Lowe's is becoming a smaller Wal-Mart

[jmowreader]

The current CEO of Lowe's is Bob Tillman. In January, he will step down and Bob Niblock, who's currently president of Lowe's, will replace him at the head.

Niblock has already implemented his first big initiative: New Lower Prices, or NLP. Here's how it works, according to Home Channel News:

* Prices will be lowered on all products when practicable. Lowe's can request a price be lowered at any time.

* The only justification for a price increase is an increase in the price of raw materials; even if a raw material goes up in price, a price increase will not automatically be approved.

* Any request for a price increase is likely to be answered by Lowe's conducting a "line review"--their crawling through each product your company sells to Lowe's with the intent of finding products Lowe's believes are overpriced and cutting the prices on those products. (Said a Lowe's spokesman, it's amazing how quickly those price-increase requests disappear when you do this.)

My district manager was in the store today. I showed him the article. After a few raised eyebrows and whistling, he muttered something about that being no way to run a railroad.

[NEOBuckeye]

1. I thought Lowe's was already part of Wal-Mart?

They use the same colors and similar design for their Big Box stores. It would seem to suggest some sort of a partnership, at the very least.

[jmowreader]

5. No, they're different entities

They do have one thing in common, at least in Fayetteville: walk into one and you get to see the associates work on their 40-yard dash times to try to get away from you.

[Squeech]

8. Dammit

We started shopping at a Lowe's in the suburbs, because the staff at our nice convenient urban Home Depot started treating us like shit. We're gonna spend four figures on storm windows, we think we're entitled to some help from a knowledgeable salesperson. Now where will we get it?

[jmowreader]

14. You're spending four figures on STORM windows?

How many storm windows are you getting, and what's the difference in price between installing the storm windows and replacing the old windows? This month, we are definitely and Lowe's is probably giving you free low-E glass when you purchase vinyl windows...and if you're doing special-order storms the vinyl windows are not that much more expensive.

[Lugnut]

9. Gee!

That must be the SOP. That is the only store I've been to around here where the employees completely ignore you. When you're the only kid on the block I guess customer service isn't a top priority.

[Siyahamba]

7. They always seem to pop up next to each other too

I thought the same thing.

[Not Me]

2. It's an evil offshoot of a concept called "Target Costing"

Target Costing (TC) was a process whereby large companies with well developed processes and technologies would review their (usually smaller) vendors' manufacturing and business processes to help them eliminate waste, align their production with inventory needs etc.
The intent was to get to a fair, efficient price.

When the easy opportunities got met, the process turned ugly, and large procurement arms of the big boxes simply set the price they wanted to pay forced the suppliers to meet it or go out of business.

That is pretty much how walmart and other major retailers work today.

[UpsideDownFlag]

3. ...lowering costs is bad? is it going to cause their workers to be paid

less, or something?

[lcooksey]

4. Outsourcing

It can cause a company to have to lower their prices so much that they have to close their US factories and move production to China. That's happened with several companies that Wal-Mart buys from.

Wal-Mart says, we'll buy way more of your product from you than you've ever sold before, if you cut your profit so it will be cheaper at Wal-Mart than anywhere else. So the company does that. After a year or two of growth where Wal-Mart becomes 30 to 50% of the business' yearly sales, Wal-Mart says, despite inflation, we want you to cut the price on your items by 10%. If you don't, we'll stop selling them.

The company now has the choice of losing a huge chunk of their sales and possibly going out of business, or dramatically cutting production costs. So they set up new factories in Mexico or China or Indonesia and close the US factories. Or they cut wages in the US to the point where, as I once read, the US employees making things can't afford to buy them. Even at Wal-Mart.

[Hong Kong Cavalier]

6. Best example is Levi Strauss

Just try to find a pair of Levi's that's made in the US anymore. All 11 factories closed when LS decided they wanted their product sold at Wal Mart. Wal Mart said "no, we're not going to sell $35-$40 pairs of pants. Reduce your prices." Levis did reduce their prices and introduced the "Signature" brand of Levis pants. This led to lower profit for LS, and they were forced to close all their US plants and move to Guatemala and Mexixo.
Now Levis are crap, last about half as long, but still cost the same.

So technically, you could blame Levis for this, but Wal Mart insists on these "lower" prices, which is essentially putting lipstick on a pig. No more than that. The price may be low when you buy it, but you pay for it in the future with a wounded economy, massive job layoffs, and a bleak outcome for all.

[progressivebydesign]

11. I actually think the consumers demand the lower prices.

Kerry spoke the truth when he said that 20 years ago a job paid breadwinner salaries that could support a family, and pay for college. If we actually all had to pay what things should be worth, the economy would collapse. I hate Walmart.. but the truth is, they sell $6.00 shoes because our economy demands it. Costs go up, salaries go down. It's more than pricing.. it's the new economy. and it sucks. If we all had to pay normal prices for things, the fucked up economy would collapse.

