How Lowe’s Created the First Interconnected Shopping Experience
Even today, it is hard to imagine an interconnected shopping experience—a world where, during your entire customer journey, your expectations are anticipated and exceeded by the retailer. The store associates communicate with you on time and follow up regularly without prompting.
And, you, as the consumer control your experience and know in real-time, the status of your purchase and related services whether you are in the physical store, on a mobile device, calling the call center, or are using the retailer’s website.
“I would much rather blaze a trail than be blazed by the trail,” John R. Miles
Now imagine it in the mid-2000s, and this scenario is not only possible, but it is also fast-tracking to become a reality in a Fortune 50 specialty retailer. This article is a firsthand account of one of the most significant narrowly missed opportunities in Retail history—Lowe’s Home Improvement’s Total Closed Loop Selling Model and Strategy. The goal: to create the first completely seamless customer experience. Something the Home Depot is trying to replicate in their One Home Depot multi-billion initiative.
According to Marshall L. Fisher, a Wharton professor of operations, information, and decisions, “The big enigma (in retail) has always been why does a customer buy; what causes someone to pick something off the shelf, put it in their basket and pay for it?”.
This type of customer data is precisely the consumer insights that the closed-loop process would unveil.
By focusing on the interconnected shopping experience, Lowe’s would know who is buying what without relying on any loyalty programs. The other primary data output it would provide is showing what products a customer picks off the shelf and in what sequence do they make their purchases during the customer journey.
The fundamental holy grail of hyper-personalization, seeing everything a consumer does and predicting their behavior—through analytics, automation, and artificial intelligence. In essence, the ultimate application of competing through the use of applied intelligence.
What is an interconnected shopping experience?
The interconnected shopping experience is when the retailer provides operational touchpoints throughout the complete shopping, buying, and fulfillment lifecycle. This process happens in real-time. At every step of this cycle, the customer is seamlessly engaged, regardless of where or how they wish to shop. The consumer experiences complete transparency in how they go shopping and how they communicate with the retailer. In other words, a total closed-loop frictionless shopping journey from ideation to fulfillment of the product.
“Frictionless shopping is what’s desired by today’s customers. Analyzing how your omnichannel touchpoints are working to create a seamless experience for customers, decides how much success you’ll achieve in retail” according to Rajneesh Kumar, Associate Director Pimcore.
Think of it in the customer journey scenario of a kitchen remodel. You are starting a new kitchen project which can go on from weeks to months. The first aspect of your journey is envisioning your future kitchen. What is your budget and what can you design for that budget? What is the kitchen appearance that you desire? Do you want a galley, an L-shaped, an island, or another design? Next, what type of appliances do you want in your kitchen? What are the sizes of the appliances, color options, makes, and models? What kind of cabinets and flooring options are you considering? What tile and backsplash will coordinate? What are the colors, brands, and options? Where is this kitchen going? Your home? Second Home? Vacation Rental? What is your project timing? Lastly, who do you want to do the work from demolition to installation of the new kitchen products, and in what schedule?
One of the most critical things I learned during my time with the company is that the consumer’s needs revolve around the particular project they are undertaking. Because of this, each project is different and is its own unique customer journey. They each have their own set of associated tasks and products that correspond to omnichannel touchpoints. Building a storage shed is different than installing a home theater or repairing a plumbing leak. Therefore, the sales associates must understand not only the product options but also the life-cycle details that make up the project so they can properly manage it, coordinate with all the other providers in its delivery, and exceed the customer’s expectations with each touch along the way.
What makes this even more challenging is that a consumer may start envisioning the project in the primary residence. However, the result may go into a second home, a vacation rental, in-laws’ home, or a child’s apartment. These endpoints may be hundreds if not thousands of miles away. Therefore, the store associates in all locations and at the retail headquarters need to understand the status of the project and be able to take it over and run with it.
How did Lowe’s solve the interconnected shopping experience?
