Home Depot, Inc. (HD) and Lowe's Companies Inc. (LOW) have been the giants of the home improvement retailer industry in the U.S. for decades, each operating approximately 2,200 stores, each with more than 100,000 square feet of retail space.  Both retailers go after the same market, but their branding and supply-chain strategies are different. As of 2020, the average Home Depot store has about 105,000 square feet of enclosed space and about 24,000 square feet of outdoor space for garden products. Lowe’s stores are even larger, with an average enclosed space of about 112,000 square feet and about 32,000 square feet of garden space.

In 2019, Home Depot operated 18 mechanized distribution centers in the U.S. and one in Canada. By comparison, Lowe’s operates 15 mechanized regional distribution centers in the U.S. and 7 in Canada. When Home Depot launched its modernization program in 2007, almost all of Lowe’s mechanized distribution centers were already in place, giving credence to the perception that Lowe’s had enjoyed a logistical advantage over its rival for many years.

Key Takeaways

  • As the world’s first and second-largest home improvement retailers, Home Depot and Lowe’s share many similarities.
  • They compete for a shared customer base across the U.S. and Canada.
  • Both companies are committed to allowing customers to move seamlessly between online and offline channels.
  • Home Depot is looking to improve profitability by building more distribution centers, while Lowe's has closed underperforming stores to boost its bottom line.

Home Depot

Despite being larger by market capitalization, The Home Depot, Inc. is the newer market entrant.  Lowe's was founded in 1946 and Home Depot in 1978.  As of March. 2020, Home Depot has 2,287 stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, Canada, and Mexico. The company has 1,981 retail stores in the U.S., 182 in Canada, and 124 in Mexico. Following an unsuccessful expansion attempt, Home Depot closed its last seven remaining big-box stores in China in 2012.

One of the priorities for Home Depot’s management is the continued modernization of its supply chain. For most of its history, Home Depot has had the reputation of lagging behind its main rival in terms of supply-chain efficiency, relying primarily on a decentralized supply chain in which suppliers shipped products directly to Home Depot stores. Although this decentralized approach did offer some advantages, it also had significant drawbacks, such as having to use large trucks to ship relatively small amounts of cargo. However, in 2007 Home Depot began a modernization program, including a transition to a centralized network of distribution centers.

In Jan. 2020, Home Depot announced an ambitious $1.2 billion investment to improve its distribution management by building massive distribution centers across the U.S. The company hopes this new type of distribution center, called a Flatbed Distribution Center (FDC), will speed up delivery of construction and building materials directly to the customer. Home Depot anticipates they'll be able to reach 90% of U.S. customers with same-day and next-day delivery. In 2020, the company opened an 800,000-square-foot FDC in Dallas and expects to open 40 more FDCs in its 40 largest markets in the coming years. 

Lowe's

While Lowe’s has also enjoyed a spectacular history of growth, the company has faced challenges keeping pace with Home Depot, resulting in the company closing down underperforming stores. As of Feb. 1, 2020, Lowe’s operated 2,002 stores in the U.S. and Canada. That's down from the 2,155 stores it operated in 2018. In 2016, the company announced it would no longer continue its joint venture with Woolworths Limited to operate home improvement stores in Australia.

In November 2018, Lowe's reported the company would close 51 stores in the U.S. and Canada. This followed the company's announcement earlier in the year that it would shut down its 99 Orchard Supply Hardware stores and distribution center. In 2019, Lowe's shuttered all 13 stores it operated in Mexico, just ten years after it entered the Mexican marketplace. 

Management cited missteps in inventory control resulting in low same-store sales as the reason for the need to close stores and restructure its business model. Looking to improve profitability, the company announced a new leadership team focused on sales growth in its U.S. brick-and-mortar stores along with enhanced online shopping opportunities.

Home Depot vs. Lowe's: Key Differences 

Inside their stores, Home Depot and Lowe’s appear to have less in common. Home Depot’s stores feature an orange and black color scheme with tall shelves, the highest only accessible by forklifts. This industrial aesthetic gives the impression that the store is geared toward home improvement professionals. Lowe’s stores have a markedly different appearance. Employing a blue-and-white color scheme, they often feature more elaborate floor displays or themed products such as patio sets or holiday decor items.

Lowe’s has the reputation of being less intimidating for first-time home improvement customers.

Despite their distinctive brands, Home Depot and Lowe’s regard themselves as competing for the same customers. In referring to these customers, management from both companies distinguishes between two broad categories: retail and professional.  

Special Considerations

Retail customers consist of two distinct types. So-called “do-it-for-me” (DIFM) retail customers are less likely to undertake projects on their own and more likely to pay extra for installation services. In contrast, the “do-it-yourself” (DIY) retail customers prefer to buy raw materials and complete their projects independently.

Professional customers run the gamut from individual contractors to construction managers. Their needs require more complex services, such as the ability to have orders delivered directly to construction sites.

In pursuing this shared customer-base, Home Depot and Lowe’s have adopted similar but non-identical strategic priorities. One major objective that both companies do share is the desire to cater to a customer base that is increasingly active online. Both Home Depot and Lowe’s are committed to allowing customers to move seamlessly between online and offline channels.  For example, a customer might identify the desired product on the company’s website and arrange to have it delivered to their nearest store. Or, in the case of a professional customer, they may identify a product in-store and arrange to have it shipped to their worksite.