Total U.S. web traffic from Feb.-April 2023 was -5.3% for Home Depot, -8.9% for Lowe’s, and -13.1% for Overstock, according to Similarweb estimates.

Home Depot (ranked No. 4 in the 2023 Digital Commerce 360 Top 1000 database) had the best conversion rate (3.3%) among home improvement merchants, which include Lowe’s (No. 12), Overstock.com (No. 50), Wayfair Inc. (No 10), Ikea, and Ace Hardware Corp. (No. 662). That’s down half a point from 3.8% a year prior and 3.8% in the quarter ended Jan. 31. Ikea ranks No. 3 in the Digital Commerce 360 Europe database.

When compared to earnings results for Q1, only Lowe’s reported an increase in online sales (6%) for the three-month period ended May 5.

Home Depot online sales for fiscal Q1 ended April 30 fell 2.9%. While Overstock.com reported that online sales were down 29% in its fiscal Q1 ended March 31. Wayfair reported revenue decreased 7.3%, active customers decreased 14.6% and orders were down 6.7% for its fiscal Q1 ended March 31. 

Home Depot led the pack in web traffic 

With more than 521 million visits to its website in Q1 2023, Home Depot outpaced Lowe’s 321 million visits and 303 million visits to Wayfair.com, according to Similarweb estimates of desktop and mobile web visits from Feb.-April 2023.

Ikea has the most web visits that lead to conversion

Ikea’s converted web visits grew 0.3%, the only merchant to grow in this category. Wayfair’s conversion rate decreased 0.1%, followed by Ace Hardware (-0.2%), Lowe’s (-0.3%), Home Depot (-0.5%) and Overstock (-0.6%). 

Lowe’s lost the most web traffic share but gained online sales in Q1

It may be quality of time, not quantity of time, when it comes to web traffic visits. Lowe’s web traffic declined in Q1 but online sales increased 6% — an anomaly among competitors whose ecommerce sales declined.

Bounce rates were down for Lowe’s but up for Home Depot, according to Similarweb estimates. Lowe’s bounce rate decreased 2.77% in April 2023 year over year. 

“This could reflect a better ecommerce experience for website visitors,” says David Carr, senior insights manager. Over the last few years, Lowe’s has invested in upgrading its 15-year-old legacy software system. 

Online sales increased 6%, representing more than a 10% sales penetration. Lowe’s will continue to focus on upgrading its B2B Pro digital experience with new tools and personalization, said Marvin Ellison, chairman, president and CEO, during the retailer’s May 23 earnings call. Ellison attributed online growth to an increase in its pro sales. Lowe’s pro customers are contractors, repair remodelers, tradesmen, as well as property management and facility management professionals, according to the merchant.

“We also continue to enhance our DIY online experience by making home improvement projects easier for consumers to visualize, estimate and shop,” Ellison told investors. “These investments are paying off with higher online convergence and attachment rates.”

Consumers are also spending less time per website visit, according to Similarweb’s estimates. The average minutes per visit, desktop and mobile web, worldwide, is on the decline. 

In April 2023, the time spent decreased year over year:

Ace Hardware gains the most web traffic in Q1

Smaller merchant Ace Hardware’s desktop web traffic grew 22.4%, according to Similarweb estimates of desktop and mobile web visits from Feb.-April 2023. That’s in line with Ace Hardware’s Q1 2023 (ended April 1) report of a 22% increase in online visits. The merchant reported that online revenue increased 11% compared with the year prior.

Wayfair web traffic also increased 3.1%.

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Both merchants cited falling lumber prices and unfavorable weather conditions as reasons why do-it-yourself consumers pulled back on projects in Q1.

Home Depot Q1 2023 earnings

Net sales fell to $37.25 billion in the fiscal first quarter of 2023. That’s down 4.2% from $28.90 billion during the same quarter in 2022.

Net earnings were also down 8.5% at $3.9 billion, compared with $4.2 billion a year prior.

Home Depot chair, president and CEO Ted Decker told investors that after 43% growth in three years, the merchant expected “demand would moderate in fiscal 2023, which our first quarter results reflect,” according to a Seeking Alpha transcript of the earnings call with investors on May 16.

While do-it-yourself (DIY) customers bought more compared with Home Depot’s B2B Pro customers, sales to both were negative compared with the prior year, Decker said. Home Depot’s B2B Pro business sells to professional home improvement and other contractors.

The merchant still uses stores to fulfill some of its online orders. It fulfilled 45% of online orders through stores during the period.

Comparable retail sales for expensive items were down 6.5%, Billy Bastek, executive vice president, merchandising, told investors. These are for transactions over $1,000.

Lowe’s Q1 2023 earnings

Lowe’s net sales were $22.35 billion, down nearly 6% compared with $22.66 billion a year earlier.

The retailer’s net earnings for the three-month period ended May 5 were $2.26 billion, compared with $2.33 billion the year prior.

Online sales increased 6%, representing more than a 10% sales penetration. Lowe’s will continue to focus on upgrading its B2B Pro digital experience with new tools and personalization, said Marvin Ellison, chairman, president and CEO, during the May 23 earnings call.

Comparable sales decreased 4.3% compared with a year earlier.

Supply chain improvements

Ellison told investors Lowe’s continues to roll out its market delivery model, bringing the merchant to 12 geographic regions across the U.S. supporting 1,100 stores. Improvements include delivering large and bulky products more efficiently.

