Lowe's and Home Depot - home improvement retailers in search of digital fixing up

Profile picture for user slauchlan By Stuart Lauchlan March 4, 2019
Summary:
Home improvement is a lucrative game for the two gorillas in the US market.

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It’s a boom time for the US home improvement market, according to Marvin Ellison, CEO of Lowe’s Stores, fuelled by a number of factors including income growth, lower federal tax rates, gains on household formations and continued home price appreciation;

This growth is further supported by an ageing housing stock, as home prices are increasing consumers were staying in their homes longer and the cost of their improved financial position they're investing in their homes. All of these factors drive investments in home improvement projects.

It’s a market with two gorillas - Lowe’s and Home Depot, both of whom are engaged in digital transformation initiatives in a bid to gain competitive advantage. Both have also encountered some problems in the process, not the least of which was the disastrous website outage that Lowes endured during the crucial Black Friday weekend last year.

It’s a reminder of the need for a technology upgrade, according to Ellison, who hasnt been shy of critiquing the companys past performance since his surprise appointment as CEO last summer:

These challenges are reminder of the upside opportunity we have in our online business. However coming out of holiday season, it was obvious that we needed to redirect our online strategy and our focus.

The first sign of that change has come with the appointment of Mike Amend as the firm’s first President of Online. Amend earned his omni-channel retail spurs at Home Depot and JC Penney, both former alma maters for Ellison himself. The plans is for an “aggressive transformation” of lowes.com in 2019, says Ellison:

First and foremost, we know a modern day retail has to be an omni-channel retailer. For us, the classic example of our shortcomings was evident on Black Friday weekend where we had our failures from a system and service perspective. So we made a decision to just go out and recruit someone who had a specific background in this to just kind of supercharge our focus and have a much more aggressive approach.

[Amend] is going to work with Seemantini Godbole, our new Chief Information Officer, who actually ran the e-commerce business for Target, and they're putting together an aggressive plan, that's going to allow us to get very focused on creating a true omni-channel experience for Lowe's.

So the good news for us is, that we have two leaders in position, one with deep learning and proven experience from an e-commerce perspective and another with broad experience on the e-commerce world that's going to allow us to really have a more aggressive focus.

And just to up the stakes, he adds:

Our customers are begging us to get this right.

That includes getting the customer experience right in-store and there are plans on that front to roll out mobile devices to shop floor staff that Ellison believes will have a transformative impact:

No longer will associates will be required to leave the sales floor to log into a terminal to determine the price, rate of sales, on hand quantities or order status of an item. The new smart device will provide associates with real-time data at their fingertips without ever stepping off the sales floor or losing engagement with the customer.

Other innovations will include a new labor scheduling systems that can better predict customer demand by time of day, day of week and department allowing Lowes to align labor hours in peak traffic, provide better department coverage and customer service and ensure that labor hours are used efficiently.

Early days

It’s a similar story at Home Depot where CEO Craig Menear argues that the firm is still in the early days of its omni-channel transformation, but there are signs that an “interconnected customer experience” across physical and digital platforms is taking shape.

The company has assembled around 50 swat teams focused on agile development across the company to improve the online experience. With 2 billion website visits in 2018, this is seen as a core priority, says Menear:

We continue to invest in a more personalized offering for our Pro customers with a new B2B Web site experience. We have now on-boarded over 100,000 Pro customers and the reception has been positive, our plans for continuous enhancements with new features and capabilities. For example, in response to customer feedback we are adding the ability for businesses to enhance account management and ordering capabilities with improved tools. Our intent is to roll out this new Pro online experience to over a million Pros in 2019.

Beyond B2B personalization, we continue to make great strides in driving our digital experience. This year we invested in our Web site and mobile applications improving search capabilities, site functionality, and product content. This ongoing investment in our digital properties has increased traffic and conversion. Versus prior year on a like-for-like basis, online sales grew 22.7% in the fourth quarter and 24.1% in fiscal 2018, now representing 7.9% of our total sales.

Approximately 50% of online orders are picked up in store and there’s an ongoing roll out of automated lockers in store to make pick-up easier and faster. Thats happening alongside a $1.2 billion investment program to create a faster delivery network. A number of distribution pilot schemes took place in 2018 and the intention is to take the learnings from these and apply them on a larger scale in 2019.

My take

What both firms need is for economic confidence to remain high. Any slowing down of the housing market has an inevitable knock-on impact on the home improvement sector. But then again, if you decide not to sell your existing house, then you’re potentially more receptive to the idea of improving your current home. Making that improvement process as easy and frictionless as possible is critical. Of the two, Home Depot is better placed on that front at present, but it was Ellison who got the firm into that position. Can he repeat the fix-up at Lowe’s?