On Wednesday, November 20, Lowe’s reported solid third quarter results, which led to a 5% increase in stock price. Revenues are up nearly 6% in the third quarter year to year, with the “do it yourself” chain earning $13.8 billion for the quarter.
While approximately 70% of the customers at Lowe’s are not professionals, this report does bring up a serious issue for our electrical distribution supply chain.
Lowes is reporting 30% of its business comes from professional contractors every year. While that list includes products outside of the electrical industry, 30% of that $13.8 billion is still more than $4 billion dollars.
Plus, Lowe’s says the average pro customer spends around $2,000 at Lowe’s annually. 2013 numbers show Lowe’s earned $50 billion in revenue. If pro customers are 30% of that business, that means 7.5 million contractors used Lowe’s last year, spending $15 billion.
On top of that, Lowe’s is re-launching its “LowesForPros” website in the next few weeks in an effort to expand its growing professional customer market. The site is presently being tested with a select group of pro customers. In it’s second quarter earning report, Lowe’s was very excited about the LowesForPros re-launch.
“This re-launch will provide a dedicated platform for pro customers to purchase online from Lowe’s, in addition to align pros to access contract pricing, develop requisition lists and view purchase history,” Mike Jones, Chief Customer Officer told the call. “And LowesForPros will be enabled for convenient mobile access.” Jones added that Lowes will focus on winning the business of professional contractors by offering service through online and mobile channels, and offering more products than in the past.
“While pros shop across the entire store, the penetration of sales to pro customers is highest within traditional building and maintenance categories including electrical and tools and hardware,” Jones added. “For example, the mix in customers shopping electrical wire is roughly 70% pro and 30% DIY. We are losing shares in this core category, particularly with electricians. So within last year’s line review, we focused on why and what we needed to change. In the end, we added more to our selection of wire types, gauges and colors as well as full rows of wire and cable to supplement the offering of wire sold by the foot along with contractor-packed pricing so pros could benefit from buying bulk rolls.”
Lowes Chief Operating Officer Rick Damron says he will not only look to engage the local contractor, but also contractors who work across several states.
“We’ve looked at pros – now approximately 30% of our total mix of business – and we continue to work on that daily,” Damron said. “When you look at the pros, they’re reacting very strongly to our structure that we implemented last year: the in-store specialist to really manage and handle the customers when they come inside the stores; our market account specialist who manages the larger accounts within the marketplace; and then our national accounts program which manages those accounts that do business across many stores across the country. That process and that program is working extremely well.”
Lowes Chairman, President and CEO Robert Niblock reports the company’s dot com business was up more than 25% in the first quarter of 2014, and he expects it to be up even more with the re-launch of LowesForPros and the ability to deliver products to the job site.
“We still continue to see that about 50% of what is bought online is actually picked up in store,” Niblock says. “If you think about it, about 70% of what we sell online is fulfilled through those store channels, and we’re happy to ship it to them.”
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