The following paragraphs provide a description of the competition between Home Depot and Lowe's on selling flowering plants: 41
In the spring Home Depot and Lowe's engage in an annual arms race to engineer and develop new scientifically altered versions of common flowering plants that are designed to bloom brighter or withstand neglect longer. The goal in particular is "to sell something the other guy doesn't."
Home Depot is the world's largest home-improvement chain with $68 billion in annual revenue, while Lowe's is the second-largest with $49 billion in annual revenue. Although spring is the peak selling season for all merchandise, plants and trees are used to entice consumers into the stores. Analysts estimate that for every dollar customers spend on plants, they spend $3 on accessories such as hoses, shovels, and gloves. Both companies employ weather forecasters to advise them on when plants should appear in stores in different parts of the country.
Lowe's uses a team of Ph.D. horticulturalists to choose among a thousand possible blooms developed by breeders around the world. After determining how the plants grow in different climates, the growers test mass production of hundreds and then thousands of plants. Both retailers try to secure exclusive rights to popular new varieties, although sometimes they are exclusive in name only.
Lowe's uses a greenhouse complex in Huntersville, NC to grow plants and conduct consumer focus groups where customers can identify the flower varieties they most admire. Home Depot uses another greenhouse complex in Mills River, NC, two hours west, for the same purpose.
Discuss how the oligopoly models presented in this chapter apply to the behavior of Home Depot and Lowe's.