“And with our improved online capabilities, like easy scheduling and order tracking, we continue to see more and more of our customers getting comfortable completing their purchases online,” Ellison said.

Lowe’s to expand rural products in some existing stores

Lowe’s plans to add rural assortment merchandise to as many as 300 existing stores by the end of year. The stores will offer farm, ranch and outdoor products. This is in an effort “to position Lowe’s as a one-stop-shop to make it convenient for rural customers to get what they need in one shopping trip,” Ellison said. The rural store locations will offer merchandise for pets, livestock, trailers, utility vehicles, specialized hardware, and apparel from clothing brand Carhartt.

“While in years past, our penetration of rural and remote stores was viewed as a competitive disadvantage,” Ellison told analysts, “we now expect that these stores will be a key component of our operating profit growth over the next three to five years.”

The year ahead for home improvement

Deflation in lumber will be less of a headwind in 2023, says Brian Yarbrough, an analyst at financial investment firm Edward Jones. Consumer discretionary spending habits are more telling, he says.

Home Depot has had three years of unprecedented growth. As its Pro customers shift from bigger projects to small- to mid-sized projects, the merchant will continue to experience a slowdown, he says.

“Home Depot might feel some of that headwind in the near term,” Yarbrough says.

“We saw this huge pendulum shift during the pandemic for the home improvement category,” he says. “Now we’re seeing it normalized. Consumer spending is shifting back to the services sectors like travel and entertainment.

“But homes will get older,” Yarbrough says. “They will require more repair and maintenance in the long term.”

Meanwhile, over the last two to three years, Lowe’s has upgraded from a 15-year-old [technology] legacy software system to the cloud.

“Now, Lowe’s system can handle a lot more traffic,” Yarbrough says. “Lowe’s has also updated online transaction capabilities. It has been playing catch up, in a sense, with Home Depot. And I think they’re there now.”

Lowe’s plans to expand into rural locations is an interesting move, Yarbrough says. He doesn’t believe the move will affect Home Depot so much as it might Tractor Supply. Tractor Supply is conveniently located to rural shoppers and has a strong welcome/loyalty program, Yarbrough says. It also appeals to consumers on the go — its mobile app accounted for 20% of digital sales in Q1 2023.

“It’s early, so let’s not get too excited here,” he says. “But if this strategy works and starts driving more customers to [Lowe’s rural stores] and drives better sales, it will be an interesting dynamic to watch over the next several years.”

Home Depot ranks No. 4 in the 2023 Digital Commerce 360 Top 1000 database. Lowe’s ranks No. 12.

Home Depot earnings

For the first fiscal quarter ended Apr. 30, 2023, Home Depot reported:

• Net sales decreased to $37.25 billion. That’s down 4.2% from $38.90 billion from the comparable period a year earlier.
• Net earnings were $3.9 billion, down 8.5% from $4.2 billion compared to a year earlier.
• Online sales decreased 2.9% for the quarter, compared with the same quarter in 2022.
• Comparable sales in the U.S. decreased 4.6%.

Lowe’s earnings

For the quarter ended May 5, 2023, Lowe’s reported:

• Net sales increased to $22.35 billion. That’s down nearly 6% from $23.66 billion for the comparable period a year earlier.
• Net earnings was $2.26 billion, compared with $2.33 billion a year earlier.
• Online sales grew 6.0% compared with the same quarter in 2022.
• Comparable sales decreased 4.3%.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

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The home improvement retailer said sales reached $1.1 billion in the first quarter ended March 30, 2023, up from $1.0 billion in Q1 of 2022. Ecommerce sales grew 10.2% year over year to account for 18% of total sales. That’s up from 17.7% of sales last year.

Floor & Decor ranks No. 127 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest North American online retailers by web sales.

Bucking the home trend

Floor & Decor reported sales growth as other home decor and improvement chains slowed. Wayfair (No. 10) and Overstock (No. 50) both reported sales were down 7.3% and 29%, respectively.

Growing sales in this environment shows “remarkable agility and adapting to significant year-over-year declines in existing home sales amidst the broader macroeconomic challenges we continue to face in 2023,” CEO Thomas Taylor told investors.

Taylor said the flooring industry will likely contract further in 2023. He told investors Floor & Decor will continue to grow market share with competitive pricing even as the housing market remains down.

Consumers are downgrading and downsizing

Average ticket grew year over year, but growth slowed from Q4, Floor & Decor president Trevor Lang said in the call. Growth decelerated from 14.4% year over year in the previous quarter to 7.3% in Q1. Lang declined to state exact ticket size.

The slowing growth is due to “customers purchasing less square footage and strategically lowering product prices,” Lang said. Customers are making fewer transactions, and making smaller purchases for their homes, he said. Flooring is the exception, he told investors, with customers opting for higher price points.

Professional business is growing

Sales to professionals grew much faster than overall sales, Floor & Decor said. Pro sales grew 19.1% year over year and now make up 42.1% of sales. Pro comparable store sales grew 6.9% even as overall comparable store sales were down 3.3%.

The home retailer is proactively trying to grow the professional customer base with events and loyalty programs. Floor & Decor hosted nearly 700 industry professionals at 27 training events during the quarter. There are 121 events planned for the full year.

