Lowe's Fails To Man Up Against Home Depot, Underestimates Menards

In the battle for home improvement supremacy, Lowe's Cos always seems to settle for second place behind star performer Home Depot . While both of these big box behemoths recently posted comp store gains in for the critical first quarter, Lowe’s lagged Home Depot’s stellar performance in a mixed and uncertain retail environment, disappointing analysts and investors alike. When we last visited the Home Depot / Lowe’s rivalry, I equated the competition to Aesop’s Tortoise and the Hare fable. Then (and now), Lowe’s – the tortoise – benefited from a higher Net Promoter Score®*, and its shoppers valued the “extras” Lowe’s offers beyond the location advantage of Home Depot – the hare – including perceived quality and store appearance. At the time, Lowe’s was on the verge of contesting its rival as the top pick among consumers, perhaps finally winning one for the slow and steady. Fast forward two years, however, and the big boxes are becoming increasingly bifurcated in Home Depot’s favor. So what’s wrong with Lowe’s?

In my previous post, I explained the need for Lowe’s to build their male customer base. In May 2013, the retailer had a solid stable of female shoppers, but men, who spend about 30% more on home improvement items in a given month, were a more lucrative segment to target. However, it appears that Home Depot heeded this advice instead. According to Prosper’s Consumer Equity Index – a metric comparing shopper loyalty over a given time period – Lowe’s shares of male AND female shoppers have dipped while Home Depot has gained. Currently, Lowe’s shopper deficit stands at -10% among both genders (versus the comparable three month rolling average recorded in May 2013), while Home Depot has gained nearly 5% among that profitable male demographic. Home Depot’s female shopper base also grew about 2% during that same time period.

Home Depot’s single digit gains only partially explain double-digit shopper losses at Lowe’s, and regional analysis of shoppers reveals where Lowe’s is underwhelming its customers. While shopper share for Lowe’s is slipping in each of the four U.S. census regions (per our Consumer Equity Index), its deficit (again, versus the comparable May 2013 three month rolling average) is the largest in the Midwest. Incidentally, this where the Home Depot / Lowe’s home improvement bloc is the weakest.

Enter Menards. While likely unknown to at least three-quarters of the U.S., this Wisconsin-based big box has been busy building it presence in the Midwest. A home improvement retailer at heart, Menards also specializes in general store offerings – in one visit, shoppers can pick up their tiling supplies, a barrel of pretzel nuggets, and a Mickey Rooney-era DVD compilation set. With heavy emphasis on saving “BIG money,” special deals, and rebate offerings, Menards offers price conscious consumers a treasure hunting experience at its finest. And over the past two years, shopper growth at Menards (+3.5%) has even outpaced Home Depot (+1.5%) in this region.

Among Midwestern females, the attraction to Menards is even stronger. In May, 21.4% of these shoppers named Menards as the hardware store they frequented most often, besting Lowe’s (17.9%) and rivaling Home Depot (23.7%). Men in this region still cite Home Depot (25.0%) and Lowe’s (20.0%) as the stores they shop most often, though Menard ’s (15.3%) has grown with this group over the past two years as well.

The deep discount deals, vast selection, and shopping experience at Menards appear to be paying off for this regional retailer and shoppers in the Midwest, who gave Menards a higher Net Promoter Score®* than its two nationally-based competitors. Perhaps it’s time we forget the fable of The Tortoise and the Hare; the battle between Home Depot and Lowe’s now includes a third opponent.

Pam Goodfellow is Principal Analyst/Consumer Insights Director for Prosper Insights & Analytics™ and editor of the monthly Consumer Snapshot.

*Net Promoter, NPS and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld