Retail Champions 2020: Home Depot

This is the third online installment of the HomeWorld Business 2020 Retail Champions, a special report from the May 18th print edition examining six retailers that will lead the post-COVID-19 retail recovery. View a digital version of the entire May 18 edition by clicking one of these links: Flipbook or PDF.

ATLANTA— Home Depot has experienced some tailwinds through the buffets of the COVID-19 pandemic, as experienced by the home center/hardware channel, that should position it to maintain momentum through the next stages of recovery from the crisis.

After gaining designation as essential businesses, home centers/hardware stores remained open as the crisis descended despite other retail shutdowns. The designation turned out to be a double benefit as consumers who couldn’t get household essentials and cleaning products from their typical sources turned to Home Depot and other retailers who they otherwise would tap for DIY products. Then consumers started shopping for items to help with lawn and garden and minor home repair projects as they sought a good way to occupy their time while subject to stay-at-home requirements.

To deal with the coronavirus-impacted retail environment, Home Depot institutes customer and employee health safety measures and cancelled all of its spring promotions to avoid driving too much foot traffic to stores. At the same time, it adapted some services including to-vehicle delivery of products as well as the experience of helping consumers deal with extreme events such as hurricanes to better serve the range of customers during the COVID-19 outbreak. Home Depot spokesperson, Christina Cornell, said the company had seen “increased demand for curbside pickup and delivery, and we’ve expanded curbside pickup to the majority of our stores nationwide.”

She added, “As an essential retailer, we know the communities we serve look to us to provide vital products, which is why we’re committed to keeping stores open just as we always do during times of crisis and natural disaster. If you have a plumbing leak, or if your hot water heater goes out, home improvement stores become incredibly important to find urgent repair needs. Plus, a lot of pros depend on us to continue serving their customers. Our stores and supply chain teams have done a phenomenal job pivoting and adapting to increased demand in certain product categories and greater demand for customer delivery.”

As COVID-19 impacted customers, basic DIY and lawn and garden products did well, even as the company put an emphasis “on meeting the essential needs of our customers and communities,” she said.

Although prospects for Home Depot are positive, Matt Zielenski, an analyst with The Freedonia Group, a division of MarketResearch.com, said DIY retailers benefited from extra foot traffic where allowable as consumer movement restrictions spread. At that point, Home Depot has to manage in a suddenly altered store environment.

“In some areas, bored consumers are wandering around stores that are still open because of their essential status,” he said. “That has led to harder hit areas— like Michigan and New York— to restrict in-person sales of lawn and garden products so that those and other product groupings that are considered nonessential are closed to in-person shopping. We expect this trend to play out, to some degree, as more consumers become economically anxious and unwilling to spend on all but the most important repairs. However, as the weather continues to improve and consumers look to develop their own food gardens as extra insurance against food insecurity, we expect sales in the garden category to pick up, albeit with greater emphasis on delivered products or curbside pickup.”

Home centers/hardware stores continue to enjoy an opportunity to expand their customer base. As some regions of the U.S. continue to experience broad consumer movement restrictions, Zielenski said, when DIY retailers get consumers to shop the store or shop it more often, “those customers are more likely to pick up other items like accessories for their grill or items to entertain their children, and maybe even plan future projects while they are there.”

The movement of Millennials into more suburban locations over the past couple of years as they begin raising families has provided Home Depot with the chance to position itself as a solutions center where new householders can not only purchase needed products but also learn about home repair and renovation through personal interaction with staff or through online presentations. As the COVID-19 crisis prompts more consumer footsteps through the door, the company has additional opportunities to emphasize its role as a homeowner resource, a position the coronavirus crisis has only underscored.

“Just being available to help customers solve problems in this crisis period will help build loyalty in the future,” Zielenski said. “New homeowners are probably feeling pretty on their own right now, with family members and friends who they would otherwise turn to unable to help complete or provide guidance for home projects. This is where retailers can step in. While physical distancing guidelines are restricting their ability to offer in-person classes, even having online instructional videos for common projects, including consumer education on selecting products needed for seasonal outdoor projects, will help. Such features will also help serve customers who are being encouraged to limit visits to stores and when extended chats with staff may not be recommended.”

Just how much traction Home Depot can pick up with consumers in the coronavirus-hobbled marketplace is hard to estimate, Josh Winters, a Euromonitor analyst, noted. Yet, by communicating the support it can offer to consumers who are looking to save money doing their own home renovations, Home Depot can leverage the current market conditions to build a relationship with the next generation of core customers. Although nothing is certain, Home Depot is in a position to make ground with “younger people wanting to do renovations, wanting to do DIY, and seeking out that expertise,” Winters said.

One question that looms over Home Depot’s prospects is whether or not the current recessionary economic environment will set it back after consumers no longer need it for household essentials. Two schools of thought emerge, one that consumers will pull back their spending on domestic projects, the other that economic worries will make consumers take on more home repairs themselves. Many consumers who visited Home Depot during their household confinements now understand that it is a broader product purveyor, and that’s knowledge the company can leverage.

Although Euromonitor does predict that the second quarter will begin a gradual deceleration of home center/hardware store channel sales, the market research firm also noted small home projects should keep consumers involved with the channel as it turns positive in the relative short term. Euromonitor suggested that the coronavirus crisis could prompt major home centers including Home Depot to reconsider what it characterized as an underused online operation. The company recently launched television advertising for furniture, a product category it hasn’t emphasized in some time. Considering that furniture is an online business for Home Depot, that reconsideration may be in progress.