Earlier this year, I was fortunate to sit down with Lowe’s CEO Marvin Ellison at the National Retail Federation’s Big Show. Marvin took the helm at the home improvement giant in July 2018 after serving as chairman and CEO of J.C. Penney. We talked about how Lowe’s is adapting to a rapidly changing environment, key trends in retail and lessons learned from his more than 30-year career in retail leadership. Here are some highlights from our conversation:
Q: You’ve talked a lot about transforming how the organization interacts with the customer. What are some of the things you’re doing?
A: As simple as this sounds, I think the first thing you have to do as a company is decide who your core customer is.
If you look at home improvement at a very high level, there are three distinct segments: The "do it yourself" customer who’s coming in and needs assistance to understand what to buy, how to use it and exactly when to use it. Then you have the "do it for me" customer who wants to hire someone to do a more complex project. And then you have the “pro” customer who leverages Lowe's as a supply house to buy a product to enable them to serve their customers.
So the challenge for any retailer in home improvement is: How do you serve these three distinctly different customers in the same box and in the same digital platform?
When you think about customer service, all customers want to be served in a way that allows them to fulfill their desires when they shop. When you try to paint a broad brush and say, "We're going to serve these customers and train our associates the same way," you miss out on a huge opportunity to serve the unique needs of the customer. We're understanding the needs of those customers, spending time with those customers, and we're making sure that we're addressing those things properly.
Q: You've announced you're making significant hires inside of the organization. Are you spending some of that effort on data analytics and consumer insights?
A: Data is king. It always will be in retail and other businesses, and for us, it is very important. The good news is we have great data analytics. We have a significant amount of information that helps us with one-to-one marketing so we can speak to the customers as individuals. It helps us to understand how we'll sort our stores and what marketing messages really resonate.
All companies have a desire to use their data more effectively, and all companies have a desire to make sure that they're leveraging all of the modern technology at their fingertips to ensure that they are listening to the customers in a unique way and solving their problems, and Lowe's is no different. It’s a work in progress for us to get better at that as well.
Q: When you first joined the company, you made a very bold statement that Lowe's had lost its way and its focus. What did you mean by that and what did you discover when you arrived?
A: If I could borrow a line from Jim Collins' great book, Good to Great, I think Lowe's was a great example of good being the enemy of great. It’s a company that will end this year with more than $70 billion in revenue and $5.5 billion in free cash flow operating margin — there's not a whole lot to not be excited about, but the question is: How much better can you be? How much better can you be for shareholder return and for creating an environment that's great for your associates to work?
We're on a journey not to be a good company, but to be a great company, and part of that is the awareness that we can be better. My "lost its way" comment was really more around strategy, and more around the allocation of capital, and the reason why those things were done in a way that was away from core retail is because the division of the company was broader than what I thought it should be. When you are a great brick-and-mortar retailer, you have to invest your capital in maintaining the strength in the core of your business. But then you have to also create a digital platform so that you can be a true multichannel, omnichannel environment because, again, you want to serve customers the way they choose to be served.
We're going back and revisiting those things, and we’re calling them "retail fundamentals," which is just a term for: How do you get back to the basics of great product presentation in the store and online, great staffing and training, being in stock, marketing messages that'll resonate, and the ability to have a multiple platform business to serve customers the way they want to shop? Getting back to those basics, we think, will unlock tons of opportunity for us, both financially and from a standpoint of growing our consumer base.
Discussing retail and leadership with Lowe's CEO Marvin Ellison.
Q: Talk a little bit about the millennial homeowner and different trends you might be seeing there.
A: At one point, there was a strong belief coming out of the financial crisis that the millennial demographic would shy away from home ownership, and the good news is that's just not true. To the contrary, millennials are buying homes and are first-time homeowners. They're in some cases buying older homes, and that's primarily because they desire to live closer to the city, and they're making investments to make those homes modern and to their taste.
The millennial demographic is going to emerge very soon as the demographic larger and more powerful than the Baby Boomers, which is going to be significant not only for Lowe's, but for all of retail. It’s incumbent upon us as a company to really understand those customers when we look at our marketing or innovation of products. We know that we're going to have to be significantly better in the future to get a disproportionate amount of that consumer spending.
Q: What does innovation look like in your industry?
A: It depends on the category, but, obviously, anything that is battery-powered has a lot of interest. Now we sell lawnmowers and trimmers that operate exclusively with battery power. Appliances have also become incredible hubs for innovation, where you can get messages from your refrigerator telling you what you need to buy based on the current quantity of it, or you can remotely view the contents of your refrigerator on your smartphone while you're out shopping.
But home improvement is no different than any other industry. Innovation matters and innovation sells, and customers will always pay a premium for something that they believe is on the cutting edge.
Q: Let’s shift gears a bit. You started as a retail security guard making $4.35 an hour and paid your way through school. Today, you are the CEO of the No. 40 company on the Fortune 500 list. Across any sector, that is an inspirational path. What are the leadership skills that you acquired early in your career, what are you still learning as a CEO, and how can other retailers can apply some of those fundamentals in their business?
A: There are great retailers, so I don't believe I can teach anyone anything new, but just looking back at my past, I can tell you what have been foundational elements of my growth, and I think the first thing is really having a vision of what you want to be, and what you want to stand for relative to the contribution you want to make.
I grew up in a really small town in rural western Tennessee, and I've said many times, I could go out in my front yard and look to the north, south, east and west and see nothing that looked like success. But my parents taught my siblings and me, you're not to allow your surroundings to limit your vision of the future. And so I always had a desire to do more, and so I think it starts there.
The other thing for me, in business, is just to have a plan. Plan well around your short- and long-term objectives. In business and in life, it’s a necessity to make sure that you're thinking beyond what is right in front of you, but don't overreach.
You also have to have an insatiable appetite to learn. I've been so fortunate in my career to work in so many different functional areas. I've been intellectually curious, and because of that, I made decisions early in my career to make lateral moves when most people were looking for promotions. I wanted to learn more, and if it meant I would have to transfer into a different department without making more money or getting a more important title, that always interested me if I felt I could learn something and it could make me better. In the long run, the lateral moves that I've made in my career in many cases were more important than the promotions because they allowed me to broaden my horizons.
The last thing, from a personal growth standpoint, is sometimes you have to be careful. When you have really bold aspirations, when you're the VP of loss prevention and you desire to be the CEO of a company, you can't tell a lot of people that because they will kill your dreams. They don't do it intentionally, but people often can't see your vision, and they will sometimes subconsciously give you limitations. I've always been very disciplined around not expressing what I'm thinking about my future to a broad array of people because some people are not going to be able to grasp it. I've been enormously blessed to surround myself with very, very talented individuals, and the reason why we will be successful at Lowe's is less about me and more about the people who work there.
Q: Any other words of wisdom about a career in retail?
A: I should be a great motivation because there's nothing special about me. Nothing. My advice to you is plan well, don't let anyone kill your dreams, have an insatiable desire to learn. Don't be afraid to take a lateral move if it's going to expand your knowledge base. Understand if you're working for a company, and your results and great leadership are not enough for you to move forward, then you're working for the wrong company. At the end of the day, results and effective leadership are the difference makers, and there's not a good company in the world that's not looking for leaders who can do those two things well.