Photo: Lowe’s
Is ‘Total Home’ a strategy that Lowe’s can build on?
Lowe’s last week updated its plan to drive market share growth in the home improvement category.
The chain’s “Total Home Strategy” seeks to achieve growth across five areas: professional contractors and construction professionals, online sales, installation services, localization and elevated product assortment.
Lowe’s last month reported a three percent gain in U.S. same-store sales in the third quarter ending Oct. 28.
“These better-than-expected sales were driven by improved DIY demand supported by fall nesting trends as travel slowed down and children returned to school,” Marvin Ellison, chairman and CEO of Lowe’s, told analysts on the earnings call. “We also saw continued momentum in Pro, reflecting the success of our Pro initiatives and the resilience of home improvement demand.”
Lowe’s said that sales to the professional market achieved 16 percent year-over-year growth in the last quarter, bringing its streak of quarterly double digit gains to 10.
Mr. Ellison said that the retailer recently completed its Pro pulse survey of customers in the professional market and found that they are optimistic about their prospects heading into 2023. Over 70 percent told Lowe’s that they expect to have “even more work” in 2023 than they did this year.
Online sales made a greater contribution to Lowe’s results in the third quarter, as well. The retailer said that online sales were up 12 percent and that continued improvements in the user experience and fulfillment will help it achieve greater share going forward.
Mr. Ellison said that Lowe’s “made significant strides” rolling out its market delivery model for “big and bulky” items in the quarter. The system, which currently supplies customers at more than half the chain’s stores, is expected to be fully in place by the end of 2023.
“This is a centerpiece of our supply chain transformation as the market delivery model will enable us to further consolidate our industry leadership position in appliances and position us for profitable growth in other big and bulky products like grills, riding lawn mowers, stock cabinets, and vanities,” said Mr. Ellison. “This also improves the customer experience through expanded fulfillment options and a seamless omnichannel shopping experience powered by technology.”
The National Retail Federation recently announced that Mr. Ellison will be the recipient of The Visionary award at the eight annual NRF Foundation Honors next month in New York. Mr. Ellison is being recognized for “his stewardship to drive positive change within the retail industry.”
- Lowe’s (LOW) 3Q 2022 Earnings Transcript – The Motley Fool
- Lowe’s Reports Third Quarter 2022 Sales and Earnings Results – Lowe’s Companies, Inc.
- Lowe’s Unveils Strategy to Drive Market Share Acceleration At Its 2020 Investor Update – Lowe’s Companies, Inc.
- NRF Announces Lowe’s CEO Marvin Ellison as The Visionary 2023 – National Retail Federation
Discussion Questions
DISCUSSION QUESTIONS: What are the keys to Lowe’s achieving the goals of its Total Home Strategy? How will it achieve differentiation from competitors who have similar strategic priorities?
Poll
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Mark Price
Adjunct Professor of AI and Analytics, University of St. Thomas
Rachelle King
Retail Industry Thought Leader
Lowe’s has performed excellently over the pandemic and into this year. Unfortunately it is overshadowed by Home Depot, which is performing a lot better. Part of Home Depot’s growth has come from its traction with professionals — which is helping to boost sales at a time when consumer spending is more muted. Lowe’s has shown great progress with the pro group via its Lowe’s for Pros program, but there is a lot more work to do to convince more to switch and that task will not be easy. I think there are some more solid wins to be found in installation and online, especially if those things are aimed at consumers.
Mr. Ellison’s plans strike all the right chords. Providing extra attention and effort on the professional market is especially smart. Ultimately this is a battle between two major players, and so Lowe’s must continue to keep up the pressure. The themes all sound the familiar, but it comes down to execution — and that’s where Lowe’s can shine if focused accordingly.
Improved customer experience is the hallmark of the Lowe’s strategy, whether in the pro market or with consumers. The relationships built on improved customer experience will be more sticky and should contribute to a stable pattern of growth going forward. Expediting professional orders and improving customer service, combined with new capabilities for delivery in the consumer market, should reap benefits for years to come.
Given some level of supply chain challenges resulting in limited inventory, Lowe’s must communicate expectations with customers in both markets and then take extra pains to make sure that they fulfill their promises.
