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Home Depot To Spend $1.2B To Up Its Game In Online Deliveries, Tesla Dumps Home Depot Kiosks

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Home Depot is going to spend $1.2B over the next five years to speed up the delivery of its goods in response to online orders. The move comes despite the fact online orders only accounted for 6.7% of the retailer's more than $100B in sales in 2017. 

Home Depot

The home improvement giant is preparing for the future of retail, Home Depot Executive Vice President of Supply Chain and Product Development Mark Holifield told the Wall Street Journal. The retailer plans to add about 170 distribution facilities nationwide, with the goal of being able to reach 90% of the population in a day or less. After all, last year's online sales represented an increase in that channel of 21% compared with 2016.

The supply chain revamp is also part of the current $11B plan to re-engineer the company, Holifield said. 

Speaking at a recent conference, Home Deport CEO Craig Menear detailed what the 170 new facilities will do. Home Depot will develop 40 flatbed distribution centers to handle building material-type products, and about 100 hubs for consolidating shipments of bulky consumer items — appliances and the like — before they go to homes and businesses. 

The company will also develop about 40 direct fulfillment centers for more frequently ordered items.

"If they need a water heater, a toilet or something from the stores, we will flow all of that together in one shipment to that customer in an expeditious fashion, and that's what we're building on in the supply chain,” Menear said.

Currently, Home Depot has about 2,280 physical stores. The company posted Q1 sales of $24.9B, up 4.4% year-over-year, though that was below expectations. 

Overall, Menear is optimistic about growth in home improvement. "By 2020, 54% of the houses will be north of 40 years old ... and that bodes well for our business overall," he said.

Tesla Factory Fremont

Separately, Tesla is ending its partnership with Home Depot after expanding its presence at the retailer's store over the last six months. The news was included in a memo from Elon Musk to all employees outlining plans to cut 9% of the company's workforce, according to Fortune magazine.

The Tesla-branded kiosks at Home Depots were designed to spur sales of Telsa's residential rooftop solar panels and Powerwall, a battery for homes to store solar power. In February, Tesla said it was setting up kiosks in more that 600 Home Depot stores.

All of the kiosks will be removed. Tesla told employees who work in the company’s home energy department that it would not renew its residential sales agreement with Home Depot during a brief conference call Tuesday, Fortune reported, citing an anonymous source.

Telsa will continue to be in the solar panel and battery business, but the focus of its retail efforts will be at Tesla Motors locations. The automaker has about 300 retail locations.