How Lowe's Is Leveraging Digital for a Bright Future

Brought to you by WBR Insights

Digital technology is helping brands the world over better serve their customers and manage their own operations. Nowhere is this felt more keenly than in those brands operating in the ecommerce and omnichannel spaces.

However, digital transformation is not always a smooth process. Companies can often find themselves surprised by its complexity and the obstacles they encounter while attempting to move from an analog world. Twenty percent of all departments are struggling to adapt to technology disruption and 35.5% feel negatively or neutral about their ability to do so. In fact, nearly a quarter (23.4%) of companies admit to being slow to adopt new technology.

This is the situation home improvement giant Lowe's found itself in 2019 when trying to operate in the ecommerce space. However, the company has been making some changes.


Speaking following the release of Lowe's third-quarter earnings report, President and CEO, Marvin Ellison admitted that his company has been lagging behind when it comes to online sales. By its own admission, ecommerce sales have had a neutral impact on Lowe's business with sales in that area only growing by three percent.

"I would argue that there's not a brick-and-mortar retailer in the US that is our size that has such limited growth in the dotcom business," said Ellison. "Most US retailers that announce their comp growth for the quarter typically will have a dotcom number that starts with 20% growth, which is typical in this day and age. We're not there yet but we know how to get there."

Lowe's puts this underperformance down to it not truly understanding the complexity of running a successful ecommerce business and that the space was still a bit of a mystery to the brand. One particularly salient example of this was on Black Friday. Lowe's completely underestimated demand led to its website crashing, costing the company revenue and reputation on one of the most critical days in the retail calendar.

This was a massive wake up call for the brand. It has since been pouring money and resources into overhauling its ecommerce capabilities and doing everything it can to avoid a repeat of that highly embarrassing and costly incident.

"We've been very clear that this is a transformation," added Ellison. "We didn't make any bones about the fact that this was a company that had great potential but that had underinvested in supply chain, IT, and also leadership development. It's not difficult to grow dotcom sales; it's difficult to do it correctly and make money. Rather than having a bunch of unproductive promotions and couponing events, we shut that down and we basically asked — how do we structure this business in the right way?"

Digital Transformation

To help it better understand the ecommerce landscape, Lowe's recently closed a deal to purchase the retail analytics platform developed by Boomerang Commerce — which also sells the ecommerce automation technology retailers use to sell on Amazon's marketplace platform.

The acquisition of Boomerang Commerce's technology will bring next-generation analytics capabilities and expertise in-house at Lowe's and will, hopefully, prevent a repeat of incidents like those seen on Black Friday.

The technology will allow Lowe's to improve on its strategic priorities and existing capabilities by allowing it to perform large scale data collection and analytics. This new and improved data gathering functionality combined with artificial intelligence-driven analysis will empower Lowe's to identify pricing changes, learn about gaps in its product lines and in-stock rates, identify which products are being sold by competitors, and identify profit margin opportunities.

"Pricing and assortment planning have been identified as strategic areas in need of modernization," said Lowe's Chief Information Officer, Seemantini Godbole. "And when we find the right assets available to buy and advance our strategy, we'll do that. The acquisition will increase our ability to competitively price products with a much-improved understanding of demand elasticity."

The Boomerang Commerce acquisition is the first in a line of planned spends on digital technology. Ellison announced late last year that, to improve its ecommerce offering and performance, Lowe's plans to spend $500 million per year through 2021 and hire more than 2,000 engineers to make improvements to its website, supply chain, merchandising, admin, and more.

Final Thoughts

It seems Lowe's has certainly learned from its past mistakes and is dedicating serious money and resources into its ecommerce operations. Home improvement isn't always the most natural fit for ecommerce, but with big brands like Lowe's bucking trends, that may be all about to change.

The traps and pitfalls of digital transformation are set to be hot topics at eTail Canada 2020, taking place in May at the Hyatt Regency Toronto, ON.

Download the agenda today for more information and insights.

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