Photo: Lowe’s
Home Depot and Lowe’s are in a race against time and each other
Home improvement retailing rivals Home Depot and Lowe’s have a need for speed. Each company has announced this month that they are taking steps to outpace the other when it comes to the delivery and pickup of online orders made by their respective professional and do-it-yourself customers.
Home Depot revealed earlier this month that it plans to open three new distribution centers in Georgia over the next 18 months to meet growing demand. The largest of the new facilities will be a 657,600-square-foot DC to speed inventory replenishment at stores. A new “flatbed” center will offer same- and next-day deliveries of bulk and oversized orders, including direct service to job sites for the retailer’s professional building trade customers.
“Retail has changed more in the past four years than in our company’s 40-year history. Customers expect to shop whenever, wherever and however they want — whether they’re buying a hammer or a pallet of pavers,” said Stephanie Smith, senior vice president of supply chain development and delivery at Home Depot, in a statement.
The three new warehouses are part of a $1.2 billion multiyear investment announced by Home Depot in 2017. The goal was to add 150 new warehouses nationwide to help expand Home Depot’s same-day and next-day delivery capabilities to 90 percent of the U.S. population.
Earlier this week, Lowe’s announced it will open its second direct fulfillment center in October in Mira Loma, CA. Lowe’s said the new facility combined with the first center, which opened in Nashville in 2018, will enable it to provide its two-day delivery program to almost 100 percent of its customers across the country.
The Mira Loma DC is part of a bigger effort at Lowe’s. The home improvement retailer said it plans to open 50 cross dock delivery terminals, seven bulk distribution centers and four e-commerce fulfillment centers over the next 18 months. The goal is to enable more same- and next-day service to customers. Lowe’s announced in 2018 that it would spend $1.7 billion over five years to upgrade its supply chain.
“Opening these new facilities will allow our stores to operate more efficiently through improved flow management and inventory visibility and improve the customer experience with more predictable deliveries, better in-stock rates and faster fulfillment options,” Don Frieson, Lowe’s EVP of supply chain, said in a statement.
Home Depot (+7.5 percent) and Lowe’s (+12.3 percent) reported first-quarter same-store sales gains in May.
Discussion Questions
DISCUSSION QUESTIONS: Has the coronavirus pandemic created a paradigm shift in how consumers and professional customers purchase from home improvement retailers? How important will speed relative to both delivery and pickup be for home improvement retailing success going forward?
Poll
BrainTrust
I see significant improvements in customer experience at Home Depot and Menards where I shop regularly. The stock availability is generally accurate, and the shopping experience has been good.
But for the DIY challenged it is still intimidating to shop and put together a home improvement project. The next frontier could be getting some organization into the chaotic, unorganized sector of home improvement.
There have been some shifts for sure, but home improvement remains a sector that is dominated by store sales. There are lots of reasons for this – one being that many consumers actually don’t know exactly what products they are looking for and so need to go to a store to look and check with staff. The “it’s a kind of O-ring type thing” dynamic will ensure that stores remain critical. However online is growing and many, especially in the professional community, value being able to buy digitally. Speed for these customers is absolutely paramount because they’re working on projects of jobs where a lack of a part or material can cause delays. Because of this investment in digital is very important. Fortunately, both retailers can use their stores to support multichannel which will aid efficiency and speed.
I agree 100 percent on the “it’s a kind of O-ring type thing” point — I never know what I need until I carry the broken item into the store with me.
Due to the pandemic consumers are doing more to fix up their homes, which plays into Lowe’s higher percentage of DIY business vs. Home Depot’s pro focus. However when this bubble ends, take a look at 2019 for a true metric of how these two actually stack up. Both have been late with BOPIS, but Home Depot has been delivering to site for years now, so you’d think they would have a clear advantage. My chips are in the Home Depot pile on all counts.
I don’t think their “paradigm shift” is any different than that of other retailers. Would shoppers like choice in terms of how to engage with them? Yes. But shoppers want them from every retailer.
Speed of delivery and pickup have their limits — you can only get so fast. I think retailers have to be at parity for certain expectations and when parity won’t cut it for their audience, figure out how to lead. Some projects require immediacy for both DIY and pro. Other times, speed isn’t as important. In fact, the consumer/pro might rather save money by getting a discount for pushing delivery or pickup further out.
I think setting up the supply chain and inventory management to ensure speed of inventory replenishment and accuracy is spot on. Not having the item can be much worse, especially when your audience needs it right then.
It used to be “speed kills.” Not anymore. Customers have learned that retailers (can) have the understanding and abilities to institute and meet the immediate needs (or nearly immediate needs) of deliveries. And just as importantly, customers (especially professional customers) are coming to expect it. Retail is in a new competitive world, and it’s all about speed.
Great points in this article. I was really surprised (but shouldn’t have been) that I saw lines of people waiting to get into home improvement stores when capacity limits were implemented. People are spending more time at home, so it only made sense to invest in upgrading their rooms in their homes. I saw some wonky pickup configurations in front of the store but again it’s what had to be done with no time to really do any kind of remodeling to accommodate this new way of shopping. Good for them. I don’t see a slow down in the home improvement arena anytime soon — because people working from home in increased numbers is not going to stop anytime soon.