The “Total Closed Loop” strategy was the brainchild of one of the most talented technology leaders I’ve worked with, former Limited Brands and long-term Lowe’s CIO Steve Stone. He created the initial Total Closed Loop strategy in 2003 with Sandy Bhasker, John Mitchell, and Alex Panzano, outlining the vision and actions to create a truly frictionless shopping experience.
Ultimately, Lowe’s wanted its customers to have an interconnected shopping experience.
It fundamentally derives from the concept that no retailer can carry the stock of all products a consumer may need or desire. Therefore, the total closed-loop capability provides the ability to accurately order and track millions of merchandise items from a variety of manufacturers and brands. And in many cases, those products need to be configured to customer specifications for things like doors, windows, countertops, cabinets, tile, flooring, or window decorations. Finally, the presentation of all these products needs to be custom to each customer and their preferences across any channel they desire. In other words, a hyper-personalized experience.
Stone’s goal was to enhance and automate the shopping, purchasing, customer engagement, product fulfillment, and service management components of the omnichannel customer and marketing experience. And, to enable it for projects that ranged from simple to complex, allowing them to be accomplished by do-it-for-me, do-it-yourself, or a combination of both versions.
The project was built for the future in mind and we anticipated adding additional customer capabilities such as frictionless checkout, like Amazon Go.
Total Closed Loop, Lowe’s codename for an interconnected shopping experience, is a selling model built around unique customer journeys. The design of the system is from the customer’s point of view and the touchpoints they encounter for each individual project. To accomplish this project-based lifecycle, the system needed to interpret data and recognize consumer behaviors. Using applied intelligence to anticipate a customer’s needs and make adjustments throughout the entire journey.
The solution roadmap and sequencing were created through working sessions with a cross-section of functional representatives across Lowe’s. The working sessions, customer interviews, and analyses provided a broad understanding of the customer expectations and the requirements to fulfill them.
For the customer journey to be enabled, all constituents, including the consumer, sales associates, suppliers of products, fabricators, call center agents, and contractors, need to be electronically interconnected. And, this sequencing is envisioned through a real-time engine that monitors each event and sequences them with a robust order management capability. Its purpose is to ensure that each step is categorized in the process workflow, communicated to the store associates, suppliers, contractors, and, most importantly, related to the customer. Finally, the fulfillment needed to be flexible so it could be accomplished online, in the store, or the final destination and sequenced according to the project schedule.
In essence, a ton of complexity and coordinated moving parts necessary to make this all happen and work together in unison. The most important part revolved around standardizing Lowe’s Data on Customers, Services, and Products. The data architecture had to be right to enable the frictionless shopping experience.
Did Lowe’s create an interconnected shopping experience breakthrough?
The simple answer is YES. And here are a number of accomplishments.
Envisioning, Navigation, and Search Capabilities
Lowe’s created a series of envisioning software tools allowing a customer to design their project either from the comfort of their home on Lowe’s eCommerce site or in the store. Stone, Lowe’s CIO, wanted to ensure that the solution was flexible and to allow different entry points during the customer journey.
The reason for this is that a customer may start a bathroom project with a simple toilet replacement but then decides that they want to include new cabinets, flooring, bathtub, and shower in the mix. Lowe’s IT organization worked with the business to create these solutions that guided the consumer through the process. The solutions provided the consumer with a visual representation of the final project with approximate price range estimates based on their preferences.
Additionally, the in-store selling system received numerous upgrades and lowes.com was completely rebuilt to complement the process and moved from an in-home-built solution to an industry-leading eCommerce platform from IBM. Both used to capture customer touchpoints along the envisioning, product search, and shopping process.
The overhauls to Lowes.com were significant and designed to make the eCommerce presence a natural extension of the store. The end solution provided consistent communication, status, visibility, order status, expectation changes, and enhanced insights into expected delivery and/or installation.
