Lowe s Hardware vs. Home Depot

Not until a follow-on attempt did Lowe s successfully target the critical vulnerability of Home Depot in the U.S. retail home improvement market.

In the early 1980s, Lowe s attempted to compete head to head with Home Depot on the basis of price and failed; Home Depot s national presence and unmatched buying power rendered low price an unassailable strength. In recent years , however, Lowe s has redirected its efforts toward exploiting the seemingly invincible Home Depot s Achilles heel ”an apparent lack of user friendliness in its store format. As a result of this approach, Lowe s has emerged as, perhaps, the new market leader.

Home Depot founders Bernie Marcus and Arthur Blank long prided themselves on and even promoted the austere, warehouselike feel of their nationwide chain of home improvement retail superstores. This approach appealed to professional contractors and semiskilled craftsmen, and Home Depot s ability to offer low price and wide selection redefined the retail market for home improvement. But Home Depot failed to recognize and accommodate a shift in consumer preference as the U.S. housing market boomed in the late 1990s. Americans with little or no experience in home improvement began to undertake repairs and new construction on their own homes as professional contractors services, in short supply, became prohibitively expensive.

In contrast to Home Depot s emphasis on catering to contractors and semiskilled craftsmen, Lowe s conducted and acted on market research that revealed that women initiated 80 percent of home improvement projects. Realizing that only 13 percent of its shoppers were women, Lowe s decided to target its own critical vulnerability: its inability to attract women who were turned off by buying things ˜in lumber shops . ^[3] It invested heavily in a pleasurable shopping experience and captured considerable market share from Home Depot as this new segment of nonprofessional do-it-yourselfers opted for the more user-friendly Lowe s format.

The stock market punished Home Depot s loss of sales to Lowe s, and the declining price per share of Home Depot stock produced a second-order effect ”lower morale among employees . A large component of employee compensation at Home Depot was stock option “based, and a low share price meant that most of the employees options fell out of the money. Customer service declined with Home Depot s share price, further detracting from the incumbent s ability to provide a pleasurable shopping experience to the consumer. Said Sandy Cooper, a mother of four and formerly loyal customer of Home Depot, in 2002, At Home Depot, you can t find anybody to help ”and if you do, they just point. ^[4]

Leadership Lessons

Lowe s was both persistent and forward-looking in challenging Home Depot, and the success of this challenge underscores the powerful psychological impact of targeting critical vulnerabilities in the business environment. Lowe s was persistent in that its initial failure prompted it to regroup and reformulate a more creative, less defensible attack ”based on an awareness of its own critical vulnerability ”the second time. Lowe s was also forward-looking in that it identified Home Depot s critical vulnerability before it existed; thus it was well positioned to exploit the opportunity created by the market shift from professional contractor to do-it-yourselfer. Finally, just as the Italians lost the will to continue fighting at Isonzo once Rommel captured the mountain pass, many Home Depot employees lost the will to continue providing customer service at levels above and beyond the call of duty once the company s share price fell.

^[3] Pascual, Aixa, Lowe s Is Sprucing Up Its House, BusinessWeek Online , June 3, 2002.

^[4] Ibid.