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At a time when there is a lot of talk about investing in e-commerce, this week Home Depot decided to do that in a big way, announcing a $1.2 billion dollar program designed to deliver purchases to homes and job sites with same day or next day services.
The move comes just a month after the latest Home Depot earnings report, where the DIY announced a strong quarter of sales to its Pro Customers, despite not really knowing if the Pro Customer will make the expansion profitable.
In December 2017, Home Depot announced that it will invest more than $11 billion into the business over the next 3 years. Part of that investment will be the $1.2 billion in 170 distribution centers across the country. The goal is to have those centers reach 90% of the U.S. population within a day, cutting delivery times. The delivery will allow for growth in e-commerce, since customers will be able to buy online and have the item shipped to a home or job site.
Home Depot will use the investment to expand its Pro Customer services, even though it is still trying to establish buying patterns. In its May earnings call, Chairman, CEO and President Craig Menear admitted that while Pro purchases remain strong, there is still some instability when it comes to e-commerce. “It’s still early days, and customers are choosing to purchase all sorts of things. It could be a Pro on a jobsite leading something. But there’s a lot also on the Buy Online, Deliver From Store front. So it’s interesting to see where it goes. It’s not taking a real pattern at this point,” Menear announced.
But during the earnings call, Menear did report growth in Pro sales, and that Home Depot would continue to build on those relationships. “Part of the strength we saw in the business can be attributed to the health of our Pro customer as Pro sales once again outpaced DIY sales in the quarter. Investments aimed at deepening our relationship with our Pro customers are yielding increased engagement, which translates to incremental spend. While still early, the combination of enhanced associate tools in the store and expanded delivery capabilities are gaining traction with the Pros,” Menear said.
William Lennie, Executive Vice-President of Outside Sales and Service, agreed with the growth in Pro Customers. “We are seeing them start to utilize more services like delivery, and then as a result, we’re seeing accelerated growth in the accounts that are managed by our passes. So great strength in Pro and top performing Pro trades,” Lennie said.
Home Depot said the $1.2 billion investment will allow the DIY to compete with Grainger and Amazon when it comes to product delivery.