Home Depot Inc (NYSE: HD) Has Built A Moat for Its Digital Sales Strategy

Home Depot Inc (NYSE: HD) is one of the few retailers with an integrated digital sales strategy that has made its immune to Amazon.com, Inc. (NASDAQ: AMZN) e-commerce threat. While many other physical retailers are reporting declining comp sales growth, Home Depot recently reported comps growth of close to 8% fueled by growing digital sales.

Article Summary

Home Depot has created an integrated digital sales strategy rivalling Amazon’s.

The company leads its closest competitor Lowe’s in the home improvement market.

The company has strong financials and promising future prospects.

Here’s the trading report on HD.

The specialty home improvement retailer launched an interconnected retail strategy that it has been successfully implementing for the past few years. The retail strategy aimed at streamlining all the company’s operations by integrating its key functions, which are in-store and digital sales accompanied by deliveries and returns.

The company’s unique digital and retail strategy has provided a seamless e-commerce experience for its customers, which has created a moat for its digital sales that cannot be breached by Amazon. The retailers continues to outperform its closest competitor Lowe's Companies, Inc. (NYSE: LOW), which is expected to generate about $68.45 billion in revenue this year, while Home Depot is likely to gross over $100 billion in sales.  

Given its massive scale, Home Depot is able to negotiate huge discounts with its supplies, which allows it to pass on the price discounts to its customers. Home Depot consistently offers low prices to its customers, which is a crucial factor given that home improvement customers are extremely price conscious.

Home Depot’s digital sales have grown at a rate of about 20% over the past five years leading to digital sales contributing 6.2% of net sales in Q3 2017 as compared to fiscal 2012 where digital sales contributed 2.4% of net sales. The double digit growth in digital sales is contributing significantly to retailer’s overall sales, which have been growing at a much slower rate of 5%.

The company’s integrated digital sales systems allows customers to buy online and pick up in-store, return in-store, ship to store, as well as deliver from the store. The company applies digital marketing to attract customers to its website as well as its mobile applications where its offers advanced search improvements accompanied by a superior user experience.

The integrated digital sales strategy has allowed the company to emerge as a leader in the home improvement industry, which has proven quite immune to the ‘Amazon threat.’ The company’s future prospects look promising given that it has generated excellent financial performance despite fluctuations in the housing market.

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