Lowe’s Sees Lift From Contractor Loyalty, Tech Investments in Slow Q2
Drill into the second-quarter earnings call at Lowe’s, and you’ll find a detail critical for any brick-and-mortar business looking to win in a digital-first world: a rewards program with a name that appears to have lived up to its carefully vetted-by-focus-group promises.
The contractors who joined to the Lowe’s Pro program and started earning MVP Rewards last month proved to be the most valuable players in a second-quarter narrative dominated by declining revenue and continuing supply problems. In fact, the company’s business-to-business (B2B) arm, which sells wholesale to contractors, racked up double-digit growth in the period, accounting for 25% of overall sales.
Of course, heavy investments in fulfillment and payments tech helped lay the foundation behind the loyalty marketing blitz, executives said during the company’s earnings call on Wednesday (Aug. 17).
“MVP Pro Rewards is designed to make every pro feel like an MVP regardless of the size of their business,” Lowe’s CEO Marvin Ellison said during the call. “Time is money for pros, so one of the most valuable ways we could serve them is by saving them time with enhanced fulfillment. Therefore, we are actively piloting convenient fulfillment options, including a new pro fulfillment center in Charlotte that offers same day delivery.”
The Pro loyalty program launched in the first quarter. In July, the company launched MVP bonus points in conjunction with its first ever Lowe’s MVP bonus days event, with a focus on the products that Pros use every day. Extra bonus points were awarded for leading brands. Pros can redeem their points for other products or gift cards in the MVP Pro Rewards Center.
Plans are to further enhance the MVP’s Pro Rewards and Partnership program.
Pro penetration reached over 23% in the U.S., an increase of over 500 basis points from 2019. The company believes it has a long runway to continue to grow.
“We’ve made the needed investments, in particular in the Pro space as we’ve seen momentum there to continue to support them, and we’ve had improved stocks in certain areas that we struggled with a bit through the pandemic,” according to management.
Pro growth transcended all regions despite a truncated Spring planting season, as Pro sales are less seasonal than the DIY side, which is heavily exposed to gardening and landscaping.
Digitizing for Dollars
Lowe’s continues to invest in the online user experience for both Pros and DIY customers by expanding and enhancing assortments, building out and improving its Visualizer and Configurator tools, and enhancing the delivery experience to make it easier for customers to track their orders.
Overall, Lowes.com digital sales grew 7%. Online sales represent 10% of total business.
Reporting its second-quarter 2022 results on Wednesday (Aug. 17), Lowe’s said total second quarter sales were $27.5 billion compared to $27.6 billion in Q2 2021 — a comparable store sales decrease of 0.3% — while the home improvement category ticked up 0.2%
See also: Lowe’s Looks To Personal Income, Aging Homes to Extend Home Improvement Trend
Lowe’s Q2 story is contrasted by competitor The Home Depot, whose focus on professional builders and contractors with a backlog of contracted work insulated the retailer from the change in DIY consumer mindset around spending on home improvement projects now.
Like other consumers, Pros have come to expect a more digital experience as their ranks generationally change and great consumer expectations cross over from consumer to B2B.
The easier and more rewarding Lowe’s and Home Depot make it for Pros to do business, the more they will source materials from them, which creates more volume and competitive threat to other suppliers.
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