For the first quarter ended March 30, Floor & Decor reported:

• Net sales grew 9.1% year over year to $1.1 billion from $1.0 billion.
• Comparable store sales were down 3.3% year over year. 
• Net income grew 0.8% from the year-ago period to $71.5 million.
• Ecommerce sales grew 10.2% year over year to account for 18% of total sales.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

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Melanie Cochran, vice president, Hawkins HVAC Distributors Inc.

And in an uncommon approach in its industry, it’s stepping up its digital ecommerce technology and operations to implement that growth strategy.

“In general, HVAC is a little behind the curve in digital transformation,” says Melanie Cochran, vice president of operations, whose family has roots going back decades in the HVAC industry.

The industry is not without ecommerce expertise, as shown by Watsco Inc., a multibillion-dollar national distributor that for years has racked up steady ecommerce sales at a high percentage of its total revenue. But for legions of smaller HVAC distributors that serve local or regional markets, ecommerce is still an opportunity to explore, Cochran says.

In her company’s core market of North and South Carolina and parts of Georgia, she adds, Hawkins is determined to stand out with a digital commerce strategy that complements the Charlotte, North Carolina-based distributor’s industry experience to bring exceptional value in the buying experience to its dealer network, she says.

“We know our industry is lagging in ecommerce, but we know it’s going to come on, and we want to be part of that,” Cochran says. “We want to be a leader of that change.”

Taking that leading ecommerce position rides on how well Hawkins convinces many of its customers to get on board with online purchasing — and on how well it upgrades the online customer buying experience on HawkinsHVAC.com to win over those customers.

Hawkins is off to a promising start as it sets up long-term growth online.

Relaunching a more personalized ecommerce site

The company relaunched its website, at HawkinsHVAC.com, in the fall of 2021, replacing a legacy site with a new level of personalized content and an online buying experience that Hawkins figures it needs to engage online customers.

Hawkins HVAC Distributors’ Charlotte, North Carolina, corporate office.

The privately held company doesn’t publicize sales figures. But Cochran notes that, after launching the new site at the tail end of that year’s peak selling season with 5,000 available SKUs, Hawkins quickly got to 7% to 8% of total sales online, with an average order value of over $1,400 for a mix of HVAC equipment, replacement parts, and supplies.

“For the first year, that was pretty strong for us,” Cochran says.

More significant, however, is that most of the buyers placing the online orders are from Hawkins’s largest customers — a market segment where the distributor is planning on strong sales growth over the long term.

Cochran notes that her company’s ecommerce volume continues to increase, and, over the longer term, Hawkins expects ecommerce to account for about 25% of sales. “Ecommerce is not a huge channel yet for us, but we expect it to be,” she says.

To drive growth, Hawkins has deployed a digital commerce technology platform offering multiple improvements over the prior website, including:

• Product catalogs offering personalized product pricing and selection for each dealer.
• Letting dealers search on multiple product attributes to find exactly what they need.
• Enabling dealers to find the nearest Hawkins distribution branch location when they want to pick up products.
• Educational online content designed to help buyers determine which products suit their job site needs.
• The ability to more easily build new customer-serving features.

Hawkins is operating its new ecommerce system on Amla Commerce Inc.’s Znode headless commerce technology platform, which uses an extensive system of APIs (application programming interfaces) to share data between three independent components: the customer-facing online interface, the ecommerce engine, and the enterprise resource planning system. Hawkins retained Xngage, a B2B digital commerce services firm, to implement the Znode platform and integrate it with the distributor’s related technology systems.

In addition to the Znode ecommerce platform and customer-facing website, Hawkins’s digital technology infrastructure includes:

• Infor CloudSuite Distribution enterprise resource planning software.
• AD product information management (PIM), from the AD (Affiliated Distributors) distributors’ organization, as well as a built-in Znode PIM.
• Billtrust invoice management, which lets HVAC dealers on HawkinsHVAC.com link to Billtrust to view and manage their Hawkins invoices.

The new platform, Cochran says, was a good fit to integrate with the distribution company’s digital technology ecosystem, helping to provide the kind of personalized buying experience its dealers want. For example, the API-driven headless configuration enables Hawkins to modify the customer-facing interface without also having to redo the software in the ecommerce engine or the back-end business operations software in the ERP system.

At first, Hawkins was wary of relying on APIs

The commerce platform uses APIs to transfer information between the Infor ERP, the AD PIM (which uses EnterWorks PIM software) and the Znode ecommerce platform, providing ecommerce customers with such information as up-to-date product descriptions, the location of available inventory by distribution center, and order status.

At first, Hawkins was wary of going with a new ecommerce platform that relied heavily on APIs, as is the case with Znode.

“We were nervous about that because with our original ecommerce platform, one of the main issues we had was speed and lag time,” Cochran says, adding, “The folks we were using at the time were blaming that [slow] speed on APIs, so we were nervous about having another system that was built off of APIs.”

But she adds that Znode, which Hawkins came to know through Xngage and AD, has so far proved to be an effective platform for building digital commerce. AD is an organization that serves as a buying group for its membership of independent distributors.

Quick-order forms and online inventory management

In addition to providing personalized product catalogs and pricing, Hawkins is also developing online features and promotions to improve the online buying experience and generate more sales. For example, returning customers can use a quick-order feature to reorder parts by simply inserting the Hawkins part identification numbers and the needed quantity, then clicking Add to Cart.

When one new large customer wanted to start placing orders with its own system of parts numbers, Hawkins was able customize its product data management to accommodate the customer.

