Brick-and-mortar retailers have discovered that not only is it important to have a digital presence, but it's critical to have one that's integrated with their physical footprint as well. This hybrid approach is referred to as omnichannel retail.
Lowe's (NYSE:LOW) has been investing heavily in its omnichannel experience, and those efforts are paying off with impressive online growth.
Double-digits and accelerating
Lowe's posted 33% sales growth through its online channel in the most recent quarter. The company attributed the solid progress to investments in the online platform, enhanced marketing, flexible fulfillment options, and positive customer response to the improvements.
These online efforts are also bolstering in-store traffic. An impressive 60% of online orders are being picked up in store, with 40% of those customers buying additional products once there. Management attributed double-digit top line growth for large ticket appliances to its "best-in-class omnichannel offering".
But Lowe's is still playing catch up with its bigger rival, Home Depot, which has 6.2% of its overall sales attributed to online as of the most recent quarter, while Lowe's last reported 3.5% for 2016.
Investing in the omnichannel
The Lowe's app is quite capable, with a key feature that allows customers to search inside its stores for a specific item. If what they're looking for is in stock, the customer can either buy and pick it up, have it delivered, or follow a store map to where the product is located. The app also has search by scan capabilities, ability to set a "home store", or just browse what is available on Lowes.com.
Chief operating officer Rick Damron discussed future improvements on the roadmap in the most recent earnings call.
We are leveraging our investments in Lowes.com, providing an upgraded online shopping experience with enhanced functionality and display for touch screen devices to deliver an optimized mobile experience; improved product and content recommendations; refined search algorithms; optimized assortments informed by digital earned reviews; and expanded product views, including video content.
These investments are playing their part in winning over customers and earning their loyalty.
Customers love omnichannel
By integrating store and distribution center inventory levels on Lowes.com and the app, customers have more choices than ever in how they get their order. Customers that are part of the "My Lowe's" loyalty program even receive free shipping from the distribution center.
Recently, Lowe's was recognized by Forbes in its first ever top 50 Most Engaged Companies list. The company placed 9th in a top 10 that includes notable customer-focused companies like Amazon, Alphabet, Nordstrom, and Starbucks. The rankings were based on "social media engagement, Net Promoter Scores (NPS), and year-over-year sales growth." The net promoter score is a well-respected gauge of customer satisfaction that measures their willingness to recommend a company to friends and family.
And customers clearly appreciate the kinds of omnichannel offerings that Lowe's has developed. JDA Software Group, which provides supply chain and retail merchandising software solutions, completed a survey that indicated three-quarters of customers favored "a quick and easy shopping experience" over a personalized one. It also found that adoption of buy online, pick up in store has grown 44% annually since 2015.
In the last earnings call, CEO Robert Niblock highlighted the importance of Lowe's omnichannel efforts:
Reflecting our third-quarter results, we were pleased with our continued traffic growth, driven by optimized marketing messaging and the benefits provided by strategic investments in our integrated omnichannel experience. We look to further build upon our strong foundation by developing capabilities to anticipate and support customers' evolving needs and improve our operating discipline and execution, making productivity a core strength for Lowe's.
With almost 80% of U.S. consumers making purchases online, Lowe's has plenty of competition that's only a click away. The company will need to continue to remain focused on the omnichannel to ensure customers keep coming back.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brian Withers owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, and Starbucks. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Starbucks. The Motley Fool has the following options: short January 2018 $170 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot, Lowe's, and Nordstrom. The Motley Fool has a disclosure policy.
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