Home Depot Hopes SAP Can Help Boost Sales
The home improvement retailer, fresh off spending $1 billion in the last three years on self-checkout aisles and other store systems, wants to give its associates "real-time access" to information about products and customers, its executive vice president and chief information officer, Robert DeRodes, said at the Sapphire 2005 conference in Boston.
That is part of the company's long-range plans, he said, and will be based on information systems it will put in place in conjunction with conference host SAP AG, the enterprise software supplier.
DeRodes said Home Depot will convert all its basic operations over the next seven years to run on SAP software, in a deal estimated on the floor of the convention to be worth approximately $50 million.
As part of those long-range plans, associates in the aisles will be able to pull up details on the products they sell, possible uses and capabilities, appropriateness for various projects, and their availability, DeRodes told Baseline. They'll also be able to find information on the customer they're talking to, including past transaction history.
Employees will be able to retrieve information on any digital device, DeRodes said, from a terminal at a customer service desk to kiosks in aisles to handheld computers.
This information-based customer-service blitz comes as Home Depot tries to fend off competition from Lowe's Cos., particularly in North America. Home Depot hopes to double in size in the next five years, to $150 billion in annual revenue.
Before the company's big investment in "digitizing the Depot" began three years ago under new chief executive Robert Nardelli, "the No. 2 pencil used to be the most important network technology we had," DeRodes said.
Now, its most visible technology is in checkout aisles at its stores where customers scan their own purchases and pay for them. That effort ("Home Depot Self-Checkout Boosts Sales, Satisfaction," Baseline, April 2005) has boosted the Depot's bottom line, although customers have said they find the system does not deal well with the complete variety of odd-shaped and heavy merchandise found in a home improvement warehouse.
The conversion to standardized information systems, from financial reporting to inventory tracking, on SAP software will help Home Depot expand in four new strategic directions, DeRodes said. Home Depot expects its fastest-growing businesses to be in-home installation services, Web retailing, sales to commercial contractors and international operations. Each could add more than $10 billion a year of revenue in the next five years, DeRodes said.
Sales to commercial contractors will be handled through different outlets than its sales to consumers through its big box stores, DeRodes said, and may be handled under brands it owns, such as White Cap, not just the Home Depot name.
Home Depot has been experimenting with other types of retail outlets, as well.
One is its Expo line of stores with wider aisles and higher-priced goods, aimed at upper-income customers.
However, the company announced on Tuesday that it will close 15 of its 54 Expo Design Center stores over an unspecified period. It also plans to convert five other Expo stores to The Home Depot store format.
The announcement came when Home Depot announced its first-quarter earnings, which increased to $1.25 billion, up from $1.1 billion a year ago. Sales in the quarter reached $19 billion. Its shares rose, while competitor Lowe's shares fell. Lowe's earnings, while jumping 31 percent, failed to increase as much as Wall Street analysts had projected.