DIY Giants Seek Ways to Build Business

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Aug 23, 2006
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By George
Anderson


“You can do it. We can help.”


“Let’s build something together.”


Home Depot and Lowe’s want consumers to know they are there to help them handle even the most difficult do-it-yourself projects. With signs the housing market is softening and taking the two DIY businesses along with it, the question is which of the two chains will consumers most look to for assistance down the road?


As a BusinessWeek article points out, most Wall Street analysts expect both chains to do quite well over the long haul.


“They will have very good growth prospects as they continue to open new stores and take market share,” said Anthony Chukumba, an analyst with Morningstar. “We think for the most part they both have great store models and great management teams.”


The short-term prospects for the two chains, however, may be a different matter.


Both have recently reported lower than expected sales for their second quarters while cautioning investors the next couple of quarters may not be any better.


Home Depot’s aggressive move into the wholesale commercial building supply business has given it a hedge to overcome any weakness in the residential construction sector. According to Action Economics, nonresidential construction has been growing in the double-digits while the residential market has languished.


While Home Depot has benefited from the billions it has invested in the nonresidential building supply business, it is facing formidable internal challenges on the consumer/residential end of the market.


Customer satisfaction with the chain is low with Lowe’s rated 11 points higher by consumers in the University of Michigan’s annual American Customer Satisfaction index. Home Depot has responded by announcing it would spend $350 million on employee training and customer service programs.


Lowe’s has not followed Home Depot into the nonresidential sector and, therefore, does not have the same cushion to fall back on. The chain, however, continues to build on a reputation for customer service seen as a major advantage in its head-to-head competition with Home Depot.


Michael Tesler, president of RetailConcepts.com and a RetailWire BrainTrust panelist, said women, in particular, appear to be drawn more to the Lowe’s approach than Home Depot. “Lowe’s has more positive momentum right now,” he said. 


Discussion Question: Digging deeper into areas such
as buying, operations, merchandising, marketing, real estate strategy, online,
etc., where do you see opportunities for Home Depot and Lowe’s to improve their
respective businesses?

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19 Comments on "DIY Giants Seek Ways to Build Business"


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Bhupesh Shah
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Bhupesh Shah
14 years 6 months ago
Home Depot has hacked through the buying ranks, laying off veterans who just happen to be on the higher end of the pay scale. While this may have helped HD when facing financial analysts, it certainly did not help them take advantage of merchandising and sourcing opportunities. There was an “execution gap” while they struggled to fill the positions and ensure that exceptional merchandiser support existed. As a result, there are a number of categories where Lowe’s enjoys an exclusive since HD does not even participate. Like most companies, the support staff seem to lack the resources to do a good job. Or, they lack the motivation to seek out/act on anything outside of the normal SOP. What happened to the drive and passion that HD used to exhibit? This trickles to the field where customer service is woefully lacking. Used to be that an associate would take you to the proper aisle, grab the right product off of the steel and thrust it into your hands with a confident, “Sir, this is what you… Read more »
Matt Werhner
Guest
Matt Werhner
14 years 6 months ago

I’ll add one more point to Ian’s list: staff enough personnel to handle the amount of customers coming into the stores. I can’t begin to imagine the amount of lost sales resulting from potential customers walking away because the service rep was backed up or non-existent.

I really love standing in line down some aisle, behind three other people who are waiting desperately to talk to the only employee on that side of the store. It gets even better when the entire line has to follow that rep down other aisles while he/she is looking for someone else’s potential purchase.

Lowe’s and Home Depot have a big opportunity to increase loyalty, not just through their credit card programs, but through personable service. These customer service reps should be trained to act as minor consultants to your home projects and, after the store visit, customers should feel as if they can return to the store and see the same rep for another personable experience.

Paul Waldron
Guest
Paul Waldron
14 years 6 months ago

Just last night I visited one of these DIYs. I was impressed with the knowledge of the employee who came up to help me – who tactfully made me aware of what I had come to buy was not really what I needed. Knowledgeable customer service leads to sales – for most DIY’ers it will win over price.

