Retailers that are surviving and thriving are reaping rewards during the COVID-19 pandemic from digital transformation investments and bets on omnichannel delivery. What's emerged is a retailing playbook that will be widely adopted.
This week brought financial results from retailing giants that have benefited from a series of events. In the cases of Home Depot and Lowe's, results are driven by home investments spurred by lockdowns, remote work and education needs. Walmart and Target were essential retailers during the COVID-19 pandemic lockdown and have leveraged shop online and pickup in store, delivery and curbside pickup.
All of those retailers have different levels of digital investments, but the results are stunning.
- Lowe's saw US same store sales increase 35.1% with Lowes.com sales up 135%.
- Home Depot US same store sales were up 25% in the second quarter.
- Target's second quarter same store sales were up 24.3% with digital comparable revenue up 195%. Same-day services such as order pick up, drive up and Shipt grew 273%.
- Walmart same store sales in the second quarter were up 9.3% with e-commerce sales up 97%.
Here are the common themes from the four retailers based on earnings call transcripts.
Buy online pickup in store.
Before the COVID-19 pandemic, buy online and pick up in store models were a nice perk. During the pandemic, these models helped save retailers.
Target has focused on same-day services with buy online and pickup in store, delivery and curbside pickup. The systems keep contact with customers and save money on shipping. CEO Brian Cornell said:
Among our store-enabled digital fulfillment options, we continue to see the most rapid growth in our same-day offerings in-store pickup, Drive Up and Shipt. These services offer speed, reliability, convenience and value to our guests. They are digital capabilities enhanced by human interaction, even though they're contactless. This explains why they generate some of the highest levels of satisfaction of anything we provide.
Walmart has also focused on pickup services and Home Depot noted that 60% of customers are opting to order online and pick up at a store.
Home Depot CEO Craig Menear said:
Our interconnected retail strategy and underlying technology infrastructures have supported record web traffic on a consistent basis for the past several months. Sales leveraging our digital platforms increased approximately 100% in the quarter and more than 60% of the time, our customers opted to pick up their order at a store. The accelerated growth of our interconnected and digital offerings has given us the opportunity to showcase, in a very condensed time frame, new capabilities in different ways to engage with The Home Depot that customers may not have been fully aware of. The rate at which customers are authenticating with us has also accelerated, which provides us with a unique opportunity to know our customers even better. This is critical as we continue on our journey to offer a deeper level of personalization and further enhance the interconnected shopping experience.
Delivery services are also big especially for Walmart and Target, which has Shipt, but remember that in-store pickup has better margins and can leverage stores as a competitive advantage.
Digital sales save your business.
Walmart CFO M. Brett Biggs said that e-commerce represented two-thirds of comparable sales growth. Walmart has become an e-commerce juggernaut to rival Amazon with 97% e-commerce net sales growth in the second quarter.
Target's results also highlighted how physical and digital sales co-mingle. Target said second quarter digital same store sales were up 195% and contributed 13.4% of same store sales growth of 24.3%.
Walmart's Biggs said:
We saw significant increases in repeat rates and weekly active digital customers, and we continue to make progress on assortment expansion and seller tools with eCommerce marketplace sales growing triple digits. We're accelerating investments in omni fulfillment solutions, including the continued rollout of same-day pickup and delivery services to more stores, expanding store pickup and delivery slots by nearly 30% since February and permanently increasing ship-from-store capabilities from pre-COVID levels.
Target said its year-to-date digital sales of $7 billion have already passed 2019's full-year results. Pickup services have grown to top more than $1.6 billion in sales so far in 2020.
Lowe's has been investing heavily in its Web site and has seen digital sales boom. Lowe's CEO Marvin Ellison said:
With our transition of Lowes.com to the cloud now fully complete, the teams are working quickly to accelerate the front-end work and deliver improved customer-facing capabilities in the second half of this year, such as online delivery scheduling, online order tracking, a dynamic customized homepage, simplified search and navigation and an expanded online product offering to further enhance the customer experience and to continue to grow sales
Supply chain improvements
Home Depot's Menear noted that the retailer is working through scaling its supply chain and handling digital fulfillment. Home Depot outlined changes to its supply chain before the COVID-19 pandemic and those early investments are paying off. However, there's more to do.
The step change in demand across our digital platforms is not without its challenges, particularly from a delivery and fulfillment standpoint. We have been able to leverage investments we have made in the scale and flexibility of our supply chain network to relieve some of the pressure. This is exactly what we did during the quarter when we temporarily transitioned one of our recently opened market delivery centers, or MDCs, to a direct fulfillment center, or DFC, which primarily fulfills online orders. The investments that we have made in the underlying infrastructure and systems supporting the MDC, coupled with a strong cross-functional alignment across the organization, enabled us to make this conversion in just a few short weeks. The net result for our customers was the reduction in lead times for orders flowing from our direct fulfillment network.
Supply chain worries were a constant on retailer earnings calls. Lowe's noted that it is investing heavily in supply chain to handle orders.
We're also advancing our supply chain infrastructure with our recent announcement that we'll open 50 cross-dock delivery terminals, 7 bulk distribution centers and 4 e-commerce fulfillment centers over the next 18 months. Our investments in our stores and investments in our supply chain evolution reinforces our commitment to becoming a world-class omni-channel retailer.
One experience, multiple channels
In the new world retail order, experience turns up in transcripts as much as merchandise, inventory and supply chain.
Home Depot's Menear said:
Customers are consolidating the number of retailers they visit and are blending the physical and digital elements of the shopping experience more than ever before. As a result, the distinct competitive advantages and overarching benefits of an interconnected One Home Depot strategy have never been more relevant.
The catch is that Ellison, chief of Lowe's, also wants to be that home improvement customer. He said:
Our data is pretty consistent that when customers shop us in store or online, they have a good experience. They come back. When customers shop us in our stores, especially in this environment and they feel safe, they come back.
McMillon said experience has to be the center of Walmart's plans especially as the retailer launches a membership plan similar to Amazon Prime.
Building repeat (business) is going to be an important aspect for the company to focus on. We'll also get the benefits of data and learn how to serve customers more effectively in time as that membership grows. So I think in a nutshell for the customer, it relates to experience.
And we keep talking about how omnichannel is a winning strategy. And what we really mean by that, I think, is the customer is ultimately in charge. We are going to be flexible. We're going to have multiple ways to serve them, and those families will decide in that moment how they want to shop. And sometimes they'll be in the store and sometimes they'll do pick up and sometimes they'll do delivery and many of them will buy a membership.