“So that customer can log onto our website and not only see their pricing and our inventory levels, but they can also search for products with the numbers they already know,” Cochran says.

Going forward, she adds, Hawkins will look into further adding to its customers’ online buying experience, features that would appeal to large customers in a market extending far beyond its current base in the Carolinas.

Building an ecommerce-based replenishment system

One project on the drawing boards is building an ecommerce-based system to replenish the HVAC parts and supplies inventory that dealers keep on their service trucks and in storerooms. By scanning products as they use them on customer service calls, dealers and their technicians will be able to trigger online orders to maintain a minimum level of on-hand inventory. Another version of this replenishment system would let dealers review their updated on-hand inventory status at the end of each day or week, then click to place an order based on that status plus any additional products they need to satisfy large orders known to be coming in from dealers.

In addition, the internet-based electronic inventory management system would also track parts and supplies usage by individual technicians, helping contractors to better control inventory and view the performance of individual workers, Cochran says.

Such reordering and inventory-management and -visibility features may be common among large B2B companies in industries such as maintenance, repair and operations (MRO) products. Among HVAC distributors, however, it’s far from a common strategy, she says.

But that void presents an opportunity for Hawkins to stand out.

“One of our goals is really to just be innovative in this industry,” Cochran says.

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“That means logistical and fulfillment challenges,” says Angie Brown, senior vice president of technology.

These challenges are evolving as consumer shopping patterns change, Brown says. Currently, Home Depot is experiencing a “minor shift” from buying online, pick up in store, to buying online and shipping to home.

Angie Brown, senior vice president of technology, Home Depot

“But that’s a positive,” Brown says. “As we’ve invested in the supply chain and gotten things out faster, we see this minor shift as an advantage. It’s a testament to the faster you can get things to customers, the more they’re going to take advantage of [ship to home].”

Consumers want convenience, and they don’t want to wait long. According to Digital Commerce 360 and Bizrate Insights omnichannel survey of 1,069 online shoppers in February 2023, half of survey respondents (48%) said they used BOPIS or curbside pickup to save time or for convenience (47%). 34% ordered to pick up in store to avoid waiting for home delivery, and 32% wanted the product the same day.

Home Depot ranks No. 4 in the Top 1000, Digital Commerce 360’s database of the largest North American online retailers by web sales.

Building a supply chain to manage inventory

Home Depot relies on a network of approximately 150 supply chain facilities/vendors to meet demand. The merchant also fulfills online orders from its 2,300 store locations in North America.

According to Home Depot’s fourth quarter 2022 earnings call on Feb. 23, the merchant fulfilled 45% of its online orders in store. That’s down from 50% the prior quarter.

“What is driving that?” asks JC Jammal, vice president, online and marketing technology. He says Home Depot’s continued investment in the supply chain network has driven down the time it takes to ship orders to customers’ homes.

“You may have not wanted to wait three days for something. We can get it to you tomorrow — you might be willing to wait one day,” Jammal says. “More customers are opting in to that option if they don’t have another need to go into the store.”

Home Depot manages this network with its home-grown predictive modeling software.

“This allows our replenishment teams to direct the product to the areas with the most demand,” Brown says. As the artificial intelligence machine learning software learns, its predictive capabilities improve.

Stocking products closer to customers costs the merchant less for last-mile delivery, Jammal adds.

JC Jammal, vice president, online and marketing technology, Home Depot

Using mobile to connect in store and online

Another way shoppers’ behavior is changing is how they shop. Brown says more Home Depot shoppers are choosing to shop online using their mobile devices to visit HomeDepot.com or via the Home Depot mobile app.

The app allows shoppers to get more product information without the help of a store associate when shopping in person.

“Now, I can scan that product and get that additional information,” Jammal says.

The ability to scan products is “one of the key features that is driving increased app engagement,” he says, without revealing more.

“We continue to build more parity between what’s in our app and what’s on our website,” Jammal says. Home Depot has been building “web views” in the mobile app. Web views mirrors the web browser experience within Home Depot’s mobile app, he says.

“Everything you can do on the website, you can now do on the app,” Jammal says.

Over the last year, Jammal says app downloads are on the rise, including “better engagement,” he says. Jammal declined to reveal details but says “a lot of metrics are trending positive.”

Home Depot invests in search keywords

Before consumers can decide how they want to receive their items, they first need to find the merchandise. As a result, Brown says the merchant has focused on improving what it calls “intent search online.”

Brown says Home Depot adjusts how the software algorithm responds to shoppers’ search of basic keywords on HomeDepot.com. Depending on the customer, searching for the keyword “shingle,” can mean different things, she says. A do-it-yourself customer might need a small amount for a smaller-scale project roofing project. Whereas a Home Depot Pro Perks customer might order in bulk for larger projects. The search also pulls up relevant complementary items such as as roof vents, and other materials needed to install shingles.

“As you think about shopping on HomeDepot.com, your search term can mean different things based on who you are or what you’re trying to accomplish,” Brown says. “We continue to update search to handle the demands of the different shopping patterns we see from customers as they engage with us online.”

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A slowdown in the housing market — the average rate on a 30-year fixed mortgage went over 7% on March 2, according to Freddie Mac — and inflation fears remain for the home improvement merchant, much like The Home Depot Inc., which reported last month.

