More and more shoppers are flocking to home-improvement retailers to fix up the old homestead. According to the Joint Center for Housing Studies of Harvard University, the average household in 2001 spent $1,820 on home remodeling projects. More affluent households spent $3,870, and four percent of households spent as much as $20,000. All the new decks, bathrooms and add-ons have created a windfall for home centers, with Home Depot and Lowe's emerging as the undisputed leaders in the $400 billion home-improvement market.

While Home Depot and Lowe's compete in many of the same categories and operate comparable store formats, they distinguish themselves in some very different ways. Due to its sheer size and growth, Home Depot is a Wal-Mart-in-the-making. It operates more than 1,500 stores across the United States, using its size to achieve scale advantages in buying and price competitiveness. Lowe's, while having only half as many stores, is the industry's operational leader, demonstrating an advantage in practically all core retailing competencies including merchandising, customer service, technology and distribution. To put it another way, Home Depot focuses more on the building side of home improvement, while Lowe's emphasizes improving the look and feel of the home.

In recent years, however, Lowe's has become the home-improvement darling on Wall Street. Analysts that compare Lowe's to Home Depot believe that its decision to target women as well as men has given it the edge over Home Depot. Lowe's retail strategy is one that attracts the whole family, not just home-improvement contractors.