Lowe's Following Walmart Playbook into Marketplace And Loyalty Program

Lowes is launching a Marketplace, and it is unequivocally a smart idea.

On the last earnings call, the CEO of Lowe's was asked a simple question about the potential of a marketplace:

"What's the common denominator of brick-and-mortar retailers that are transitioning to an omnichannel environment that's created explosive growth? And 1 common denominator was a marketplace."

More from the CEO:

"then, we conversely asked the question, can we grow our online sales at the rate we desire without having to create capital-intensive investments in fulfillment centers, et cetera? And how do we do that and do it in a profitable way where we are driving profit contribution? And marketplace, again, was the answer."

The fact that we have category-killer retailers that still don't have scaled marketplace programs as we sit here in 2024 is somewhat impossible to believe. Some facts, though:

* Half of Walmart's operating income growth is coming from advertising (a significant percentage of which is driven by marketplace) and loyalty (Walmart+).

Lowe's is investing straight out of Walmart's playbook:

* Increased investments in consumer loyalty as well as professional loyalty programs.

* A closed but aggressively planned marketplace which will also propel expansion of its retail media revenue.

* Lowe's has invested this year to expand in-store retail media options for advertisers as well.

Lowe's overall comp sales are down 1% y/y, but digital comp sales are up 6%. Lowe's leaning into the progress of its online revenue, but in a capital efficient way, should produce good results for them.

It's not a panacea though. Lowe's says it will add products to its new marketplace that are both value-oriented consumers as well as those are for affluent consumers. But the products need to be relevant. There is nothing magical about adding a SKU to your assortment (even one you don't purcahse) unless your consumers value that SKU.

Additionally, we also need to look to execution and commitment. In my experience it takes 5-10 years to scale a marketplace to a size that can be meaningful.

Most retailers don't have that kind of patience. So, while I like the strategy, the devil still remains in the execution.