Lowe's and Home Depot are working to further grow their small but lucrative B2B businesses. Both companies' B2B business is primarily based on sales to contractors, but their growth strategies are different.

Home Depot is building a new website for merchants, what it calls "professional" customers. New services will be added and integrated on this website for the convenience of merchants in various ways. Meanwhile, Lowe's, under the leadership of Marvin Ellison, who took over as CEO last May, has strengthened its price competitiveness, improved the in-store experience to speed up transactions, and, above all, attracted high-value brands. We aim to acquire professional customers by promoting

A study published last fall by Harvard University's JCHS (Joint Center for Housing Studies) predicted that home renovation consumption in the United States would cool in 2019. Rising mortgage rates and higher apartment sales are the reasons. To combat this, Lowes and Home Depot are working to secure their most valuable customers: the Pros.

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Majority of revenue is B2B

A Home Depot spokesperson told Digiday that businesses make up just 4% of the company's customer base, but account for 46% of revenue. They answered yes. A Lowes spokeswoman said 20 to 25% of revenue comes from professional customers. In their earnings announcements for the first quarter of fiscal 2019, which took place in the fourth week of May, both companies said that sales growth from professional customers was greater than that from general "DIY" customers.

Publicis' chief commercial officer, Jason Goldberg, said, "We tend to think of both companies as B2C-centric companies, but the reality is that we make a lot of money from B2B."

Lowe's and Home Depot aren't under as much pressure from Amazon as other specialty retailers. Many of the items they sell are too large or too expensive to ship directly to customers. In particular, contractors purchase lumber, concrete, electrical wiring, etc. in large quantities. But merchants, like most sole proprietors, rely heavily on automated software for some tasks, such as submitting invoices, that were previously done manually.

Home Depot Grows IT

The Home Depot is also focusing on these aspects with its new dedicated site for professional customers. The company first announced in December 2017 that it would create a professional customer website as a project that would take two to three years. Home Depot CEO Craig Menier announced in an earnings call on May 21 that 135,000 pro customers have signed up for the new site, which is expected to hit 135,000 by the end of the year. We aim to reach 100,000 registrations.

Bill Rennie, executive vice president of external sales and services at the company, said this quarter it added an integration of accounting software QuickBooks to its website. A major focus for the next quarter will be linking the purchasing cards previously created by the company for professional customers to its website so that the card's points can be used both in-store and online. In addition, it is said that it is redesigning the page so that personalized product recommendations are posted on the homepage.

Lenny says, "There is data that the less hassle you have to deal with, the more you will do with your customers."

And Home Depot, which recently pushed its tool rental service, is trying to get more professional customers to use the service. As many as 90% of professional customers have used a tool rental, but only about a quarter of them have used Home Depot's rental service, Menier said. And customers who used the rental service tend to spend more money.

Lowe's Focuses on Store Improvement

Meanwhile, Lowe's is working to improve its products and in-store experience to attract more professional customers. When Lowe's announced Mr. Ellison as CEO last May, the company's sales were growing, but its market share was much smaller than Home Depot's. That still hasn't changed, with Lowes' sales of $68.6 billion in 2018 versus Home Depot's $100.9 billion.

Mr. Ellison and company executives said in their earnings call that 2018 was focused on investing in fundamentals in retail. By adding a lift table and increasing the number of trucks in the parking lot, we have created an environment that makes it easy for professional customers to load.

In addition, he said that he will make improvements to display top-notch brands such as Craftsman, which he has acquired over the past few years, more prominently. Craftsman's tools, which were previously sold at Sears department store, have been under contract to be sold at Lowe's since 2017.

B2B needs to build trust

Goldberg said Home Depot and Lowe's will continue to prove that they have a reliable supply chain to offer to merchants. pointed out. Merchants, for example, often need more detailed information about what is sold in stores than the average customer.

"The [professional] supply chain is very complicated," said Goldberg. “There are cases where B2B customers want to know, for example, whether the primer they want to buy is available for purchase next Tuesday, rather than whether it is available that day.”

Anna Hensel (original / translation: SI Japan)