And – we DIY’ers need signs – if the toilet’s not working, we need to find the plumbing area right away – and the proper part number needs to be in the right place on the shelf. If its space is empty, at least we know they carry it and to ask if they have it somewhere in the store.

And – we need pictures – lots of times we know what it looks like, but don’t have a clue when it comes to numbers.

Help me, and I’ll keep coming back and giving you my dollars.

Jeff Weitzman
Guest
Jeff Weitzman
14 years 6 months ago

Stores like Home Depot are really three stores, in my mind. They are a substitute for the traditional hardware and lumber stores, providing the raw materials for household projects. Success requires knowledgeable staff willing to help you figure out how to do something. The next part of the store is housewares, which requires a retail staff to help you find things and suggest other choices. Finally, it is a design store, with a consultative staff willing to sit down with you and pick cabinets, carpets, and window treatments.

Not an easy trick to pull off.

George Anderson
Guest
George Anderson
14 years 6 months ago
Typically, I shop at Home Depot. There is one located less than one mile from my home. Recently, however, I went to the store and asked about whether Home Depot stocked organic weed retardant and fertilizer (small children and dogs running around makes traditional products less than appealing). The associates I spoke with (three in all) looked at me as though I had two heads. They didn’t even know there was such a thing as organic products to deal with basic law maintenance issues. Having realized that no help was forthcoming, I chose to travel to the nearest Lowe’s (about four miles away) and was pleased to find it sold organic fertilizer. I was a bit mystified to find, however, the company did not sell the same manufacturer’s organic weed retardant. The associates at the company did not know the manufacturer sold a weed retardant and had no idea why Lowe’s didn’t carry it. My next stop was the local nursery. It not only had the manufacturer line only partially covered by Lowe’s and not… Read more »
Andrea Learned
Guest
Andrea Learned
14 years 6 months ago
One thing to remember here is that women make, or influence, 80%+ of consumer goods purchases. So, even if it doesn’t seem like women are an important market for DIY, they actually are buying for themselves as well as influencing where their husbands/boyfriends buy. The credit card may have a man’s name on it, but that doesn’t tell the whole story. And, of course, customer experience/staff knowledge is key for women and their higher standards, but that certainly serves everyone – as today’s RetailWire poll reflects. One particular segment of the women’s DIY market that could be even better served these days is unmarried women. According to the book by Celinda Lake and Kellyanne Conway (pro pollsters), “What Women Really Want,” single women are trend #1. There are 22 million of them. (That’s one-third of American women.) 12 million never married, 8 million widowed and 2 million divorced. In 2003, twice as many single women as single men bought houses – and one in five first time buyers is a single woman. HD and Lowe’s… Read more »
Gene Hoffman
Guest
Gene Hoffman
14 years 6 months ago
The “best” is the enemy of “good” in DIY. When I go into a Home Depot or a Lowe’s to do a home improvement or maintenance project, I begin with the belief that both retailers are good at what they do. They both have big well-stocked stores and offer top quality products with wide selections. The employees at both retailers are frequently knowledgeable and usually helpful, i.e., “good.” If neither has become a “best” rating with me, I go to the closest store. The three things I want most in either store are clean, well-arranged departments; competent advice when I seek it; and the lowest price on comparable products. Since both retailers run clean stores and pricing structures are usually comparable, I want my Home Depot and/or my Lowe’s store to have cleanly-groomed, helpful, knowledgeable employees easily available when I have a vexing question. Like many customers, I am not concerned about the other markets or business sectors these retailers serve. Thus, assuming both retailers maintain competitive assortments and pricing, I’m inclined to believe that… Read more »
Randy Grebel
Guest
Randy Grebel
14 years 6 months ago

In dealing with both Lowe’s and The Home Depot, I can tell you from a merchandising perspective, both companies have taken a step back. Constant turnover and change in the merchandising teams have left key categories in disarray and confusing to shop. In our category, we have had three merchants in three years – each with a different opinion and take on the category, and each wanting to “undo” the mistakes of the previous merchant. The job gets half way done and the merchant moves on or out.

Don’t get me started on operations. You have a better chance of getting money to repair your roof in St Bernard Parish than you do in getting something implemented through the bureaucracy of these companies.

