Image: Lowe’s
Ellison shaking things up at Lowe’s
It didn’t take long for Lowe’s new president and CEO, Marvin Ellison, to begin shaking things up at the home improvement chain.
Mr. Ellison, who joined Lowe’s on July 2, having moved over from J.C. Penney where he was chairman and CEO, announced a new organizational structure in the company’s c-suite with the elimination of the chief operating officer, chief customer officer, corporate administration executive and chief development officer positions. A number of new positions will be added, including EVP, stores and EVP, supply chain.
As to the why behind the changes, Mr. Ellison said, “We have taken a fresh look at our organizational structure and are realigning our leadership team to improve our focus, better leverage Lowe’s omnichannel capabilities and deliver increased value for our customers, associates and shareholders.”
Mr. Ellison also took steps to bring his own team on board when he became CEO of Penney in 2015 with an emphasis on building the department store’s omnichannel infrastructure with executive recruits from Home Depot and Target. Mr. Ellison was criticized for not closing stores quickly enough at the underperforming department store chain. He pushed back, insisting that stores were not only sales producers themselves, but that they directly affected Penney’s e-commerce business, as well.
Many analysts and retail industry watchers see Mr. Ellison as a good fit for Lowe’s. He spent many years at Home Depot, most recently as vice president of U.S. stores, before he moved to Penney in 2014.
Mr. Ellison takes over a chain that has seen its growth lag behind Home Depot in recent years. Lowe’s reported a 0.5 percent increase in same-store sales during the first quarter, while Home Depot’s comp number improved 3.9 percent.
Earlier this year, Lowe’s reported that traffic in its stores had increased, but that customers were purchasing lower-margin goods. Costs associated with advertising and home delivery served as a further drag on the chain’s bottom line.
- Lowe’s Realigns Leadership Structure To Drive Operational Excellence – Lowe’s Companies, Inc.
- Lowe’s Reports First Quarter Sales And Earnings Results – Lowe’s Companies, Inc.
- The Home Depot Announces First Quarter Results; Reaffirms Fiscal Year 2018 Guidance – The Home Depot
- Why does Lowe’s seem to have a problem turning shoppers into customers? – RetailWire
- Penney hires Home Depot and Target execs for omnichannel push – RetailWire
- Penney CEO says stores critical to omnichannel push – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will his previous experience at Home Depot help Marvin Ellison develop a strategy to compete more effectively against Lowe’s larger rival? What would you advise Marvin Ellison to do with Lowe’s, if asked?
Poll
BrainTrust
Christopher Jordan
Chief Business Officer, Hubba
Dick Seesel
Principal, Retailing In Focus LLC
I think it’s too soon to say what effect Ellison is going to have on Lowe’s. Changing positions and people are okay, but that alone will not change the course of a company. What is Ellison’s strategic plans for Lowe’s? How does he see the chain competing with Home Depot and others? How does he feel he can improve the in-store experience? Those are the questions I would like to see answered and then, given some time, I would like to see how Lowe’s achieves those goals under Ellison’s leadership. The opportunity for me at Lowe’s is to create a superior in-store experience which they lack. Too often you cannot find anyone to help you and that’s frustrating. So investing in more staff and better training would be a good start.
Wait, didn’t Mr. Ellison just come from J.C. Penney where nothing of note happened on the good side for three years? Even though this job is a little simpler, as in copying whatever Home Depot does, do we really think he can compete with someone so far ahead? I’m betting on a lot of press without much actual progress, just like the last gig.
This is one category the retail world and its boards need to overcome: the serial CEO.
Lowe’s had Home Depot on the ropes during the Nardelli era, while Mr. Ellison was also at Home Depot, and could have made significant competitive strides at that time — and didn’t. Mr. Ellison went from Home Depot to J.C. Penney and their struggles have been well documented. Mr. Ellison is now at Lowe’s and is replicating the boardroom change tactic he used at J.C. Penney. While he has familiarity with DIY retailing, the world of retail has seismically shifted since 2007. The management change is good for Lowe’s — it will allow significant changes to happen quickly as part of the transition disruption. Mr. Ellison’s success will be directly related to the people he listens to.
A “shake-up” shouldn’t end up with the Lowe’s team looking like every major retailer from the last 20 years.
There’s been a number of sweeping executive changes at large retailers over the last couple years, but the “major shake-up” typically ends up being a game of musical chairs, bringing in more of the same — executives from some other top 50 U.S. retailers (who have generally been in retail their entire careers).
The strong moves Marc Lore and team have made with Walmart e-commerce illustrate the benefits of bringing in a team with experience outside of traditional retail circles. Lowe’s is going to have to innovate, be different and think big to gain the ground they need to against Home Depot, and getting a diverse mix of backgrounds on the executive team is the best starting point.
Ellison made the right first moves. Of course, there’s still a ways for Lowe’s to go before it recovers its mojo.
Regardless, those close to Lowe’s knew there were clearly major changes needed in these major roles. This is an excellent first step. He won’t be able to achieve anything until he has the right people in the right roles.
From here, I wish him well in making the next steps. Lowe’s is a good company — it deserves good leadership.
If anyone can understand the competitive advantages of Home Depot and how to apply them to help Lowe’s grow, it’s Marvin Ellison. His quick reactions are proof that he learned lessons from J.C. Penney and he will not wait to act. He needs to move aggressively and push Lowe’s to innovate and make noise in the category and it seems he is on the way to doing so.
I worked with Lowe’s for three years during the time that they were leading the category. The CMO at the time, Bob Gfeller, was — and still is — a shining example of leadership, vision and a fearless and focused commitment to CX and doing what’s right for the customer. We had 33 departments involved and it was an honor and privilege to be part of such an amazing group of retail leaders. This was 10 years ago, and only two of this team are still there.
