Convenience Gives Home Depot Edge Over Lowe's

Dow Jones Newswire, NY, August 5, 2007--In the battle of the big-box home centers, homeowners give a slight preference to Lowe's Cos. (LOW) but Home Depot Inc. (HD) still gets more of their money thanks to the larger chain's convenient locations, according to a recent survey.

The survey by Consumer Specialists, a Germantown, Tennessee marketing research and consulting firm, found the two largest home-improvement retailers are closely matched competitors

Lowe's rated higher than Home Depot in most areas, including product selection and customer service. Asked which chain they like better, 53% of respondents chose Lowe's, while 47% chose Home Depot. That's an even wider gap than a similar survey in 2006, which found a 51%-49% preference for Lowe's.

But Home Depot ranked significantly higher in having convenient locations, which turned out to be the strongest predictor of where respondents spent the biggest chunk of home-improvement dollars, the firm said

"If you're only going to win one (category), that's a good one to win," said Fred Miller, president of Consumer Specialists. Miller is also managing director of the Home Improvement Research Institute, but that industry trade group had no connection to the survey.

People who prefer Home Depot reported spending an average of $763 at the Atlanta retailer's stores in the previous six months, while fans of Lowe's reported spending $454 at Home Depot stores during that period.

Meanwhile, Lowe's reportedly got an average of $604 in spending from homeowners who prefer the Mooresville, N.C., chain, and an average of $322 from customers who actually prefer Home Depot.

"A large portion of the amount of money being spent at each store is by customers who do not prefer that store," the survey report said.

Home Depot has 2,206 retail stores in the U.S., while Lowe's has about 1,400 stores. Home Depot last year posted $90.8 billion in sales and $5.8 billion in net earnings, compared with $46.9 billion in sales and $3.1 billion in net income for Lowe's.

The survey's spending statistics go along with other evidence that home-improvement customers are fickle when it comes to the top two chains. More than half of those surveyed had shopped at either chain in the previous two weeks, with a third of those people saying they had visited both Home Depot and Lowe's.

"People are shopping both stores and shopping both frequently," Miller said.

That's important because it provides opportunities for each retailer to steal sales from the other. Lowe's could benefit from more locations - including more convenient ones - as it grows, while Home Depot's widely announced efforts to improve its stores could be a swing factor, according to the survey.

"With the large amount of cross-shopping between Lowe's and Home Depot, there is an opportunity for Home Depot to make changes in its product selection and operations and to quickly boost its positioning of preference," the study said. "No data in this study indicates that Home Depot has 'burned any bridges' with its customers, so there is the opportunity to win back their preference."

The survey was conducted online between July 26 and Aug. 1 and included roughly 1,000 homeowners who are close enough to shop both chains. It has a margin of error of about 2.6 percentage points at the 90% confidence level.

Miller said that most homeowners in the survey said they had noticed no changes at Home Depot in the past year, but those who had noticed differences reported changes for the positive.

Home Depot sold its wholesale distribution business last week in order to focus efforts on its retail stores. The company has outlined plans to spend $2.2 billion this year on five priorities focused on improving shopping experiences for customers, company representative Paula Drake said.

"We've made a lot of progress on the priorities thus far this year, but we know we have more to do," she said. She had not seen the Consumer Specialists survey but said Home Depot's internal surveys show customers are seeing improvements. "We intend to make sure that continues."

Lowe's said it also hadn't seen the survey results. But spokeswoman Chris Ahearn said Lowe's plans to add between 150 and 160 stores in fiscal 2007 show that the retailer understands that convenient locations are important to customers. Lowe's also focuses on "hiring great employees and training them to focus on the customer," she said. "We're pleased to see that customers recognize these efforts."

As the 2006 study by Consumer Specialists found, homeowners this year considered Lowe's superior in most product categories found in the stores. Lowe's was rated better on 11 of 14 product categories this year, up from 9 in 2006. Major appliances was the category with the biggest advantage for Lowe's, with 40%of respondents saying Lowe's was a lot or somewhat better than Home Depot, compared with 21% favoring Home Depot. Lowe's also showed strength relative to Home Depot in lighting, home decorating items, kitchen and bath fixtures and outdoor living products, but its leadership in flooring weakened, according to the survey.

Home Depot led only slightly in lumber and building materials, and was tied in power tools and hand tools.

Lowe's led Home Depot on three of four customer service factors measured, although Home Depot rated high for its how-to clinics. Neither company has taken a clear leadership position on installation services.

Consumer Specialists also took a look at geographic and demographic differences. Lowe's continued its hold on the South, its heartland, and gained in the Northeast from 2006, but Home Depot leads in the Midwest and West, according to the survey. Females preferred Lowe's 54% to 46%, Miller said.