HOME IMPROVEMENT CONSUMER TRENDS AND MARKET RESEARCH

HOME IMPROVEMENT CONSUMER TRENDS AND MARKET RESEARCH

The COVID-19 pandemic is causing a surge in demand for home improvement products since consumers are undertaking more DIY projects, particularly Millennials. It is still too soon to know the exact percentage of consumers who will permanently migrate to online shopping. Even though online purchases are growing, most buyers still prefer to shop in-store, especially those purchasing from home improvement retailers. However, despite this preference, retailers such as Lowe’s and Home Depot saw a massive spike in online sales. This spike is possibly being driven by consumers turning to online channels due to product availability issues in-store, as product variety is more important than price now. Finally, online home improvement consumers are getting information from multiple sources, both online and offline. Still, they are more likely than in-store consumers to use social media as an information sources, as well as digital services, such as retailers apps and discount websites, during their shopping journey.

Trend #1: Millennials are Driving the DIY Trend

  • The COVID-19 pandemic and shelter-in-place orders forced consumers to reevaluate their living conditions, leading to a massive surge in home improvement projects. As reported by the US Census Bureau report, “home centers, hardware stores, garden centers, and building materials suppliers realized a year-over-year sales increase of 22.6 percent, leading all retail categories except for online purchases.”
  • A poll conducted by Bank of America discovered that 70% of Americans were doing home improvement projects and planning for more in 2021. Although analysts expect activity to decrease as the population returns to work, they also noted that Millennials’ appetite for home renovations might start a “wave of renovation activity by a generation that has been relatively slow to enter the house market.”
  • DIY projects are driving home improvement sales, as consumers are concerned about health and safety issues and looking for cheaper alternatives to improve their homes. COVID-19 is resulting in more DIY projects since consumers have more time now (79%), want to complete projects for health or safety reasons (35%), and don’t want contractors in their houses (30%).
  • Americans are also accelerating home improvement projects due to the constant video calls. A survey conducted in May discovered that 64% of consumers in the US were embarrassed by parts of their living space showing on video calls. Millennials were the ones most embarrassed (75%), followed by Gen X (66%) and Boomers (55%).
  • In August, 76% of Millennials surveyed said they started at least one DIY home improvement project. When asked if they plan to start new projects soon, 35% said they would definitely start some DIY project around the house, and 41% said probably. Only 5% said they would not start any project.
  • Despite Millennials being the driving force behind the DIY trend, Gen X DIYers are rising as contenders for the number one spot. Thirty-nine percent said they would definitely start a DIY project within the next few weeks, and 34% said probably. Nonetheless, Millennials are still planning to spend more than Gen Xers.
  • Both Home Depot and Lowe’s reported that DIY sales outpaced pro sales in the first quarter of 2020. Lowe’s chief executive, Marvin Elllison, said during the Q2 earnings release that sales “were driven by a consumer focus on the home, core repair and maintenance activities, and wallet share shift away from other discretionary spending.”

Trend #2: Consumers are Still Favoring Physical Stores but Online Purchases are Growing

  • Although the pandemic is increasing the number of consumers shopping for home improvement materials online, in-store is still their favorite, as the segment benefited from big retailers being considered an essential service. In August, 84% of consumers bought home improvement products in-store, 39% purchased online (delivered at home), and 15% bought products online but picked up in-store.
  • According to the HIRI, homeowners are going back in-store purchases as restrictions are lifted, but online purchasing remains “robust due to homeowners’ concerns over health and safety.”
  • Professionals, such as contractors, are slightly more likely to buy online. Eighty-one percent reported buying materials in-store, 40% bought online to be delivered at the jobsite, and 30% purchased online and picked up in-store. This move to “online purchases is occurring even more so in larger firms.” Furthermore, 90% are planning to maintain their “increased use of online ordering” after the pandemic.
  • The categories with the most significant sales growth, from 2018 to 2020, are doors and windows, paint and accessories, hand tools, lawn and garden, electrical and lighting, and outdoor living. Products such as power tools, windows and doors, and flooring are more likely to be bought online:

Products

  • Compared to August last year, consumer spending at independent and small retailers for home improvement products dropped by 17% for the hardware/garden category, while big box retailers of home improvement goods are seeing an increase in weekly foot traffic compared to last year.
  • Overall, the top hardware retailers sites’ year-over-year traffic growth was 42% between March and June 2020. The second highest growth, losing only to office supplies retailers
  • Big box retailers are thriving as they can serve consumers both ways, and tend to have a well-structured e-commerce operation. They are also surpassing the overall online consumption for the category. For example, Lowe’s online sales soared 135%, while same-store sales increased by 34.2%.
  • Home Depot’s profit increased by 25% in the second quarter of 2020, and net sales rose 23.4%. CEO Craig Menear said, “digital sales doubled, with customers picking up about 60% of their orders in stores.” Same-store sales increased by 25%, and average purchases rose 10.1% compared with Q2 2019.

