Crowded market competition

Crowded market competition

Indianapolis and surrounding suburbs is one of the first metro markets in which the three largest home centre chains are competing head to head – Home Depot, Lowes and privately-owned Menards.

Catalogue advertising developed by Home Depot for the Indianapolis market

At the moment, three home centre giants operate 18 stores to serve 1.5million people. It is one of the most heavily-stored metro markets in the United States, if not the most competitive. Lowes and Menards each had half a dozen stores in Indianapolis, Indiana and then in February of 2002, Home Depot quickly opened half a dozen units.

Conventional industry wisdom says it takes 35-38,000 households to support a major big-box home centre. With the three chains running 18 stores, the number of households-per-store is down to less than 24,000. Will they all survive?

Though store sizes may be similar (100,000 sq. ft. each or larger) and the same types of products are being sold by each, in many other ways the three firms give consumers decidedly different choices. For example:


  • Choices in store ambience i.e., bare-bones warehouses to upgraded, better-lit warehouses to conventional gondola fixtures at Menards
  • Choices in in-store light levels; from Depot’s minimal lighting to Lowes brighter levels and Menards’ even brighter lighting
  • Colour schemes; from Depot’s dominant orange to Lowes blue and Menard’s green and red
  • Choices in categories which are featured in store layouts
  • Choices in type and frequency of advertisingIt is in this latter choice, however, that one can see the emerging strategies behind the competitive scene. The advertising reflects the direction in which the three chains appear to be headed. Let’s examine the advertising approaches of the three chains.

    These stores reflect less of the warehouse look than either Lowes or Depot because they utilise gondola fixtures in most areas of the store instead of warehouse racking, and it is the most aggressive local advertiser.

    Catalogue advertising developed by Menards for the Indianapolis market

    It features weekly circulars, generally containing 32 (8″ x 10?) pages, which are item-oriented. Each circular contains some 350-500 priced items, including lumber and other building materials. Each ad has a theme and contests are frequently a front-page feature; one recently giving away a new Mini Cooper automobile (in conjunction with Sylvania Lighting) to consumers who register for it. A great way to accumulate direct mail lists.Menard also features seasonal opportunities regularly such as Halloween, an American fall promotional theme, and it often offers non-hard goods items at special prices, such as candy bars. As would be expected, products are categorised by department – paint, lighting, building materials, tools, etc.

    Discounts and sale prices are prominently featured on each page and/or by each item. The emphasis constantly is on savings. Regular weekly circulars are supported by TV spots in markets such as Indianapolis, these being institutional but always stressing Menards’ low prices and price-beating guarantee.

    Lowes’ consumer advertising reflects its upscale store design, compared to Home Depot. In other words, it is more colourful and stylish than that of either of the other two chains.

    Catalogue advertising developed by Lowes for the Indianapolis market

    Printed by rotogravure, it is on a better grade of paper than Menards, features some large, image-building four-color photographs and a range of big colour illustrations of products. It also features several hundred items, with a considerable emphasis on bigger ticket items (power tools, powered lawn equipment, etc.)As it is America’s second largest retailer of major appliances, these products get far more attention in a typical Lowes circular than the space given to them in either Menards or Depot, both latecomers to selling these products.

    A recent Lowes 40-page circular emphasised higher price points, on average, than did the Menards circular running the same week. It also featured its installation services throughout by using little symbols saying, ÒWe InstallÓ.

    Headlines for each merchandise category featured consumer benefits, not just price. For example, “Let Us Help You Save Money And Increase Your Home’s Value”, “Give Your Home A Face Lift” and “Prepare Your Lawn For Fall”. While it was filled with products and consisted of 40 pages, its design seemed less crowded because the circular pages measured 10″ x 10″.


Another element of Lowes’ advertising is that it is filled with product knowledge and helpful homeowner tips. It is obvious the company is seeking to convey its helpful image in print as well as on the sales floor. Lowes’ TV advertising stresses key categories like major appliances, shows stores’ well lit, well-signed sales floor and focuses on its physical attributes as well as its claim to superior customer service.

Home Depot
Surprisingly, Home Depot, as the newcomer to the market, has done less advertising in its first six months than either of the other two chains. While it does run circulars similar to those of Menards, it does so far less frequently – apparently about once a month, not weekly. Earlier this year, its weekly ad was an 8-page gravure piece, 9Ó x 12Ó, which was primarily devoted to flooring of all types, with the last page also featuring window blinds.

Like the Lowes circular, it featured full colour photographs and large illustrations. It promoted 20% off and while it stressed price, it did so in a more subdued fashion than the Menard sales circular. It also mentioned that carpeting and flooring could be installed by Depot.

None of the other departments was featured, and considering that Depot’s stores are 100,000 square feet or larger and stock tens of thousands of items, it seemed unusual that the week’s ad emphasis would be focused so much on a single category. The look of the flooring circular is far more upscale than the look of the way products are displayed on Depot’s sales floor. It is quite a contrast between the ad look and the store itself.

Depot’s TV advertising is national, and highlights price and assortment, often showing store shots of warehouse racking.

With same-store sales recording only a 1% gain in the second quarter of 2002, Home Depot is also intensifying its efforts to find new ways to grow. The latest attempt, firmly denied previously by company spokesmen, will be an 80,000 square feet smaller unit, dumping the bright orange which has identified Depot since its inception in favour of off-white racking and other changes. It clearly is an attempt to improve its appeal to women and be more like Lowes, which females have indicated they find less intimidating because it is brighter, cleaner, less cluttered and better signed.

This female-friendly concept has been tested (and denied) in Blairsville and Loganville, Georgia for months. It also appears to be part of Depot’s strategy to fight Lowes’ invasion of suburban Chicago.

One of this new version stores will be opened in suburban Glenview, Illinois, next year. Originally, it was destined to be a typical Depot store, but with the Lowes’ invasion imminent, Depot made the change.

In addition to the off-white colour scheme, plans call for a wider assortment of appliances and lots of kitchen layouts at the front of the store. Other changes include brighter lighting, less clutter and smaller shelves. It clearly is aiming to attract suburban homemakers interested in redecorating and remodelling.

Since former GE executive, Bob Nardelli took over two years ago, he has been aggressively seeking ways to reinvigorate the chain with new concepts – everything from free-standing lawn and garden stores, urban units and pro stores to adding new categories such as major appliances. It even is testing a heavy-equipment rental store in Naperville, Illinois, one of the cities to get a Lowes store next year.

The Glenview store is seen as a hybrid of the smaller neighborhood stores opened in the East and some of the interior design emphasis of its Expo Design division. One of its urban-market units is scheduled to open in Lincoln Park, a Chicago neighborhood. It will be a two-level, 80,000 square ft. unit.

An Ace retailer in Blairsville, Georgia, says the 9-month old Depot pilot store there very much resembles a Lowes unit in presentation and ambience. Recognising that other operational problems exist, Nardelli is cutting capital spending on new stores in order to redirect some investment into improving existing stores, which many industry observers say have gotten sloppy and messy.