Merchandising mix gets a makeover

Home Channel News, Dec 11, 2000 by Elizabeth Consavage

A sharper focus on decor helps boost sales and draw a men affluent customer

As it moves farther West in its quest to capture more of the national market, Lowe's is capitalizing on its stores' aesthetic assets and an increased mix of fashion and home decor products to attract affluent shoppers.

Changes in its stores' merchandise mix reflect larger chainwide changes, as Lowe's banks on its store format and marketing strategy to win over those customers who balk at shopping Home Depot in favor of a cleaner, brighter and more open layout.

Lowe's stores are designed to offer more welcome shopping environments and to showcase better merchandise -- through a wider assortment of brands and upscale products, according to Dale Pond, executive vp-merchandising and marketing for Lowe's. "It's a shopping environment that basically gives us a better way to present the brand," he said. "We have this store that just shows the products better, so we position the store as this better environment."

To attract higher-income customers, Lowe's is offering more - and more high-end - home decor products, bringing fashion to the forefront in its stores. As a result, over the past 10 years, higher-margin decor items such as flooring, fashion plumbing, paint, windows and walls, fashion electrical, appliances, cabinetry, nursery products and outdoor fashions have increased to 50 percent of the retailer's total sales from 35 percent in 1990.

This merchandising makeover isn't confined to fashion items, either, but extends to certain segments of Lowe's building materials mix, too. The company's "Top Choice" program, which offers wane- and knot-free dimensional lumber to customers, has been in Lowe's stores for several years. "We've really worked hard over the past two or three years to upgrade the quality of our lumber," said Mark Kauffman, a senior vp-general merchandise manager who handles the "functional" side of Lowe's product assortment. "Lumber is a really important category for Lowe's because it can help set the image of the entire store"

If it ain't broke, make it better

To stay on top of merchandising trends, Lowe's relies on a five-person forecasting and design team, headed by Melissa Birdsong, who noted that presentation is as important as the product being sold in many customers' buying decisions. "There's an underlying value quotient in our mix. We want to give customers the quality they expect, but also a wide range of products."

And as Lowe's expands into major metro markets, it encounters customers who have what Pond called "more refined tastes" and demand top-of-the-line merchandise.

"While still covering the lower-end products, we're certainly looking at the higher end of the line," added Mike Menser, senior vp and general merchandising manager for home decorating products. "One universal theme is offering our customer more choices than they could find in other home centers."

"We see some big opportunities to move to another level," he said.

A major component of Lowe's strategy is to position itself as a high-value venue that sells namebrand products at great prices. To do that, the retailer plans to showcase as many national and regional brands it can while still developing its own private-label lines.

Major appliances, as a growing department, has lent itself to that strategy. Lowe's is the country's second-largest appliance retailer, and its goal is to surpass Sears in sales in five years. Its stores devote 8,000 to 10,000 square feet to 300 to 400 skus that include all of the top brands, such as Maytag, General Electric, Whirlpool, Frigidaire, KitchenAid and JennAir. It is also selling appliances online, and the entire department's business is supported by installation services that can get the product into a customer's home a day after it's purchased.

The company also found that by adding small appliances last year, it was able to generate $1 million more in gross product than the consumer electronics they replaced at only 40 percent of consumer electronic's sales.

Lowe's also learned some things about merchandising and display from its acquisition of Eagle Hardware & Garden, which had some of the more stylish kitchen and bath departments in the industry. In many of the Eagle stores being converted to Lowe's format, the kitchen and bath area has been left intact. "We've used some of their displays and some of their ideas in the new stores because it is better than what we were doing," said Larry Stone, Lowe's chief operating officer. "We tried to capitalize on some of their strengths."

New stores also feature what the company refers to as a Four Seasons room, which replaces a conventional greenhouse and allows those stores to get in and out of seasonal merchandise more smoothly and efficiently, said Bill Warden, chief administrative officer.

Welcoming new vendors

For more than a year, Lowe's has conducted line reviews with nearly all of its suppliers and has winnowed its mix by several thousand items as a result, according to analysts who follow the company. However, its move toward fashion-oriented merchandise has brought Lowe's into contact with a new mix of vendors, some of which are developing proprietary brands for the chain.