Can home improvement retail weather the storm?

  • Categories:

    Industry Trends, Marketing Insights

  • Date:

    July 11, 2019

Can home improvement retail weather the storm?

Industry Trends Marketing Insights

Home improvement retail has built a solid infrastructure over the last decade, embracing omnichannel best practices to go with an already strong foundation. But home improvement channels took a step backward in 2018. So, what’s next? For more, we caught up with the experts at Kantar. Here are four key takeaways.

1. Macro challenges linger, but they’re manageable.

    Storm clouds are brewing. Housing indicators have been volatile throughout the first half of 2019 after multiple home improvement channels slowed in 2018, from home improvement centers and specialty building materials to paint and wallpaper stores, hardware stores and lawn and farm supply stores (U.S. Department of Commerce). Furthermore, heavy spring rains in 2019 affected spring sales in much of the country, while tax laws on the West Coast and elsewhere hampered growth.

    “In 2019, the economy will most likely grow, but a cooler housing market will contribute less to the overall economy.” ~Wall Street Journal

    Rain, rain, go away

    Heavy rains hurt home improvement especially hard in these regions, setting the stage for tightening markets through the remainder of the year:

    • Great Lakes region
    • Tennessee
    • Arkansas
    • Western United States

    Like housing, lawn and farm saw a huge drop-off, signaling a slowdown for the rural economy and farm-related investments. After a one-year growth rate of 14.2%, this channel saw a nearly 5% dip in 2018 (U.S. Department of Commerce).

    Tariffs are affecting home improvement, too, especially in about a dozen categories including major appliances and carpets and flooring. Industrywide, smart suppliers and retailers are using a mix of strategies to absorb tariff impact, from sourcing and inventory management to portfolio management.

    “A prolonged trade war with China is unlikely to help. Consumer confidence appears to be weaker than recognized, particularly with respect to large ticket purchases like housing or remodeling. Clearly, a trade war increases this uncertainty. We estimate that the 25% rate on the existing set of tariffs represent a $2.5 billion annual tax increase for the housing sector in terms of materials used for construction.” ~Rob Dietz, Chief Economist, National Association of Home Builders, via MarketWatch

    All of these waves signal the monetary impact of global unrest, setting the stage for tightening tension in the year to come. Tensions, of course, impact not only the tangible elements of housing but also general shopper mindsets, as people become increasingly anxious and concerned about things like prices and job security.

    Now, for the good news: Indicators suggest that today, the housing market is less vulnerable to a recession versus the 2008 crash. Positives like high job security (U.S. Bureau of Statistics), strides in digital technology, and heavy investment in remodeling can help steady the ship on an otherwise stormy sea — and maturing millennials may represent the brightest beam of light for home improvement.

    2. New millennial homeowners = opportunity in an uncertain 2019.

      Millennials are aging and maturing into the homeownership space. After all, most will be in their 30s or early 40s by 2024 (U.S. Census data). Soon, this age group will be the housing segment’s largest. According to the Harvard University Joint Center for Housing Studies’ State of the Nation’s Housing report (2019), the U.S. homeownership rate edged up in both 2017 and 2018. The largest increase came from the 25-39 age group, accounting for 1.1 million owners in 2016-18.

      These young homeowners are not only signing on the dotted line, they’re staying busy after move-in day: 60% plan to start a home improvement project in the next six months. What’s more, millennials have a more optimistic near-term outlook than boomers.

      How can retailers and brands capitalize on millennials’ big home market splash? If you can position your company as an advocate for convenience, experience and education for these younger homebuyers, you’ll ease entry, turning these eager customers into powerful brand champions.

      Don’t forget some of the nuances of this growing audience:


      • Tend to spend less on average but take on more projects than boomers
      • Value convenience and experience (versus price and quality for boomers)
      • Are more likely to shop on Amazon for home improvement products (21%)
      • Care about brand more than other generations — 60% actively interact with brands they like on social media (Forbes)

      Still not sold on millennials? Consider that this group is taking on more advanced projects and spending more money on things like exterior painting, window treatments, room additions and bathroom and kitchen renovations. At the same time, their boomer parents are beginning to shift to more maintenance initiatives.

      3. Remodeling is king.

        Remodeling, rather than homebuilding, generated the most spending since the end of the last recession. Aging housing stock and an aging population, home equity potential and the lean pace of new home builds are all part of the puzzle (MarketWatch). Overall, the remodeling market has grown 50% since the end of the last recession, with rental improvements to thank for a chunk of that growth. Weather plays a role, too, with an increase in weather disaster-related home improvement spending.

        “The aging of the housing stock has been a boon to the remodeling industry, with spending surpassing investment in homebuilding every year for over a decade.” ~Abbe Will, Associate Project Director, Remodeling Futures Program via Building Products Digest

        With more people focusing on improving existing homes than new builds, it is important for retailers and brands to keep this in mind when crafting messaging for campaigns, tools to support their consumer, or reaching their consumer at the right touch point in their project journey. Knowing the types of projects consumers are tackling is becoming more and more critical to staying engaged and relevant.

        4. Omnichannel rules: Your store is a big piece of the puzzle, but it isn’t the only piece.

          You’ve probably heard the news: Home improvement shoppers are becoming omnichannel shoppers, with many touch points, both online and offline, in their customer journey. Today, more than half of purchasers turn to online sources when shopping, and nearly 20% of those who purchase online do so solely for convenience. In fact, three-quarters of homeowners wish it was easier to compare products in-store (Home Improvement Research Institute).

          Digital personalities

          • Omnivores are “all in.”
          • Pragmatists “value the convenience.”
          • Socializers are “digitally engaged but prefer stores.”
          • Wallflowers “see the benefit but do not use.”
          • Outsiders are “digitally disengaged.”

          Like it or not, Amazon is also beginning to have a real impact on consumer behavior in the home improvement space, though that impact is somewhat generation-dependent. Millennials, for instance, are turning to the e-commerce giant for home improvement two times more often than boomers.

          What are some keys to success in an omnichannel world? First, make sure your in-store and online touch points maintain a quality, on-brand, ease-of-use, consumer-focused presence. This will help you communicate a united voice and a clear reason-to-buy to your consumers. Meanwhile, ease and experience will only become more important, and getting ahead of how your consumer DOES and WILL shop will separate your brand from those that don’t.

          Driving it home

          These takeaways only scratch the surface of a complex, changing home improvement retail segment. It’s an uncertain time, with everything from tariffs to digital touch points keeping everyone up at night.

          Those storm clouds may seem ominous, but most signs point to an industry well equipped to brave the rain. If anything, the current landscape holds plenty of opportunity. Shoppers’ growing focus on product quality, brand mission and their own experience can only be good news for strong, smart home improvement brands.

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