Lucious Lowe never saw his empire, but his son and son-in-law figured out how to give the customer what they needed.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.

[OG Law Ad]

Dave Young:

Welcome back to the Empire Builders Podcast. I’m Dave Young, Steve Semple’s here, and we’re going to talk about another empire.

Stephen Semple:

Another one. Imagine that.

Dave Young:

And it’s another one of these big boxes.

Stephen Semple:

Yes.

Dave Young:

So this is brick and mortar big box store. And so there’s two things. One thing I love, one thing I hate about big box stores in this category. I used to love going down to my local hardware store and just tooling around.

Stephen Semple:

Yeah.

Dave Young:

And I guess you can still do that, but there’s something about some old guy walking up and chatting with you about what you could maybe buy or not.

Stephen Semple:

Yeah.

Dave Young:

And so Lowe’s is our subject today.

Stephen Semple:

Yes.

Dave Young:

I’m interested to see how they started. And again, I love shopping at Lowe’s, I hate shopping at Lowe’s, for two different reasons, right?

Stephen Semple:

Yeah.

Dave Young:

The variety. It’s all there.

Stephen Semple:

Yes.

Dave Young:

The old guy that knows every piece of hardware in the store. Good luck finding that person. I mean, they may be there, they may not. It’s hit and miss.

Stephen Semple:

Yes. So the first Lowe’s, of course, started as one of those old-timey hardware stores.

Dave Young:

Sure.

Stephen Semple:

It was a 3000-foot store in 1921 in North Wilkesboro in North Carolina by Lucius Smith Lowe. That’s basically the first Lowe’s was way back in 1921.

Dave Young:

Lucius Smith Lowe. Okay.

Stephen Semple:

But the success of Lowe’s actually did not come from Lowe, but rather an in-law named Carl Buchan, who came on the scene in 1943.

Dave Young:

Okay.

Stephen Semple:

So when Lucius died in 1940, the business was inherited by his daughter, Ruth Buchan, who then… Now, I was not able to find the family story on this, because I find this interesting. It was inherited by the daughter, who then sold the company to her brother, and I always thought, “Why’d the brother not inherit the business?”

Dave Young:

Right?

Stephen Semple:

Now, I also get why she probably sold it, because as we know, one of the really big problems, especially back in the 1940s, was women couldn’t get credit, and it was very, very, very hard in the forties for a woman to actually run a business. So I also understand why she sold.

Dave Young:

Yeah. Yeah, and weird estate planning goes on that you don’t know why they did what they did. Right? Maybe the son had an insurance policy. Right?

Stephen Semple:

Who knows? Who knows?

Dave Young:

I don’t know, but maybe he got… Who knows?

Stephen Semple:

Now, at the same time, when she sold it to her brother, her husband, Carl, ended up becoming a partner in the business.

Dave Young:

Okay.

Stephen Semple:

So it was this really weird, father dies, it goes to the daughter, the daughter sells it to the brother, and the husband ends up becoming a partner.

Dave Young:

Who knows about the transactions inside family businesses, right? That’s a…

Stephen Semple:

Right? All I’m just saying is, if it sounds weird, it was.

Dave Young:

Yeah.

Stephen Semple:

That’s all I’m saying. But moving forward, what’s really incredible is today, Lowe’s is 1700 locations doing 80 billion in sales. So it is-

Dave Young:

That’s not nothing.

Stephen Semple:

That’s not nothing. That’s not nothing. But back in the early forties, hardware stores did not have building supplies. They didn’t have plywood, they didn’t have… They didn’t have building supplies.

Dave Young:

Yeah, yeah. You went across to the lumber yard to get that stuff.

Stephen Semple:

Correct. Correct.

Dave Young:

Yeah.

Stephen Semple:

And so one day Carl gets this deal on toilets, and he decides to buy a whole pile of toilets. When I say a whole pile, the whole truckload, which was 400 toilets.

Dave Young:

Okay.

Stephen Semple:

And James? James Lowe comes in the office one day and he’s like, “Toilets in the office.” And he says, “Carl, why is there toilets in the office?” He goes, “Well, I bought 400 of them and I ran out of space, so they’re sitting in here.” And he’s like, “We don’t sell toilets.” He goes, “Well, we are now, because we got 400 of them.”

Dave Young:

“Yeah, we sell toilets. Sell them or else.”

Stephen Semple:

“[inaudible 00:05:20] now!” So, “Yes we are.” And what turns out is that they sell out really quickly. And Carl looks into this a little bit more and he sees this trend. Right? Think about it. It’s 1946. What’s happening in the United States? There’s a building boom. Right? The number of homes being built has grown 10 times over the last three years, because we got the baby boom happening. We got the return of the soldiers, we got the baby boom, we got the sprouting up of the suburbs. That part is growing.

