Non-price competition in markets

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 to make those kinds of stores that could appeal to both men and women. Lowe's has restructured its product positioning throughout the store. Traditionally women have been scared off from all of the most basic home improvement products outside of lawn and garden. To successfully reach this gender group Lowe's have designed stores that are lighted and featured wider uncluttered aisles. Their main goal is to make women feel comfortable when shopping without jeopardizing the male class (Fredrick, 60).

Recently Home Depot has been focusing its advertising and marketing campaign on Hispanic marketing. Home Depot's new objectives have also been providing numerous creative approaches and campaigns that are strategically aligned with the general-market work.

The Home Depot Inc. is keeping steady pace to maintain its stature as the No. 1 U.S. home improvement retailer. Recognizing Lowe's competitive efforts, Home Depot has launched a spree of renovations and new store concepts, constantly revamping its brand with a new face. The company appears to be wearing its new image well.

In an effort to regain ground from Lowe's with the ever-increasing population of female home-improvement shoppers, Home Depot's renovations are intended to create L. leaner, better-illuminated, navigable stores. The company has also restarted its popular Do-It-Yourself Workshops in stores across the country. Geared toward educating women in home improvement projects, the workshops cover wide varieties of subjects such as laying ceramic tile, installing ceiling fans and learning decorative painting techniques (Dolbow and Janoff, 69).

The Home Depot is focusing on a new battlefront in its ongoing home improvement war with rival Lowe's. After a lengthy trial of an Internet-based order and delivery service in the Las Vegas market, The Home Depot recently rolled out its own version of a national Web store, roughly six months after Lowe's. The newest phase of The Home Depot's Web strategy, selling 20,000 products online to shoppers in the continental United States, debuted last month; the program operates independently of the company's broader selection of 50,000 items available in the test markets of Austin and San Antonio, Texas, as well as Las Vegas (Griswold, 16)

Just like Lowe's, The Home Depot has ventured cautiously into e-commerce. The first test market debuted in Las Vegas last summer; the two Texas markets were added by yearend. In these "neighborhood store" tests, all 50,000 products available in The Home Depot stores for that particular city can be purchased online. Shipments are handled through UPS, store pickup or by Home Depot truck delivery. Eventually, the company expects a similar model may be offered nationwide. Meanwhile, The Home Depot will use the information it gains from both tests to tailor its Web strategy. Most of the sites now are being used for information purposes. What you'd like to see them do is drive more people into the store obviously," said Wayne Hood, an analyst with Prudential Securities (Embrey, 55).