Consistency in product and merchandising is what these companies need. Mark, if the turnover numbers were released, it would be scary and bad for business. Remember,”It’s not how you feel, it’s how you look…and you look maaarvelous”

Michael L. Howatt
Guest
Michael L. Howatt
14 years 6 months ago

While it’s admirable that Lowe’s is consumer-centric, and especially to women, the question is how much are they gaining from it? The percent of women customers must be very low compared to the average male customer, which in turn is dwarfed by the contractor business.

I think the HD strategy is more on track towards the marketplace – keep their core businesses content and focus some additional effort on consumers. If Lowe’s doesn’t turn an eye towards taking away some of the contractor business from HD, then this predicted short term lull will be long term for them.

Ian Percy
Guest
14 years 6 months ago

As with most things in American life, the knee jerk solutions have little to do with the problem. $350 million for customer service programs at Home Depot? Let me save HD some time and money. Here’s the employee program: 1) Don’t hang out talking to each other at the paint station. 2) Stay in the section where you actually know what you’re talking about. 3) Walk around your section actively looking for a customer to serve; don’t wait for them to come to you. 4) Have people at the front door who know where everything is. 5) Most of us make up reasons to go to Home Depot or Lowe’s because it’s fun. It’d be great if it was fun for you too.

To Home Depot: I’m here to serve. Please write your note of appreciation on the back of a check and click below for where to send it. Thank you.

Bill Robinson
Guest
Bill Robinson
14 years 6 months ago
Home Deport and Lowe’s are well positioned to help the remodeler, the DYI person, and the small contractor. But their execution in the field is far off the mark. My wife and I have recently completed an extensive rehabilitation of our house. During the course of this project, we spent many $1000s over a year in many departments at each of local Home Depot, Lowe’s and Sears stores. Here’s the amazing fact. No one at Home Depot, Lowe’s or Sears ever asked my wife or asked us whether we were doing a rehab on our house. If they had asked us and offered some assistance, we would have doubled or tripled the amount of stuff we bought there. Here’s another amazing fact. We never received anything in email or in the mail from Home Depot, Lowe’s or Sears offering us services relative to our rehab. Had they analyzed our market baskets, it would have been obvious to them that we were rehabbing. Our identity was clear. We would have joined any loyalty program with services… Read more »
Don Delzell
Guest
Don Delzell
14 years 6 months ago
The hardcore DIY market is well served by the existing business model, as is the infrequent consumer brought in by breadth of assortment in a given destination purchase. Despite advertising and press releases, neither serves the wanna-be-DIY consumer very well, at least in the stores I have shopped. Customer service, defined as knowledgeable and friendly associates in sufficient numbers to meet customer needs within an appropriate waiting time….this costs money. The big box DIY model was built on limiting costs to help keep margins low, to allow for breadth of assortment. I haven’t seen any data to support this, but I believe strongly that large amounts of cash are tied up in non-productive inventory in both stores. As purse strings tighten, the reality of the market means making choices. Breadth of assortment combined with category dominance means non-turning inventory. Period. Or it means out of stocks, and the appearance of out of stocks. My suggestion would be to seriously question the breadth and depth of assortments across all categories. Try to find opportunities to trim… Read more »
Mark Lilien
Guest
14 years 6 months ago
The number one opportunity for both Lowe’s and Home Depot: to find the best people possible, train them, and motivate them to do a great job. Lowe’s and Home Depot (to the consumer, not the professional builder) are very similar. Their assortments and services are very close, which isn’t surprising since they’re very jealous of each other. There’s no doubt that fast growth reduced the skill level and quality of both companies’ store staff. The slowdown in home construction opens up big opportunities to recruit underemployed construction personnel. Great training technology is available at very reasonable cost compared to the cost of having mediocre service. What’s needed is each CEO’s focus and constant public results measurement. Here’s a place to start: announce the staff turnover figures each time the comp sales are announced. Both Lowe’s and Home Depot can get sidetracked by the professional market. The homeowner is their core market. Neither Lowe’s nor Home Depot serves the professional home builder as well as 84 Lumber. 84 Lumber sells home building kits, manufactures its own… Read more »
Dan Nelson
Guest
Dan Nelson
14 years 6 months ago

I believe the long term prospects for both Lowe’s and Home Depot are very good, but the key for both chains continues to center on expert in-store consultation, followed by store layouts/merchandising effectiveness. Lowe’s is simply better than H.D. in this area, and that’s why they are winning. It can be risky to move from the home shopper to a small business positioning H.D. is working to accomplish.

