(Bloomberg) -- Lowe's Cos. wants to attract more big-spending contractors, so it's sweetening its rewards program and rolling out the perks.
From gift cards and free snacks to tips on taxes and warehousing, the retailer is expanding its bid for the core group of professionals who generate an important portion of home-improvement sales. Lowe's has also started pumping up contractors' tires for free and is now giving some a chance to win prizes such as a Ford F-Series pickup truck. It's promising an improved website to help shoppers keep track of their rewards.
“When I arrived three and a half years ago, we didn't have credibility with the pro customers,” Chief Executive Officer Marvin Ellison said in an interview. The company had backtracked and stumbled with that key group of shoppers, he said. Now it's aiming to win them back.
Contractors have been a key part of Lowe's recent growth, which includes eight straight quarters of rising sales and a market value that has risen more than 250% since the start of the pandemic. Home-improvement professionals typically spend more than regular shoppers and visit stores more frequently. Their business is also an area where Home Depot Inc. is ahead.
Home Depot caters to contractors to build on record stock rally
Currently, contractors generate about a quarter of Lowe's sales, which totaled $95.2 billion in the 12 months ended Oct. 29. They make up about 45% of Home Depot's sales, which were $147.7 billion over a similar period. In December, Lowe's executives said they expect the company's pro sales to grow at double the market rate over the next several years.
“The one thing that the pros said to us loud and clear in our research is that they wanted a business relationship and not a series of transactions,” said Ellison, who worked at Home Depot from 2002 through late 2014. The new services at Lowe's are aimed at helping contractors' small businesses grow and locking them in.
Lowe's already offers credit incentives to pro shoppers such as 5% off on some items and no interest for 60 days for business accounts.
The Mooresville, North Carolina-based company is trying to win over contractors at at time when their prospects are bright. This year, the majority of U.S. homeowners are planning to use more discretionary income on home improvement projects compared to 2021, Lowe's research shows. Almost half of homeowners say they intend to hire a professional. Contractors are already inundated with jobs, thanks to the nesting trends of the pandemic.
Lowe's is also targeting the market share held by smaller home-improvement retailers -- which Ellison estimates is roughly $600 billion in annual sales in the U.S., or about double the revenue brought in by Lowe's and Home Depot. Ellison said his company is one of the largest importers of shipping containers in the U.S. on an annual basis -- potentially giving it an advantage as supply-chain snarls limit goods at smaller players.
The broader selection will appeal to contractors, Ellison said.
“If we're in stock and we are ensuring that we are investing in our business -- and trying to limit the amount of costs that we push forward to our pro customers in price -- we create a tremendous benefit to them,” Ellison said.
Lowe's shares fell 1% to $235.01 at 10:56 a.m. in New York trading. The stock fell 8.2% in January, deeper than the 5.3% drop of the S&P 500 Index.
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