Trend #3: Product Variety and Availability are More Important Than Price Nowadays

  • Health and Safety concerns are not the only reason why consumers are changing their buying behavior. Availability is increasingly the driver of online purchases. The percentage of consumers that said that physical stores not having what they needed in stock was the reason they purchased home improvement items online increased from 23% in June to 31% in August.
  • For professionals, availability is also an issue. The number of professionals who said they bought online because stores didn’t have what they needed in stock went up from 33% in July to 40% in August.
  • The Farnsworth Group conducted a comprehensive study to understand why and how consumers select channels for their purchases. Given that the Farnsworth Group has 30 years of experience studying home improvement consumers, it is a noteworthy source. Unfortunately, the full study is not available to the public; however, the institute released a video preview of the content, containing several insights. It is a 36 minutes video; therefore, to make it easier to verify the information, screenshots of the charts used and the time stamp for each information were provided in the two trends that use this source (#3 and #5).
  • When it asked consumers where they made their most recent home improvement purchase in June, 61% said home centers (e.g., Home Depot), 13% said discount/department store (e.g., Walmart), and 10% said online-only retailers. (5:07)

1

2

  • There are differences in online versus in-store according to the type of retailer. Forty-eight percent of consumers who purchased in discount stores went to the physical store, 29% bought online, and 22% ordered online but picked in-store. (9:55)

3

  • Again, the younger the consumers, the most likely it is that they will purchase online. For example, 45% of Millennials made their last HI purchase in physical stores versus 61% of Gen X. Overall, women are more likely to buy HI items in physical stores than men (72% versus 53%). (11:00)

1

  • Consumers are more likely to cross-shop now than in previous years. Thirty-six percent of consumers in 2020 said they shopped multiple retailers prior to their purchase, versus 29% who said the same in 2018. (15:50)

1

  • When asked how they select a store, variety of products, price, and convenience were the top three priorities (by unaided researchers mean they did not provide pre-compiled answers to respondents). (17:57)

1

  • There is a difference in the criteria consumers use according to the channel as well. (19:08)

1

  • Expanding on the previous findings, researchers gave respondents various options and asked them to choose which of these options described the reasons they selected the channel. With this guidance, it is possible to see a breakdown of what consumers mean by convenience and product variety. (22:12)

1

  • Contractors are also shifting channels. Forty-five percent of contractors said they had tried new suppliers in June and July. While this is not unusual, “it’s typically below 20% within a ‘normal’ year.” As for why they are trying these new suppliers, quality, availability, service, and pricing are the top reasons.
  • It is still unclear if these preferences will continue as supplies and stocks stabilize, or the lasting impact of this trend in the market. However, both DIY consumers and contractors have indicated they plan to maintain their new habits after the pandemic. One survey also discovered that consumers are more loyal to new channels and brands they bought in quarantine.

Trend #4: Outdoor Projects

  • Americans are trying to make their homes a more pleasant space to spend time. They are also not able to travel or spend much time outside, which led to a great interest in outdoor home improvements.
  • Frank Owens, senior vice president at QUIKRETE, noted: “We’ve averaged about ten million views of our QUIKRETE® how-to project videos in the past several months, which is about 2.5 times more than the same time last year. That’s a clear indication that homeowners are focused on outdoor projects like concrete patios and fire pits so families unable to travel or take a vacation can get the most out of their backyard.”
  • A survey conducted by Houzz reported that outdoor space was the number one area consumers were looking to upgrade (27%), a departure from the usual kitchen/bathroom trend from previous years. Parents (54%) are more likely to make outdoor home improvements than non-parents (46%) and to take on pool projects (26% versus 10%).
  • Dan DiClerico, home expert at HomeAdvisor, explains, “In the past, a deck or patio might have been seen as a nice amenity for occasional barbecues. But now this outdoor space is an essential expansion of the home’s living space.”
  • He further adds that there is also an increase in biophilic designs, those that create a connection to nature. “At the high-end, we’re seeing expansive walls of glass, which create a seamless transition into outdoor living rooms. When that’s not in the budget, homeowners are using outdoor plants, natural materials and nature-inspired paint colors to enhance their home’s feeling of biophilia.”
  • An analysis of Amazon’s search data (US) for the month of May shows that Americans looked for “super glue” 1.6 million times, while “solar lights outdoor” was researched 2.2 million times. Pool related searches amounted to 5.4 million, “bird/squirrel” feeders to 5.8 million, and Trampoline searches to 3.4 million.
  • Other common searches included “fire pit,” “grill cover,” and “outdoor furniture.” Additional notable DIY searches included “measuring tape,” “outlet covers,” “light bulbs,” “spray paint,” “ceiling fan,” and “command strip.”
  • The impact of this trend is evident in some segments. Prefabricated pool and spa sales saw a spike in demand, decking sales are up, and outdoor furniture sales saw “unprecedented sales growth.