Lowe’s goal was to optimize search and navigation functionality both in the store and online and to make it easier for a consumer to shop. They did this by deploying visual enhancements to merchandising, new planning and merchandise re-set capabilities, a cross channel shopping cart, an initiative that integrated merchandise planning with the supply chain, pipeline management, and improvements to store signage. The company also built sales specialist scheduling and calendaring tools both in-store and online. These enabled consumers to schedule appointments either in the store or in their homes. All of this was monitored and tracked with customer touchpoint workflow.
Lowe’s launched extensive product finder pilots in their innovation lab to examine ways to enable a more natural in-store search. The company also deployed mobility devices into the stores to enhance the store associate’s ability to provide customers immediate answers to their questions with how-to-information.
All these advancements allowed Lowe’s to capture the initial customer touchpoints, record them, and through artificial intelligence score the probability of the customer opportunity. Ultimately, they significantly improved the service to the consumer.
Applied Intelligence Innovation
Another example was around advancements Lowe’s made in big data, business analytics, AI, and master data management disciplines. For the Total Closed Loop Selling Model to work, the company’s underlying data assets required standardization and centralization. The goal was to provide a seamless way to obtain centralized and accurate information regarding location, product content, product attributes, service catalogs, pricing, location data, and the customer. The organization built one of the most advanced applied intelligence capabilities of any business with a robust Master Data Management (MDM) architecture, middleware platform, business analytics, and Enterprise Information Management (EIM) strategy.
The implementation of a master customer database was critical to the success of the project. Dubbed the single view of the customer (or 360-degree view of the customer), the initiative standardized all information about a Lowe’s customer into a single repository. In other words, every touchpoint with the customer, their location, their interests, credit card transactions, their projects, their past purchases centralized into one place. It is an essential function of providing a consistent and standardized customer experience.
The single view of the customer project was a groundbreaking achievement, producing over 90% accuracy without a retail loyalty program of any kind. This solution provided Lowe’s associates and the marketing organizations with the means to know if you were shopping in your home store if you were at your second home, a vacation rental, or on vacation and to knowingly and uniquely market and service to your needs. It allowed Lowe’s employees the ability to analyze past consumer behaviors to target consumers with marketing and personalize their future customer interactions.
In other words, Lowe’s had an authoritative overview of every action their customer’s performed and the ability to predict them. And, if we knew when a customer’s project was commencing, we could capture the entire project revenue stream or a major portion of it.
In addition to the single view of the customer, an interconnected shopping experience also requires additional data on products and services that are standardized and grouped by end-user applications into categories. Think of these as things like flooring, a washer, and dryer, refrigerators, Halloween, or Christmas decorations.
There also needs to be attributes of the products and services that provide details about each item. Called product-specific selling attributes, these are physical, character, and personality traits such as color, dimensions, safety measures, and quality. All of these categories and attributes aid the consumer in making an informed decision.
For omnichannel marketing success, a centralized database of location and pricing data is required, so Lowe’s Home Improvement knows where all products are at all times and their pricing.
Lowe’s created all these data repositories for product content management, product-specific selling attributes, location, pricing, merchandise, and service that were all built and delivered in unison to the single view of the customer, business analytics, EIM, and master data management capabilities mentioned above.
Supply Chain, Order Management, and Specialty Sales Innovation
Lastly, to enable an interconnected shopping experience, a retailer needs a robust and flexible supply chain ecosystem with the ability to have configurable and specialty selling solutions. Lowe’s was one of the first if not the first major retailer to enable online orders to be obtained by customer preference – either at your home or in-store pickup. Led by supply chain leader Britt Dayton, this flexible fulfillment capability significantly accelerated order processing and shipping. It was instrumental in growing lowes.com revenue by 70%.
Lowe’s decades-old in-store selling system ironically called “Genesis” is the cornerstone behind this capability. It provides the retailer with the ability to understand real-time inventory levels and proximity to the customer’s location. Around this core system, which is still in use today, Lowe’s rebuilt almost every supply chain system and process in the company – transportation, logistics, supply chain planning, warehouse management, analytics, the way we picked product, and imports to name a few.