So they sell out these toilets in like a week, and so he wants to open a second store. He goes, “Look, here’s what I want to do. I want to open a second store and we’re going to sell everything for building and fixing a home. Everything. We’re going to turn specialty stores into one shop.” So in other words, you don’t have to go to the plumber… you know. Look, this is another variation on the department store and the convenience store.

Dave Young:

Absolutely.

Stephen Semple:

So Lowe agrees, and they invest a hundred and sixty thousand dollars in the second store, and it’s a 10,000 square foot, so they’ve gone from 3000 square feet to a 10,000 square foot store in Spartan, North Carolina.

Dave Young:

And so yeah, we tripled the size. It’s all the space we’ll ever need. 10,000 feet.

Stephen Semple:

Right. So it’s 1949, and literally customers are coming. Yeah, that’s right. It’s 10,000 square feet. I missed that for a minute. Yeah, yeah. Hold that thought.

Dave Young:

“Hang on.”

Stephen Semple:

Hold that thought. So it’s so popular, they’re actually finding customers are coming from states away from, outside of North Carolina. So Carl wants to open a third store, and Lowe doesn’t want to. He doesn’t want to grow this thing.

Dave Young:

Isn’t it amazing that the whole company’s not called Carl’s instead of Lowe’s?

Stephen Semple:

Well, here’s what ends up happening. Lowe says, “Look, I don’t want to do this. Why don’t you just buy me out?” Carl buys out Lowe, but says, “Well, let’s keep the name.”

Dave Young:

Yeah.

Stephen Semple:

“Let’s keep the name.”

Dave Young:

Yeah, that’s smart. You got equity there.

Stephen Semple:

Yeah. So in 1952, Lowe is bought out, but they keep the name. And it expands rapidly. They quickly open 13 more stores. [inaudible 00:07:27]

Dave Young:

Oh, wow. See, I did not know they were this old.

Stephen Semple:

Yeah. So it starts growing like crazy, but then they hit a problem. After six years, profits stall.

Dave Young:

Oh, okay.

Stephen Semple:

What he notices is, he’s been focusing on opening stores, but not focusing on the buying experience. And if you went into a Lowe’s at that time, it was super disorganized. Stuff was just all over the place.

Dave Young:

Okay.

Stephen Semple:

And so it was not appealing. So he hires Bob Strickland, marketing guy. Bob points out that people come in to get what they need, but what if we were able to make them to stay and buy other things? Like instead of an oven, how about a whole kitchen?

Dave Young:

Sure.

Stephen Semple:

So he says, “Let’s be like a department store.” They looked at how Sears was laid out, right? There was these departments.

Dave Young:

Yeah.

Stephen Semple:

And basically this is the model that they created, which is really the template that all these big box home improvement stores are built on. Here’s the appliance section, here’s the flooring section.

Dave Young:

Yeah.

Stephen Semple:

But it didn’t just have flooring. It had, okay, along with the flooring, the caulking and the this and the…

Dave Young:

Yeah.

Stephen Semple:

All the things that you need with it.

Dave Young:

So take those toilets out of the power tool section and put them where they belong. Yeah.

Stephen Semple:

Yeah. So they create this template that they’re going to roll out, and before they’re ready to roll it out, Buchan passes away.

Dave Young:

Oh no.

Stephen Semple:

And so now it’s up to Strickland to open with the new idea. So Strickland takes the ideas. He opens five stores on it. They’re super successful. In two decades they got a hundred and eighty stores, 1978 they’re the largest in the region, 1979 they’re 200 stores, and they just grow and grow and grow and become what they are today.

But Lowe’s basically built this idea. The two innovations Lowe’s did was built this idea of, “We should have a store that’s dedicated to home improvement,” because they saw the trend on it. And then they created this whole idea of looking at department stores and saying, “This is how a home improvement store should be organized.”

Dave Young:

Yeah.

Stephen Semple:

That template? That template, that idea that every one of these big box home improvement stores is built on, was created by Lowe’s.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Using Stories to Sell Ad]

Dave Young:

Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.

Stephen Semple:

… that idea that every one of these big box home improvement stores is built on, was created by Lowe’s.

Dave Young:

Well, and so the reason I didn’t know about them when I was younger is that they started in the east and slowly moved west.

Stephen Semple:

Yeah. Yes.

Dave Young:

And I don’t know where Home Depot started, but in the Rocky Mountain West and Western Plains, there were Home Depot stores long before there were any Lowe’s stores.

Stephen Semple:

Yeah. Yeah, yeah.

Dave Young:

So it’s just a matter of growth at that point then, right?

