Changes in Contractor Channel Behaviors

The home improvement market has seen strong growth over the last five years and home improvement products are expected to reach nearly $400 billion this year according to Home Improvement Research Institute.  With home values increasing, consumers are investing in their homes and many are hiring professionals to do those projects. 

 HomeAdvisor/Farnsworth Index - 2018, Q2.  'How do you expect your company’s revenue to change over the next 12 months?'

HomeAdvisor/Farnsworth Index - 2018, Q2.  'How do you expect your company’s revenue to change over the next 12 months?'

The professional segment of home improvement products market has increased by 3% or better over the last few years.  Revenue growth in this segment is expected to continue in 2018 and through 2019.  In the recently released HomeAdvisor-Farnsworth Index, a study that monitors business confidence among trade professionals, nearly all pro’s surveyed stated that they expect their revenues to grow in the next twelve months with increases of between 11 and 22%.

The channels that serve this market are also benefiting from this growth.  The Farnsworth Group is regularly studying channel behavior of contractors and we've noticed some subtle shifts in recent years dues to the changing importance of key channel drivers such as Price, Service, Selection, Availability, Quality.

Where do Pro’s shop for building materials?

As we know, all varieties of trade professionals utilize home improvement warehouse stores (Lowe's, Home Depot, etc.) though the amount they spend, and categories they purchase at big box may vary.  While specialty suppliers are a distant second overall, they are gaining ground especially among specialty trades and/or select categories.  Lumber & Building Material Dealers have seen a dramatic shift over the last decade in large part due to the recession and consolidation of that channel.  However, like specialty suppliers, they are seeing small gains as the housing market continues to maintain a slow, steady growth rate.

 Home Improvement Research Institute 2017, Q2. 'What percent of all your current purchases of tools, supplies, and building materials are coming from each of these suppliers—in store or online?'

Home Improvement Research Institute 2017, Q2. 'What percent of all your current purchases of tools, supplies, and building materials are coming from each of these suppliers—in store or online?'

As for online, it certainly hasn't had the immediate growth some experts expected.  Online purchase penetration is still very dependent upon category.  Those categories that are price sensitive and/or categories with a high requirement for options/finishes/aesthetic have the highest online purchase incidence.  Think power tools and finish plumbing.

Purchase Channel Satisfaction

Although many trade professionals shop for their materials at the home improvement warehouse stores, satisfaction ratings are higher with specialty suppliers.  Contractors are most often satisfied with home improvement warehouse stores due to price and convenience.  Specialty supplier excel with selection, customer service and quality.  Each channel type delivers better in certain areas, and depending on market dynamics, what they deliver may help or hurt.

 Home Improvement Research Institute - 2017, Q2. 'How satisfied are you with purchases at your primary supplier?'

Home Improvement Research Institute - 2017, Q2. 'How satisfied are you with purchases at your primary supplier?'

Today, contractors are often trying to keep their heads above water.  Due to a healthy construction market, larger project requests, limited labor and ever changing codes, contractors are placing more value today on channel drivers like service, selection and quality.  With less emphasis on convenience and price which were critical during the recession.  Thus causing some shifts in what contractors want and where they go to get it.

The Future of Pro Purchases Online

Although most contractors purchase building products in a physical store, online sales are increasing.  Over 30% of professional surveyed expect their building products online purchases to increase.  Only a small percentage of over 1,000 contractors surveyed said they would decrease their online purchase.

As with consumers, ecommerce gives contractors today more options to purchase building materials.   The major home improvement warehouse stores have made great effort to focus on this segment and are winning the wallets of consumers and contractors alike. Online channels, although small today, continue to increase.  Even if they aren't being used as much as expected out of the gate for purchases, they are a vital component of research and information being gathered by professionals online. 

As omnichannel evolves, the ease and convenience of purchasing building materials online remains an ever present disruption for traditional brick and mortar. 

Written by: Amy Theophilus, atheophilus@thefarnsworthgroup.com