The Retail Building Supply Industry
Home Depot and Lowe’s are the major competitors in the building supply industry. The competition between the two companies has been increased by their operation in the same industry. They are both coming up with initiatives that will improve customer service, quality of the products and draw professional clientele. Both companies are believed to obtain benefit from more market created by the consolidating industry in spite of the tough competition between them. The state of the economy in October 2002 was characterized by rising unemployment, low interest rates, slow positive economic growth, high housing markets unpredictable confidence in the consumers and corporate misdeeds.
Retail building supply industry is divided into three sections that is hardware stores, lumberyards and home center in the ascending order of the sales share. In 2001 the value of retail building supply industry was estimated by Economist Intelligence Unit to be 175 billion dollars. The economic growth in the industry had fallen from 7.7% in 1998 to 4.2% in 2001 due to the poor economic status in 2001. The Economists Intelligence Unit had positive expectation from the industry because they expected the value to reach 194 billion dollars in the next four years.
Home depot and Lowe’s had a third of the market share in the industry. The other companies in the industry struggled to remain competitive in the market by having such strategies as relocating to markets with high renting charges so as to attract more customers and opening their shops for more hours. Home Depot was the leading company with a market share of 22.9% followed by Lowe’s company which had 10.9%. Home Depot and Lowes future opportunities of growing were dependent on consolidation of which both companies had engaged in. Increasing professional market was another strategy to increase the growth of the two companies. This was done by having large stocks, training employee on the skills required to serve professionals and having professional brand. International expansion is another strategy and Home Depot has already acquired international markets in Canada and Mexico.
Alternative retail design is also an important factor to enhance growth of a company. Online stores were the only formats maintained by the two companies but now Home Depot has come up with other formats like EXPO Design Center which offered different services from the usual hardware and building supply retail. Also providing alternative products like installation services was a good initiative to achieve future growth. Participating in fearless competition is also important. Initially Home Depot majored in metropolitan areas while Lowe’s concentrated more on rural areas. Lowe’s has now entered into the metropolitan areas and this has increased competition which has resulted in the decrease in prices and increase in promotions and advertisements by Home Depot.
Bob Nardelli the CEO of Home Depot has an aim of investing in those areas that will increase inventory turnover and store efficiency. He expects improvement through decrease in costs from product evaluation, improvement in purchasing and increases in tool-rental centers. Home depot has had high costs as result of the high rent expenses for the new stores being opened and energy expenses. There has been also some complains on the poor services to the customers by Home Depot. The company wants to major on customer services by ensuring that its employees offer the best services to the customers during their working hours. With these the revenue is expected to increase to 18% from 15% in 2004. On the other hand Lowe’s participation in the metropolitan areas has been successful and the management are aiming at maintaining the sales at 18-19% in the subsequently two years. The company is also planning to open more stores in the next three years so as to improve the company’s sales.
|Era of Depression||Stand Alone Project|