Stephen Semple:

Right.

Dave Young:

They figured out the formula.

Stephen Semple:

They figured out the formula, and then it’s just grow, grow, grow.

Dave Young:

I’m guessing that, yeah, Home Depot probably has a similar story. Either they copied Lowe’s or they figured it out themselves that this is the right way to do a big box home improvement store. We going to do that one sometime?

Stephen Semple:

Well, I don’t want to say much, because we are going to do… Oh.

Dave Young:

Okay. All right. I’ll hold that for another day. But-

Stephen Semple:

Well, what ends up often happening when I’m researching these things, there’s no way to do it without learning about both.

Dave Young:

Sure.

Stephen Semple:

So often that’s the reason why when we’re doing these, there will be two in a category, because you learn about both of them at the same time, because they have kind of a shared history, right?

Dave Young:

Well, and those guys absolutely copy each other. Right?

Stephen Semple:

They did.

Dave Young:

I think we go back, I don’t know what episode it was, but we talked about Cabela’s, and then we sort of told the story of them being eventually bought by Bass Pro.

Stephen Semple:

Right.

Dave Young:

And the [inaudible 00:12:08] Bass Pro, I think… Well, at least according to the people that I knew at Cabela’s, they were the first ones to build this giant experiential store. Right?

Stephen Semple:

Well, in Sam Walton-

Dave Young:

And so… But that gets copied. And Sam Walton, same thing, right?

Stephen Semple:

Well, Sam Walton has openly stated that he stole a lot of his ideas from Sol Price.

Dave Young:

Yeah. Yeah.

Stephen Semple:

He has come right out and said that. He’s like, “Oh yeah, I always watched what this guy did, and I’d always keeping my eye on him, because he was brilliant.” Right?

Dave Young:

Yeah, I mean-

Stephen Semple:

Who was the founder of Costco. Right? So.

Dave Young:

At the end of the day, these are just sharing good commerce ideas. Right?

Stephen Semple:

Yeah.

Dave Young:

Nothing new under the sun here.

Stephen Semple:

Yeah.

Dave Young:

There’s a reason that every ancient city has a bazaar, a marketplace where they all gather, right? You make it convenient for consumers by, even though you’re 10,000 little competitors, you’re all in one place.

Stephen Semple:

Yeah. What I really liked, again, about this story, was Lowe saw a trend going on in the United States, and the trend was, “People are building these homes, and so there’s going to be more demand for home improvement stuff. How do I make it easier?” Again, that theme of, “How do I make it easier for the consumer? Wouldn’t it be so much easier for the consumer if it was this one stop?”

Dave Young:

Yeah. [inaudible 00:13:29]

Stephen Semple:

Now, the other thing I thought that was brilliant is that when the profits stalled out, he didn’t flip to, “I need more leads, I need more customers.” He didn’t go there. He went, “Oh, if this has stalled out, there’s something I’m doing wrong inside my four walls.”

Dave Young:

Yeah, yeah.

Stephen Semple:

And he looked at the experience and he said, “Okay, I’ve already got customers. What I need to do is if I make that experience better, the customers will return more often and will spend more.”

I remember going to a presentation from the folks from Barnes and Noble, and Barnes and Noble talking about how they… And Ikea’s the same. They would measure how long somebody was in the store. Ikea’s amazing at this. And what they know is, the longer you’re in the store, the more you spend. Period.

So what’s their whole objective is “I’m going to keep you in the store. How do I do that? I’m going to put a restaurant in. I’m going to put in a place where you can stick your kids to play. I’m going to make it so that you’ve got to walk the maze.” The point is, the longer you’re there, the more you’re going to buy. And not only that, Ikea’s figured out, “If I display these things this way, people will stop and look at it,” so that they do move through the stores slower.

Dave Young:

Yeah. You-

Stephen Semple:

But Lowe’s really caught into-

Dave Young:

And there’s sort of a logical progression to it.

Stephen Semple:

Right. Right.

Dave Young:

Yeah.

Stephen Semple:

So Lowe’s created that idea of “Let’s do this one stop shop.” And then the next one was, “Okay. Now that we’ve made this idea more convenient, let’s now make this idea more enjoyable and also more convenient, because there’s all these ancillary things that you need when you’re doing that in the moment. Let’s put all that stuff together.”

Dave Young:

Well, and you bring designers in because if you’re coming in for all these kitchen products-

Stephen Semple:

Yeah, absolutely.

Dave Young:

… maybe you don’t know how to put that all together and make it look good.

Stephen Semple:

Yeah. Yeah.

Dave Young:

Right? So here’s you’re somebody that can help you lay it out.

Stephen Semple:

Yes.

Dave Young:

And then they can sell you all the materials that either you or your contractor need to make it happen.