You can look at the Club sector to see a similar re-positioning by Sam’s while Costco remains focused on the home shopper and wins their loyalty with excellent Club service and a focused strategy on in-store merchandising. Some would argue Costco has better locations, but in nearly every market where they are in close proximity, Costco wins in sales per shopper and # of members per club.

HD is taking the right approach to “invest” in store consultation so they can deliver on the HELP part of You Can Do It!

Kai Clarke
Guest
14 years 6 months ago

Most of my fellow panelists have commented on the key ingredient for HD to follow: better customer service. It is the same ingredient which keeps their smaller competitors in business, and builds retail success throughout the USA. Wal-Mart discovered it early on, and others like Whole Foods, have taken it to new levels. When the large retailers take customer service to the same level as the small specialty stores, then they will achieve the success which they so desperately want.

Arthur Rosenberg
Guest
Arthur Rosenberg
14 years 6 months ago
Over the past few years, Home Depot and Lowe’s have clearly chosen different paths on their quests to become Wall Street’s favorite. While Lowe’s divested itself of its aptly named Contractor Yards, Home Depot has gone on a Pro Dealer shopping spree purchasing the likes of White Cap Industries, Hughes Supply, Williams Bros. Lumber and Cox Lumber, to name a few. Not coincidentally, these were all very well managed companies. While Home Depot diversifies, Lowe’s seems to be trying to perfect its DIY offering. Its only new venture seems to be a vast expansion into Canada. Home Depot is long established there as well as in Mexico and is currently eyeing China. As to the competition between the two, the question is will Lowe’s focus on its historic core business prove the better model? Has Home Depot put its eggs in too many baskets? I have recently published a white paper and an executive summary on this industry and go into the background of these divergent views.Click here to download the White Paper. Click here… Read more »
Bob Vereen
Guest
Bob Vereen
14 years 6 months ago

There are major differences in today’s Home Depot compared to the one founded by Bernie Marcus and Arthur Blank: (1) Margins are much higher–33% compared to 25-26%; (2) Earnings are higher because sales help on the floor has been cut back and margins are so much higher; (3) Customer service and employee morale is way down compared to earlier days. Belatedly, it seems that CEO Bob Nardelli is beginning to recognize cutbacks have been too severe.

Whether he can regain the great morale and helpful knowledge the employees once had is the big question of the future.

Robert Leppan
Guest
Robert Leppan
14 years 6 months ago

I have extensive experience over the years with Lowe’s and Home Depot, having gone through four home renovation projects. My sentiments are similar to other panelist comments – i.e., if you know exactly what you need and how to do it, then either Lowe’s or HD makes sense based on who’s closer. (Six 2X4’s or a gallon of latex semi-gloss doesn’t require any advice.) However, if you actually need guidance, then forget it……and head to a professional lumber dealer, nursery operation or other specialist.

Whichever is prepared to seriously invest in the Human Capital part of the DIY business – recruiting, training, staffing levels, remuneration, product knowledge, reducing turnover – can truly differentiate themselves and in the process reap a huge advantage with single women, Latinos or weekend carpenters like myself.

david Campbell
Guest
david Campbell
14 years 2 months ago

As I shop my local Home Depot or Lowe’s, I am often asked where to find or what to use, etc. “because I can’t find anyone who works here.” I am a licenced building con,” but often need a few items that are easier to get from HD or Lowe’s. I’ve noticed that some of the employees are knowledgeable and care. More often I hear bad advice as an answer instead of ‘I don’t know’ or ‘I don’t work in this department.’

Although the bad or lack of qualified guidance may benefit me as a contractor (hire a licenced contractor), it may be beneficial to hire qualified and experienced ‘Guidance Counselors’ to help customers with the more extensive projects, to guide them through the whole project, not just ‘my department.’

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