A member of the Fortune 500 companies in the US, Lowe’s is the second biggest retailer of home improvement and hardware goods in the US. Despite facing strong competition from companies like Home Depot and Target, the company continues to hold its spot as a major player in the home improvement sector.
Lowe’s is also one of the few companies that flourished during the Pandemic – with people staying home more; it was natural that their focus turns to home improvement, and changes needed to be made around the house to accommodate work-from-home needs as well.
But despite all this, growth is slow within the company, and any bottom line Lowe’s achieves is at the expense of its staff’s satisfaction. A high staff attrition rate, the lack of innovation, and seemingly no plans to expand all seem to be standing in the way of Lowe’s long-term survival.
Bottom Line Up Front
While Lowe’s was one of the few companies that continued to see a boost in profits because of the pandemic, significant factors are standing in the way of its long-term growth and success.
Not the least of these factors are high turnover and employee attrition rates, a company culture that doesn’t encourage growth and innovation, and a failure to price their products competitively compared to other companies like Home Depot and Target.
But while Lowe’s hasn’t been a great innovator in its products and company culture, its success as a company with a well-established brand identity cannot be denied.
Lowe’s still has the opportunity to leverage technology to innovate itself and branch out into a company with more diverse operations, and it can also look into expanding internationally. So far, it has been dependent on North America for the bulk of its revenue and has only expanded into a few new stores in Canada.
However, competition from other companies like Home Depot poses a significant and ever-present threat to the home improvement giant.
Lowe’s Overview and History
Lowe’s is the second largest hardware chain in the US and the world. It is only behind its rival Home Depot, and it all began in 1921 with the first store in North Wilkesboro called North Wilkesboro Hardware. The store was owned by Lucius Smith Lowe.
In his lifetime, the store didn’t grow much, and he left it to his daughter Ruth Buchan after his death in 1940.
Ruth Buchan sold the store to her brother, James Lowe. Along with his brother-in-law Carl Buchan, Lowe started expanding the store during World War 2. The store focused on hardware and building materials – both of which were high in demand at the time.
In the next few years, the store grew to multiple locations in Asheville, Charlotte, and Durham. In total, Lowe’s operated six locations by the end of 1955.
By 1962, the number had grown to 21 stores, and the company started trading on the New York Stock Exchange in 1979. However, it suffered losses in the 1980s due to adverse economic conditions. This is also when the company fell behind Home Depot, a relatively new player in the home improvement and hardware sector.
Today, Lowe’s has around 2,355 locations across America, Canada, and formerly Mexico. Its Mexican stores, however, were shut down at the end of 2019.
Lowe’s Financial Performance
While economies slowed down and people lost jobs, Lowe’s was able to survive the pandemic because of the very nature of its products. Never before had people spent so much time indoors, and with both time and the opportunity at hand, most turned to DIY projects or home redecoration – not to mention making space in their homes for their home offices.
All of this meant more profits and better bottom lines for Lowe’s, whose profits exceeded expectations in recent years. While the question of whether people will still spend as much on home improvement in the vaccine economy, Lowe’s is in a unique position to retain the new customers it has gained and encourage current customers to increase spending at their stores.
Lowe’s made $96.25 billion in revenue in 2022, which is a 7.43% increase from its earnings in 2021, which stand at $89.59 billion. This might seem like a steady rate for a company to grow at, but earnings and profits have actually been decreasing. For example, Lowe’s earned $27.6 billion in the second quarter of 2021, but sales declined by 0.3% to just $27.5 billion for the second quarter of 2022.
Given everything that the company has been facing internally, this trend in finances doesn’t bode well in the long term, especially when spending in the home improvement and DIY sectors has increased in the last few years. In a survey conducted by Porch.com in 2020, three out of four Americans have made some sort of home improvement or another since the start of the Pandemic.
A recent study by the Harvard Joint Center for Housing Studies predicts that the sector is expected to keep growing at a steady pace, with the industry being worth $269 billion by 2025. When you put these numbers up against Lowe’s revenue, it is easy to see that the company isn’t growing as fast as the home improvement industry in general.
Lowe’s SWOT Analysis
Now, it’s time to analyze exactly what makes the company tick and what Lowe’s does right when it comes to running things. We will also talk about the opportunities Lowe’s has for its future growth and the threats it faces, both from its competitors and from within.
One of the biggest things that Lowe’s has going on for itself is its strong brand image. With retail stores present all over the country, a strong distribution system, and an established brand identity as one of America’s biggest retail chains, Lowe’s enjoys a strong position in the market.
