December 11, 2007

Lowe's opens first 3 stores in Canada | Reuters

Lowe's opens first 3 stores in Canada | Reuters

LOW is realizing its expansion plans outside the US by opening 3 stores in Toronto, Canada. The store opening took a bit longer than planned, but Xmas shopping is not a big revenue generator for home improvement retail. Typically fall, summer and spring are the times that homeowners will undertake projects around the house.

My concern here is finding real estate location close to urban centers. Big box retail locations have been snapped up quickly by Canadian retailers and we are coming towards an end of a building cycle as many developers are slowing their plans for new developments. Also adding to the complexity is the competition from Wal Mart for space is great, as it is looking to roll super centers in Ontario.

Many have suggested that LOW will make a run for RONA, a public home improvement Canadian store, to gain access to its locations. I think it is a sword with two edges. The sole benefit of such a transaction is the instantaneous access to urban real estate spots and that is it.

However, the drawbacks are many:

  1. RONA store layouts are not consistent with LOW's image of well lit and clean appearances, so each Rona location will incur similar expenditure to give it a lift as if LOW is opening a new store,
  2. Rona's staff and internal processes need an overhaul to bring them to an efficient and streamline standard at LOW,
  3. The culture of Rona customer service is good but it is not up to par with LOW.

Also, LOW is still carrying an ambitious expansion program in the US that it needs to focus on and it needs to test the Canadian market to understand it better before carrying such large expansion.

I think a Rona buyout is not in the cards at the moment.


MG said...

Rona will go under eventually.

A new Lowes just opened up in my city. Brantford, Ontario.

They are heavily promoting their customer service, which may be wise when competing against HD.

Sami said...

I agree. I have seen the commercials re customer service and that's LOW's edge. Rona is under capitalized and does not have an edge to compete in the crowded market between HD and LOW. They may retract to a Quebec only chain.

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