Stephen Semple:

Now what we know is, David Young is going to leave this talk with an even more love-hate relationship of Lowe’s. Am I right?

Dave Young:

I’m not remodeling anything. No, I love walking around a Lowe’s. I find it hard to… If I need some adhesive, I need some Gorilla Glue or something, and I walk into a Lowe’s, two things are going to happen. Unless I’m in just a blazing hurry and I’ve left someone in the car with the car running-

Stephen Semple:

Yeah.

Dave Young:

… I’m going to just wander around.

Stephen Semple:

Yeah.

Dave Young:

And I’m likely to walk out with something else besides the glue. Along with the glue.

Stephen Semple:

Correct. Yes.

Dave Young:

Sometimes without the glue, because I forgot why I went in.

Stephen Semple:

Oh God, yeah.

Dave Young:

But that’s a whole different psychological thing. We just finished talking about that at my portals class this week.

Stephen Semple:

Oh yeah, [inaudible 00:16:25]

Dave Young:

Tell you about that sometimes. That was fun.

Stephen Semple:

It’s a thing. It’s a thing.

Dave Young:

We had a blast. Yeah. Wow. Lowe’s.

Stephen Semple:

Yeah. There you go.

Dave Young:

Now I’m thinking in my head, what do I need? You know, near Wizard Academy, we’re not really close to a Lowe’s. You’ve got to drive 20 minutes or so to get to a Lowe’s.

Stephen Semple:

Yep.

Dave Young:

But about 10 minutes, 15 minutes away is independently owned Ace Hardware store.

Stephen Semple:

Yep.

Dave Young:

And I love that one too. Right? Because if you’re really just looking for a tool or some little hardware bits and bobs, you’ll always find it there. Right? [inaudible 00:17:02]

Stephen Semple:

Yeah, well, because Ace is the place with a helpful hardware man, right?

Dave Young:

Yeah. And they’re helpful because they’re locally owned. So there’s always somebody in there that can, “This is not the glue you really want. You want this.”

Stephen Semple:

Right. Right.

Dave Young:

“Oh, I thought I just wanted Gorilla Glue.” But this guy knows.

Stephen Semple:

Right.

Dave Young:

So it’s two different experiences, and a lot of your choice in it is based on experience.

Stephen Semple:

Yeah, yep. Yes.

Dave Young:

I mean, shoot. When we lived in western Nebraska, they eventually got a Lowe’s, but they had a Home Depot first in Cheyenne, Wyoming. We were a hundred miles from there.

Stephen Semple:

Right.

Dave Young:

And there was a lumber yard in Sydney, and there was a hardware store in Sydney, and we would drive to Home Depot a hundred miles away.

Stephen Semple:

Yes. Yes.

Dave Young:

Because one, we could find any of it there.

Stephen Semple:

Yeah.

Dave Young:

And two, Cheyenne also had a Starbucks and a Baskin-Robbins and a… right?

Stephen Semple:

That’s the other thing that starts to end up happening, is you get one of these, and then the other things sprout up around that.

Dave Young:

Yeah. Yeah, you rarely see one off by itself somewhere.

Stephen Semple:

Yeah. Well, that’s the reason why you would see a movie theater, and then the restaurants go.

Dave Young:

Yeah, yeah.

Stephen Semple:

These things happen. But yeah. But you know, I was pretty impressed when I heard the history of Lowe, and also thought it was really interesting looking at this department store and bringing it across. And again, it’s that idea.

Dave Young:

Yeah.

Stephen Semple:

“Who outside of my world is doing this really well?”

Dave Young:

I kind of wasn’t surprised that their origin goes back as far as it did, because I think you always are going to assume that that started as a little hardware store somewhere, or a lumber yard.

Stephen Semple:

Yeah.

Dave Young:

But I was surprised that they started that growth curve as soon as they did.

Stephen Semple:

Yeah.

Dave Young:

Right?

Stephen Semple:

Yeah.

Dave Young:

So they were really the pioneers in that. So.

Stephen Semple:

Yep, and the key is you didn’t need more than 10,000 square feet, as you pointed out.

Dave Young:

Yeah. Well, you do today.

Stephen Semple:

Some of them are like, “Holy crap.” Yeah.

Dave Young:

You need 10,000 square feet in the kitchen part.

Stephen Semple:

No kidding. No kidding.

Dave Young:

All right, well, thank you for bringing that story, Stephen. I like that.

Stephen Semple:

All right. All right, thanks David.

Dave Young:

And congrats, Lowe’s, on decades and decades of money making as an empire.

Stephen Semple:

Yeah. Yeah. Awesome. Thanks, man.

Dave Young:

Thanks.

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