Despite volatility in real estate prices and reduced consumer buying power due to inflation, the country’s largest home improvement retailer said Tuesday (Nov. 15) that its commercial customer base was showing no signs of slowing down.
The comments from Home Depot about its commercial business with professional contractors and builders come as the Atlanta-based chain announced its third quarter earnings results.
“Both our Pro and DIY customers grew again in this past quarter, and project demand, in particular, is very strong,” Home Depot CEO Ted Decker told analysts on the company’s Q3 earnings call. “Our Pro sales are strong and our Pro intercepts with our customers indicate that their backlogs are still very healthy,” he added.
In fact, the company said its so-called “pro-sumer,” or professional consumer, segment is expected to grow faster than the overall U.S. home improvement market in the coming years, a trend the retailer said it was committed to serving.
“To serve the pro, it’s about removing friction through a multitude of enhanced product offerings and capabilities,” Jeff Kinnaird, executive vice president of merchandising, said during the call.
Quest for Larger Tickets
The Home Depot considers itself the destination of choice for most pro-sumers, and has made several strategic investments to meet their unique needs and maintain that competitive position across a variety of omnichannel touchpoints.
These initiatives are primarily centered around fulfillment and offering a more personalized customer experience and business management tools, but also span solutions like the retailer’s “Path to Pro” platform, a unique jobseeker network for the skilled trades.
Finding qualified labor is an oft-mentioned friction point for professional business customers, and the platform is part of Home Depot’s mission to unlock future growth by addressing the growing skilled labor shortage in the U.S. by helping build the next generation of trades professionals.
The strategic focus on business customers was also evident on Home Depot’s balance sheet. Big ticket transactions, or those valued at over $1,000, have shown strong growth — up 10.1% compared to Q3 2021.
The company also noted that while the typical DIY Home Depot customer shops at the retailer a few times a year, the average professional customer comes in-store multiple times a month, depending on their business needs.
In addition, the company pointed out that most of its DIY customers are shopping primarily small for projects around the home or garden, meaning the dollar value of those individual purchases is usually much lower than the bigger ticket items and orders rung up by its “pro-sumers.”
Against this backdrop, Home Depot said it is actively working to make the shopping experience as frictionless as possible for its high-value business customers, via such features as dedicated pro checkouts, reserved parking, and separate order-loading and special shipping options at all of Home Depot’s 2,300 brick-and-mortar locations.
Stores also employ Pro Account Representatives affiliated with specific locations who work behind the scenes to proactively identify and assist top pro customers beyond just the transaction.
Maintaining its hold on the pro-sumer will be critical for Home Depot as consumers continue to pull back on discretionary purchases in the face of inflation and economic uncertainty.
While the company can’t predict how the evolving macroeconomic backdrop will impact its customers in the future, Home Depot considers itself well positioned to capitalize on the attractive growth opportunities that exist within the professional business space.
As a mission-critical component of its current strategy, the company said on the earnings call that they are introducing new mobile-dashboard technology to help associates improve and personalize their in-store relationships with pro-sumer business customers, as well as making several updates to its online and in-app pro-sumer experience centered around helping pros and contractors build and grow their businesses.
The rapid digital transformation of the past few years has roiled the retail industry, and Home Depot is making strides to successfully translate its business objectives over to today’s fast-evolving omnichannel commerce landscape. Sales across Home Depot’s digital platforms were up nearly 10% year over year, a trend which the retailer hopes to see continue.
As Home Depot builds out a differentiated competitive moat based on repeat, big-ticket spend, the retailer sees strategically targeting professional customers through digital innovations and personalized engagement across channels as key to its future success.
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