With the coronavirus pandemic providing a huge boost to online shopping behavior, many readers might believe that brick-and-mortar retail is now dead. But this couldn't be further from the truth. Some major enterprises, like Home Depot (HD -0.81%), have no risk of becoming obsolete any time soon. Investors need to figure out just why that is. 

To truly understand what makes Home Depot such a great business and why it has an edge over its rival Lowe's (LOW -0.10%), shareholders must look at one important data point above all else. It might just make you want to buy the stock. 

Taking care of a key customer 

Home Depot's business model is pretty simple. Through its physical footprint of 2,319 stores, which are primarily in the U.S., but also in Canada and Mexico, and its e-commerce sites, the company offers tools, supplies, and expertise to both DIY and professional (or Pros) customers for home renovation projects and upgrades.

The former category mostly consists of people who have the knowledge to tackle smaller projects on their own. The latter consists of general contractors, electricians, plumbers, painters, and the like who focus on much larger projects like multifamily properties or commercial buildings. Homeowners also often hire Pros to complete more complex projects. 

It's the professionals who are important here. They account for about half of Home Depot's total revenue. This compares quite favorably to Lowe's, which only gets 25% of its overall sales from the important customer group. Based on trailing 12-month revenue, this translates to $79 billion of Pro sales for Home Depot versus $24 billion for Lowe's. That's a huge difference. 

On the surface, this might not seem like a big deal, but it is. Pros are inclined to visit stores far more frequently and spend much more than the average DIY shopper. This makes sense intuitively. Professionals are usually working on multiple job sites at a time, and they need to buy a lot of items more often in order to handle their workloads.

And Home Depot is there to deliver. Over the years, the retail giant has created a Pro loyalty program, built up a dedicated sales force and delivery network for them, and provided attractive financing offerings to cater to these customers. 

To be fair, Lowe's CEO, Marvin Ellison, is making a push to capture more market share from professionals. In fact, he spent 12 years in leadership roles at Home Depot prior to his current gig. Lowe's is also copying many of the initiatives that have worked well for its bigger rival. 

However, Home Depot's huge lead in this area has been a big advantage, particularly from a financial perspective. Over the past 10 years, Home Depot has posted a better average operating margin (13.8%) and return on invested capital (31.9%) than Lowe's. What's more, in the most recent quarter (third-quarter 2022 ended Oct. 30), Home Depot's sales per square foot of $619 crushed Lowe's $452.

For a retail-based business, the overarching goal is to try to make your stores more productive in order to benefit from operating leverage. A typical brick-and-mortar location for any company has large fixed costs like rent, insurance, and employee pay. So, the more sales volume that can be generated, the better the profitability that can be achieved. 

If a professional customer comes in and buys $5,000 worth of merchandise in one transaction, compared to 20 DIY shoppers who purchase the same dollar amount scattered throughout the day, the former is obviously better because it takes less time and fewer employee hours. The result is improved efficiency and a bigger bottom line. An added benefit of this entire situation is the fact that Pros might be stickier customers, not shopping at competitors because they have built up longstanding relationships with a specific retailer.  

Trading at a discount 

One might quickly assume that, because of Home Depot's larger share of the professional market and its better financial metrics, it must sell at a steeper valuation than Lowe's. While this has usually been the case over the past three years, as of this writing, Home Depot's price-to-earnings ratio of 20 comes at a slight discount to Lowe's 21. 

Investors who now have a better understanding of what makes Home Depot a special business might want to take advantage of that valuation disparity right now.