the online experience: key focus areas for big box retailers

As online shopping continues to gain traction, the overall retail experience is becoming more critical to the success of big box retailers. Online product research now plays a huge role regardless of where the purchase ultimately occurs. Whether buying online or in-store, the consumer shopping journey often begins long before the final sale, challenging all retailers (especially big box) to more carefully craft the sales path from beginning to end.

The retail experience is becoming more critical to the success of big box retailers. “Retail” is defined very differently today than in the past, as it no longer refers only to brick and mortar. Online purchasing plays an ever-increasing role in the overall retail experience, so much so that time spent in the physical stores of most mass merchants is decreasing, as are the number of store locations. The primary reason for this is that there is so much online interaction prior to, during and after the purchase, which influences the selection process, brands in consideration, time in store and actual purchase.

rising to the challenge through targeted action

In order to keep up with this switch to digital retail, it is important to know how to address the expectations that come with it. What are the challenges associated with the new retail experience and what actions need to be taken to meet them?

Challenge:
Retailers are expecting their vendor partners not only to be the expert in their category, but also to be more knowledgeable and proactive in providing an evolving strong digital interaction experience on their site and any supportive sites.

Action:
Make sure you have an experienced internal or partner team that understands the trends and can demonstrate to the big boxes that you are bringing proactive ideas on trend with retail evolution. Otherwise, the retailer will simply dictate direction to you.

Challenge:
Retailers are eliminating slower-turning SKUs on the shelf and moving them online.

Action:
Make sure you are deeply analyzing your SKUs’ performance and be more proactive in your recommendations.

Challenge:
More online sales are being picked up in stores.

Action:
Define a plan in collaboration with the retailer to leverage the in-store pick-up process for incremental add-ons and project-related sales.

Challenge:
One of the key barriers to growth is logistics.

Action:
Don’t just look at your products and marketing; look at how you may be able to leverage your unique logistical approach to aiding in their growth.

Challenge:
Content strategies need to remain robust and evolving.

Action:
Identify, target and leverage ever-changing key trends, weather and seasonality, consumer purchase triggers and consumer data consumption approaches to purposefully prompt customer actions. Use this content for associate training, as they have an impact on in-store and online sales.

Challenge:
Online content is critical and at the top of a retailer’s list of support from their vendors.

Action:
Utilize strong comparative data versus other expected options. Invest in how-to videos, as they are critical for online sales both to create confidence pre-purchase as well as to help make the project run smoother. Project-specific content is what consumers are expecting, especially millennials who use this content to take on R&R projects. Make sure your content is up-to-date, fact-based, relevant and realistic (i.e., videos shouldn’t be too overproduced).

Challenge:
Reviews are more credible than your brand.

Action:
Continually analyze your review scores and comments. These are a great barometer not only of product quality but also of the overall experience with your product and a consumer’s needs assessment. Needs assessment can help to drive things like new product development opportunities.

online customer experience facts

  • 88% of consumers research their buys online before making a purchase either online or in-store.
  • 85% of consumers trust consumer reviews more than they trust the info they get from corporate brands themselves.
  • Video has a growing impact on the selection process.
  • 64% of consumers make a purchase after watching branded social videos.
  • YouTube has over a billion users, which is almost one-third of total internet users.

case study: The Home Depot online vs. Lowe’s online

​The Home Depot Online

The Home Depot has historically been the most aggressive of the two retailers in driving sales to online. Recent shareholder calls and interviews have revealed a few key data points.

  • Online sales now represent 6.7% of total sales. Based on that sales percentage, e-commerce accounted for approximately $6.76 billion of The Home Depot’s business last year.
  • Online sales grew 21% in the fourth quarter of 2018 and 21.5% overall when compared to FY2017.
  • The Home Depot ranks no. 7 in the Internet Retailer 2018 Top 500 list according to its CEO in a recent earnings call. He also mentioned that buy online/ship-to-store and buy online/pick-up-in-store sales both grew faster than the overall online sales growth rate.
  • 48% of the retailer’s orders during the 4th quarter of 2018 were picked up in stores, which was up 45% compared to the same period last year.
  • The Home Depot can now ship to 95% of the U.S. population in two days or less. The retailer intends to reach 90% of the population with same-day shipping by 2020.
  • Online success can be attributed to a new e-commerce platform, enhanced search and mobile functionality, increased checkout speed and expanded chat functionality to improve the customer experience with online contact centers.
  • The Home Depot continues to invest in digital properties, increasing traffic and conversion.
  • The company has been pushing for faster, more efficient delivery on a wider selection of products. To achieve this, a $1.2 billion supply chain upgrade called “One Home Depot Supply Chain” was created and includes a number of pilot fulfillment centers. The centers came online this year and will open over the next 12 months.
  • Professional contractors accounted for 45% of The Home Depot’s customer base, or more than $45 billion. This has been a consistent mix for the last few years.

Lowe’s Online

Lowe’s is starting to catch up with The Home Depot on focus and execution of their online strategy and performance.

  • Online sales now represent 4.9% of total sales. Based on that sales percentage, e-commerce accounted for approximately $3.3B of sales last year.
  • Lowe’s ranked No. 21 in the Internet Retailer 2018 Top 1000.
  • Lowe’s Companies, Inc. grew online sales 11% during its fourth quarter of 2019.
  • The company’s 60% pick-up-in-store online order rate topped The Home Depot’s by 50%.
  • Missteps have occurred, slowing down the retailer at times. On a recent call with investors, Lowe’s CEO stated, “While traffic to our website was strong, we were unable to fully capitalize on the traffic due to system challenges, such as the outages we experienced on Black Friday weekend.”
  • To ensure smoother online sales growth, the company hired Mike Amend as President of Online Business in January. Amend previously led omnichannel efforts at J.C. Penney Company, Inc.
  • Part of realizing this growth will include an increased online assortment in 2019, shifting slower-moving products out of stores and onto the website to improve the return on store inventory. It will also include training store employees on using that online selection to satisfy in-store shoppers.
  • Two recent acquisitions are helping to grow online and offline professional builder sales: Laurel, MD-based Central Wholesalers, a distributor of maintenance, repair and operations products serving the Mid-Atlantic and Northeast, and Maintenance Supply Headquarters, a Houston-based distributor of MRO products used to maintain facilities in the multifamily housing industry. These two acquisitions expanded the Lowe’s MRO business to 16 distribution centers and more than $400 million in annual sales.

As you look at marketing and engagement strategies for your products, it’s important to understand the focus and resources The Home Depot and Lowe’s are putting into (really “betting on”) their online experience to fuel the growth of overall sales. Keeping key insights in mind is essential for maintaining productive online big box marketing and engagement strategies in the new retail experience.

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