And, in conjunction, Total Closed Loop added a centralized order management module. The order management solution is critical because the system manages the order and its touchpoints from the initiation of the sale through delivery to the customer. This form of order management was a retail breakthrough. It built formalized relationships between order components designed to enter into an event engine with linkages between the products and services. It enabled order tracking and status visibility throughout the entire process across all channels and all levels. This functionality combined with vastly enhancing supply chain cycle times, accuracy, and flexible fulfillment created a major competitive advantage.
Lowe’s built a specialized sales process workflow to augment the order management system. The sales process consisted of unique specialty selling solutions that allow customers to order millions of products not stocked in any specific store with real-time visibility. These items display to the consumer in the form of catalogs that I referenced before.
The merchandise and associated services require everything from simple to complex configurations and associated related items. For instance, if you are redoing your shower, you need the associated elements of the shower pan or tub, the faucet, shower head, curtain, and tile. The specialized sales process workflow and supply chain ecosystem ensure that each step of the omnichannel customer experience completes in an accurate, timely, and repeatable manner.
What are the Lessons Learned From this Massive Undertaking?
Lowe’s was significantly ahead of the retail industry and the idea of frictionless shopping when it deployed all these capabilities in the 2006-2009 time frame. So, the obvious question you are probably asking yourself is, “why don’t you as a consumer experience this when you go to Lowe’s Home Improvement today?”
As I mentioned above, there are numerous aspects of the omnichannel customer experience, order management, eCommerce, selling solutions, merchandising, mobile solutions, supply chain, and the data architecture that were successfully delivered. However, a few of the critical capabilities were not completed in their entirety, while others failed to achieve optimum user adoption or maturity to the envisioned levels.
But, most importantly, over time, many of the solutions built during this initiative were not properly understood, maintained, and enhanced. You simply can’t create a platform like this and not continually strive to build upon and improve its capabilities.
Many of these solutions were groundbreaking. At that time, some were more mature in the overall software marketplace than others. Because of the newness of cloud computing, the decision was made, due to security and privacy concerns, to depend on some of the old legacy systems and lack of interoperability. I believe this was likely a foundational error that required continual complicated code changes and customization. Based on what I have read both in investor meetings and in the press, it appears the Home Depot is also facing many of these same legacy issues in their current attempt at creating a seamless omnichannel customer experience.
Lowe’s relied heavily on a start-up software partner in the creation of the core selling solution, content, event, and order management capabilities. Although the software company was a trustworthy partner and delivered significant aspects of the core selling and order management solutions, I believe they failed to realize the scale and enormity of the task at hand. There were many cost overruns, missed deadlines, and core capabilities that did not deliver expectations. The most significant functionality that lagged being the event management engine envisioned to operate on sequential or event triggers. The solution needed to be able to build dependencies, leverage store associate interface, and ultimately automate actions with AI. It was the very foundation of closing the closed-loop. This cast doubt at Lowe’s on the viability of the vendor which in turn caused doubt about the viability of the solution.
The omnichannel customer experience had many different and diverse components that cut across the entire company. The approach consisted of over forty separate multi-million/year programs that needed delivery over a larger roadmap of five to eight years. Although Lowe’s assigned various senior business heads to the project, not one was singularly in charge. This resulted in Stone and Scott Butterfield, an SVP in Lowe’s strategy team, continually re-convince their peers about the essential criticality of the strategy and its long-term importance to the company.
The constant change in business leadership and positioning within the old boy’s network led to consistent delays. As a result, many of the core leaders assigned to the initiative, including Butterfield and Stone himself, left the company or were re-assigned to different priorities creating knowledge gaps that exist to this day. I would argue that if Lowe’s appointed a top singular business leader at the onset (such as the Chief Marketing Officer or Chief Customer Officer) to co-lead the charge with Lowe’s CIO, Stone, the outcome would have been different.
