February 21, 2006

Home Depot Moves to Expand Online Sales

ATLANTA -- Home Depot Inc. is on a mission to give its stores endless aisles.

The top home improvement retailer has a bold vision to expand its online sales, including plans to broadcast live product demonstrations and how-to infomercials on its Web site, automation of special-order sales, and new catalogs focused on categories such as outdoor living.

The plan includes company-branded kiosks where consumers can surf http://www.homedepot.com and buy goods at any time wherever they are, be that a Home Depot store, mega-mall or maybe even an airport. Such self-service kiosks are already being tested in 50 Home Depot stores and at two Georgia malls.

"As shoppers become increasingly time starved, they are looking to shop any time, anywhere," said Harvey Seegers, president of Home Depot Direct, the 1,000-employee division that handles online and catalog sales.

"We're going to be investigating different channels of shopping in the upcoming years and the ones that get approved will become permanent," Seegers said in an interview.

Online retailing is an explosive growth business. For example, Internet research firm Nielsen/NetRatings tracked 92.3 million online purchases in December 2005, up from 61.9 million a year earlier.

"Retailers are able to extend their business online and capture significant sales," said Heather Dougherty, senior retail analyst at Neilsen/NetRatings.

Home Depot did not give figures, but said its online sales grew 100 percent in the past year. Over the next few years, the retailer sees potential for online/catalog sales to reach $1 billion, an e-commerce sales level already reached by discounter Wal-Mart Stores Inc.

Home and garden is among the product categories seeing the most growth in online sales. "People are becoming comfortable buying things like appliances online now," Dougherty said.

For Home Depot, online expansion is crucial to growth as new-store openings slow and smaller rival Lowe's Cos. Inc. moves aggressively into big U.S. cities.

The Atlanta retailer is stepping up its push into other markets as well, illustrated by its $3.2 billion bid in January for Hughes Supply Inc., which distributes construction materials to builders and other commercial contractors.


Home Depot redesigned its Web site a few years ago, making it more visually appealing, easier to navigate and adding gift registries. Currently, 30,000 products can be bought online, half of which include electronics, gym equipment and furniture that is not sold in Home Depot's more than 2,000 stores.

Now that 60 percent of U.S. households have broadband Internet capability, Seegers said Home Depot is investing in technology that will enable consumers to shop on homedepot.com from kiosks in various settings, home computer or cable and satellite television or from their personal digital assistant.

"I envision a day where we have complete convergence between cable, satellite and the Internet," Seegers said.

In coming years, consumers will be able to see live and archived broadcasts of projects such as deck building on the retailer's Web site, send questions to experts for quick responses and access three-dimensional product demonstrations, Seegers said.

"A retailer can stand out by offering that kind of depth of information and making (Internet shopping) an enjoyable experience, particularly now because you do have so many more people on broadband," said Dougherty, the Nielsen/NetRatings analyst.

New catalog businesses are also key to Home Depot's online expansion. Last year, the retailer launched 10 Crescent Lane and Paces Trading, catalogs aimed at affluent women that will compete with high-end catalogs from companies such as Williams-Sonoma Inc.

The 10 Crescent Lane catalog offers products such as a $2,000 headboard, while Paces Trading features upscale lighting. Both brands have their own Web sites.

At the end of this month, Home Depot will start displaying a catalog of outdoor living equipment in its stores that includes pools, swing sets and furniture, just in time for spring. All products in the catalog, which will eventually be mailed to homes, will be available for purchase online.

Special orders, which currently are mainly placed in stores, will also be moving to the Internet, pushing Home Depot's online sales into the several billions of dollars, Seegers added.


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