Lowe’s Heading to Mexico
The U.S. is just not big enough to hold Lowe’s. Previously, the world’s second largest home improvement chain announced plans to expand north into Canada (it plans to open up to 10 stores in the Toronto area this year) and now the company is taking its successful retailing concept south of the border with up to five new stores planned to open in Monterrey, Mexico in 2009.
“For several years, we have been evaluating opportunities to serve consumers in vibrant home improvement markets outside the United States,” said Robert Niblock, chairman and CEO of Lowe’s, in a company press release. “With homeownership rates in the market growing at a rapid pace, we see Monterrey as a tremendous opportunity to offer Lowe’s products and services to homeowners and commercial customers in a superior shopping environment with customer service that is recognized as among the best in retail.”
The new stores, which will cost up to $20 million per location to build, will bring 800 new jobs to the area, according to a Lowe’s press release.
Lowe’s has established a headquarters office in Monterrey, with Francisco Fernandez, vice president of Lowe’s-Mexico, responsible for getting the company up and running.
Mr. Fernandez has been with Lowe’s since 2002. Previously, he spent 16 years working in the home improvement sector including seven with Total Home (Alfa Group) in Monterrey.
Discussion Questions: What are your thoughts about how Lowe’s is going about its international expansion? How will Lowe’s approach to business translate into Canada and Mexico?
By hiring an experienced Mexican retail executive to run the expansion, Lowe’s is more likely to succeed. International expansion in retailing often doesn’t work well, and the top 2 reasons are based on the quality of the leadership, and whether they’re empowered appropriately. The Mexican economy is much more volatile than the U.S., so Lowe’s should expect its results in Mexico to reflect that issue.
I agree with Christian wholeheartedly. This is a good idea as long as they are careful to set up the store experience and product offerings around proper acculturation. Not as much as a concern with Canada, but in Mexico the classes lead very different lives and you can’t bank on just the wealthy class to support a thriving store. We have some international plays that have failed miserably because of this and having the right leaders in place will be crucial.
Mexico is a developing country with lots of potential for a D-I-Y retailer such as Lowe’s. There is a great thirst to improve houses and buildings there. On the face of it, the Lowe’s strategy to enter Mexico with a Mexico-experienced retailer, Francisco Fernandez, in growing Monterrey, Mexico appears well-planned. It is my belief that Mexico is a slightly greater opportunity than Canada. While Lowe’s announced strategy should translate well in both countries Mexico is developing faster than the more mature Canadian marketplace.
Good idea. Follow H-E-B’s and Wal-Mart’s examples along with Mark’s suggestion above. As long as they don’t build U.S. cookie-cutter stores, but rather merchandise to the local demographics, they should do fine.
Lowe’s has a good chance to succeed in Mexico, and Monterrey is a great place to start.
Monterrey boasts one of Latin America’s top three highest per capita wealth concentration districts, and is influential in the sense that their stores in Monterrey can influence a sort of desirable and aspirational image for Loew’s to extend successfully into other Mexican cities, grabbing market share from smaller home improvement businesses.
It was inevitable that Lowe’s would have to move ex U.S. Contiguous markets may appear less risky and easier to manage. Using local partners and/or managers should enable Lowe’s to localise the offer–but don’t they really need to make a step change and build growth platforms internationally on a larger scale?
The issue is what would they actually bring to the party in each country they will operate in: better understanding of the customer? A more efficient operating platform?
The most successful international retailers are those that can learn and apply lessons across the group, tailoring and refining the offer to the local market, rather than insisting on a one size fits all model.
Lowe’s will have to get to this point sometime; probably by acquisition–in which case they shouldn’t look simply for stores and sales in different countries, but expertise in knowledge transfer.
Lowe’s in Canada and Mexico; why not?
The ground in Canada may be a little more fertile than in Mexico but Mexico certainly has a growing component of wealth within their economy which can support such an operation.
International expansion and operations are never easy or straight-forward; often the best way to enter is with a strong partner which can help to mitigate the risks involved in operating in a new market to a totally new customer base. Additionally, many retailers find that they must divert resources who are focused on their core market to support these new ventures. This has the potential for disrupting the core organizations focus and impacting their business.
If Lowe’s stumbles it may be attributed to “too much, too soon” in their expansion plans.