With about a month to go before Kantar’s annual Home Improvement Workshop, our team has been busy dissecting the channel landscape and creating content to help clients better align with retailer trends. In a year of notable changes related to the economy, retailer strategies, and shopper needs, I wanted to share a few thoughts that are top of mind as we prepare for the event.
To start, I believe that whether you are a DIY channel veteran or a team member tasked with identifying new avenues for growth, the home improvement channel poses a ripe opportunity for traditional channel players and CPG suppliers alike. That said, aligning with retailers in this channel will be different in 2019 and beyond than it has been in recent years. While the channel has benefited from a strengthening macro environment, even outpacing the all-retail average growth rate for seven consecutive years, 2019’s transition to a post-recovery economy creates new implications for driving success at Home Depot and Lowe’s.
Preparing for Macroeconomic Climate Change
Because the home improvement channel is closely tied to macro trends, a potential economic slowdown means that retailers must rely on their own operations — not macro tailwinds — to sustain growth. On the economic horizon, slowing income gains, tax reform’s fading windfall, and increasingly unaffordable housing mean that shoppers, especially younger generations, may choose to invest in their existing homes instead of purchasing new ones in the near term.
In response, Home Depot and Lowe’s have invested significantly in their businesses. Since 2017, they have rolled out new supply-chain capabilities, omnichannel connections, and store refreshes. A year into its USD11 billion strategic investment, Home Depot has been assessing key pain points, such as new supply-chain pressures, and implementing new ways of working to adjust initiatives to be more efficient. A more significant change is underway at Lowe’s. A new leadership team and strategic vision focused on core and fast-moving SKUs, improved inventory management, and a greater emphasis on the pro shopper reinforce the importance of financial discipline and productivity in 2019 and beyond.
Key supplier questions:
- Do you understand how a potential future slowdown compares with previous economic downturns in terms of how it might impact the housing market and different generations?
- Are you working to drive more productivity in your campaigns with retailers?
- Are you prepared to shift your merchandising strategies to better align with retailers’ priorities?
Aligning With the Shifting Roles of Key Categories
With productivity top of mind for both Home Depot and Lowe’s, the role of certain categories, such as fast-moving consumables, becomes more prominent in retailers’ strategies. As these categories gain significance in home improvement, suppliers will need to consider not only how their SKUs can partner across categories with these types of products, but also how shoppers’ motivations and preferences for purchasing consumables in home improvement are changing.
For example, an increasing proportion of Lowe’s consumables shoppers is purchasing consumables on impulse or as a basket builder (Figure 1). Suppliers that introduce consumables SKUs as part of a solution or that pair these SKUs with traditional home products can help generate incremental sales — and align with Lowe’s goal to improve conversion and build its brand as “the project authority.”
Figure 1. Reasons for Purchasing Consumables on Last Trip to Lowe’s
Source: ShopperScape® July 2017 and July 2018
Key questions for CPG suppliers:
- Are you capitalizing on the opportunity to drive incremental sales in the home improvement channel?
- Do you understand DIY shoppers enough to plan for their differentiated needs?
Key questions for traditional home suppliers:
- Are there opportunities to pair your products with faster-moving SKUs in a cross-category or seasonal solution?
- How will your strategy need to change based on varying preferences at Home Depot and Lowe’s?
Assessing the Professional Contractor Opportunity
With the professional contractor consistently outpacing consumer sales growth and driving big-ticket sales, Home Depot and Lowe’s are doing more to serve this lucrative shopper segment. They have introduced pro-focused digital tools, trusted pro brands, job-lot quantities, and additional associate support in stores. Retail partners that can drive deeper connections with the pro segment will find success.
Key supplier questions:
- Do you have a strategy for connecting with pro shoppers?
- Have you considered how this unique segment may interact differently with your products than the consumer segment does, and what that means for your assortment and promotional planning?
While home improvement is an untapped opportunity for many, the need to align with changing macro, retailer, and shopper dynamics will be key to creating and maintaining growth in this channel. For an in-depth look at the themes impacting the channel and answers to these key questions with actionable insights to grow your business at Home Depot and Lowe’s, please join Kantar’s home improvement experts at our Home Improvement Workshop on June 18 in Charlotte, N.C.
For more information, please contact:
Hannah Hayes, Senior Analyst
Doug Hermanson, Principal Economist
Laura Kennedy, Vice President