Home improvement retailer Lowe’s (NYSE:LOW) has announced a partnership with the Seattle-based website Porch.com that connects home improvement services contractors to homeowners. The employees at Lowe’s stores across 139 locations in Seattle, North Carolina and South Carolina will now be able to recommend such service providers to customers who ask for advice. 
Even though the financial terms of the deal haven’t been disclosed thus far, we think it is likely that Porch will pay a fixed annual fee or a commission based fee to Lowe’s. The deal will certainly benefit Lowe’s in other ways as well such as attracting more customers. Home Depot, Lowe’s main rival in the home improvement market, already has an in-house service called Redbeacon which connects homeowners to contractors. The partnership with Porch could help Lowe’s offset Home Depot’s advantage to some extent.
We have a $46 Trefis price estimate for Lowe’s stock, which represents 5% downside to the current market price.
How This Will Work
Porch.com has a database of nearly 1.5 million home improvement professionals such as painters, plumbers, electricians etc. which will be made available to customers at Lowe’s who ask for in-store employees’ for recommendations. For this purpose, Lowe’s employees will be able to use their hand-held devices or in-store terminals. So far, Lowe’s employees were unable to guide customers due to their limited knowledge of such services in various localities. Lowe’s’ in-house associates also provide only a limited range of services. All this used to leave customers unable to figure out how to use or install the stuff they bought. In locations where Home Depot stores are also present, some of them may have chosen it over Lowe’s for this reason. ((Lowe’s Partners With Porch For Home Improvement Matchmaking, Fast Company))
What makes Porch different from services such as Craigslist and Redbeacon is the use of data and insights. Both sites list professional contractors along with a description of their skills, services and charges but Porch goes a step ahead. It also collects data about previous jobs executed by contractors, customer ratings, reviews etc. This will enable customers to make an informed choice based on contractors’ track record. Porch claims that its method of recommending professionals is resistant to manipulation that normally afflicts review sites. The Porch database has about 90 million projects so far. If the partnership turns out well, Porch’s services will likely be extended to cover more of Lowe’s stores. 
Considering that Lowe’s made sales worth $50.5 billion in 2012 and serves around 15 million customers every week across about 1,800 stores, more contractors will likely want to sign up with Porch now. This would be a win-win situation for both Lowe’s and Porch.
We expect the deal with Porch to result in an increase in customers for Lowe’s as buyers will have less incentive to gravitate to rival retailers. With the advent of the “do-it-for-me” generation which typically belongs to the 20-30 age bracket and is willing to hire services of contractors even for simple jobs, this could prove crucial for future growth.Notes:
- Porch.com Scores Big Win With Lowe’s Partnership, TechCrunch.com [↩]
- Lowe’s teams with startup Porch.com to help customers find contractors, Charlotte Business Journal [↩]