Can Innovation Help Lowe’s Compete Better With Home Depot?

by Trefis Team
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As the housing market recovers, home improvement retailers such as Lowe’s (NYSE:LOW) and Home Depot are seeing an improvement in sales. Both companies are now looking at ways to capture this uptrend in the market and currently it appears that Home Depot is winning the race. However, Lowe’s innovation lab is likely to change the way customers shop at its stores and this can give the company a competitive edge. The company is testing a robotic store assistant which can help customers locate products and aid navigation around stores. This will help its DIY (do-it yourself) segment customers significantly, and free up employees to assist them in more complex decisions. The DIY segment generates maximum revenues for Lowe’s and its focus on innovation can improve the customer experience and convenience, driving growth for the company in the long term.

Future Of Retail : Easier, Faster Purchases

Several retailers are looking to provide the convenience of e-commerce in their offline stores to increase store traffic and encourage customers to purchase products which they need to “touch, feel, and experience” before buying from stores. Concepts such as AmazonGo, which allow customers to pick up grocery items and leave the store (the Amazon app takes care of billing) are being introduced to eliminate long check out queues and reduce the time taken for grocery shopping. Similarly Wal-Mart is working on an automated shopping cart which will make it easier for customers to navigate the long alleys. Lowe’s innovation is focused on making it easier for customers to shop for and use home renovation products. For instance, the company is experimenting with a virtual reality tool that would teach customers how to do basic home renovation, along with self-guided robots called Lowe Bots who can lead customers to the products they need.

However, use of technology in retail stores comes with its own challenges. Lowe’s has not yet been able to scale up its technology and the products of its innovation lab are being used in a few stores. The benefits of this technology can be visible only if they are available in all stores. Further, the actual pay-off might take longer to realize and there could be a long gestation period before the benefits are visible.

Further, the professional segment is currently driving sales for Home Depot and an increased focus on this segment might give Lowe’s better results. DIY customers visit stores less frequently and purchase small ticket items. Professional customers on the other hand are more loyal and big ticket buyers.

We believe Lowe’s focus on innovation for a better customer experience at its stores can help the company in the long term. However it needs to focus on the right technology which can be scaled, and the results might not visible immediately. For now, a better focus on the professional segment is crucial for the company to gain a competitive edge over Home Depot.

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