprint For Pragmatic Digital Transformation: The Home Depot Story, summarizes the full report on how The Home Depot approached its digital makeover and offers tips for accelerating your brand’s digital evolution.
Watch the most recent talks from The Home Depot at SpringOne Platform to learn more about the company's accomplishments and lessons learned along the way:
Keynote by Barbara Sanders, Vice President and Chief Architect, The Home Depot
Enterprise Application Migration, Ashley Eckard, Senior Systems Engineer, The Home Depot
Time to Good DX, Claire Moss, Senior Software Engineer and Cheryl Spruce, Senior Product Manager, The Home Depot
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