Lowe’s has a retail heritage that dates back to 1921 when Lucius S. Lowe opened Lowe’s North Wilkesboro Hardware in North Wilkesboro, North Carolina. During the 1950s, the company opened many other hardware stores, primarily in small towns in the southeastern United States, and went public in 1961. In 1962 the company operated 21 stores. Lowe’s today continues to be publicly held and is the second largest home improvement retailer in the United States, behind Home Depot and ahead of Menards.

Lowe’s was very successful not only at merchandising but also at financial management. It was one of the first retailers where senior management embraced the strategic profit model, described in Chapter 2, as a major financial planning and control tool. However, what the retailer did not embrace was the aggressive growth of Home Depot as it expanded at breakneck speed in the 1980s with its big-box format. Lowe’s eventually got on the big-box home improvement bandwagon and grew rapidly with this new format during most of the last two decades.

As of February 3, 2012, Lowe’s operated 1,745 stores which consisted of 1,712 stores across all 50 United States, 31 stores in Canada and two stores in Mexico. Lowe’s also has its sights on Australia for future expansion and in 2009 completed a joint venture agreement with Woolworths Limited, an Australian retailer to jointly develop a chain of home improvement stores for the Australian market. Lowe’s is a one-third owner of these joint-venture Australian stores.

Market Served

Lowe’s serves customers in several market segments that include homeowners, renters, and commercial business customers. The homeowners and renters can be further divided into those that are more active do-it-yourself (DIY) versus those that is more do-it-for-me (DIFM). Of course, these are not categories per se but a continuum. Most of the customers on the commercial side are those who work in construction, repair/remodel, commercial and residential property management, and business maintenance professionals.

Through market research, Lowe’s has identified that there is a very active home improvement customer and this active customer visits Lowe’s more frequently and spends more. Furthermore, these customers “seek quality tailored experiences, and are on the lookout for new ideas to improve homes,” and also this customer is more discerning and demanding. Lowe’s refers to this group of customers as “Creators,” and Lowe’s has decided to focus on their needs because if they meet the needs of these more discerning customers, they will meet or exceed the needs of other customers.

Lowe’s sells and/or reaches customers through multiple channels. Lowe’s is primarily a bricks-and-mortar retailer, but it also is an e-tailer with its website www.lowes.com. Lowes.com provides a 24/7 shopping experience and provides information to reduce the complexity of product decisions and to simplify home improvement projects. In addition to these two primary channels, Lowe’s has on-site specialists who are available to retail and commercial business customers. These specialists can assist customers with selecting the products and services that are right for their project. Finally, Lowe’s can reach customers and vice versa through two call centers: one in Wilkesboro, North Carolina, and another in Albuquerque, New Mexico. These call centers provide direct support to customers who contact Lowe’s via phone, e-mail, or letter.

Value Proposition

Lowe’s strives to be the first choice among customers for home improvement. The company recognizes that most customers want a full solution to their home improvement projects, and thus Lowe’s offers to be a partner through the home improvement process and that includes inspiration, planning, completion, and enjoyment. Lowe’s has a goal of executing better than competitors and to create a seamless and simple process for customers. Behind this goal are three principles (possibilities, support, and value) that are described as

“Possibilities means providing customers with inspiration and ideas for enhancing and maintaining their homes through innovative solutions. Support means being a trusted partner and resource whenever and wherever customers need us in the home improvement process. Value means offering competitive pries plus helping customers successfully accomplish their home improvement goals.”

Merchandise Offering

A Lowe’s store will stock 40,000 or more items plus many other items available through special order. Lowe’s has over 7,000 vendors. The merchandise categories include appliances, lawn and landscape, fashion electrical, lumber, building materials, paint, home fashions, storage and cleaning, rough plumbing, flooring, tools, seasonal living, millwork, hardware, fashion plumbing, nursery, and cabinets and countertops.

Lowe’s offers a variety of popular brands across a wide spectrum of merchandise lines. Some of these brands include:

■ Levolor (Blinds)

■ AquaSource (Fashion bath products)

■ Kohler (Fashion bath products)

■ Moen (Fashion bath products)

■ Delta (Fashion bath products)

■ Dekor (Fashion bath products)

■ Bel Air (Lighting)

■ Sea Gull (Lighting)

■ Kichler (Lighting)

■ Juno (Lighting)

■ Monte Carlo (Ceiling fans and accessories)

■ Hunter (Ceiling fans and accessories)

■ Bosch (Tools)

■ Dewalt (Tools)

■ Hitachi (Tools)

■ Porter-Cable (Tools)

■ Scotts (Lawn and garden)

■ BlueHawk (Hardware)

■ Schlage (Hardware)

■ Kwikset (Hardware)

■ Pella (Windows)

■ Larson (Doors)

■ Perfect Flame, Charbroil, and Masterforce (Grills)

