Louis Jacquot

Lowe’s Canada

Competitive Brand Strategy Analysis

Page 2: Strategic brand analysis

Page 6: Lowe’s brand identity
Page 8: Appendices (Porter’s 5 forces analysis)
 Strategic Brand Analysis

1. The home improvement market in Canada

 The Canadian home improvement market shrank by 5.1% in 2008 to reach a value of $23

billion. This decline is expected to persist until 2010.

 The compound annual growth rate of the market in the period 2004-2008 was 2.8%.

 Non-decorative materials sales were the most lucrative for the Canadian market in 2008,

generating total revenues of $7,954.2 million (34.6% of the market's overall value i).

2. Customer analysis

 Trends:

o Thanks to low interest rates, job security and consumers confidence, more and more

Canadians (more and more young) bought their home (home sales increased from

331,092 units in 1997 to more than half a million sales in 2007 ii).

o However, because of the crisis and a growing unemployment rate, the demand for

household and domestic services/goods is likely to weaken significantly.

 Motivation:

o According to a recent survey by AC Nielsen, 51% of consumers said they are choosing

to stay homeiii more often, a phenomenon heightened by the economic downturn.

o These consumers may thus try to make their homes as comfortable as possible.

o Making homes energy-efficient can allow people to save money in the long term.

 Segmentation:

o The demand for household goods and services is really discretionary and a large

number of consumers are prepared to delay purchases and to do with what they have.

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 o New homeowners and people who move tend to spend more on household goods than

other types of consumersiv.

o As renting is very common among younger households, their needs for household

goods are relatively low. Older households are typically owners.

3. Competitor analysis: Home Depot Canada

 Brand image/Identity: very large stores with a large selection of tools and parts for

experience DIYers.

 Strengths:

o World’s leader in DIY (Do-It-Yourself), home improvement and gardening.

o Huge economies of scale and high level of brand recognition.

o Accounts for 4.6% of global sales of the segment in 2008.

o The company’s revenues remain considerably greater than its nearest direct rival,

Lowe’s.

o Strong presence in the emerging markets of Mexico and China.

 Weaknesses:

o Revenues fell by 8% to US$71.3 billion in 2008, with net profit falling by nearly 49% to

US$2.3 billion.

o Heavily dependent of the US market. The housing market in the US is in crisis.

 Positioning:

o Competitive prices on abroad range of products.

o Small number of exclusive and proprietary private label lines

o Many big bog stores with a very large range of goods.

o Good customer service.

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 o Eco-Friendly differentiation.

4. Competitor analysis: Rona Inc

 Brand image/Identity: Independent, public Canadian company with a strong presence and

the strongest private label programs in the DIY and gardening market in Canada.

 Strengths:

o Canada's leading home improvement retailer.

o High consumer awareness of its retailing brands, especially in Quebec.

o Nationwide presence through acquisitions and new store openings.

o Investment in advertising. Partnership with the show Les idées de ma maison.

o Private label products and eco-friendly products.

 Weaknesses:

o increased financing expenses and amortization costs due to the expansion of the

networkv.

o Despite higher revenues, the net income in 2008 decreased by 13.5% compared with

2007.

 Positioning:

o Competitive prices

o Strong geographic presence and the diversity of its formats allow the firm to satisfy

various consumer needs.

o New division dedicated to the very promising professional and commercial market.

o Website as an alternative to its brick-and-mortar stores.

o Customer friendly: e.g. nationwide contract with the Air Miles Reward Program.

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5. Internal analysis: Lowe’s Canada Inc

 Strengths:

o Revenues of $48,230 million in 2008 (US+Canada+Mexico) vi.

o Efficient merchandising (e.g. ideas to the customers, cross-selling, easy shopping

experience).

o Wide offer of private-label products (with 7 private labels) and eco-friendly solutions.

o Practices and processes to reduce expenses (e.g. recycling and waste management

programs).

o Very efficient regional distribution hubs.

o Installation and special order services.

o Credit financing for its customers through private label credit cards.

 Weaknesses:

o The net profit was $2,195 million in FY2009, a decrease of 21.9% compared to 2008

(US+Canada+Mexico)vii.

o Only 11 stores in Canada.

o Reduced margins due to excessive promotions (consequence of the aggressive

promotional activity of the competitors).

 Opportunities:

o Increasing demand for eco-friendly products.

o Growing demand for private label brands

 Threats:

o Rising unemployment and food prices threaten discretionary spending.

o The housing market in the US faces difficulties.

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 o Only 30-40 suitable big box sites left in Canada’s major urban centres viii.

 Positioning:

o Very good customer service and friendly atmosphere.

o Lowe’s is the preferred destination among do-it-yourself customers.

Lowe’s brand Identity

Brand essence: Helpful

Core identity:

 Service quality and novice-friendly: consistent and excellent customer service thanks to a

very well trained staff, very knowledgeable.

 Clean and pleasant: merchandise is arranged like in a department store, neat and orderly.

Perfectly swept floors and extra-bright, super-wide aisles easy to navigate.

 Large product selection.

 Quality: high-end materials, top-of-the-line products (including refrigerators…).

 Bargains both in time and money: frequent sales and clearance prices. Easy product

comparison (brands neatly displayed side-by-side with the prices listed clearly).

Extended identity:

 Innovation: e.g. a website on which you can place an order to pick-up whatever you need.

 Aesthetic: focused on the aesthetics of home improvement and the final product.

 Women-friendly: shelves placed at the perfect height for the 5-foot-4-inch customer.

Value proposition:

 Functional benefits: great value, quality in both the products and the customer service, for

a good price.

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 Emotional benefits: great satisfaction as salesmen are always willing to help. You feel like

you matter as an individual.

 Self-expressive benefits: willingness to show that you are someone who demand an

excellent service, who insist that people show consideration.

Relationship:

 Customers –men, women, novice or experiences DIYer- must be helped and have a great

shopping experience.

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 Buyer Power: moderate

o Large number of small buyers with no strong financial power.

o Increasing number of people now working from home  bigger expectations

o It’s easy and costless to move from a retailer to another.

o Price sensitivity is likely to be exacerbated with the downturn.

 Supplier power: weak to moderate

o Great number of providers diminishes supplier power

o Market players can move from one supplier to another without being penalized

o Players use the advantages of a global source of supply to search for the best deal

 New entrants: moderate

o Low capital requirements to start a new business

o Economies of scale are necessary to offer competitive prices

o Some customers don’t want to visit larger retailers, often located in industrial parks at

the edge of cities and towns

 Threat of substitutes: weak

o The main substitute is to use the services of professional which is very expensive

o Many people have no time or knowledge to do home improvement tasks

 Degree of rivalry: moderate

o There are several large retailers, and many smaller.

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o The major market players are very similar in the type of products they sell

o Competition is encouraged by low switching costs for customers

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i
Datamonitor.com (September 2009) : Home Improvement in Canada
ii
GMID - Global Market Information Database
iii
GMID - Global Market Information Database
iv
GMID - Global Market Information Database
v
Rona Inc 2008 annual report : http://www.rona.ca/content/2008-annual-report_2008_annual-reports-other-documents_investor-relations
vi
Lowe’s 2008 annual report : http://www.lowes.com/lowes2/assets/2008%20Annual%20Report%20Bookmarked-%20FINAL.pdf
vii
Lowe’s 2008 annual report : http://www.lowes.com/lowes2/assets/2008%20Annual%20Report%20Bookmarked-%20FINAL.pdf
viii
GMID - Global Market Information Database : Rona Inc - DIY and Gardening - Canada