Jul 1, 2018 - Economy

Go deeper: Amazon has met its match in Home Depot

Home Depot storefront

Photo: Michael Brochstein/SOPA Images/LightRocket via Getty Images

Home Depot plans to invest $1.2 billion over the next five years to increase its supply chain and distribution abilities in an effort to keep disruptors like Amazon out of its home improvement market, reports the Wall Street Journal's Jennifer Smith.

The big picture: Despite being the number one home improvement retailer, Home Depot recognizes the power of e-commerce giants like Amazon that have a hand in nearly every market. So far, the company's plan to dominate the home improvement market and keep competitors at bay has been working.

What they're doing: To reduce labor costs, Home Depot looks for convenience factors, like faster deliveries, a better online shopping experience, and stores that help customers find items quicker with a faster check out rate.

By the numbers:

  • The $1.2 billion investment will go toward 170 new distribution facilities in the U.S., which will allow 90% of the country to have same-day or next-day delivery by 2020, writes Smith.
  • The investment is part of a larger $11 billion plan announced in December 2017 to deflect Amazon and Lowes.
  • Home Depot hired 1,000 people so far this year to beef up its technology teams in software engineering, user experience design, network engineering, and product management, reports Recode's Jason Del Ray.

Full disclosure: Amazon still surpasses Home Depot as an international business power. Amazon's revenue was nearly $178 billion in 2017 in while Home Depot's revenue was roughly $101 billion.

  • Yes, but: Home improvement is one market in which Amazon has struggled to break through. Most of the time, people need home improvement products immediately — and the names, sizes, and product specifics can be hard to search online for customers who are not sure what they need, GlobalData retail managing director Neil Saunders tells Axios.

The state of play:

  • Home Depot's stock price is up 40% just this year, the opposite of continuing horror stories in retail.
  • Nine out of 10 people in the U.S. live within 10 miles of a Home Depot location.
  • 45% of Home Depot's online orders are picked up in stores and 85% of online returns are completed in stores, Home Depot's executive vice president of U.S. stores, Ann-Marie Campbell, said at an investor and analysis conference.
  • The company has grown its online sales by $1 billion each year.
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