Lastly, there were some adoption issues with the store associate’s willingness to take on these advanced capabilities and to train them on their functionality correctly. Lowe’s has over 400,000 associates so it is a massive logistical training challenge. A few of the systems, especially the Made-to-Order (M2O) selling platform, were not well received by the store associate community due to inconsistent training, not fully understanding the capabilities of the system, and, in other cases, the complexity of the execution process.
What is its legacy on the war between Lowe’s and the Home Depot?
Being a trailblazer is not for those who lack courage, and like any entrepreneurial endeavor, it requires a steadfast resolve and commitment to the problem at hand. Lowe’s had some of the most accomplished executives in retail during my tenure with the company. That said, I often find that you have to lead from the front when undertaking something this significant. The IT and strategy groups within Lowe’s played a major role in trying to keep the project moving but the entire organization needs to become passion struck to conquer the unconquerable, starting with its leader.
Often, the end goal can be hard to comprehend because of its enormity and complexity. I believe this was in part the case with Lowe’s at that time. Although the Total Closed Loop Selling Model had initial top executive support, it failed to ever gain traction in becoming Lowe’s number one priority. I contrast that with the Home Depot where CEO Craig Menear is making it their number one priority and focusing $11 Billion on its creation. Lowe’s spent a small fraction of that amount.
The chance to achieve the holy grail of a truly seamless interconnected shopping experience was in grasp but trumped by other significant initiatives, international expansion, and a focus on do-it-for-me services. Even today, Lowe’s still retains much of this vast array of capabilities. Ultimately, it is up to the new leadership team led by Marvin Ellison to chart its next course.
I would encourage them to dust off the Total Closed Loop Selling Model patent and leverage it as the Home Depot appears to be doing.
What is its legacy on retailers’ pursuit of an interconnected shopping experience?
I believe the Total Closed Loop Selling Model set the trail and benchmark for others to follow. It was well ahead of its time. Although others are trying, most notably the “One Home Depot” initiative, I am not aware of another retailer who has completely implemented it yet today. I think Amazon Go may offer the best opportunity for ultimate success. Much of this reasoning is because of Amazon’s technical prowess, its understanding of the customer journey, research and development budget, supply chain scale, and immense data capabilities.
During the course of the Total Closed Loop Selling Model, we received significant interest from other retailers, consultants, Forrester, Gartner, and software vendors over its novelty and ground-breaking approach. Countless news media also unsuccessfully requested to write about it given Lowe’s private nature. This included Paco Underhill, founder, and CEO of retail research company Envirosell and author of Why We Buy: The Science of Shopping.
“You can’t compete against the past, you’ve got to compete against what the future is going to be. I see retail changing so much from inventory, from the customer, and even the whole level of personalization that we’re trying to offer to the customer now. The customer is going to be asking for things that we would never have dreamed possible and yet in a few years we’re going to be delivering it,” Steve Stone, Former CIO of Lowe’s and Limited Brands
This quote from Stone in 2018 reveals a lot about his thinking back in 2003. One thing is for sure. Seamless omnichannel customer experiences will not be a “nice to have” option in the future. I argue it will be an omnipresent experience across retailers. Customers expect and in the future will demand hyper-personalization. The first movers (like Lowe’s and Amazon) will have a significant advantage if the strategy is executed and frictionless shopping becomes reality.
In the end, I would much rather blaze a trail than be blazed by the trail. And that was unquestionably the case here.
I remain incredibly proud of my tenure with Lowe’s Home Improvement and what the fantastic teams in the information technology department, our business partners, service providers, and software vendors accomplished. During this account, I was a Vice President and responsible for leadership over software development, business intelligence, MDM, middleware, lowes.com, operations, marketing technology, and quality teams. Streamlining the customer journey and exceeding the consumer’s expectations were always at the center of the Total Closed Loop initiative.
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John, excellent and very interesting article