It has always had a focus on customer service and a strong focus on customer service, Lowe’s might not be the absolute cheapest option for customers, but it is still among the top few places to go when you need supplies for any DIY projects.
Strong Supply Chain
Because of its own network of suppliers and a strong supply chain, not only is Lowe’s able to cut down on transport costs, but also offers customers options like cheap shipping that they can track live. Its supply chain has allowed Lowe’s to offer its customers multiple ways to get their hands on Lowe’s products – some of these options include in-store pickup and home delivery.
The strong supply chain also gives the company the opportunity to either take these savings to its customers in the form of reduced pricing or to have these savings reflected in its bottom line.
Wide Product Range
Lowe’s offers thousands of products in its locations and is known as the place to go if you’re trying to get supplies for any DIY project, be it for some living room changes or to make changes to your garden.
This attracts a wide range of customers across multiple demographics. Along with Lowe’s focus on customer support, this means that when you need guidance for how to get a project done as well as the supplies for it, you can trust that you’ll get both from here.
If there’s one thing Lowe’s does right, it’s the marketing. The company is known for being there for its communities, and these efforts were only doubled as the Pandemic changed people’s lives all over the world.
Lowe’s initiated multiple marketing campaigns that earned it goodwill with its consumers, as well as a shift in marketing that focused on a wider range of demographics. While programs like the Bucket Brigade help provide necessary rebuilding materials to the victims of natural disasters, marketing campaigns like the #BuildThanks encouraged consumers to honor essential workers during the Pandemic.
These marketing moves have earned Lowe’s a lot of praise, as well as keeping its position as one of the biggest hardware store chains in the world.
Strong Focus on Customer Service
Lowe’s routinely restructures its workforce to ensure that customers are given the best experience possible. It has done so by ensuring there are always more than enough people working in its locations.
Not only does this improve customer experience, but it also means increased sales as customers are guided towards things they might not know they needed for a particular project. Despite high training costs, Lowe’s ensures that its employees know what they’re doing when it comes to sales and customer-facing roles.
No International Expansion
Most of Lowe’s revenue comes from its sales in North America, with a handful of locations in Canada and none anywhere else since it shut down operations in Mexico in 2019.
This leaves Lowe’s heavily dependent on the North American market for its revenue.
Every Lowe’s has a different set of products to offer, with little control over their manufacturing quality. Not only does this mean that people might not get the same experience across different locations, but also that many customers will not know whether a particular product they’re looking for would be at a Lowe’s, even if they had found it there before.
This decentralized model leaves something to be desired when it comes to the customer experience at Lowe’s, which is something that the company places great importance on.
High Employee Attrition and Turnover Rates
Employee satisfaction has long been an issue are Lowe’s. Changes are often made in the way Lowe’s stores are staffed and the way they’re paid, and while these changes sound good on paper, Lowe’s is not the best at executing them in a way that avoids a fall in morale on the ground level. Company executives insist that these changes are for the best, but employees remain skeptical, and morale seems down.
In 2017, Lowe’s restructured its whole HR department and removed a lot of middle management roles in what is termed something next to a poorly disguised layoff. While Lowe’s insisted that the employees were given the option to move to other jobs within the organization and ample time to look for work, employees were not happy. In 2019, Lowe’s again made a similar move when it removed its commission program for its salespersons, negatively impacting many employees’ livelihoods.
These moves and a lot more have left employees juggling multiple balls at a time. The constant uncertainty, lack of growth opportunities, and navigating these changes have made employees feel unsure about their role in the company.
Employee attrition is high, and so are turnover rates, which ends up costing Lowe’s more than it sets out to save and negatively impacting customer experience.
Resistance to Change and Failure to Expand
Lowe’s as a whole has a company culture that isn’t very supportive of change and innovation. In the last few years, moves like company-wide restructuring – while good on paper – has harmed company morale and given rise to high turnover rates and unhappy employees.
When employees are worried about their jobs and policies that can affect their chances of growth within the organization, there isn’t much bandwidth for a change in company culture or to manage any kind of change, really.
In addition, Lowe’s past attempts at expanding globally – like their operations in Mexico – have met with failure, and they barely have any presence in the one other international market they already exist in, Canada.
Lowe’s has started innovating more in this space in recent years, with things like augmented reality being offered on its online portals to help customers figure out how much building materials they might need for projects. As it stands, Lowe’s customers are able to make their orders online with the option of in-store pickup or home delivery with a live order tracking option.
