Market share in the spotlight
When Lowe’s looks at the home improvement space, it sees 20 broad merchandise categories, from appliances to windows.
Of these 20, Lowe’s and the entire warehouse home center channel—Home Depot and Menards among them—together have a dominant position in only eight of the 20, based on third-party research for Lowe’s.
That leaves a general strategic choice for the Mooresville, N.C.-based retail giant: Focus on those eight categories where customers are convinced of your channel’s position as the go-to option, or focus on those 12 categories where dominance has thus far eluded the warehouse home center.
IMPROVING LOWES.COMWhen Nick Canter began his career at Lowe’s in 1974, there was no such thing as the video game Pong, let alone a corporate e-commerce Web site.
Things have changed, and they changed even more in February when Lowe’s rolled out its new platform for Lowes.com, culminating a process that included heavy interaction from the merchant team. One look at the site shows why: It’s heavy on the links to categories and products.
Canter is a big believer in consistent multichannel marketing.
“We have to ensure Lowes.com presentation is as good as our in-store presentation,” he said. “Your experience anywhere you go [should be] consistent.”
Based on comments by Nick Canter, Lowe’s executive VP merchandising, during the recent Morgan Stanley Retail Field Trip presentation, the emphasis is on the latter. Lowe’s is going after those categories where there is significant room for growth.
“Our focus on 2010 is to aggressively grow market share that outpaces the competition—and that’s all competition,” Canter said during the analyst event held in Dallas, March 16. “We want to continue to grow market share and specifically pay attention to those categories where we are not most dominant.”
Of course, Lowe’s isn’t about to let up in its head-to-head strength-to-strength competition with other home centers. But while much has been made of the intense rivalry between the giants of Mooresville and Atlanta, there’s much more going on in the race for sales and market share.
“This business is not just about one big box against another big box,” Canter said. “This is about taking market share and growing market share throughout the country in all of our markets from all those other channels.”
Case in point: home organization, a category where the home centers lack dominance and where mass channel and specialty stores such as Bed Bath & Beyond and Container Store have a lot of power. Lowe’s merchants took a hard look at its category after altering and rearranging signage proved an unsuccessful fix.
“The product quality we had was not good, frankly,” Canter told analysts in Dallas.
As a result, Lowe’s embarked on a “total redo” of the home organization set, adding several hundred new SKUs from garage to home organization to storage. The reset should be complete across the chain sometime this month.
One star attraction he mentioned was the Lowe’s brand allen + roth solid wood closet organization, which figures prominently in the aisle. And as this article goes to press, the company announced a deal with Masco Retail Cabinet Group, bringing a DIY closet organization system exclusively to Lowe’s stores.
Another case of market share opportunity is cleaning supplies, and here Lowe’s has merchandised into shelves that present cleaning as a project, not just a product.
“The No. 1 share player in cleaning is certainly not home centers, and we probably will never dominate this category,” Canter said. “But we have tremendous opportunity to take share from grocery and discount and mass.”
Part of the plan is a window cleaning project bay, an example of how the retailer has embraced the cleaning category in the past two years.
During his presentation, Canter shed light on the Lowe’s way of going about business in a post-recessionary environment. He pointed to four strategic concepts that are guiding the merchandising department. Some of them sound like the way the retailer has always competed for customers, with a few new twists.
First to market
There is a tremendous amount of innovation in the home improvement industry today, and it’s the job of Lowe’s merchandising teams to discover it and bring it into the stores. (Lowe’s teams were on the floor in Germany at the International Hardware Fair.)
“To be a great retailer today, you have to be first to market, first with great ideas and first with innovation,” Canter said. “We are moving more quickly today than we ever have.”
Vendors play a big roll in this concept, as they are encouraged to bring Lowe’s new products, new ideas and new opportunities, he added. He pointed to one example, a Levolar special order cellular shade in the window fashion category, another area where home centers are not dominant and opportunity for market share exists.
Another is GE’s hybrid water heaters, which is answering the call for energy savings and dollar savings that can be heard from one end of the home improvement industry to the other.
In California, Lowe’s is bringing merchandising innovation in the form of an Energy Center set in 21 stores. The department is designed to educate customers in three areas: how to measure the energy they are using; how to conserve energy; and how to generate, through solar or wind applications.
As the merchants test and learn from the energy sets, it could roll out to 400 stores over the next year, he said.
Go local
Not all markets are created equal. Neither, then, should the stores be. Obviously, styles vary. “Customers who walk into a flooring department in South Texas need to have a different experience than they might have in Boston,” he said.
One of the categories where home centers do have dominance over other retail channels is rough electrical. And here, Lowe’s has done its homework to fine-tune its planograms, of which there are hundreds in total, he said. The stores’ rough electrical load centers are determined based on local building codes, as well as regional vendor and contractor preferences.
One obvious category for regional preferences is swimming pools and supplies. After experimenting in pool-friendly Orlando, Fla., the company is rolling out a completely redesigned pool set, with new SKUs and a more visible location in the store. “We’ve never done a great job with pool products,” Canter said. But the latest version has shown success, he said, and it is rolling out where pools are important.
Everyday value
Describing Lowe’s as an “everyday competitive price” retailer—as opposed to a hi-low approach—Canter took pains to differentiate value from price. “It’s not just about price,” he said. “The customer is looking for price plus something else, and it’s our job as merchants to fill in [that something else.]”
Why Lowe’s?
His final merchandising concept dealt with giving the customer a reason to shop at Lowe’s. Canter explained it this way: “If you’re a customer driving down the road, we have to give you a reason why to turn into Lowe’s, instead of turning into someone else.”
Success along these lines begins with products and value, but they also include operational strategies, such as simplifying and improving the shopping experience. The company removed signage, a form of addition by subtraction when one considers the reduced costs and the reduced store clutter.
An effort is under way to generate inspirational packaging throughout the store. The company has color-coded its glue departments and made its soil products easier to shop.
The end result here is to “visually inspire the customer to buy the product by pulling it all together,” he said.
It’s all part of a total package with an extremely ambitious goal: “We have to win against the competition in every bay,” he said. “Every bay, every day.”