Even though the online stakes are comparatively small for the two giants, offline competition between them is getting so intense that even incremental business can make a difference. Home Depot has saturated the nation with stores, and now Lowe's is beginning to move into many of the markets where Home Depot used to have a lock. This means that the company with the better online arm will have an advantage.
To understand why the Web could become more important, look at the Home Depot in Colma, Calif., just south of San Francisco, where the atmosphere on a recent afternoon could be described as merry mayhem. Customers walking down the aisles had to maneuver around beeping forklifts and employees attacking packages with box cutters. Home Depot has made it a priority to improve this ambience, and the online option could help: Customers could avoid, or at least spend less time, in the store. Indeed, four out of the nine shoppers interviewed that day said they would have shopped online if only they had known about Home Depot's site.
True, many customers still want to see and touch what they're buying. It's almost a cliche that consumers won't buy big-ticket items they can't check out first. Yet there's some evidence that appliances - a category that Lowe's and Home Depot are counting on for growth - could sell well on the Net.
Unlike other expensive items, such as automobiles, you can't test out a washing machine before buying it. In addition, big appliances have to be delivered to the buyer at home, even after being purchased at the store. And early reports from Maytag, the nation's third-largest appliance maker, suggest that large appliance sales have a future with e-commerce. Seventy percent of sales on Maytag.com, which launched in January, are for items costing $600 or more, says Kenneth Boyle, Maytag's e-commerce manager. He declines to provide the company's online revenues.
A major factor in whether the e-commerce plans of Home Depot or Lowe's become profitable is the companies' ability to control fulfillment costs. Lowe's gives customers the option of having items delivered or of picking them up at the store. In the latter choice, Lowe's store personnel package orders that come in from the Web. For its other e-commerce deliveries, Lowe's contracts with NFI Interactive, a Cherry Hill, N.J., logistics company.
Home Depot has a simpler arrangement: E-commerce items are shipped via UPS. The company says that orders are handled by store staff who are already responsible for fulfilling orders placed by professional contractors. Thus far, Home Depot reports, it has not had to hire additional personnel to handle Web commerce.
Home Depot execs add that many of the site's visitors are using it to learn more about products. "If we accomplish the goal of educating customers, [the site] really will be a moneymaker," says Brad Albers, Home Depot's director of information systems. "We think customers will buy things they might not have bought otherwise because they can explore."
The big question remains, however, whether Lowe's can use its online operation to lure customers from Home Depot. There's no evidence yet that that's happening. The bigger company still has the name and the national network of stores. And in the race for No. 1, that lead still matters.
Lessley Anderson and Greg Dalton contributed to this report.
