Lowe's Aims To 'Improve Home Improvement'

Michele SanFilippo, March 28, 2005

New York —Lowe's Companies, Inc. outlined its plans for “improving home improvement” at last week's Merrill Lynch Retailing Leaders Conference last week.

Company executives are optimistic about Lowe's future, stating they have “a very young, well-positioned store base from which to grow,” with average stores less than five years old. The company plans to open 150 stores this year concentrated around metropolitan areas. In 2004, Lowe's invested $600 million in improvements to existing stores.

According to Dale Pond, senior executive vice president of merchandising and marketing for Lowe's, the company's tagline “improving home improvement” continues to resonate with customers linking the brand to trust, innovation, quality and warmth.

He added that this year the campaign will feature more radio spots with contemporary music and a more comprehensive pre-print campaign featuring better distribution through the company's database of 44 million customer names and addresses. The print campaign will have a new more logical flow that is easier to read and shop.

Also, Pond said that installation will now be the primary message as opposed to a footnote in previous years. Pond added that customers will take away the following ideas from the campaign: genuine trust and confidence that the job would be done right, that a project manager would be there from start to finish if need be, and that Lowe's would be there to help if there were any complications.

He said that the company's different affinity clubs are the heart and soul of the database marketing program. Lowe's also markets to new home buyers, pick-up truck owners, members of its racing team and those involved in its creative ideas program.

“Effective merchandising is putting what we know about our customers to work and then leveraging that relationship with the customers in our stores,” described Pond. “There is a market for our higher-end products today and it is growing, but that doesn't mean we are abandoning opening price points; people will trade up for quality and value.”

Recent Lowe's research found that the number of household incomes of more than $120,000 has increased by 73 percent since 1995, according to Pond. “Those home owners spend more than the average on home improvement and will trade off in order to trade up,” he explained, adding that they will buy high-end products that are meaningful to them, but are discriminating.

“Our lines must be designed to appeal to the full spectrum with all levels of income from low to high,” said Pond. As an example, he referred to the company's New Lower Price initiative, which is used to move an entry-level customer to a higher price-point model by providing a better value. “The vendor is moving more units at higher price points, we're selling a much more favorable mix and the customer is getting a better value,” he added.

In 2004, Lowe's direct import program contributed more than $3 billion in sales. “We believe that with our distribution network, we are in great shape to do more importing and still get good turns out of that product,” said Pond, explaining that the company is holding more inventory in distribution centers, then sending it to meet demand.

“We're confident we have the right programs, the right plans, and the right people in place to drive traffic, transactions, average ticket and a balanced comp-store sales performance this year,” he added.

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