Lowe’s online sales results

Online sales on Lowes.com increased 5% in the fourth quarter 2022 compared with a year earlier. Once again, this increase was partly due to strong appliance sales, CEO Marvin Ellison told investors during the March 1 earnings.

Overall sales were $22.44 billion for the fiscal fourth quarter ended Feb. 3, 2023. That’s up 5% from $21.33 billion for the comparable period a year earlier. Net earnings were $957.0 million, compared with $1.20 billion a year earlier.

For the fiscal year ended Feb. 3, net income was $97.05 billion, down from $96.25 billion from the comparable period in 2021. Net earnings for 2022 were $6.43 billion, down from $8.44 billion a year earlier.

In the fiscal fourth quarter of 2022, total sales declined 1.5%

Lowe’s is ranked No. 11 in the 2022 Digital Commerce 360 Top 1000 database.

Lowe’s offers Apple Pay, rolls out new delivery model

Ellison noted the home improvement merchant’s addition of Apple Pay as a payment option at checkout in Q4 “to improve conversion,” according to a Seeking Alpha transcript. The merchant also plans to make changes to its omnichannel shopping experiences, including a “rollout of our market delivery model for appliance and other big and bulky products.”

The new delivery model replaces what Ellison said was an “inefficient store delivery model.” Lowe’s intends such changes to help boost sales of “big and bulky product” categories such as grills, riding lawn mowers and stock cabinets.

The merchant services 10 geographic regions in the U.S. with more than 1,000 stores. 

Lowe’s Pro

Ellison told investors that the home improvement merchant surveyed its Pro customers in January 2023, and 70% said they were booked out with jobs in 2023 the same or more compared to 2022.  

While the outlook is cautious, Ellison said, Lowe’s is confident consumers will continue to invest in their home upkeep.

“Even if there is a modest decline in home prices, the level of equity built up during the pandemic would not be meaningfully eroded,” Ellison said. “And the housing stock continues to age with 50% of U.S. homes over 41 years old, the oldest since World War II.”

Ellison said Millennials continuing to invest in their home and baby boomers’ “increasing preference to age in place,” as well as continued remote work, will favor the merchant in the long run.

“And given the slowdown in housing turnover is driven by higher rates and low supply rather than demand, we continue to see a nationwide trend of trading up in place with consumers opting to upgrade their existing home to meet their evolving needs,” Ellison told investors.

Lowe’s earnings

For the fiscal quarter ended Feb. 3, 2023, Lowe’s reported:

• Online sales grew 5.0% for the quarter, compared with the same quarter in 2021.
• Net sales increased to $22.44 billion. That’s up 5% from $21.33 billion for the comparable period a year earlier.
• Profit was $957.00 million, compared with $1.20 billion a year earlier.

For the fiscal year ended Feb. 3, 2023, Lowe’s reported:

• Net sales were $97.05 billion, down from $96.25 billion from the comparable period in 2021.
• Profit was $6.43 billion, down from $8.44 billion a year earlier.

Percentage changes may not align exactly with dollar figures due to rounding.

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Wayfair is No. 7 in the 2022 Digital Commerce 360 Top 1000, Overstock is No. 33.

Overstock and Wayfair sales are down 

Wayfair and Overstock reported a decline in sales in 2022 across the quarter and year.

Wayfair’s total net revenue for the quarter ended Dec. 31 decreased 4.6% year over year to $151 million. The company also reported a net loss of $351 million, significantly higher than the net loss of $202 million in the fourth quarter of 2021. 

Net revenue at Wayfair was also down for the 2022 fiscal year, dropping 10.9% over 2021. The net loss over the year was $1.3 billion.

Overstock’s earnings report was even more grim. Net revenue decreased 34% in the fourth quarter ended Dec. 31 to $405 million, though the net loss was a comparatively small $16 million. 

Net revenue for the full year was $1.9 million, a 30% decrease year over year. Overstock reported a net loss of $35 million for 2022, with about half of that loss in the fourth quarter.

Active customers declined

Executives at both furniture retailers said they had fewer active customers making purchases. Wayfair reported 22.1 million active customers in the fourth quarter of 2022, a 19% year-over-year decrease. 

Overstock is a relatively smaller operation, with 5.2 million active shoppers in Q4, a 36% decline year over year.

This trend is in line with consumer data Digital Commerce 360 collected in an April 2022 survey of 1,113 online shoppers. Three-quarters of respondents said they planned to buy less than half of home goods online, compared to 59% answering that way in 2021.

Consumers planned to pare down their online home shopping. 42% said they would spend the same amount on home goods as they had the previous year. Another 41% said they would spend less. Respondents also said they would spend less on outdoor furnishings, new furniture and home office setups than in 2021, with appliance repairs the only section seeing a slight increase.

Overstock aims at increasing sales to younger customers 

Even as overall sales decreased, mobile orders were a bright spot for Overstock. Overstock’s app adoption is growing “rapidly,” CEO Jonathan Johnson told Digital Commerce 360 in a phone interview. It’s now the company’s fastest growing sales channel, making up 52% of fourth quarter sales. The company expects to see at least the same level of app growth in 2023.

Overstock’s typical customer skews “older and more affluent,” Johnson said. App users show higher loyalty, have higher conversion rates and are also younger than the average customer overall, he said, though he declined to share specifics.

