Home Depot 2013 Annual Report Download - page 7

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Our Business
Operating Strategy
Over the past several years, we have maintained a consistent strategic framework comprised of three key initiatives:
Customer Service; Product Authority; and Disciplined Capital Allocation, Productivity and Efficiency. We tie these together
through our Interconnected Retail initiative with the objective of strengthening our performance in each element of the
framework and providing a seamless customer experience, whether it begins online or in our stores. In fiscal 2013, we
continued to execute on our strategy as follows:
• Customer Service. Our customer service initiative is anchored on the principles of creating an emotional connection
with our customers, putting customers first, taking care of our associates and simplifying the business. One of our
primary objectives has been to take tasking out of the stores so that our associates can devote more time to assisting
our customers. By the end of fiscal 2013, we reached our goal of dedicating 60% of our store labor hours to
customer-facing activities. We have also instituted new programs for our professional customers and new associate
training specific to our "interconnected" customers who order product online and pick it up in our stores. Through
these efforts, we exceeded our internal goal in customer satisfaction survey results, and we are continuing our efforts
to improve on those results. We also sought to maintain competitive wages and incentive opportunities to attract,
retain and motivate our associates.
• Product Authority. Our product authority initiative is facilitated by our merchandising transformation and portfolio
strategy, which is focused on delivering product innovation, assortment and value. In fiscal 2013, we introduced a
wide range of innovative new products to our professional, do-it-for-me and do-it-yourself customers, while
remaining focused on offering everyday values in our stores and online. To maximize the productivity of our selling
square footage, we invested in advanced tools to localize the selection of in-store products and identify space
availability that can be shifted to other categories we want to grow. We also continued to expand our online product
assortment to provide more variety for our customers. For example, in fiscal 2013, we continued our appliance
showroom resets in our stores and expanded our assortment of appliances available online, resulting in double digit
growth for appliances in fiscal 2013. In addition, to respond to increasing customer demand for personalization, we
introduced customizable products such as patio sets.
• Disciplined Capital Allocation, Productivity and Efficiency. We have advanced this initiative through building best-
in-class competitive advantages in our information technology and supply chain to better ensure product availability
to our customers while managing our costs. During fiscal 2013, we continued to focus on optimizing our supply
chain network and improving our inventory, transportation and distribution productivity. This effort included
enhancements to our forecasting and replenishment systems, which help our business react to and recover from sales
spikes while keeping inventory under control. We also invested in our information technology to support our
interconnected retail initiative. In addition to making disciplined decisions about capital allocation, we maintained
our focus on expense control, which drove higher returns on invested capital and allowed us to return value to
shareholders through share repurchases and dividends as discussed in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
• Interconnected Retail. As customers increasingly expect to be able to buy how, when and where they want, we
believe that providing a seamless shopping experience across multiple channels, with an expanded array of
merchandise, will be a key enabler for future success. The interconnected retail initiative is woven throughout our
business and connects our other three key initiatives. At the core of this initiative is using our almost 2,000 U.S.
stores as a network of convenient locations for our customers who shop online. In fiscal 2013, we completed our
rollout of Buy Online, Ship to Store ("BOSS") and Buy Online, Return In Store ("BORIS"), which complement Buy
Online, Pick-up In Store ("BOPIS"), introduced in fiscal 2011. We also began the groundwork for Buy Online,
Deliver From Store ("BODFS"), which will give us the capability to deliver orders placed online from our stores to
the customer's home or job site. We expect to launch BODFS in fiscal 2014. To further support direct-to-customer
delivery, in February 2014, we opened a new direct fulfillment center in Georgia, with two additional facilities
expected to be built by the end of 2015. For our user experience online, we continued to enhance our website and
mobile sites by improving our search functionality, making our product content more visual and engaging and
simplifying the check-out process. For fiscal 2013, sales from our online channels increased over 50% compared to
fiscal 2012. We also enhanced our online experience by acquiring Blinds.com, the market leader in online sales of
window coverings, in January 2014.