Lowe's Big Plan

By Larry Dignan Print this article Print

The No. 2 home improvement retailer's systems target better store designs...and Home Depot.

One right turn, two lefts and three miles away from the Secaucus Home Depot, mothers are pushing baby strollers along airy, bright aisles at a Lowe's home improvement store in North Bergen, N.J. Space is largely organized by project, such as a kitchen remodeling. Garden aisles are protected from birds. Red buttons in every aisle summon customer service. The storewide call for help repeats every 10 seconds, often enough to become grating if there isn't a quick response.

PDF Download This store is a beachhead in the New York area. Lowe's plans to spend $1 billion to open 60 new stores in the Northeast. It will spend $200 million in 2003 to keep its stores current. The upshot? Increasingly there will be a like-new Lowe's near a Home Depot—in every section of the country.

The No. 2 home improvement retailer clearly has its sights on No. 1 Home Depot. In 1994, 13% of Lowe's stores were within 10 miles of a Home Depot. Today, that number is 72% and counting. Lowe's, which trails Home Depot in stores 875 to 1,568 through May 2, also is using technology and intelligent store planning to try to outsmart its rival. "Opportunities are plentiful for us," said CEO Robert Tillman, on an earnings call.

Lowe's doesn't disclose much about how technology fits into its strategy, but notes in financial filings its systems offer real-time inventory monitoring, labor planning, "item movement experience" and centralized inventory replenishment—most of the items Home Depot has on its list.

Industry executives familiar with Lowe's plans say the company mines sales and customer data to select merchandise, schedule workers based on sales trends and gauge the success of promotions. Lowe's also has excelled at integrating its operations with those of its suppliers. In comparison to Home Depot, Lowe's has streamlined many business processes such as human resources, upgrading to PeopleSoft 8 late last year, about the time when Home Depot was immersed in the early stages of a rollout of the same software.

Lowe's technology tactics are often conservative. Where Home Depot tries automated checkout counters, Lowe's counters by simply opening more registers. On a red sign, Lowe's pledges that "if we see more than three people in line we will open another register." On one recent visit Lowe's was true to its word: five open registers with two people in each line.

Lowe's also has managed to keep full-time employees on the floor. Full-timers accounted for more than 80% of Lowe's employees in 2002. Nick Canter, senior vice president of operations for Lowe's Northern division, said at an investment conference in April that the company has cut turnover while boosting retention for 20 straight months.

One person familiar with Lowe's technology says the company is like many retailers, with dozens of applications that don't communicate well together. Nevertheless, Lowe's picks projects that give it the best opportunity to outwit Home Depot. The company uses data warehousing to target customers who sign up for newsletters and catalogs, aid store design and employ electronic data interchange tools to meld its operations with vendors'.

"More technology doesn't mean you're more successful unless it translates into a unique customer experience," says David Szymanski, director of retailing studies at Texas A&M.

This article was originally published on 2003-06-16
Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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