Lowe's Cos. Inc. was a sleepy small-town hardware store, rolling out steady growth for 33 years when Home Depot rocked the retail world with its big-box home improvement concept. Lowe's response? Study the new market - for a total of 14 years - and get it right.
By the time it came to market with its own big-box stores, it had refined the target market beyond professionals to include a growing number of do-it-yourself shoppers. It also figured out that women were the big decision makers in home improvement purchases, and drew them to the stores with washing machines and refrigerators long before Home Depot got into the category. Today, appliances are the single largest product category at Lowe's with 9 per cent of its overall sales - larger even than lumber.
Generally not the innovator, it looks around. It aims to copy the best and make it better. Slow and deliberate, it tends to come out a winner. So it is not surprising that it's taken the company more than two years to gear up for its Canadian invasion.
The company was started in 1946 in North Carolina as a mom-and-pop hardware store, owned by James Lowe and his brother-in-law Carl Buchan, who bought out Mr. Lowe a decade later. Mr. Buchan kept prices low - that's why he stuck with the Lowe's name - saving money by dealing directly with manufacturers and bypassing wholesalers. But his reign was short: He died of a heart attack in 1960, leaving 15 stores and $31-million (U.S.) of annual sales, and the company went public the following year. The chain profited in the ensuing years by catering to a burgeoning army of professional home-builder customers amid a housing boom.
"What Lowe's has done in the U.S. is create a better mousetrap than Home Depot did," said Geoff Wissman, a consultant at TNS Retail Forward in Columbus, Ohio, who works with Lowe's.
"They generally are not the innovator in the marketplace. They do a very good job of being the fast follower, in terms of looking at what's going on and understanding the consumer and what makes the most sense."
Now the 1,425-store Lowe's, with two-thirds the number of stores as Home Depot, is taking its methodical, even plodding, approach to the Canadian market. In its first foray outside of the United States, it is set to open six stores this year, and as many as 100 eventually.
Don Stallings, the new Canadian president and a Lowe's veteran, will disclose more details today about the plans for this country at head office in Mooresville, N.C.
But for all the seeming sluggishness of the expansion, the Canadian office has seen its share of frantic activity. At the top level, Doug Robinson, who headed the division here, left the company unexpectedly last month for "personal reasons" without one outlet open yet. The firm scaled back its plans, saying it would meet the low end of its store-opening target of six to 10 stores.
"They won't rush something out if it's not all buttoned up," Mr. Wissman said.
The slimmed-down plans are another reflection of Lowe's' deliberate mindset, added Charlie Georgas, retail analyst at Jackson Securities LLC in Chicago. The deteriorating U.S. housing market has prompted Lowe's to trim all of its expansion plans, not just those for Canada, he said.
But its strict, by-the-playbook approach can lead it into choppy waters sometimes, some observers said. For example, it can require that suppliers go through more then 200 steps to get approval for new products, one industry source said. The process at Home Depot is roughly one-third shorter. There was concern recently that Lowe's lengthy approval process might prevent it from stocking enough Canadian merchandise in time for the launch, the source said.
"At Lowe's, if you don't do Step No. 12, you can't go on to Step 13," the source said. "At Home Depot, it's, 'Let's keep the process moving. You do 12 and 13 concurrently, or maybe 13 doesn't require 12 to be finished.' " On the real estate front, Lowe's has been locked in a heated race to pick up Canadian store sites as rivals also scramble for new locations. Already, Lowe's has lost out on some opportunities, various sources said.
But in characteristic fashion, Lowe's has been plotting out its Canadian launch, and quietly studying the market. It has found, for instance, that consumers here prefer modern light fixtures, so the stores will carry more recessed and track lighting, rather than the preponderance of colonial and traditional lamps at U.S. stores, Mr. Robinson has said. The company recently started to tout its name in radio ads in the Toronto area, trumpeting its sponsorship of an upcoming Christmas show.
At just over half the size of Home Depot with $46.9-billion in sales last year, Lowe's had no same-store sales growth (at outlets open a year or more) and a 6.1-per-cent increase the previous year - better than the 2.8-per-cent drop in these bellwether statistics at Home Depot in 2006 - and a 3.1-per-cent gain a year earlier.
As the copycat player in the U.S. big-box home improvement market, Lowe's learned from Home Depot's mistakes, and emerged with a better model, said Mr. Georgas, the analyst. For instance, to appeal to the softer side of home improvement, Lowe's had aisles of lamps and carpets, and displays of entire room layouts.
And while Lowe's has been a follower, now its rivals are lifting its ideas for their own stores.
That's the case in the $39.4-billion Canadian market, where Lowe's faces four significant rivals.
Lowe's won't have an easy time, analysts agreed. Even Home Depot Canada has made bigger strides than its U.S. parent in welcoming women to its stores with enlarged home decor sections, wider aisles and brighter outlets.
Nobody is taking Lowe's for granted, said Michael McLarney, publisher of the Hardlines trade publication. While Lowe's may be a copycat and slow off the mark, it's been an innovator in its own way.
"The competition is already bracing for their arrival."
Lowes Companies
SHARE PRICE WEEKLY, (LOW-NYSE)
Yesterday's close $31.89 U.S., up $1.13
SOURCE: THOMSON DATASTREAM
Cdn. home improvements
Canadian home improvement retail sales in 2006: $39.4 billion, a gain of 7 per cent over 2005. It forecasts 6 per cent growth in 2007.
Canadian Tire 11.5%
Home Hardware 11.5%
Rona 14.7%
Home Depot 15%
Rest, mostly independents
DOUGLAS COULL/THE GLOBE AND MAIL
SOURCE: HARDLINES TRADE PUBLICATION