Lowe’s believes that customers and the company both would benefit from enhanced search functions and customized product recommendations.
Still, there is much room for improvement in these functions, and Lowe’s can benefit from continuing to develop its online shopping platforms to make its products accessible to a wider audience.
Low Shipping Costs
Lowe’s enjoys a robust store supply and transport chain that greatly reduces transport costs for the home improvement giant. More investment into this network can lead to further savings on Lowe’s part, which can either be turned into profit for the company or be used to give clients cheaper products.
As it stands, Lowe’s and its biggest competitor Home Depot usually price their products in almost the same ranges. A lot of customers believe that similar items in the stores are priced within cents of each other, and a decrease in product costs can probably put Lowe’s ahead.
Customer Retention and Better CRM
Lowe’s is a well-performing company regarding customer experience and support, but customer retention rates have been low lately. This may be partly because of how often the company stores are restructured, which means that customer support staff on the floor often scrambles to fill in the gaps.
In 2017, Lowe’s eliminated middle management in most of its locations in favor of making sure more customer-facing staff could be present, but the move pushed morale down and didn’t necessarily mean that the staff was motivated to really help customers.
These factors contribute to Lowe’s poor customer retention rates, but it also means that the company stands to gain more if it addresses these issues.
Hybrid and Remote Working
With the rise in hybrid and remote working post-pandemic, more and more people will be looking to improve their homes. Not only does this mean more people looking to add desks and home offices to their houses and apartments, but it also means that people will be looking to decorate and redecorate the space they’ll be spending more and more time in.
This predicted growth for the home improvement sector means more money for companies like Lowe’s.
While companies like Lowe’s offer quality home improvement products, there is no shortage of people and sellers who might imitate those products and sell them at a cheaper price, often compromising on the quality.
This poses a significant threat to Lowe’s bottom line.
Continuous competitor innovation and product development pose a constant threat for Lowe’s, should it fail to keep up.
Worker’s Movements Demanding Higher Pay
Worker’s movements like the Great Resignation and others that might pop up in the future may cause problems for the company, especially with costs for employee training running high already. Lowe’s is already believed to cut costs when it comes to employee remuneration, with programs like SPIFFS being taken back in 2019. SPIFFS was a commission-based program that impacted workers’ earnings throughout a majority of Lowe’s locations.
Given these factors and Lowe’s growth rate, worker’s rights movements can pose an issue for the company.
The End of the Lockdown
Now that the world and most of the US is coming out of lockdown, it is possible that customer spending in the home improvement sector goes down. This would mean less money for the company.
Lowe’s Competitive Strategy – How Does It Stay Ahead?
While Lowe’s faces strong competition in the market, it does have some advantages against its competitors that keep it ahead. In addition to positive marketing and a strong focus on customer service, Lowe’s offers a wider selection of goods than its competitors. It also has wider aisles and bigger stores, with a different strategy for product placement than others have to offer.
Most of its stores also have the same layout, which makes for a comfortable shopping experience for its customers. Compared to Home Depot, Lowe’s also has a higher percentage of full-time workers in its stores. These employees have more knowledge and expertise about the products they’re selling to customers, which means customers get more help at Lowe’s.
It also enjoys a strong brand identity that certainly doesn’t hurt when it comes to keeping its market share, and all of these factors combined are what keep the company running.
FAQs – Lowes SWOT Analysis
Question: What can you find at Lowe’s?
Answer: If you have any kind of home improvement project that you need supplies for, you can get them at Lowe’s. From things to make your home friendlier for your pet to gardening supplies and the right tools to build your home office, Lowe’s has it all.
Question: Is Lowe’s more expensive than Home Depot?
Answer: Most of Lowe’s and Home Depot’s products are priced within cents of each other, and the two companies compete fiercely to keep their shares in the market. Despite this, Lowe’s does have a reputation of being more expensive than its competitor.
Question: Is Lowe’s successful?
Answer: Lowe’s is the second largest home improvement retailer in the world and in the US, with billions of dollars in annual revenue. By most standards, it is a successful company ranked among the Fortune 500.
Question: Did Lowe’s struggle during the pandemic?
Answer: While most companies and businesses struggled during the pandemic, the home improvement sector was booming. Lowe’s, too, felt an increase in revenue since the start of the pandemic, having made $72.148 billion in 2020.