Jan 14 2021

NRF 2021: How Digital Transformation Helped Lowe’s Thrive During the Pandemic

Two years ago, the home improvement chain had an obsolete IT infrastructure. Today, it’s an e-commerce leader.

It wasn’t easy for Lowe’s, the home improvement retail giant, to transition from a conventional brick-and-mortar retailer with an outdated tech infrastructure and an obsolete e-commerce program. But CEO Marvin Ellison said the company’s digital transformation journey was all about staying focused on the fundamentals.

“Two years ago, we couldn’t even provide our customers with an e-receipt,” said Ellison, who joined Lowe’s in July 2018. Speaking at NRF 2021: Retail’s Big Show, the virtual version of the industry’s biggest annual event, Ellison continued, “Our e-commerce platform was on a decade-old infrastructure. Think about what your computer was like 10 years ago: That’s the equivalent of what our e-commerce platform was built on. We really hadn’t made any significant investments in merchandising systems or supply chain technology. I felt it was critically important that we focus on the core retail elements and get those operational underpinnings in place.”

It’s not clear what position the company would be in today, in the midst of a global pandemic and widespread shutdowns of storefronts, had it not pivoted aggressively toward e-commerce and omnichannel experience technology in 2019. But because of those efforts, Lowe’s emerged as a retail winner in 2020, delivering a 30 percent increase in sales in the third quarter compared with the same period in 2019.

Lowe’s capitalized on increased demand for home improvement goods at a time when millions of consumers were stuck at home. But had the company not shifted away from its store-based merchandising approach, it would have missed its opportunity, Ellison said.

“One of the most difficult things to do for any company in the middle of a transformation is deciding what your priorities are,” he told Matthew Shay, president and CEO of the National Retail Federation, sponsor of the event, which is taking place through Jan. 22. “For us, we were a very large company with a great brand and a strong balance sheet, but we’d made limited investments in the fundamentals of the business. So we’d been working on those things for two years, and because we’d been doing that, we were able in 2020 to meet this unprecedented demand we saw as an essential business, with everyone staying at home.”

Older Shoppers Are Becoming Online Consumers

Lowe’s digital transformation efforts seem to have it well placed for the future, if a new survey of more than 4,000 consumers around the world — more than half of them in the U.S. — is any guide.

“Our research shows that once restrictions ease, new online shopping behaviors look likely to continue, particularly for younger consumers,” said Melanie Noronha, senior editor at The Economist, which conducted the survey. “Once restrictions lift, you will see some return back to stores, to a certain extent. But about 60 percent of respondents will retain some of their new online shopping habits, and that includes about 55 percent of baby boomers.”

In fact, said Noronha, the most dramatic shifts toward online shopping during the pandemic took place among older shoppers, with baby boomers increasing their online spending (as a share of their total spending) from 25 percent to 37 percent, followed by Generation X, whose share of online spending climbed from 39 percent to 47 percent.

Overall, retail spending dropped by 9 percent during the pandemic — but online spending increased by 15 percent. Retailers around the world, recognizing this big flip in their industry, have responded by aggressively accelerating their digital transformation projects.

“We’re seeing there’s now a seamless experience between on- and offline shopping,” Noronha said. “For instance, a consumer could go in-store, discover a product and then place the order online, or they could discover it online and then go in-store to test it and purchase it.”

MORE FROM BIZTECH: Find out the four tech trends to watch for in retail in 2021.

How to Reduce Friction In Retail Transactions

For Lowe’s, Ellison said, the goal is to simply deliver on customer expectations.

“It’s not about our competition or what will happen in the macro environment,” he said. “It’s about being customer-centric: If a customer wants a simple in-store transaction, how do we execute that in a way that’s flawless and frictionless? If a customer wants to buy online and pick up in-store, buy online and pick up in a locker, buy online and we’ll ship to your home — as we think about all the ways customers want to shop and the ways they’ll shop in the future, that dictates our capital spend and our innovation strategy.”

Lowe’s built a store navigation app to help in-person shoppers find what they need, among other in-store innovations. It was a leader in offering secure lockers outside retail locations where customers can pick up online orders. And it’s been following the buy online, pick up in-store trend, as well.

Whatever the tech solution, Ellison said, the key is to remove all friction from the shopping experience. “As my CIO, Seemantini Godbole, says to me often, the most effective technology is the technology no one sees. It’s always behind the scenes. And all the customer knows is, ‘This was really simple.’ And the associate in the store, in the distribution center, and in the corporate office is saying, ‘This system works so well and is so intuitive.’ So our innovation is focused making things simple without putting anything in front of the customer or associate.”

Keep this page bookmarked for articles and videos from the event. Follow us on Twitter at @BizTechMagazine, or the official conference Twitter account, @NRFBigShow, and join the conversation using the hashtag #NRF2021.

Getty Images/ SDI Productions