Home Depot vs. Lowe's: An Overview
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 more than 2,000 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 2019, the average Home Depot store has about 104,000 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 2018, Home Depot operated 18 mechanized distribution centers in the U.S. and one in Canada. By comparison, Lowe’s operates 15 mechanized distribution centers in the U.S., 10 in Canada, and contracts with a third-party logistics provider in Mexico. 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.
Despite being larger by market cap, The Home Depot, Inc. is the newer market entrant. Lowe's was founded in 1946 and Home Depot in 1978. As of October 2018, Home Depot has 2,286 stores: 1,733 in the U.S., 182 in Canada, and 112 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 their supply chain. For most of their 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 an ambitious modernization program, including a transition to a centralized network of distribution centers.
Lowe’s has also enjoyed a spectacular history of growth. As of August 2018, Lowe’s has expanded its operations to 2,155 stores in the U.S., Canada, and Mexico. Like its rival, Lowe’s has not yet gained a foothold in China, but in August 2018 announced a joint venture with Woolworths Limited to develop a network of home improvement stores in Australia.
Perhaps due to this logistical advantage, management at Lowe’s are currently placing less emphasis on the need to modernize their supply chain. The company announced a new leadership team focused on improving customer service as one of its principal objectives. Lowe's has also announced in 2018 that it will sell its 99 Orchard Supply Hardware stores and distribution center.
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 esthetic 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.
[Important: 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.
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.
- 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., Canada, and Mexico.
- Both companies are committed to allowing customers to move seamlessly between online and offline channels.