Sunday, November 23, 1997

Competition building in the home-improvement retail market

By DAN SEWELL / AP Business Writer

ATLANTA (AP) -- There's something building in the home-improvement market -- competition.

In August, Lowe's opened a new store across the street from The Home Depot in Athens, to the east of Home Depot's headquarters. Then Lowe's opened a new store in Stockbridge, to the south. And a store in Woodstock, to the north.

Within weeks, it will open for business in Cobb County, to the northwest, and Gwinnett County, to the northeast.

A Shermanesque-encirclement, with the orange-aproned Home Depot facing a siege by its red-aproned competitor?

Not exactly.

While keeping an eye on Lowe's and girding with some relish for the head-to-head competition, Home Depot is busily carrying out its own massive expansion -- a doubling in size and plans to extend beyond North America.

What such direct competition most likely means in the short-term is benefits in price and selection for home-improvement do-it-yourselfers. In the long term, it will cause further consolidation in an industry transformed by the gigantic success of 19-year-old Home Depot and its low-price, high-service warehouse stores.

Outside his office, Arthur Blank, who became Home Depot's chief executive officer this year while co-founder Bernard Marcus remains chairman, has Wild West pictures with slogans such as "If you don't make dust, you eat dust" and "Bring on the competition!"

"We're very competitive people, there's no hiding that," Blank agreed. "That's part of the culture of the company."

Both he and his Lowe's counterpart, Robert Tillman, call each other's companies worthy competitors.

Tillman calls Home Depot "an icon brand," while Blank says Lowe's is "a very fine company."

Still, not surprisingly, each believes his own brand is better.

Tillman suggests that his North Wilkesboro, N.C.-based company has stores that are more family-friendly than Home Depot's, and that women enjoy its amenities and added inventory of large appliances such as washers, dryers and refrigerators.

"We're not copying Depot," Tillman said in an interview at Lowe's Athens store. "We try to create a little different environment."

And Blank?

He referred to Home Depot's annual sales revenues of $19.5 billion being more than double Lowe's: "That speaks to the way the customers vote, what the customers say. It is the way the customers feel when they shop in our stores about the quantity and quality of the service."

While Tillman uses the Avis rental car "We try harder" slogan to explain Lowe's, it was in fact was No. 1 in the industry until just eight years ago. But the Home Depot concept of large inventories and well-trained helpers built a national powerhouse that began crowding out smaller competitors.

Lowe's, now 51 years old, revised its approach to also emphasize bigger stores to compete for the rapidly growing do-it-yourself market.

"I think it's probably fair to say that the best thing that happened to us was Home Depot," Tillman reflected in a speech last summer. "A good scare is worth more than good advice."

Analyst Daniel R. Wewer Jr. of Atlanta-based Robinson-Humphrey said Lowe's move into Home Depot turf -- besides north Georgia, Lowe's is expanding into Dallas-Fort Worth and the Tampa-St. Petersburg markets -- help its effort to grow from traditional small and mid-sized markets to become more of a national chain.

"I seriously doubt that they can catch Home Depot. They're too far in the hole," Wewer said.

Lowe's, with 425 stores, mostly in the Southeast, plans to expand to 600 by the year 2000. Home Depot, with 588 stores, plans to be at 1,100 by then. It is moving into new markets such as Ohio and Puerto Rico and preparing to go global, with a store in Chile scheduled to open next year.

"The truth of the matter is the world is our oyster," Blank said of Home Depot, which currently only claims about 14 percent of the do-it-yourself market nationally.

Tillman is unconcerned.

"There's more than enough for both of us," Tillman said. "It's not a matter of us going into Atlanta to put Home Depot out of business."

Still, the competition is sure to heat up.

"I tell our people that this is always going to be like the First World War," Blank said. "The battle is one hill at a time -- one customer at a time -- in the store, in the aisle, every single transaction."