Home Improvement

Home Depot is betting its $1 billion investment in IT infrastrucutre will boost growth and earnings, while fending off rival Lowe's. Can a strategy designed to improve efficiency also increase customer satisfaction?

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It's a retailing truism: Strategies that improve the bottom line and inspire investor confidence don't always make customers happy.

Ultimately, says Whalin, "their ability to distinguish their stores [from their competitors] is going to be badly damaged the more they go to this model of more technology and little in the way of service."

It's a retailing truism: Strategies that improve the bottom line and inspire investor confidence don't always make customers happy.

Fixing the Crunch at the Registers

Self-checkout stations were installed in 2003 in over 800 stores to improve customer service by (theoretically) shortening lines and wait times, and getting employees who would otherwise be working registers onto the sales floor. That line-shortening strategy doesn't appear to be working here at store #2669 in Natick, Mass., which is mobbed on a warm Saturday in spring, the home improvement retailers' Christmas season. In the outdoor garden center, lines nine customers deep form at the two open checkout lanes; people pushing flatbed shopping carts stacked with bags of mulch and potting soil can barely squeeze past each other in the narrow aisles; a male customer helps a woman load some of those heavy bags of soil onto her cart because Home Depot employees are too busy.

Inside the store, only four out of 10 cash registers are open; one of the four self-checkouts is out of service. The lines are long. The store, in its busiest season, seems understaffed.

Still, self-checkout has reduced wait time by one-third across Home Depot stores, according to the company. John Simley, a former spokesman for Home Depot, says opening registers is an inefficient use of labor and argues that it can take 10 minutes to open one up.

"If we hired every electrician in the United States, we wouldn't have enough people to staff our electrical departments," says Home Depot CIO Bob DeRodes. "That's how big we are."

To address the staffing issue before the lines start to form, Home Depot in 2002 launched a 48 terabyte IBM DB2 data warehouse that runs on new Regatta p690 servers and contains three years of sales history. The warehouse is intended to take the guesswork out of labor scheduling as well as inventory planning. Lowe's has had a Teradata warehouse with that functionality since 2000. Steven Baumgarten, a research analyst with Parker/Hunter, says not having such a warehouse put Home Depot at a competitive disadvantage.

DeRodes says that while the company has improved its ability to mark down merchandise and manage its margins, he couldn't quantify the data warehouse's ROI. "It's hard to say the new merchandising approach added this percent and the technology added that percent [to the bottom line]. We don't make ourselves crazy [determining those numbers] as long as we're making the right progress. Our numbers are all moving in the right direction as a company, so we know these tools are helping," he says.

DeRodes also replaced Home Depot's ancient green-screen POS system with color, touch-screen, Web-based POS terminals from NCR to move customers through checkout more quickly. The upgrade of the company's five highly customized POS systems to the NCR terminals cost tens of millions of dollars, according to DeRodes. He says the new registers have decreased the average time it takes a customer to check out from 6.7 minutes to 4.9 minutes.

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