Home Improvement & Hardware Retail Industry Trends

Increased Services to Contractors

Historically Strong Market Growth

New methods of appealing to contractors include renting construction equipment, tools, and delivery trucks. Retailers like Lowe's and Home Depot hope to draw more commercial customers and increase walk-in sales by renting equipment.

Sales by home improvement retailers (including lumberyards) grew at an average annual rate of almost 10 percent between 2000 and 2005, according to Hardware Retailing. Expansion of large home center chains drove the majority of market growth, as sales in hardware stores grew slower. Even as growth in the residential real estate market corrects from historical highs, sales in home improvement retailers are projected to grow at an average annual rate of almost 6 percent through 2010.

More IT

More "Green" Products

New technology, especially in product tracking and supply chain efficiencies, has cut costs. Home Depot is introducing a wireless scanner it hopes will dramatically reduce the time spent in checkout lines. Self-checkout systems, which reduce labor costs and improve traffic flow and overall customer service by allowing customers to scan their own purchases and pay with credit cards or cash, are making their way to the hardware industry.

Growing consumer concern over global warming, environmental causes, and energy savings has increased demand for environmentally friendly home improvement products, such as sustainable wood cabinets and recycled glass tiles. Home Depot's Eco Options program identifies products that minimally impact the environment, including all-natural pesticides, energy-saving appliances, and compact fluorescent light bulbs. The number of building projects seeking Leadership in Energy and Environmental Design (LEED) certification, which sets standards for "green" buildings, is increasing.

Environmental Certification

Private-Label and Exclusive Brands

In response to the anticipated continued increase in consumer demand for certified forest products, more building material suppliers and home improvement retailers are expanding their lines of certified wood products. Environmental concerns are driving the growth of environmental certification and labeling for wood products. Certification, or eco-labeling, is a way to reassure consumers that the wood was harvested in an environmentally responsible way that sustains the forest ecosystem.

Large companies are enhancing merchandise selection and developing a competitive advantage by selling more private-label and exclusive products. Private-label brands typically offer higher margins to stores and better value to customers than branded. Exclusive brands often allow companies to provide high-end, better performing products. The True Value cooperative carries over 8,000 private-label items. Both Home Depot and Lowe's stock exclusive brands in multiple categories.

Women Customers

More Interactive Retail Experiences

Women are taking a bigger role in home improvement, and according to Lowe's research, initiate 80 percent of all home improvement purchase decisions, especially big-ticket orders like kitchen cabinets, flooring, and bathrooms. New store designs are created to attract women, focusing on details like better lighting and merchandise racks and floor colors. Product selections include more home furnishings like curtains, lamps, and seasonal decorations. A national survey commissioned by Lowe's finds 94 percent of female homeowners consider themselves DIYers and complete a home improvement project on their own at least once every five years.

Home improvement retailers are adding interactive elements to stores to increase sales. Live product demonstrations, televised demos, and how-to classes educate customers and help sell merchandise. Stations allowing customers to try tools can demonstrate benefits and promote high-end products. Interactive kiosks allow customers to view different paint colors in a variety of settings.

Synthetic Materials Gain Popularity

Commercial Building Spending Increasing

Synthetic materials are increasingly replacing natural materials, such as wood and brick, in construction, creating a potential new product market for building material suppliers. Technological developments continue to make the products more realistic, making them a legitimate substitute for natural materials. These substitute products are also more cost-effective long-term as they're more durable and need less frequent repair or replacement. In the last five years, synthetic materials have grown more popular in siding, roofing, porches, trim, decks, columns, molding, and flooring.

While the housing industry has struggled in the recent past, the market for nonresidential building has grown at a healthy rate. Spending on commercial building increased at double-digit rates between 2005 and 2006, driven by both real growth and higher prices for construction materials. Within the nonresidential market, the public construction sector (which is about half the size of the residential segment) is performing well. Experts project strong growth for commercial building to continue.