Overstock’s other strategy for reaching younger buyers involves influencers, Johnson said, and Overstock is spending more than ever before on marketing. The website partnered with influencers and brand ambassadors with far reach on social media, including HGTV star Tarek El Moussa.

Wayfair focuses on cutting costs

As Overstock concentrates on drawing in new customers, Wayfair has cut costs as a strategy to get back in the black. 

The furniture retailer has taken several measures to cut unnecessary costs, CEO Niraj Shah told investors in a Feb. 23 call. Wayfair laid off 1,750 employees in January, totaling about 10% of its total workforce including 1,200 corporate employees. These cuts were on top of earlier layoffs of 900 corporate workers in August to “reduce redundancies and remove excess management layers,” Shah said at the time. 

The company has also had a hiring freeze in place since spring 2022, and has been reducing advertising budgets that had grown beyond the small tests that they were originally intended for, Shah said.

Both companies are hoping 2023 will turn things around for the online furniture industry. 2022 was a “year we will not forget nor repeat,” Overstock’s Johnson told investors. 

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Total net revenue for the quarter decreased 4.6% year over year to $151 million. The company also reported a net loss of $351 million, significantly higher than the net loss of $202 million in the fourth quarter of 2021. Wayfair is No. 7 in the 2022 Digital Commerce 360 Top 1000.

Net revenue was also down for the 2022 fiscal year, dropping 10.9% over 2021. The net loss over the year was $1.3 billion.

Wayfair is cutting costs and adding promotional deals to turn losses around in 2023, CEO Niraj Shah said in a Feb. 23 call with investors.

Wayfair cuts corporate spending

The furniture retailer has taken several measures to cut unnecessary costs, Shah told investors. Wayfair laid off 1,750 employees in January, totaling about 10% of its total workforce including 1,200 corporate employees. These cuts were on top of earlier layoffs of 900 corporate workers in August to “reduce redundancies and remove excess management layers,” Shah said at the time. 

The company has also had a hiring freeze in place since spring 2022.

Wayfair saves money on customer service

The furniture giant also found ways to cut costs in the sales process. Wayfair saved time and money by connecting customers directly with suppliers on product issues, Shah said. For example, when a product has a faulty piece, the company now connects customers directly with the supplier. Wayfair saves by only sending the replacement part, rather than replacing the entire product.

The company is also reducing advertising budgets that had grown beyond the small tests that they were originally intended for, Shah said.

Promotions still bring in customers as sales decrease

Despite the sales slump of the last year, promotions still work to entice customers, chief financial officer Kate Gulliver said. Customers show a “strong” response to promotions, she said, and customers in the top three quintiles of income have significant savings to spend. They have money but are waiting for a “call to action” like a sale to buy furniture, she said.

The annual “Way Day” sale and other traditional promotional periods were successful, Shah said. Wayfair sold a mattress every 12.2 seconds, on average, over the Thanksgiving weekend.

Wayfair is optimistic about growing customer base

Despite challenges, Wayfair said there are reasons to be optimistic. 

“Scarcity is a good thing for Wayfair,” Shaw told investors, adding that some promising signs are emerging. 

Wayfair’s Perigold website saw encouraging results. Perigold sells premium designer furniture rather than private-label products. 30% of Perigold customers in 2022 were new to Wayfair, Shah said. The website had high customer satisfaction, and it’s growing popular with professional customers like interior designers, he said.

Shipping and inventory look better than before

Inventory at the end of 2022 reached its highest levels since before the COVID-19 pandemic, Shah told investors. Shipping also became faster and less costly over the quarter, thanks to easing port congestion and decreased demand from the height of the pandemic. Wayfair shaved one day off averaged delivery speed in 2022, Shah said, leading to higher customer satisfaction. 

For the fourth quarter ended Dec. 31, Wayfair reported:

• Total net revenue of $3.1 billion, down 4.6% over the same period in the previous year.
• U.S. net revenue totaled $2.7 billion, down 1.8% year over year. 
• Net loss was $351 million.
• Active customers reached 22.1 million, a 19% decrease over the previous period.
• Returning customers placed 77.4% of total orders, an increase from 76.3% of orders in the fourth quarter of 2021. 
• The average order equaled $283, up from $269 in 2021.
• 61.7% of all orders were purchased through a mobile device, compared to 59% in the fourth quarter of 2021.

For the full fiscal year ended Dec. 31, Wayfair reported:

• Total net revenue reached $12.2 billion, down 10.9% over 2021.
• U.S. net revenue decreased 7% year over year to $10.5 billion.
• Net loss of $1.3 billion compared to a loss of $131 million in 2021.

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As the broader economy shifts from goods back into services, “it is our assumption regarding consumer spending … that we will see flat real economic growth and consumer spending in 2023,” Kinnaird said.

The merchant reported revenue of $35.83 billion for the fiscal three months ended Jan. 29, 2023. That’s up 0.3% from $35.71 billion year over year.

Revenue for the 2022 fiscal year ended Jan. 29, 2023, was $157.40 billion. That compares with $151.15 billion a year ago, a 4.1% increase.

Home Depot sales, Q4 earnings 2022

Home Depot reported online sales grew 4.0% compared to a year ago for the fiscal fourth quarter ended Jan. 29. That’s down from 10.0% growth for the merchant’s fiscal third quarter ended Oct. 30, 2022.