Trend #5: The New Shopping Journey Includes Multiple Channels and Tools

Channels and Tools

  • Farnsworth asked consumers if they look for information online, offline, or other methods (e.g., family and friends). Surprisingly, other information sources are still more relevant than online sources, even for consumers purchasing from online-only retailers.
  • Researchers asked consumers what sources they were using to get information specifically about home improvement projects or products, and discovered that age and channel influence their decisions. The following chart shows the three top consumer choices in each category (online, offline, others): (24:40)

1

  • Age and gender carry more weight than online versus in-store preferences. Women are more likely to seek the opinions of friends/relatives and salespersons and consider reviews. On the other hand, men are turning to online videos, manufacturer websites, and social media for information. (26:30)

1

  • Age also significantly influences how consumers look for home improvement information online. Online “how-to” videos resonate with younger generations, while older consumers tend to prefer the opinions of friends and family and salespersons. There are also small differences regarding which social media platform they use to get information. (28:00)

1

  • Facebook and Instagram are prevalent for both online and in-store consumers. Nonetheless, combined with the previous finding that indicates discount store consumers as more likely to buy online, it is reasonable to conclude that online shoppers are more likely to use social media to get information than in-store shoppers, and to see their preferences:

1

  • Desktop is still the most commonly used by 62% of American home and garden consumers. However, mobile is gaining traction.
  • When asked what home improvement activities they are doing on their mobile devices, retailers apps are a popular choice, both for researching products and comparing prices. (29:00)

1

  • Furthermore, age also influences how they buy and interact with retailers and other digital services during their shopping journey, regardless of the device. For example, Baby Boomers and Gen Z are almost as equally likely to use a retail store app to buy home improvement products. (31:00)

1

  • Finally, the channel may not make a huge difference for social media platforms, but it does affect digital services used for home improvement purchases. Consumers buying from online-only retailers and discount stores (more than 50% buy online) are most likely to use numerous digital services during their journey. Once more is possible to see that discount store and online-only consumers are more likely to use all digital tools available than in-store consumers, even in-store scanning. (32:00)
1

Home Improvement Market Size

The US home improvement market is currently worth at least $425 billion. It is expected to grow by 2% to 4% within the next three to five years.

Market Size

  • According to Forbes, the US home improvement industry is worth over $425 billion, fueled by the growth of home values, the significant increase in the revenue of companies like Home Depot, and the wave of millennials buying homes. The market has reportedly been growing at almost twice the rate of other sub-sectors in the retail industry.
  • In 2017, Harvard found that US homeowners spend around $383.3 billion on home improvement. According to Home Advisor, this figure does not factor in any work done on unoccupied homes that are being remodeled by an investor and work done by “those prepping their homes for sale, in a year the index doesn’t take place.” Home Advisor estimates a total of $400 billion when these factors are accounted for.
  • In 2018, home improvement sales in the US reached $394 million.

Growth

  • The home improvement market is expected to grow by between 2% to 4% within the next three to five years. Prior to the pandemic, the forecast growth was around 4%. Despite the fact that more Americans are remodeling their homes in the COVID-19 era, experts predict a decline in growth as the COVID-19 pandemic dissipates. As a result, based on data published in June 2020, the US home improvement market is forecast to grow by 2.1%.
  • Based on the Leading Index for Remodeling Activity, home improvement spending in the US is growing at 6% or more annually, compared to an annual growth less than 6% in 2014.
  • In January 2019, the Joint Center for Housing Studies of Harvard University reported that US renovation and repair spending grew by 7.5% in 2018, but is forecast to shrink to 5.1% by the end of 2019.

COVID-19 Effect

  • Amid the COVID-19 pandemic, more US homeowners are tackling home improvement projects. According to Houzz, over 50% of homeowners “in the midst of home renovation projects mid-March continued their renovations during the pandemic and nearly 80% of homeowners planned on completing home improvement projects in the short term.”
  • From March 2020 to June 2020, home improvement retail sales grew by 11.8%, despite retail sales for the rest of the retail industry decreasing by 3.6%.
  • Between March to May, almost 60% of US homeowners finished a home improvement projects. These individuals spent $1,750 on average, on these projects.
  • A study by Bank of America showed that 70% of Americans decided to undertake a home improvement project in the COVID-19 era. LightStream conducted a similar study and found that 75% of US homeowners still plan on tackling a home improvement/renovation project in 2020 despite the pandemic.