Some great minds have been inside of their walls and I hope that as more come back in, they are the right people and they are empowered. They’ve lost a lot of years and, as Bob often said, there’s a narrow window in which to get ahead.
I do agree with Doug. However, we always suggest that when taking over the reins of a business, as a new CEO for example, don’t just throw the the operation and staff upside down and out because you need immediate change. That can cause a lot of immediate chaos and uncertainty among those left. Get to know who is good, bad and extremely marginal, along with making plans for the big change. You never know where great talent has been stifled.
That being said, I think bringing on Mr. Ellison is an incredibly great move, and I am sure we will see very enlightening changes come about in the near future.
Only time will tell if these changes yield results. However, the home improvement space is very different from the department store space. Omnichannel is important, but it’s nowhere near as critical as in other sectors. As such, I hope that Ellison and his team will take time to understand customer buying journeys — something that may now be harder with the elimination of the chief customer officer role.
What Lowe’s really needs to do is find ways of standing out against Home Depot — to which it has always played second fiddle. That comes down to strategy and vision as much as it does management reshuffles.
The first Peter Principle isn’t “we reach our level of incompetence,” rather it is “we do what we know.” To replicate Home Depot won’t work, it already exists. Ellison has to create meaningful differentiation in the category to succeed. That means reinvent.
At J.C. Penney he added elements of Home Depot and hoped for the best. It didn’t happen. There was a fundamental difference between Home Depot and Lowe’s five years ago. Home Depot specialized in behind-the-wall projects while Lowe’s went in front of the wall. Targets were different: Home Depot was heavy construction DIYer; Lowe’s was heavy decor DIYer. Since then, those differences are some what modified.
So Ellison’s challenge is even greater. He needs Frank Blake’s wisdom that allowed Home Depot to rebuild the airplane while it flew.
What Ellison learned at J.C. Penney: “retail ain’t for sissies!”
Mr. Ellison is finishing his second week on the job, so it’s premature to judge the reorganization or anything else he’s done. The newly created positions (stores and supply chain) may be needed but they appear from the outside to be more operations-oriented than customer-facing. It’s too early to tell whether this kind of approach is meant to improve operating margins or to truly recapture some of the market share being won by Home Depot. That may take a deeper dive into Lowe’s strategy than what we’re seeing so far.
Whereas most people, for obvious reasons, felt the Home Depot experience would be more relevant, these are structural/management changes, so it’s difficult to see that impact … as opposed to, say, a decision of carry more leaf blowers.
But once that clearer impact is felt, I think the important thing is to avoid the temptation to just make Lowe’s another HD: competition should not be about doing things the same, but about doing them better.
Ellison’s 12 years of experience at Home Depot is certainly helpful, as he understands home improvement customers and he was instrumental in Home Depot’s turnaround.
Lowe’s has experimented with a few tech innovations to improve the customer experience, LoweBot (robotic salesfloor assistant) and Holoroom (virtual/augmented reality-based home product visualization); however, these tools are not likely to dramatically improve the shopping experience.
Lowe’s will probably benefit more from other initiatives that truly improve the shopping experience by removing friction and improving the quality of service, such as: making BOPIS and BORIS (Buy Online Return In-Store) more efficient with streamlined processes and maybe lockers (like Home Depot), helping shoppers find products (store locator apps), and most of all, improving the availability of store associates to assist with questions and directions to the right products.
Service is a big differentiator in this space and Lowes can win by a singular focus on service. It doesn’t have to be just people but technology in the form of customer facing apps and real-time inventory availability, not just day old inventory like everyone else, will allow them to win and win big.
Yes, Marvin Ellison’s previous Home Depot experience will help him tremendously, but so will his growth during his tenure at Penney’s. He needs to shake up Lowe’s corporate team and their positioning of products. Lowe’s is too busy trying to be like Home Depot rather than being better than Home Depot. Their pricing on major products needs to be lower, their OOSs need to be managed better, and Lowe’s needs a fresh promotional approach to their line, especially their online presence. Increased discounts for omnichannel marketing or online purchases and volume purchases will be keys to Lowe’s future, and the faster they recognize this the quicker they will grow and develop a loyal following.
Something in the article that Mr. Ellison said seems a little contradictory. He believes in improving the omnichannel experience but also believes in maintaining sales square footage. If the omnichannel experience is growing and that means that BOPIS and web ordering will be taking a larger share of sales, why is it necessary to maintain sales square footage in the store? Let’s take a radical approach. Suppose that we decrease sales space in the store and make room for an area to efficiently process omnichannel orders and assure the customer experience that everyone says is so essential. Just a thought …
There are several reasons for Lowe’s to make a change in leadership. The most obvious is results. There are many differences in structure and approach. Lowe’s looks at profit taking as a primary market directive. This has been a problem for them in terms of one-stop shopping. Contractors and DIY project sales will almost always incur a need for low-profit add-on items. It is common knowledge that Lowe’s is missing many of these elements. This needs to change faster than the names on executive office doors.
While Lowe’s has nowhere near the buying power and liquidity of Home Depot they can put equal pressure on vendors that face price-determining factors like manufacturing planning volumes which Home Depot cannot support by themselves. A new look at perhaps entering the rental industry with a clearer understanding than that owned by Home Depot would satisfy their love for high margins and impulse sales.
Mr. Ellison’s previous two missions will in no way resemble what he is facing today. I do not think Lowe’s needs to be reinvented. It must be made relevant to today’s home improvement market without price wars. Becoming a supplier of relevance to small and medium businesses outside of existing store ranges might work to support better quantity extra schedule price points in closely competitive commodity product lines.