It is certainly interesting watching the two giants, Home Depot and Lowe’s. Sales performances are certainly neck and neck. Lowe’s seems to be watching the professionals and homeowners carefully. Instituting the bulky delivery program will be a market hit. Overall, two great competitors and great operations. Watch the focus on creating more help and membership in their contractor market.
The Total Home Strategy is smart, and I’d especially advise Lowe’s to double down on the pro segment (both contractors and independent pros). This is where significant strides can be made, especially given the financial markets today. With climbing mortgage rates, continued inflation and high grocery prices, consumers will opt for home renovation vs. moving. A solid, well-executed pro strategy will drive strong revenue streams for Lowe’s.
Lowe’s has repeatedly demonstrated best in class retail offerings, so it’s no surprise the numbers reflect that. Pros are a smart, scale customer and function like influencers in the category.
Lowe’s keeps doing everything right. A relentless focus on execution will help it to excel against the competition. I’d add another focus area, though: way-finding for non-professionals who have difficulty locating the item they want in the store.
Under Marvin Ellison’s leadership, Lowe’s has performed well and made some strides in gaining home improvement market share. Their Total Home strategy has been developed to attract the professional contractor market, where their main competitor Home Depot has dominated. Localization, elevated product assortments, and a digital-first and customer-centric approach will all be critical to Lowe’s continuing to make strides in the professional sector.
By relentlessly focusing on the retail fundamentals and execution at the store level and across digital channels, Lowe’s will have a fighting chance to gain market share with the professionals. This will be a critical foundation for their success, as the DIY market is more susceptible to inflationary pressures and economic uncertainties.
Forgive me for being a tad skeptical. Given the rampant inflation in key Lowe’s categories like lumber it would be hard to not see “sales” growth. I’d like to see what the results look like, inflation adjusted by category. As to the Total Home Strategy the key seems to me to be not to overextend too far and get stuck holding inventory consumers will never want. Why not branch off into services? Fixing DIY jobs, maintenance contracts, linking professional painters, etc. to customers in need of their services and so on? Differentiation is the key and the easiest routes lead through product and/or price.
I’m struck that a Total Home Strategy implies continuation of their DIY focus only to discover it starts with beefing up pro sales. Certainly Lowe’s falls behind Depot with contractor sales so it’s a smart area to improve business. But is an online focus going to improve their Total Home? I don’t see it. Lowe’s would be wiser to let Home Depot continue to lead the online fight against Amazon and put their money and energy into more productive efforts.
Color me a skeptic. Yes, Lowe’s is doing a good job executing in the stores. However focusing on five areas dilutes the supposed focus. The claimed traction on the pro segment has to be compared with Home Depot, which has a solid hold on that crucial segment. Optimism that 2023 will be stronger than 2022 may be justified, but let’s revisit by April next year.
Be the trusted marketplace at a reasonable price for these types of projects. Right now you have ALL of these “providers” –and they are hired because you happen to talk to a neighbor or you see a sign up at the right time (Roof by Al, etc.), or you Google it and take your chances. If Lowe’s becomes the trusted marketplace, that will drive growth.
A quick, real life example: we just got two different electrician to give us a quote on something. One bid $2,500, the other $1,450. We hired the lower of the two. BUT if the quote were more defensible, etc., perhaps the higher quote would be the better choice. We will never know. You insert Lowe’s here with a trusted advisor kind of marketplace and you upend much of the “haggling” that goes on between the owners and the providers, that so often ends up in someone feeling like they got the proverbial short end of the stick.
When consumer inflation is running 7 percent to 9 percent, and home renovation is running up to 40 percent, it is hard to get excited about 3 percent same-store sales or even a 16 percent increase in contractor sales.
Something is wrong. They should not be looking at these numbers as a success.
Planning the business around how different customers see shopping for and getting products for what they are trying to accomplish is completely customer centric. And a good differentiator for Lowe’s over other places who sell lots of stuff.
Communicating these options and benefits on a larger company scale, and in store will be an important part of success. Signage at all levels, training programs, and thinking about shortening time in store or online. Employees must also feel empowered with good tools and programs to help them problem solve for customers.
Lowe’s is firing on all cylinders with a focus on customer experience, supply chain and omni-channel shopping. Combining these priorities into one strategic plan should set Lowe’s up for success in 2023. Though, they will need to keep a close eye on all three as market dynamics can swing in the current economic conditions.