How the team at The Home Depot is using AI to build the agility consumers seek and the business demands.
The Home Depot’s business is built by people who make things with their own two hands, and its customers rely on the screws, boards, tools and everything else the company has sold for nearly half a century. There are more than 475,000 orange-aproned Home Depot associates on the cutting edge of retail innovation, driven to help customers finish their home improvement projects faster and more affordably than ever.
Led by chair, president and CEO Ted Decker, the company—the largest home improvement retailer in the world—employs big data and machine learning to build a more resilient and efficient interconnected shopping experience for its customers. “Ten years ago,” says Decker, “we didn’t have Ph.D. data scientists at The Home Depot. Now, we have officer-level data scientists, as well as industrial engineers in store operations.”
The company’s tech initiatives go well beyond keeping SKUs in stock: They extend to how merchandise is stored, moved and displayed. To optimize sales, merchandise needs to be displayed within reach of the customer—a challenge in a vast warehouse shopping layout, where backup inventory is stored on shelves high above customers. Some shoppers, when seeing an empty display rack, will ask an associate if there’s more merchandise above. But many won’t. Either way, empty racks can mean missed sales.
“Now,” says Decker, “we can know with high confidence when a particular set of drill bits needs to be packed down”—that is, taken from the upper storage shelves and put within reach of customers—“based on all our data.”
Artificial intelligence (AI) allows even more granular calculations. “Let’s say we need to pack down the drill bits but also dozens of other SKUs. It’s a busy Saturday, and the associate can only do one at a time. Based on numerous inputs and performance data, we can tell them how to prioritize what to do and get back to helping customers.”
Beyond inventory management, The Home Depot uses AI to tear down walls between online and brick-and-mortar sales. The pandemic converted millions of people to online shopping, but not many retail leaders saw opportunities in the big-box space. Decker begs to differ. “We’ve invested significantly in our interconnected online and mobile experience, again using data science to anticipate customer searches and serve the most relevant results” he says.
Decker rejects traditional concepts of siloed sales channels. “For us, purchase journeys often start online,” he says. “If they don’t click through to buy, that just means they’re doing research—and we’ll see them in the store.” To that end, the company is building a robust last-mile delivery network because most Americans live within 10 miles of a Home Depot store.
AI also guides The Home Depot’s sustainability initiatives. “We have terrific insight into our customer preferences for products with low environmental impact,” Decker says. “So, we’re partnering with vendors who focus on that—everything from battery-powered outdoor equipment and water-conserving faucets and toilets to smart-home technology for energy-efficient temperature controls.”
Decker has been with The Home Depot for 23 years and at the helm since 2022, so he brings a lot of institutional perspective. “AI has really been a progression for decades,” he says. “It isn’t like we jumped last year from the abacus to AI. But everything is getting much more powerful very quickly.”
The Home Depot grew by over $47 billion over the last three years. “Fragility brought agility,” he says of the pandemic. “Now, business has to get back to foundational planning. That starts with knowing what your customer wants and when they want it—and machine learning is putting that knowledge into overdrive.”