Net sales increased to $35.83 billion. That’s a modest 0.3% increase from $35.71 billion for the comparable period a year earlier. Net earnings increased to $3.36 billion. That’s up 0.3% from $3.35 billion for the year-ago period.

Additionally, Home Depot fulfilled 45% of online orders through its stores. That’s down from 50% in Q3 2022.

Home Depot fiscal year 2022

For the 12 months ending Jan. 29, Home Depot net sales rose to $157.40 billion. That’s up 4.1% from $151.15 billion a year earlier. Net earnings for the period were $17.10 billion. That’s up 4.1% from $16.43 billion for the year-ago period.

Home Depot omnichannel strategy

The home improvement merchant also talked about its investment in “HD” phones. In-store sales associates use the machine learning-powered devices to access inventory supply in real time, said Ann-Marie Campbell, executive vice president of U.S. stores and international operations, during the call.

Campbell said the merchant increased the number of managers on the shop floor to free up other store associates. This will allow them to concentrate on associate training and development.

Home Depot’s investment in its supply chain includes its approximate 150 facilities designed to ship small orders as well as facilities that only stock and deliver big and bulky products, Angie Brown, senior vice president of technology, told Digital Commerce 360.

Brown says the merchant is also focused on helping customers easily find what they need online.

“We continue to update [homedepot.com’s] search to handle the demands of the different shopping patterns we see from our customers as they engage with us online,” Brown says.

Going forward, Edward Jones analyst Brian Yarbrough expects Home Depot to continue its focus on improving delivery times to ensure a positive customer experience.

He says the 5% drop in online orders fulfilled in store is “really significant compared to last quarter.”

“If the trend continues to move lower, then there could be a few negatives associated with that,” he says.

According to Yarbrough, it could cost Home Depot more to ship items to customer homes versus picking up in store.

“It also eliminates the potential for a customer to purchase other items when they enter the store to pick up items ordered online,” he says.

“It could signal that more of the business is susceptible to competition from online-only retailers,” he says.

Spending $1 billion to increase wages

The merchant will spend $1 billion to increase employee wages for its frontline hourly associates.

“While we expect this to be a year of moderation in demand for home improvement, we believe that the long term underpinnings of our market remains strong,” Ted Decker, chair, president and CEO, told investors. “[This allows] us not only to attract the most qualified talent [but] also retain the exceptional associates base that is already in place.”

Home Depot ranks No. 4 in the 2022 Digital Commerce 360 Top 1000 database.

Home Depot earnings

For the fiscal quarter ended Jan. 29, Home Depot reported:

• Online sales grew 4% compared to a year ago.
• Net sales increased to $35.83 billion, a modest increase of 0.3% from $35.71 billion for the comparable period a year earlier.
• Profit grew to $3.36 billion. That’s up 0.3% from $3.35 billion for the year-ago period.

For the fiscal year ended Jan. 29, Home Depot reported:

• Net sales rose to $157.40 billion. That’s up 4.1% from $151.15 billion a year earlier.
• Profit for the period was $17.10 billion. That’s up 4.1% from $16.43 billion for the year-ago period.

Percentage changes may not align exactly with dollar figures due to rounding.

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“Across the retail industry, brazen theft inside of stores has been increasing,” says Josh Shabtai, Lowe’s Innovation Labs senior director of ecosystem.

The hardware retail chain is piloting a program called “Project Unlock,” which would work to deter criminals from stealing products at stores and prevent criminals from trying to sell stolen goods online and at other locations.

Theft at stores grows at Lowe’s, across retail industry

For the past decade, Lowe’s has kept a portion of its store products, including pressure washers, outdoor powered equipment, chain saws and power tools, behind a locked gate. If shoppers wanted to purchase one of these items, they would need to find an employee to take it out.

Power tools are often the most stolen items at Lowe’s, Shabtai says, which is why the merchant keeps these products locked up. Power tools have high value and are easy to resell, which makes these items attractive to online marketplaces, Lowe’s says.

The National Retail Federation estimates that theft costs retailers an average of $700,000 for every $1 billion in sales, according to its 2020 organized crime survey of 61 retailers.

While locking products deters criminals from stealing, it also is a negative customer experience, Shabtai says. If a shopper wants to purchase these tools, she has to find an employee to unlock them before she can bring them to the register.

“Putting more of these hurdles in stores makes it harder to sell things, but it makes it difficult for customers to not feel like they are in a super-maximum prison area,” Shabtai says.

But these measures are necessary, as Lowe’s stores have had not only an uptick in theft, but also an uptick in “brazen theft,” Shabtai says. Thieves are not afraid of having a confrontation about stealing an item before walking out of the store, he says.

This is unsafe for Lowes’ employees and shoppers, and its stores challenged the Lowe’s Innovation Labs team to come up with a solution.

This dovetails with data from another NRF survey, in which 26.5% of retailers said they had an increase in organized retail crime in 2021. Plus, 81.2% said the violence and aggression associated with organized retail crime increased in the past year, according to the National Retail Federation’s 2022 National Retail Security Survey, based on a survey of 63 retailers.

Using technology to solve theft with Project Unlock

The two priorities for the theft solution were that it had to be invisible to shoppers, and it had to be low cost.

Lowe’s completed phase one of a pilot called Project Unlock that ticks those boxes with point-of-sale activation and transparent purchase records using blockchain technology. Many of Lowe’s Innovation Labs’ 50 employees have developed this program for about three years, Shabtai says. It piloted the program in six stores with more than 600 of its power tools.

