business news in context, analysis with attitude

Following up on yesterday's piece about the deepening competition between Home Depot and Lowes, MNB user Jane Larson wrote:

"There was a squib in the local fishwrap that Lowe's was (finally) coming into the Twin Cities market. The store will be located in the northern suburbs, meaning that southerners like me will have to pack the car, find the passport, and make a long trek over the tundra to get there. Does that deter me? Heck no! We're tough and hardy here, and Lowe's is a retail experience on par with IKEA and Trader Joe's. Yes, Kevin, I don't get out enough, but if they build it, I will come.

"By the way, my son calls it Home Despot because there is no true competitor, they own the country, and they can rule however they please."

"Home Despot." We like that.

Another MNB user wrote:

"What is going to be difficult for HD in markets like here in Atlanta is how to up-grade the older stores when there's a new one just a few minutes further away. I'd go, in a second, to the newest for the better selection, nicer, cleaner surroundings even though the older one is half the drive closer. And, in this case, the older store is on the back side of a shopping center/area without much to it to be attractive for another retailer if closed and sold. But if the newer stores cannibalize the older ones' sales, that's probably what will happen."

MNB user Bob Vereen adds some perspective:

"Both chains are really increasing their pricing compared to their previous strategies. Depot averaged a gross margin of 31.1% last year; Lowes, 30.3%. Both are up from the high 20%s; typically, they had been about 27-28%.

"Manufacturers who supply them tell me that both are now marking some items up two and three times cost, which means that independent retailers and small chains can more easily be price-competitive, along with offering good service and greater convenience."

The only problem, it seems to us, is that there are so few independent retailers and small chains left in the field…they've all been driven out of business.

This is the nightmare of big box/category killer retailing. They kill the competition, and then are free to raise prices. It is the best argument for diversity and government intervention when certain retailers get too big.

Big question: what is too big?

In response to our story yesterday about Boston Market, MNB user Tom Bauer wrote:

"I don’t often get a chance to laugh at work, but your dialogue with the woman about the closed Boston Market was ‘priceless.’ Thanks for the day brightener."

Thanks. And you ought to laugh at work more…that's why we're here.
KC's View: