Home Depot's magic value: Returns

During an August investors call, Home Depot CEO Craig Menear let loose a stunning stat: 90% of all online returns are processed in-store.

During an August investors call, Home Depot CEO Craig Menear let loose a stunning stat: 90% of all online returns are processed in-store. Allowing an online return to be boxed and handled by a local store has always been a popular feature, but this is the first a primarily physical chain has released a returns percentage anywhere close to 90.

This forces us to consider what is the objective behind in-store returns of mobile items. Is it mostly a shopper convenience — to boost their confidence at purchasing something online that they're certain about — or is it a tactic to lure online shoppers into the store, where they might as well buy a lot more stuff?

This is the plus side of being store-centric, something that has been limiting how often Walmart has been able to go with its repeatedly attempted merged channel strategies, although its recent Jet move may give it another shot.

Home Depot's return effort isn't seen by customers as a reach. It actually is the most convenient way to do a return, especially some of the more awkwardly shaped items that Home Depot sells. Shoe stores' mostly uniform box sizes make returns a tad bit easier, as long as you have a shoebox lying around. Home Depot has wonderfully executed this as a soft sell. It's not including any special incentives to upsell shoppers, although that may happen in time.

Let's dig a bit deeper into those stats.

Here's Menear's take on his team's online sales results: "Our online business had sales growth of approximately 19 percent versus last year and represented 5.6 percent of total sales. So, 42 percent of online orders are picked up in the store and 90 percent of returns are processed in the store and then one of the big benefits following the rollout of comp is we are now following with what we call Buy Online Deliver from Store," Menear said. "We’ve always delivered from our stores. The difference now is you can execute the transaction online and pick much shorter delivery window for your delivery. We are in about 700 plus stores now with buy online deliver from store very early days. We will be finished with that rollout by the end of this year and we're seeing really nice pickup from our customers and reuse, particularly our Pros, who have used buy online deliver from store coming back and using it a second and third time. So we think that fulfillment number which is the 42 percent will grow when we include Buy Online Deliver from Store deliveries in that number."

That delivery issue is more interesting because Home Depot had, until very recently, not considered the customer's location when projecting a delivery window. That a major operation like Home Depot would somehow think that destination location was not something to include in the calculation is a pretty stunning admission. Adding that location is something the chain has dubbed Dynamic ETA — presumably because Common Sense ETA was already taken.

"Dynamic ETA provides a delivery date based on the customer's location. In the past, we issued a generic delivery window estimate, which allowed for extra time or cushion for the delivery commitment to customers, Menear said. "As we’ve begun to implement the dynamic ETA, our promised delivery date to customers is earlier and more accurately estimated. As a result, we're seeing an increased conversion in customer satisfaction."

Another interesting Home Depot stat is that, according to merchandising EVP Ted Decker, "mobile and tablet are over 50 percent of our traffic and are important tools that our customers use to engage with our products, our stores and our associates." Two thoughts. First, Home Depot doesn't consider tablets to be mobile? Setting that aside, I would have been curious to see the breakdown between what presumably are phones and tablets.

It's not surprising, though, that laptops and PCs have fallen to minority status. Again, specifics would help. If phones and tablets combined are 51% of traffic, that's in the norm. But if laptops/PCs have fallen below 30%, that starts to get interesting. It's a figure stat to watch across all chains over the next year or two, to see how quickly desktops dissolve away.

Copyright © 2016 IDG Communications, Inc.

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