Here’s how it works: Lowe’s is working with its tool manufacturers to embed Radio Frequency Identity (RFID) chips into its power tools. The RFID has the power tool’s unique serial number. This serial number is also on the product’s bar code. When a shopper goes to purchase a tool, the tool will not work until an associate scans that bar code at checkout. Once scanned, Lowe’s has an overhead RFID scanner that will read the serial number RFID chip in the power tool and activate it. The tool will not work unless this activation happens.

Project Unlock: Anti-Theft Technology from Lowe’s Innovation Labs on Vimeo.

This process achieves a few things. If the power tool does not work until it is activated at purchase, it is less valuable for a criminal to steal. In addition, a shopper is not aware that this process is happening, making this anti-theft solution “invisible.”

What’s more, RFID is on the lower-end of cost implementation than other solutions that could achieve the project’s goal, such as Bluetooth. RFID chips are less than $1 per chip compared with Bluetooth technology, which could be $3 to $6. This would considerably increase the cost of the product, Shabtai says, and it would not be a cost Lowe’s would want to absorb or pass on to manufacturers or consumers. RFID scanners, which would be needed in each Lowe’s store, could cost “a few thousands of dollars,” Shabtai says. But, RFID scanners typically have multiple applications, and could be used for other purposes in the store, he says.

RFID also is low-powered, whereas with Bluetooth, the retailer would have to worry about the battery running out, Shabtai says.

This anti-theft solution is similar to a gift card activation, in which shoppers can take gift cards off a shelf, but they do not have value until activated at the cash register.

A purchase record using blockchain to verify product legitimacy

The other piece of this solution is the transparent purchase records.

Although the power tool is deactivated until it is purchased, a criminal could still steal it. While this does make it less valuable to a criminal, the thief could still resell it and hope that the purchaser does not know the tool is deactivated until it’s too late.

To combat this, Lowe’s will put the purchased product’s serial number on a blockchain-encrypted record. Blockchain is an open, distributed internet ledger that can record transactions between two or more parties in a verifiable and permanent way. The purchase is anonymous, and no data is recorded other than the serial number, Lowe’s says.

This record is a consumer-facing website that marketplaces, retailers, manufactures, law enforcement and consumers could use to validate if the product is authentic and not stolen by verifying if it is on this list.

For example, if a marketplace wanted to validate its power tools were authentic, it could verify the product was on this list before allowing the seller to post the product.

Thieves selling stolen goods on marketplaces

While this is a good idea in concept, it may not stop the problem, says Gene Zelek, senior council at law firm at Taft Law. Zelek specializes in antitrust and pricing litigation.

“It’s a nice effort, but it’s cumbersome,” Zelek says. “You are ultimately going to have upset customers who can’t figure out why their tool doesn’t work that they paid for, and they will go back to the marketplace or the manufacturer with a warranty claim.”

It would be nice if marketplaces would verify if their goods are authentic, but many don’t, or only do so on an ad-hoc basis or for a fee, Zelek says.

Based on working with his clients that sell on Amazon.com Inc., Zelek explains how this technology may break down in practice: If a marketplace seller sells a drill and uses Amazon’s Fulfillment by Amazon services, and another marketplace merchant using FBA also sells that same exact drill, all of those products are comingled at the warehouse. This is called random stow, Amazon says. Amazon says once its warehouse receives a product its gives that item a unique barcode that links the product to the seller, even if they are stored together. When a customer purchases an item, the employee will pick and scan the item’s barcode to ensure it is correct product to ship. Zelek says that this is not always done in practice based on issues he has had with clients. If a shopper purchases a legitimate drill from a legitimate seller, an Amazon warehouse worker could pick, pack and ship any one of the drills to the customer, including a stolen drill with the same SKU that a criminal is selling on the marketplace, Zelek says.

If that product is stolen or counterfeit, and the drill has not been activated and it doesn’t work, that shopper is going to call Amazon.com or the manufacturer of the drill. While the product’s barcode could be used to trace which seller the product came from, likely the manufacturer or the marketplace is the one bearing the brunt of the customer service issue, and it will be on them to make the situation right, Zelek says.

Because of this, it may be hard to get manufacturers on board with this concept of product activation, Zelek says. While manufacturers don’t want to encourage stolen goods, this problem is on the retailer to secure their own merchandise, Zelek says.

Project Unlock is a long-term, tech-forward plan to counter an ongoing theft problem

Lowe’s has not announced any tool manufacturers that have officially signed onto this project with embedding RFID chips into products, Shabtai says.

Even with allowing consumers to look up if their product is legitimate before purchase, it sounds too complex, Zelek says.

Right now, Project Unlock is still in testing mode. Lowe’s knows it may not be the perfect solution to solve theft at stores and fraud. But it knows that there are likely better options than locking products up. Lowe’s hopes that other retailers will be open to a technology-led solution, Shabtai says.

“The aim is to have larger industry conversation,” Shabtai says. “If we develop it, we have something we can make available. It’s a lot easier to have a conversation when you have the technology product, not a theory.”

Blockchain is a good solution, Shabtai says, as it’s not owned by one retailer, but all products could be registered in this way, he says.

“We wanted to prove it could be done. If we can do it, other retailers can do it,” Shabtai says.

Lowe’s is No. 11 in the Digital Commerce 360 Top 1000.

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