Home Depot -vs- Lowes

Lowe’s (LOW) and Home Depot (HD) are competitors in the every growing market of Home Improvement. The following analysis of each company will examine the home improvement industry, the individual companies, their operating philosophies, their financial strengths or weaknesses, and a final conclusion on which company would be a better long-term investment.

While Lowes and Home Depot follow similar differentiation and low cost strategies, there are a few differences in marketing due to the fact that Lowes seems to be more targeted towards women with bright and colorful displays, wide aisles and product stacking that is lower and easier to reach (Clemons, 2012). While this is a calculated decision because women make 80% of home improvement decisions, it may distract from growth in the contractor business since the vast majority of home improvement professionals are men. The advantage shifts toward Home Depot since men also spend thirty five percent more than women on home improvement supplies therefore, attracting men may actually be more efficient in terms of return of investment (Goodfellow, 2013). The ability to quickly locate products and return to work is a tremendous advantage for contractors who would prefer to be on the job instead of leisurely strolling the aisles of a store while examining multitudes of options. This may be a major component of Home Depot’s rebound since they derive a larger percentage of their sales from professionals and the rebounding housing markets and rebuilding efforts from Hurricane Sandy have introduced significant cash flow into the industry (Cheng, 2013).

The Home Depot knows that they must stay on top of technology and management must be able to organize this function in a way that surpasses the competition, pleases the customers, and keep the employees satisfied.

This industry, although more attractive than the lumber industry, has its own inherent flaws . The Canadian retail hardware and home improvement industry can be characterized by high degree of rivalry, mainly due to a large number of players competing over products of low differentiation and incurring high fixed costs. Furthermore, due to low switching costs, high information, and price sensitivity, buyers are not loyal and have high bargaining power relative to retailers. Additionally, the medium threat and power of large new entrants and suppliers adds to the industry's unattractiveness.

Lowe’s is continuously being threatened by Home Depot in losing market shares. It is a constant battle; Lowe’s and Home Depot are expanding substantially in attempts to take over territory claimed by the other as well as unclaimed territory. The biggest weakness for Lowe’s is its lack of customer service. Customers are leaving Lowe’s in search of credible, knowledgeable service which is found at Home Depot.

Lowe’s is the 14th largest retailer in the United States and is presently planning aggressive expansion, opening a new store on average every three days. Lowe's revenue growth is primarily a function of penetration of the market increase resulting from a burst of new locations instead of the same store sales. Although Lowe’s has grown tremendously, it remains half the size of Home Depot and has serious debt burden that increases its risk level drastically. Lowe’s is Home Depot’s largest competitor because both companies have the same products, services, and enormous warehouse formats. In this major retail market Lowe’s and Home Depot stores go toe

Home Depot and Lowe's believe in big warehouse space, an informal atmosphere and low prices. They are able to offer the lower prices to consumers due to their purchasing power. Inventory differs depending on the story type, home centers typically sock more lumber and building supplies, as their biggest customers are contractors. They pay their floor employees minimum wage, and keep overall costs down by keeping them as part time employees.

Looking forward, Lowe’s plans include expansion, with more than 100 store openings in line until the year 2004. Although it was not explicitly stated that it will continue to expand until 2006, the analysts assumed the contrary, that is a continuous expansion in order to strategize and reach Home Depot’s level in terms of scale.

In order to further strengthen its holdings on the home improvement market, Lowe’s Companies, Inc. has restructured the company’s vision to conform to meet the ever-changing needs of its customers. Lowe’s extensive research has led it to include a well lit sales floor, informative in-store displays, exclusive and proprietary brands, and an ingenious store layout just to name of the few changes. This new vision is not only centered on the store itself, Do-It-Yourselfers and Commercial Business Customers have many ways to satisfy their needs conveniently though stores nationwide by placing orders over the phone, fax, or from the improved Lowe’s web site.

