Mooresville-based Lowe’s Inc. is pushing to attract more professional contractors, builders and tradesmen, targeting their business with special discount programs, dedicated salespeople and sophisticated new data-mining.
The effort has ramped up over the past 18 months or so for several reasons. Although pros are a small percentage of Lowe’s shoppers, they generate an outsize percentage of revenue – 28 percent in Lowe’s case. They reliably and frequently place big orders.
And with the housing market rebounding, there’s a bigger chunk of new business up for grabs as home builders get back to work. The pro business is growing faster than the general home improvement market, Lowe’s executives told analysts last week.
“We’ve completely redesigned our operational model regarding the pro this past year,” chief operating officer Rick Damron said during a recent conference call.
Chief customer officer Greg Bridgeford echoed him. “We’ve got a very, very heavy focus on it right now.”
Lowe’s still lags Atlanta-based Home Depot, its biggest competitor. Home Depot started aggressively targeting pros with discount programs and new services designed to help them shop quickly in 2011. Sales to pros account for about 35 percent of Home Depot’s revenue.
“This is something that’s been on our radar for quite some time,” said J.T. Rieves, vice president of pro business for Home Depot.
But Mike Horn, Lowe’s vice president of pro services, said that while Home Depot is Lowe’s chief rival, it’s also the easiest to keep tabs on and compete with. The real challenge for Lowe’s, Horn said, is to compete with lumberyards, specialty stores selling only plumbing or electrical equipment and mom-and-pop retailers who can devote more attention to each customer than a big-box store, even if they don’t always have the lowest price.
Balance between DIY and Pros
Lowe’s is the nation’s second-biggest home improvement retailer, operating more than 1,830 stores with annual revenue of $53 billion. When Lowe’s began expanding as a regional chain of stores six decades ago, sales to pros accounted for about 60 percent of sales.
That fell through the years, as the company closed its lumberyards and changed to be more of a consumer-friendly retailer aimed at do-it-yourself shoppers.
Here are some of the steps Lowe’s is taking to lure professional customers:
The system should allow pros to order supplies, track their orders and integrate everything with their own purchasing systems. There are challenges, however. For example, Lowe’s lets authorized buyers for big companies purchase goods for their employers without a card. But because the company’s e-commerce platform requires a 3-digit verification number from the back of a credit card, Lowe’s has to figure out how to give authorized buyers access on the Web. “They can’t even buy online,” Horn said.
The store must balance pro customers’ needs with the broader base of homeowners and other do-it-yourself customers who make up the bulk of its business.
“We have to separate out the pro customer,” Horn said. At the same time, the stores have to maintain a wide appeal. “We try to stay centered around that logic.”