[jmowreader]

12. It encourages the Walmartesque practice of creating jobs in China

Every product that's ever been made has a break-even point: the price below which you lose money on the unit.

If a piece of ridge vent (it's part of a roofing system) contains two dollars worth of materials, twenty-five cents worth of labor, twenty-five cents worth of facility costs (you got to pay for the factory and the warehouse somehow), a dime's worth of packaging and a quarter's worth of transportation in it, the break-even point is $2.85. And because all rigid ridge vent is about the same, GAF, Owens-Corning, CertainTeed, Tamko and everyone else that makes roofing is looking at the same situation.

GAF is the largest manufacturer of roofing products in the United States. It has thousands of stockholders. None of them are interested in seeing GAF sell ridge vent for $2.85 a stick; they would really like it to go off the loading dock at $5.70--a 100-percent markup. And that's not unreasonable because the retail price of four-foot ridge vents is $8.95 and there is no middleman on this product--GAF roofing comes straight from GAF's warehouse to the dealer. (Incidentally, except for my price all of these numbers came straight out of my ass--this suggests an approximate 50-percent initial markup and believe you me, no dealer's getting 50 percent out of ridge vent.) Lowe's in Fayetteville sells Owens-Corning roofing, so their ventilation systems are also O-C.

Now! Assume Lowe's wants to cut the price on ridge vent to $8. Remember, I'm getting nine and sell all I can get. Lowe's stockholders don't want the company to make a lower profit. O-C's stockholders don't want their company to make a lower profit. If they try to cheapen the ridge vent it would cost them in the short term--they'd have to get it recertified by every jurisdiction it was to be sold in*, and there are hundreds of them--and in the long term because people would quit buying it if it got flimsy. The solution? There are hundreds of factories in China who have plastics molding equipment. Send these people your molds, the film for the boxes, the spec for the plastic in the vents, and ask that two Sealand containers full of this product be delivered to the port of Charleston in a month.

All of a sudden, Lowe's has a product they can sell for $8. Which means I need a product I can sell for $8 too, because even though the roofing industry is covered up with patriotic people, it is not covered up with patriotic people who will pay $9 for an American-made vent when they can get a Chinese one at Lowe's for $8.

Anyone want to take a guess at what happens to the people who made ridge vent for O-C in the United States?

* I didn't realize this until I went into the building products industry, but a lot of building materials have to be approved in your area before you're allowed to use them. There used to be three big bodies that generated "model codes"--the Building Officials and Code Administrators (BOCA), the Southern Building Code Congress International (SBCCI) and the International Conference of Building Officials (ICBO). They have merged into the International Code Council after they figured out that the three model codes were basically parallel documents. There are some local codes that supersede the ICC regulations, such as Miami-Dade, which is worried about windload and supersedes in roofing, doors and windows; the Wisconsin Administrative Code, which is worried about snowload and supersedes ICC only in roofing; and the New York City Building Code, which is largely concerned with fire prevention and overcrowding and contains a lot of paragraphs on high-rise structures you don't really find in other building codes--although it is modeled on the ICC, most of it is stricter. ICC is just a guideline--if your jurisdiction wants to require 2x6 studs on the exterior walls instead of 2x4 studs, ICC has no problem with their doing that.

[progressivebydesign]

10. It's just a sign of our new economy.

The free trade agreements screwed us good. When our mfg. jobs disappeared, we were told to train for HI TECH and customer service jobs. Now.. those jobs are outsourced, or foreign workers are imported HERE to do the job at half the cost to employers.

Shopping a smaller retailers? Hmmm.. most of that stuff is made in China, too. You go into a cute little shop downtown and find exactly the same things that the big retailers have now, only more expensive. Hell, I went to a Christmas bazar at a local church last weekend, I bought some adorable, handmade ornaments. got them home to find a MADE IN CHINA sticker on them! So what's the point? You're supporting local workers jobs either way, the DISTINCTION that you should make, when shopping (considering most everything is made overseas now), is how the company does business. I won't shop at Walmart because they abuse their employees financially.. but I prefer Lowes over Home Depot, any day. (But MAN, what is WITH Lowe's employees?? We tried to buy a microwave there an hour before closing and was told the sales person on the floor went home already, and no managers where there anymore at that hour. We got a cool stocking/receiving guy to help us. If you CLOSE AT TEN, then STAFF until closing time!).

[hexola]

13. Lowes is being killed by Home Depot...

at least in my area...they remodled the Lowes...and now it sucks...so everybody goes to Home Depot...way better IMO.

[West Coast Democrat]

15. Home Depot has almost no selection....

they carry about one or two brands for each product, and that's it. I've stopped shopping there.