Lowe 's is the world 's second largest home improvement retailer and the 14th largest retailer in the U.S. Lowe 's is in the midst of an aggressive expansion plan, opening a new store on average every three days. Lowe 's is an active supporter of the communities it serves. Through the Lowe 's Heroes volunteer programs and the Home Safety Council, it provides help to civic groups with public safety projects and share important home safety and fire prevention information with neighborhoods across the country. Lowe 's has been a publicly held company since October 10, 1961. Its stock is listed on the New York Stock Exchange, with shares trading under the ticker symbol LOW.Lowe’s Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States and Canada. The company provides a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance. It offers home improvement products in various categories, such as appliances, lumber, paint, flooring, building materials, millwork, lawn and landscape products, fashion plumbing, hardware, lighting, tools, seasonal living, rough plumbing, outdoor power equipment, cabinets and countertops, nursery, rough electrical, home environment, home organization, and windows and walls. The company’s products also include boards, panel products, irrigation pipes, vinyl sidings, and ladders. It serves

This represents a unique opportunity for Lowe’s as most of the competitors cater to the lower income groups (Home Depot) or higher income group (Studio41/boutique stores). Also some players do not have the capability to do complete installation will all the accessories (Menards, Sears or Ikea). The entire middle range buyer with disposable income could be a segment that Lowe’s could essentially capture. Lowe’s already had business that delivered the required products for kitchen remodeling. The existing product of Lowe’s targeted the middle range buyer, combining this with installation services would be beneficial for Lowe’s. Case Exhibit 1 reinforces the fact the in the lower income group consists of mostly DIY customers and in the mid to high range customers prefer outside services to install the kitchen. Case Exhibit 2 clearly shows that major remodel with mid-range materials and upscale materials are growing. All the above said reasons make it a perfect case for Lowe’s to move into the kitchen remodeling space. It is a sensible decision by Lowe’s to move into the kitchen remodeling and installation services given the above facts. 2|Page

Home Depot, Sears, Lumber Liquidators, Menard, Harbor Freight just to name a few. However, Home Depot is probably the biggest rivalry for Lowe’s. Home Depot sells wood, tools, home accessories, and even every day household supplies. Likewise, most people would go to Home Depot for wood and things for their home. Next in the competition retail chain is Sears. Sears sells similar merchandise to that of Lowe’s. especially when it comes to appliances for the home. They have appliances, tools, things for the house, even lawn mowers. Yet another competitor, but further down the line, is Harbor Freight. Harbor Freight sells tools, lawn mowers, and generators like Lowe’s. However, Harbor freight seems to have lower pricing.

Home Depot competitors are primarily in the home improvement and hardware retail industry, but also compete in the building materials retail and distribution, consumer electronics and appliances retail, and convenience stores and truck stops sectors. Some of Home Depot’s main competitors include: Lowe’s, True Value, and Ace Hardware. Now, these competitors are the main competition of Home Depot and all three stores carry about 75% if not more of what Home Depot sells. Keep in mind, that there are also smaller companies, often family-owned lumberyards or hardware stores that compete with Home Depot and the other large chain stores. However, Home Depot’s biggest competition is Lowe’s. “Home Depot and Lowe’s are home

Home Depot effort of complete customer satisfaction has led the company to improve customers’ service; however, Lowe did the same and therefore I would say that was rather a necessity than gaining a competitive advantage.

Home Depot is one of the few businesses that come to mind when thinking about home improvement and do it yourself projects. But, it is not necessarily the first one that comes to mind considering its competitors like Lowe 's, Ace Hardware, or True Value. In 1978 when Home Depot was founded by Bernie Marcus and Arthur Blank its growth seemed unstoppable. This is most evident by looking at financials of the organization, in 1981 stock options were opened to the public and by 1984 Home Depot was listed on the New York Stock Exchange (The Home Depot: Investor Relations). In 2000, cofounders Marcus and Blank retired and at this time the decision was made to bring in Bob