Customer and employees looking at screens at Home Outlet's Partner in Design Center. Home improvement retailer Home Outlet found that its e-commerce preparation boosted digital sales and curtailed fraud throughout the COVID-19 pandemic. — Home Outlet

Why it matters:

  • Lockdowns, canceled vacations and stimulus checks fueled growth for home improvement retailers amid the pandemic.
  • The crisis has changed buying behaviors, with consumer purchases of these big-ticket goods via e-commerce and curbside pickup poised to stick, analysts say.
  • In just its second year of e-commerce, Home Outlet doubled its 2020 online sales by relying on buy-online-pickup-in-store when local ordinances limited the foot traffic in its in stores and some customers didn’t feel comfortable shopping in person.

In 2008, Jeff Chastain had an idea for his bosses at discount home improvement retailer Home Outlet: Why not start using e-commerce to allow the Jonesboro, Arkansas-based company’s devoted base of do-it-yourselfers, contractors and landlords to place orders online? Competitors like Home Depot and Lowe’s had long been doing a brisk business with online sales as decision-makers grew increasingly comfortable making such big-ticket purchases online.

But a chain that got its start as a general store selling lumber in 1885 didn’t see the need to do anything differently. On the ground, it was a different story.

“I heard time after time from store managers, ‘This is a problem that we need to fix,’” recalls Chastain, head of e-commerce for Home Outlet. “It also didn’t allow us to effectively reach new customers.” Without a website to direct prospective customers to, social media marketing was ineffective. At the time, Home Outlet was still advertising in local newspapers.

To establish a toehold in the digital era, the chain, with 105 locations in 18 states, built what Chastain describes as an online catalog. Buyers could browse offerings, research products and check inventory, but “there was no way to make remote [purchases],” Chastain says. They would still need to visit a store to get all the materials for their home renovation projects.

Building an online shopping site in fits and starts

Later, Home Outlet started a limited e-commerce capability for its long-time customers, emailing customers an invoice which they could pay online and pick up their order in the store. As a starting point, Home Outlet only listed its most popular products and those with good margins and good availability. “It was a crutch and slowed down the bleeding,” says Chastain.

While that allowed customers to make some purchases, it didn’t replicate the in-store shopping experience fully. “We had a limited number of SKUs on the site, so customers couldn’t fill an entire shopping cart,” Chastain says.

We did not succeed because of COVID. We were successful because we were prepared for COVID.

Jeff Chastain, head of e-commerce, Home Outlet

It also opened up a whole new problem. Because the email system wasn’t secure, the only way to determine whether a transaction was legitimate was to personally verify it. Home Outlet’s employees would need to vouch for each transaction based on order history and what they knew about their customers. However, “our hunches weren’t good enough,” Chastain explains.

Chargebacks, in which a customer makes a transaction with a credit card and then disputes the charge directly with the card company without asking the merchant for a refund, were rampant. When credit card companies grant these refunds, they demand that payment from the retailer. When credit card companies make refunds, they demand that payment from the retailer.

All told, chargebacks cost Home Outlet nearly $70,000. BOPIS, or buy-online-pickup-in-store, is particularly prone to chargebacks because customers don’t have to provide retailers with a delivery address, making it difficult to verify their identities.

[More here on understanding credit-card chargebacks.]

A bold move into e-commerce boosts digital sales, curtails credit card fraud

Yet even though Home Outlet had no trouble moving doors, countertops and flooring, there was no getting around the need for the chain to launch a full-fledged e-commerce site.

The chargeback issue alone was putting pressure on company leadership to move more decisively toward a system that would curtail fraud. Chastain also billed it as an opportunity to improving the shopping experience of existing customers and get in front of a new customer base that wasn’t familiar with the brand.

By 2019, Home Outlet’s leadership was on board. Working with Centarro, a third-party developer, Home Outlet built an e-commerce site. Another company, Signifyd, helped build an anti-fraud system. Signifyd uses big data and machine learning to recognize signs that indicate fraud in transactions.

The timing couldn’t have been better, as last spring’s coronavirus lockdowns pushed much of the workforce into work-from-home arrangements.

Without the possibility of travel, concerts or dining out, many turned to home renovations. Two-rounds of stimulus checks also helped, analyst said.

Home Outlet’s e-commerce site allowed the company to respond to COVID store density restrictions and customers’ desire for curbside pickup. (According to Signifyd's transaction data, there’s been a nearly 600% increase in curbside pickup from pre-pandemic levels.)

 Headshot of Jeff Chastain, head of e-commerce for Home Outlet. Jeff Chastain, head of e-commerce for Home Outlet. — Home Outlet

Home Outlet isn’t alone. Home Depot, for example, saw digital sales surge 83% in the first quarter of 2020 compared to the year prior, and approximately 55% of those sales were fulfilled in a store, Craig Menear, chairman and CEO of the chain said on a call with investors.

However, Home Outlet’s Chastain said, “We did not succeed because of COVID,” he said. “We were successful because we were prepared for COVID.”

All told, Home Outlet’s e-commerce revenues doubled in 2020 from the year prior, Chastain said.

[Read here on how pandemic-led innovations are changing the way businesses do business.]

Leaning into macro trends to monetize growth in home-improvement retailing

According to John Burns Real Estate Consulting, unplanned home improvement projects surged in January, said Todd Tomalak, principal and lead analyst for the real estate research firm.

Those trends are likely to continue, predicts Tomalak.

While increasing vaccination rates will eventually open up travel and other activities, the U.S. isn’t there yet. Many businesses continue to allow work-from-home arrangements and according to a survey from Education Next, half of U.S. schoolchildren continue to receive instruction remotely. That means people are still spending plenty of time at home and looking to improve their spaces. The recent $1.9 trillion pandemic COVID relief bill will send additional $1,400 checks to many taxpayers, providing additional funds for home repairs.

Tomalak’s firm predicts new construction materials will grow by 29% in 2021 and big project remodeling projects by 6%.

For Chastain at Home Outlet, the past year validated his long-held belief in the power of e-commerce. Now there’s widespread buy-in, too.

“We want to expand e-commerce to do more touchless transactions and provide customers with an intuitive process to research products and complete orders, without assistance, online,” he says.

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Published March 23, 2021