DIY Giants Seek Ways to Build Business
“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