■ John Deere (Power equipment)

■ Honda (Power equipment)

■ Troy-Bilt (Power equipment)

■ American Olean (Flooring)

■ Emser (Flooring)

■ Milliken (Flooring)

■ Stainmaster (Flooring)

■ Valspar (Paint)

■ Olympic (Paint)

■ Rust-Oleum (Paint)

■ Minwax (Paint)

■ Kraftmaid (Cabinets)

■ Brainerd (Cabinets and hardware)

■ Samsung (Appliances)

■ Electrolux (Appliances)

■ GE (Appliances)

■ KitchenAid (Appliances)

■ Maytag (Appliances)

■ Whirlpool (Appliances)

Services Offering

Installed sales are an important part of Lowe’s offering and in 2011 represented 6 percent of total sales. Installation is offered through independent contractors in areas such as flooring, millwork, and cabinets and countertops. Lowe’s also offers extended protection plans and repair services. These plans extend the coverage of the manufacturer’s warranty plans. Also Lowe’s Authorized Service Repair Network allows a customer to contact Lowe’s with an issue and get the problem diagnosed and the solution facilitated. Credit is another important service and consists of a proprietary credit card program for retail customers. This service also offers Lowe’s consumer credit card holders with a 5 percent discount on everyday purchases, and with purchases over $299, a customer can choose between a 5 percent discount or no-interest financing. Lowe’s also offers proprietary credit programs for commercial business customers. These programs also offer a 5 percent discount to commercial business customers.

Lowe′s at a Crossroads

As the data in the following exhibit reveals over the last five years financial performance at Lowe’s Companies has been disappointing. Sales are up a mere 4 percent and profits are down 35 percent. As a consequence over the last few years, Lowe’s has been on a pathway of strategic renewal that consists of a transformational journey from being a “home improvement retailer to a home improvement company.” Robert Niblock, chairman of the Board, president and chief executive officer, believes that Lowe’s needs to deliver better customer experiences, and this will foster long-term sales growth, profitability, and shareholder value. Critical to success is developing deeply engaged customers and employees.

During fall 2011, the firm introduced mylowes (www.mylowes.com), which is representative of how Lowe’s wants to simplify the customer experience and make it more engaging. As of late April 2012, the site boasted a registered user base of over 5 million users. The goal is to make managing, maintaining, and improving homes simpler including the ability for customers to create virtual versions of their home, view their purchase history, track previous home improvement decisions such as paint color formulations, access to product manuals, and the ability to set reminders for maintenance such as air filter changes. Customers can also view more than 600 how-to videos at Lowes.com. Lowe’s also recognizes it must embrace social media and has developed an internal social business network that allows employees to share information and knowledge with fellow employees.

Another webpage, which Lowe’s hosts to enhance the customer experience, is Lowe’s Creative Ideas (www.lowescreativeideas.com). This site provides many tips and ideas on home improvement projects for every area of the home and even provides a community for site members to share their home improvement projects with other’s seeking ideas and information for home improvement projects. There is also a team of bloggers associated with the site who share their views and stories and encourage site user participation through comments and discussion of each blog post.

In addition to these new web pages, Lowe’s has also placed Apple iPhone in the hands of employees, a move to allow employees to better serve customers in the store. Lowe’s CIO Mike Brown stated that, “In all of my 27 years at Lowe’s, iPhone will go down in history as being the most impactful device we have ever put in our employees’ hands.” With this technology an employee is able to do things such as help a customer locate a hard to find item, check to see if another Lowe’s location has available inventory of an out-of-stock item that a customer wants or even check out the Lowe’s competitors’ offerings and prices.

Despite these important steps, the transformational journey that Robert Niblock needs to lead is just beginning. In fact, it makes many employees and financial analysts a bit worried as Lowe’s attempts to make the biggest transformation since when it transformed itself to a national big-box retail format 25 years ago.

Lowe′s Companies′ Selected Financial Data (2007-2011) (million of dollars)

Questions
1. What do you think is Lowe’s biggest asset (resource) that it needs to draw on for its transformational journey?
2. Develop some ideas for how Lowe’s can better deliver on its value proposition and meet its transformational goal.
3. From a household customer perspective how can Lowe’s make home improvement projects simpler?
4. What do you see as the major barriers that confront Lowe’s in its business transformation?

Cost of Net Net Profit Total Goods Fiscal Year Ended Sales (after tax) Assets Sold Inventory January 31, $48,283 $2,809 2008 $30,869 $31,556 $7,611 January 31, $48,230 $2,195 $32,686 $31,729 $8,209 2009 January 29, $47,220 $1,783 $33,005 $30,757 $8,249 2010 January 28, $48,815 $2,010 $33,699 $31,663 $8,321 2011 February 3, $50,208 $1,839 $33,559 $32,858 $8,355 2012