As a time-bound person who spends time every week in both the Home Depot and Lowe’s parking lots waiting for pickup, I can tell you that speed is very important. Both retailers have done an excellent job at real-time developing pickup and delivery options for customers during this pandemic. In April, curbside pickup at both retailers took me about an hour and that was after waiting on hold for 20 – 30 minutes to get a person on the phone who could verify a curbside order. Now, in August, it’s about 10 minutes, they know what my car looks like, and I can request curbside delivery from the app. As a frequent user of the services of both stores, I can tell you that there are new pickup/delivery developments in both apps every week — and I’m excited to see what they think up next! (Kits! Sell kits with everything needed to complete a job! For example – chicken feeders!)
I believe that people are less excited about having people in their homes and more inclined to fix what they can themselves. This is causing the increase in purchases we are seeing from home improvement retailers. In-store purchasing will be more important for this market than others – if people are not experts they may not know what exactly it is that they want. It’s important for Lowe’s and Home Depot to continue to beef up on the shopping experience to make sure it is easy for the shopper to understand best and find what they need. If they know what they need and order for pickup/delivery, I think home improvement delivery expectations will be in line with other market expectations — high.
Quick delivery is an important part of the shopping process, especially when a project typically requires lots of interdependent pieces and parts. Equally important is digital technology to support consumers (and in a different way, contractors) in selecting the right products For their projects.
There’s speed and then there’s accuracy. Maybe the distinction is better expressed as speed vs. intelligence. Neil Saunders said it well. I find that shopping at a home center is usually about problem solving, not just simple need vs. want. And the problem solving usually involves a conversation with a human being. Maybe it’s different for the pros who know exactly what their solution is and for them delivery or BOPIS is perfect. I’m an amateur and will invariably have questions. Both Home Depot and Lowe’s have been terrific in their level of informed customer service.
As our homes transform into offices and schools, the pandemic has jolted us to reimagine our space. Since the pandemic is far from over, we will continue to invest in domestic comfort, functionality and aesthetics.
Now we’re more likely to shop online to avoid crowds, lines and germs. Yet we don’t want to wait. We’ve been pampered by prompt e-commerce service this year and we expect speed across all retail categories.
Also given the seasonal constraints of their work, home improvement contractors rely on home retailers for speed and in-stock merchandise to stay competitive, trustworthy and well-reviewed.
Efficient omnichannel processes are vital to help home improvement retailers earn the loyalty of consumers and contractors.
Online retailing begins at the website. Both retailers’ websites are very difficult to shop, even as far as simply logging in or checking stock availability goes. Their websites are not updated to specific store stock availability nor in-store pricing even on basics. During COVID-19 shopping Home Depot online for a few basics, I was looking for water filters and furnace filters. The website said they do not carry the items, yet in-store there is a shelf of the specifically requested both water and furnace filters. Another example. The same Barbecue costs $100 more online than in-store. Resulting in having to visit several stores to get the in-store pricing. Once in-store, associates are very helpful. The everyday home improvement shopper requires a smart, updated website more than we need quick lumber delivery. What is very interesting is that in the end, I found it was super easy to shop Target.com for furnace filters. I found the specific sizes I needed throughout my home with various levels of filtration available in each size. They were super easy to pick up after I threw in the towel on HomeDepot.com.
A few minor and temporary shifts are visible: Shift to exterior projects with less person to person contact. More protections for contractors. Interior projects are being taken on by DIY homeowners rather than allowing contractors in the home (and contractors preferring not to go into every home).
Speed is still not the focal point for DIYers, but the retail home improvement chains are focusing on post-pandemic infrastructure for contractors who seek delivery on demand to reduce time on site and expand business. Contractors make up about 3% of the transactions but 40% of sales for Home Depot. Waiting for building materials is a hassle. For the chains, it’s less about the next 6 months at this point, given their overwhelming success. The home improvement retail market continues to grow at ~5.5% despite the pandemic. Delivery will be key, especially for delivering on site via truck. Home improvement retail is highly dependent on how deliveries can be made as these sales are larger and tied to the increase in home improvement with COVID-19.
Solutions like curbside pickup and parcel delivery will continue to be critical for the broader market, especially the DIY business, but these are still smaller, more frequent, store based sales and precautionary measures suggest safety, not speed, will pull the most attention.
Time and availability is becoming more critical. With a YouTube available that guides you through fixing anything (and no help at all when your fix-it doesn’t progress quite the same way as that 20 second YouTube showed…). Being able to get that part you didn’t anticipate needing immediately without having to hunt in a crowded store is essential. I’ve had some circumstances where Amazon prime beat Lowes/Home Depot for getting plumbing parts the fastest.
Yes, the impact of COVID-19 means that online shopping has become more important and as such, prompt delivery of these items becomes a necessity. Both of these retailers are really racing to update their old retail infrastructure and model to become more online friendly and respond more efficiently to modern needs.