Home Depot’s New Customer Service App Could Spur Market Share Growth

HD: Home Depot logo
Home Depot

Home Depot (NYSE:HD) is the world’s largest retailer of home improvement products, mainly competing with Lowe’s (NYSE:LOW) in this business. We have a $35.61 price estimate for Home Depot, roughly 5% below market price.

Home Depot recently introduced its first mobile barcode program, with the QR code technology being provided by ScanBuy, a market leader in the field of barcode technology. Home Depot launched a series of ads that included  two-dimensional bar codes which customers could scan, using the ScanLife app. This app is connected to the phone’s camera and enables users to access product ratings and reviews, how-to guides, product videos and access a website dedicated to making purchases of these products. ScanBuy estimates that around 25 million people in the United States already have barcode scanning technology from their mobile device and this number is growing rapidly. [1]

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Plumbing, Electrical & Kitchen Market Share Can Improve

We believe that the plumbing, electrical & kitchen division is the largest driver of value for Home Depot, contributing around 31% to our $35.61 price estimate. With the introduction of this new barcode technology, which enables customer to instantly access the latest product information before making purchases, Home Depot has the potential to attract more customers.

If Home Depot can raise customer satisfaction by providing access to instant (and relevant) information that would help customers to make more informed purchases, the company could see an uptick in its market share. If, for example, Home Depot’s plumbing, electrical & kitchen market share grows to 26% by the end of our forecast period (vs. our base case projection of 23%), it would imply about 5% upside to our current price estimate for Home Depot stock. This scenario would put our price estimate in line with market price.

Home Depot can also use this barcode program to track customer interests and align its merchandise accordingly.

  1. The Home Depot customers get a Quick Response from mobile bar codes []