Lowe’s is expanding the use of the market delivery model for large products

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diving letter:

  • Lowe’s has transitioned eight regions, covering more than half of its stores, to a more efficient delivery model for large and bulky products, chairman, president and CEO Marvin Ellison said on a third-quarter earnings conference call last week.
  • In the old hardware retailer delivery model for large products, each store acts as a step in the distribution process, with store-based delivery trucks and staff delivering the products. In its new in-market delivery model, large products skip stores on their way to customers, reducing touch and freeing up storage space in stores.
  • Lowe’s market delivery model is operational in areas such as southern California, southern Illinois and Atlanta, Ellison said. The company is on track to complete the nationwide launch of this model by the end of next year.

Dive insight:

Lowe’s has transformed its supply chain to better isolate itself from upstream logistical challenges and more effectively meet increased e-commerce demand. The transition to an in-market delivery model “is a core part” of this plan, positioning it for profitable growth in large and bulky product categories like grills and riding lawn mowers, according to Ellison.

“This also enhances the customer experience through expanded fulfillment options and a seamless omnichannel shopping experience, supported by technology,” said Ellison.

The old delivery model can lead to inefficient situations, e.g. B. when neighbors shop at different stores and receive their products from two separate delivery trucks. The market delivery model allows Lowe’s to transport a product from a bulk distribution center to a cross-dock facility to be prepared for delivery.

It didn’t take long for Lowe’s to realize the benefits of the transition. The company has experienced improved inventory turns, reduced damage and higher on-time delivery rates with the new model, Ellison said on a December 2021 conference call as Lowe’s transitioned its Florida and Ohio Valley markets to the new model.

Ellison also noted that Lowe’s will open a new shore holding facility in the port city of Suffolk, Virginia. Shoreside storage facilities allow Lowe’s to hold product upstream from its distribution centers, allowing product to be secured earlier and quickly transported downstream when needed.

“Not only does this help us generate sales, but it also reduces the risk of mark-down because we avoid having product sitting in our stores unnecessarily,” said Ellison.

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