DIY … Not just your lumber store anymore!

Lowes & Depot lead with consumer service innovations

Mention Lowes and Home Depot to most Americans and they think of “lumber, hardware & tool stores”.  Internationally, they would be classified as DIY – Do It Yourself stores where you can buy stuff to fix up your home.  Historically, DIY was not very innovative in terms of store experience or support.  Today, even the best retailers would do well to study the recent innovations of DIY leaders Lowes & Home Depot.

Anatomy & Success Factors for DIY retailers in the US

DIY retailers in the US are very large “big box” retail formats.  They cater to home owners and contractors.  Their very large format stores are stuffed with tens of thousands of SKUs … all the nails, paint, lumber, tools and appliances to build a home or repair it.

While the DIY store is unique in terms of format and merchandise, they are increasingly challenging to operate profitably:

• Big Box DIY stores are very large and take a lot of real estate
• They require a lot of inventory and LOTS of SKUs
• As a result, they generate low revenue per sq. ft. of space
• They are expensive to operate (High SG&A as % of Revenue)
• They generate low GM$ per sq.

Below are comparative benchmarks derived from 2010 Annual Reports:

Retail KPIs	Lowes	Home Depot	Best Buy	Walmart
SG&A%	23.3%	24.6%	20.5%	19.3%
Avg Rev /sq.	$289	$248	$865	$425
GM$ / sq.	$99	$87	$217	$105

In order to remain competitive, DIY retailers must not lose consumers to a host of other competitors, including Walmart.  The DIY retailers have to differentiate as the “destination location” for the home.  They must also differentiate their consumer experience to drive consumer loyalty, resulting in store trips, and large market basket per trip.  The age old adage of retail bears repeating one more time:  Differentiate or Die!

Home Depot’s Social Media Strategy Pays Off

Natalie Zmuda has posted a couple of articles in Ad Age about Home Depot’s unique social media strategy.  According to Brad Shaw, the VP of Home Depot Communications, the original strategy was to develop a corporate based team of social media experts.  But, the CEO, Frank Blake, pushed back and requested a more innovative strategy which would involve and engage experienced store associates.   

The Home Depot “How to Community” has been up and running for about 18 months.  It involves very experienced store staffs, who have alias names like:  “Steel Toes” and “THDiva”. These staff average more than 10 years’ experience.  They are the knowledge experts who answer consumer questions online, develop original content in response to consumer needs, and contribute to Home Depot’s blog “The Apron”.

Unique innovations of Home Depot’s Social Media Strategy include:

• The Experts stay based in their local stores
• They are given flip cameras to record “how to’s”
• They can respond directly to consumer questions
• 2,000+ topics have generated thousands of discussions
• The Store Experts generate customer focused content
• They become “centers of gravity” & expertise in their own stores

The major challenges of DIY are to be able answer consumer questions and garner their trust to earn loyalty and repeat visits.  According to Home Depot, the social media strategy involving associates as experts is paying big dividends.

Lowes innovations focused on ratcheting up service

Lowes is the major DIY competitor for Home Depot in the US. They have also received recent press regarding innovations designed to differentiate through new, unprecedented levels of consumer service.

Recent articles describe Lowe’s initiative called “Never Stop Improving”.  One outcome of this program will be a service that enables the consumer to have easy access to records of everything they purchased at Lowe’s.  Now, why would you want to track purchases of nails, boards or tools?  I can’t begin to tell you how many times I’ve run out of something and wish I had a record of exactly the specific item I need to purchase to finish the project! 

What’s more, the Lowes’ service is also supposed to enable access to owner’s manuals, warranties and extended protection plans.  In a word, Wowser!  Do it for me the consumer rather than expecting me to search through mountains of past receipts to find what the store demands.  This is differentiation and levels of consumer service at its finest.  CE Retailers like Best Buy, HH Gregg and even Amazon need to take heed, quickly!

Lowes is not finished – Replaces scanners with iPhones

Lowes is in the processing of giving 42,000 iPhones to employees on the sales floor.  While Lowes might be a generous employer, the iPhones are not staff gifts – they intended to make it easier for associates to help you, the consumer, shop, find specific items, and complete transactions.

Lowes is just beginning to rollout iPhones in US and Canadian stores.  Eventually, the iPhones will replace scanning guns and enable:

• Access to how to videos that the consumer can watch
• Search for answers to consumer questions online
• Checking inventory availability in store and across stores
• Making related product and accessory suggestions
• Eventual scanning to complete purchases in aisle


In other words, Lowes has gone “Apple” on DIY.  The goal is not technology for gadget sake.  According to Abby Burford at Lowes, “Our goal is to make home improvement simple for our customers and our employees”. 

Intuitively, the consumer centric service initiatives Home Depot and Lowes make a lot of practical sense for DIY … and a lot of other retailers.   But, results count … and the great news is that all of these initiatives are testable and measurable on the bottom line. These days, stacking the deck on consumer experience and engagement usually wins.  If you have doubts … do a quick check of Apple’s share price.

Which of DIY service innovations appeal most to you: (Click and share your thoughts with us!)

• Home Depot’s social media Store Expert to answer questions
• Lowes’ tracking of all your purchases, manuals, etc.
• Lowes’ associates with iPhones in aisles to assist you


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Sources:

• Ad Age: Home Depot's Social-Media Strategy Pays Off, September 19, 2011
• Morning News Beat.com: September 19, 2011
• Mobile Commerce Daily: Lowe’s replaces scanner guns with iPhones in-store, September 12, 2011
• Ad Age: Home Depot Puts a New Spin on the Idea of 'Sales Rep', May 23, 2011

Comments

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[Nicolai Jackson]

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[Elisa]

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