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Determined To Take Charge by Brae Canlen: The Lowes Home Improvement Store Chain
Introduction
In April 2008, when residential mortgages had already essentially dried up and the collapse of the housing market raised the curtain on the current recession, Brae Callen assessed the prospects at the Lowes home improvement store chain with this piece in the trade periodical, Home Channel News. The title, Determined to Take Charge , took stock of how sustainable business could be during the downturn in the home improvement market.
The Lowes store
The interest in Lowes was based on its phenomenal record of growth and announced plans for investing in chain expansion in the middle of a recession that, two years after the article was published, still shows no signs of lifting. Earnings in 2007 were already down 9.5% from the prior year to $2.81 billion. And while Lowes still has some way to go before it can match the global leadership of Home Depot in point of several stores or gross revenues, the former has pulled ahead in net earnings. All these and excellent performance in the stock market, too, have been accomplished by what was just a chain of small, open-air construction yards in the 1980s.
From hearing Lowes president and chief operating officer Larry Stone address investment analysts, Callen reveals that the company fully intends to keep its fair share of the market by judicious cost cutbacks, prudent downsizing of expansion plans, and relentless focus on customer service.
The cost-efficiency route
Certainly, business conditions for anyone having to do with housing construction and repair have been adverse in the extreme. Lowes might therefore be forgiven for making wholesale personnel cutbacks, as other industries so affected have done: financial services, cars, fuel, department store retailing, travel and hospitality. Rather than mindlessly contribute to a still burgeoning national unemployment rate, Lowes has gone the cost-efficiency and productivity route. For instance, the chain made vice-presidents and regional managers responsible for more stores and thereby reduced the executive overhead every branch is charged. Lowes also took a hard look at the hundreds of millions normally spent on advertising and co-op promotions when times were good. But Larry Stone refused to consider reducing store floor personnel.
The expansion was to continue
Lowes decided that the strategy of making inroads into the Canadian and Mexican markets made sense and must therefore stay the course, recession or not. New-store openings around the United States would continue, albeit prudently shrunk from 120 to 100 new stores a year. As it turned out, the canceled plans were those for California and Florida, two states particularly hard hit by the unwise speculation in sub-prime mortgages. On the other hand, Texas is doing just fine. Hence, even more, stores were put on the drawing board for that state.
At the heart of Lowes success, however, is a relentless focus on customer service. The chain appears to have invented, for instance, the concept of the hard goods drive-through. Resistance to slashing store personnel rosters turns out to be based on the need to maintain service. The very wide range of specialized products available in home-improvement warehouses is apt to confuse most shoppers who are unskilled handymen . Hence, Lowes is known for having installed call buttons in strategic locations; these enable shoppers to call for assistance much as a bedridden patient in a hospital would. Customer assistance desks are manned by staff who not only help locate hard-to-find items but also give valued advice on home renovation concepts. Recognizing that todays homeowners are very often dual-income couples with no time or expertise for the do-it-yourself project of yesteryears, Lowes accommodates the new paradigm of do it for me (DIFM) by sending repair, renovation, and installation consultants to come around, assess whats wanted, make up an economical bill of materials, and return to either do the work or install newly-bought home equipment. Done right, the company believes that such service cements customer relationships for life.
Conclusion
By way of synthesis, one concludes that Lowes looks set to at least maintain market share and superior earnings by being prudent about unnecessary costs, continuing with expansion plans where local economies warranted it, and, above all, securing the DIFM service niche.
References
Canlen, B. (2008). Determined to take charge. Home Channel News, 34 (5) 25-41.
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