Non-Price Competition Term Paper

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Non-Price Competition BETWEEN HOME DEPOT AND LOWE'S

The Home Depot was founded by Bernie Marcus and Arthur Blank. They opened the first Home Depot stores in Atlanta on June 22, 1979. The first few stores were later attached to Treasure Island stores, stocking around 25,000 products. Today, on average, Home Depot stores are large covering an area of approximately 130,000 square feet, and offering between 40,000 and 50,000 products. While the initial motto of the company was to provide the products at the cheapest price, later on the company began to provide hands-on training for attracting the customers from various walks of their lives (Howell, 6).

The Home Depot grew to encompass stores in Georgia, Florida, Louisiana, Texas, and Alabama within the first 5 years and this growth continues to this day.

Home Depot's approach is simple. It opens massive stores (130,000 square feet, on average) at different locations and stocks them with every item a home-improver might need -- about 45,000 a store. It also attempts to keep prices low. In just over two decades, that formula helped the Atlanta retailer overcome several competitors as it built a network of 770 stores in 43 states, Puerto Rico, Canada and Chile. The company now books $29 billion in annual sales, and its stock has rocketed 2,222% this decade, 6 1/2 times the S&P 500's return.

Home Depot rides off into its way toward total industry Domination, except that it has attracted another player in the field: Lowe's.

Home Depot's Competition

Starting in 1989, the North Carolina's Lowe's has become second to the Home Depot only. As of today, company is opening new stores, with average store size now 89,000 square feet, up from 20,000 square feet a decade ago. And Lowe's has sped its western expansion with the $1 billion purchase of California-based Eagle Hardware (Fredrick, 60).

At presently therefore, we can think that there is a duopoly of Home Depot and Lowe's in the construction and home improvement industry.

Lowe's has modified the Home Depot formula by aggressively attracting women shoppers with brighter, better-decorated stores carrying a full line of appliances. As a result, Lowe's has quintupled both total sales and earnings per share since 1989, averaging 29% annual profit increases over the past five years.

Though no one thinks Lowe's will challenge Home Depot's top-dog status anytime soon. Home Depot still generates 2 1/2 times the revenue, controls better than twice the market share, runs 300 more stores, adds more new stores annually and beats Lowe's on crucial industry comparisons like same-store sales and net margins.

Lowe's plans out its stores with Web-based software from Marketmax, a retail analytics company. With sales, household income and other data, Lowe's can develop a store-layout central, then roll it out to different sections of the country. For instance, Lowe's can experiment with a layout in one location and, if it's a hit, expand its use elsewhere. Each store's managers need only pull up a Web browser to get the layout.

Locked in a brutal fight with Home Depot, Lowe's is continuing to expand it store base and introduce new merchandising programs to win consumers. Lowe's has discovered that better space strategy drives sales. Small appliances such as food processors sit near large appliances such as refrigerators. Lowe's doesn't want shoppers to just buy a fridge; it wants customers to populate the counter next to it.

Home Depot's Marketing Strategy

Home Depot provides a wide array of helpful information to its customers. For example, at the point of sale, Home Depot's sales people can provide suggestions on size of fan, installation tips, and comparisons of features between its models and those at Target, Wal-Mart and Lowe's. By focusing on the customers, Home Depot continuously finds ways to improve, thereby expanding its vision of how to best serve the customers.

For the past decade, Home Depot has been building on its unusual success and enormous valuation on rapid expansion. Stores have increased by 20% over the past few years.

Lowe's has essentially copied Home Depot's retail model of large, warehouse and is also expanding rapidly, though the numbers of stores are considerably less than Home Depot.

The things of do-it-yourselfers are quite popular in the Home Depot. The company has catered the need of the average household people. In the initial stages, do-it-yourself was quite popular among the household men.

Lowe's took the benefit of it began…[continue]

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