Additional Insights

  • While the majority of home improvement projects Americans undertake are under $5,000, large projects like kitchen renovations are becoming more popular.
  • In 2018, most homeowners reported spending $5,000 to $10,000 on home improvement projects, with US homeowners in “more densely populated and metropolitan areas spending closer to $18,000.”
  • Americans with several properties and higher incomes tend to do home improvement projects more frequently. In 2018, up to 25% of homeowners spent $10,000 to $25,000 on their home improvement projects.
  • The most requested home improvement projects – verbatim – are, remodel a bathroom (average of $9,275 spent on this project), paint or stain a home’s exterior ($2,647), install central A/C ($5,250), build an addition ($40,825), build a deck or porch ($6,935), install concrete patios, walks and steps ($2,443), install drywall ($1,639), install asphalt paving ($4,169), build a garage ($25,008), and remodel a basement ($18,807). On average, Americans spend $14,000 on kitchen renovations, $8,000 on master baths, $3,500 on guest baths, $3,400 on the living room, $2,000 on master bedrooms, $1,500 on dining rooms, and $1,500 on home offices, and $1,500 on laundry room renovations.
  • Almost 60% of Americans renovate because they “finally have the means to do so,” while 25% take on renovation projects because they’d like to customize a home they just purchased. Less than 20% of US homeowners undertake home improvement projects to repair damage caused by age or to make room for lifestyle changes like a child.
  • The median amount of hardware store purchases per homeowner is $22. The top home improvement-specific purchases are paint (71%), light fixtures (55%), and faucets/shower heads (52%). Home Improvement Purchases

E-Commerce Home Improvement Market Size

According to IBISWorld, the online hardware and tools sales in the United States was expected to reach $11.9 billion in 2019, which will put the average annualized industry growth at 10.7%. Between 2019 and 2020, the market is expected to grow by 3.2% to reach $12.1 billion.

Home Improvement Market Size and Growth

  • According to estimates from Internet Retailer, the United States home improvement and hardware e-commerce revenue was $40.26 billion in 2017; a growth of 23.3% over revenue in 2016. With total retail sales in the category totaling $435.41 billion, e-commerce represented 9.2% of total sales in the category.
  • In 2018, furniture and DIY retail sales totaled $282 billion with online sales accounting for 10% of the sales. This means that the furniture and DIY online sales was approximately $28.2 billion (10% of $282 billion). Online sales in these categories grew by 16% in 2018.
  • According to data from the United States Department of Commerce, the total e-commerce sales for furniture and home furnishing in 2018 was $51.49 billion and $48.66 billion in 2017.
  • Statista, on the other hand, pegs the total e-commerce sales for furniture and home furnishing products in 2019 at $42.29 billion. Statista also estimates that the total e-commerce sales in the category will reach $54.23 billion by 2024.
  • Based on the Statista projections above, the e-commerce sales for furniture and home furnishing products is expected to grow by 5.1% (calculations below) between 2019 and 2024.
  • According to IBISWorld, the online hardware and tools sales in the United States was expected to reach $11.9 billion in 2019, which will put the average annualized industry growth at 10.7%. Between 2019 and 2020, the market is expected to grow by 3.2% to reach $12.1 billion.

Additional Information

  • Based on 2017 e-commerce sales data, the biggest players in the hardware/home improvement market include Amazon (25%), Home Depot (17%), W.W. Grainger (15%), Lowe’s (8%), Houzz (7%), and MSC Industrial Supply (4%).
  • Between 2016 and 2017, Amazon’s revenue from hardware/home improvement increased from $7.89 billion in 2016 to $10.17 billion in 2017; an increase of 29%.
  • Thirty-three percent of customers who have bought home improvement products have bought online, with 5% purchasing all they needed exclusively online and 28% using a combination of both online and in-store channels.
  • The average online spend for home improvement products is $941 compared with $1,371 for those buying in-store.
  • In May 2019, “U.S. hardware sales across online and in-store were up 36.2% compared to 2019.” Also, “furniture sales grew 7.5% year-over-year in May, the strongest growth rate for the sector since August 2018.”
  • According to Euromonitor, “E-commerce retailing in home improvement has the lowest channel share of any home and garden category because consumers looking to begin a home improvement project generally need two things: the products needed for the job, and expertise and advice on how to get the job done.”

Leave a Reply