Home improvement retailer Lowe's is allocating $550 million per year for IT spending out of a total annual CapEx averaging $1.2 billion, according to company executives. Key IT projects for 2013 include localized, customer-driven product assortments; a pilot of mobile POS with e-receipts; and the aggregation of five legacy sales systems down to two.
In addition to pouring considerable resources into IT, the home improvement retailer has also created a C-level position focused specifically on the customer experience and also added the job of chief operating officer (COO) to its executive ranks.
"In 2013 and beyond, we expect to improve our associates' ability to sell seamlessly across channels and introduce improved project management tools that expand fulfillment capabilities to cultivate personal and simple connections with customers," said Lowe's CEO Robert Niblock during a recent presentation to analysts that also served to introduce Chief Customer Officer Gregory Bridgeford and COO Rick Damron.
Bridgeford provided details on Lowe's Value Improvement initiative, designed to customer-centrically localize store product assortments. "Using consumer insight, as well as product and market analytics, each merchandise category team identifies the product attributes that are most important to customers in each location," he explained. "Then the team uses a suite of tools we developed over the past several years, including integrated planning and execution, to logically create clusters of stores. For each of our nearly 400 product lines, stores are grouped into an average of four customers based on differences in customer buying preferences. This information enhances the assortment strategy that guides the work of each line review process."
As the SKU rationalization process proceeds, "the teams are reinvesting inventory dollars into greater depth of high-volume SKUs," notes Bridgeford. "The result is a plan that includes more facings for SKUs, localized assortment and price point progressions."
For product lines that have gone through the reset process, Lowe's has seen comp sales lifts in the "mid single digits," and "nearly a full percentage point improvement in gross margin rate," he said. The retailer expects to complete reviews of products representing approximately 90% of its business by next month, the end of fiscal 2012, and expects to reset "40% to 50% of our business by the end of the fiscal year and substantially all by mid-2013," he added.
Lower Inventory Costs
Lowe's is projecting long-term benefits from shaping assortments more precisely around customer preferences. "Primarily as a result of Value Improvement, we anticipate driving sales growth with 4% fewer inventory dollars," said CFO Robert Hull. "This will improve inventory turnover from an expected 3.8x in 2012 to 4.4 turns by 2015."
Hull also provided additional detail about Lowe's 2013 IT spend. "As we take a look at our architecture and IT infrastructure, we've cobbled together many disparate systems over the years, so there's an opportunity to better streamline those. We've aggregated at least five different selling systems. We're working this year to consolidate those down to two. That's a big part of the IT spend in 2013, along with ongoing IT development for Lowes.com for mobility."
Lowe's is also seeking to expand the functionality of the 42,000 iPhones it deployed to store associates in 2011. "We are piloting mobile point-of-sale with e-receipts," reported Damron. "Providing mobile technology and apps to customers and to our associates is an important first step towards simple and seamless experiences and allows us to participate in the evolution of mobile technology." He added that in less than 24 months, consumer-facing mobile properties have grown to represent 20% of overall Lowes.com traffic. "We will continue to add capabilities that improve the customer's any time, anywhere experiences and make our associates more productive."
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