LBM operations nosed out big-box stores to become the preferred shopping source for small, general-service remodelers in 2008, a new study by the Home Improvement Research Institute (HIRI) finds. But the study's author believes the economic slump figured heavily in the swing, and he notes that specialty remodelers continue to rank LBMs fourth in popularity behind wholesalers, specialty suppliers and the big boxes.
HIRI based its just-released findings on a telephone survey earlier this year of 538 general and 1,203 specialty remodelers. The poll also carved out results from 100 Hispanic-owned general contractors, who unlike their non-Hispanic counterparts tended to be much more loyal to the big boxes.
The survey group defintely qualify as small-business people: the median annual sales volume was $103,000 for generalists and $178,000 for specialists, and the median number of fulltime employees was two for generalists and three for specialists. The specialists were spread more or less evenly among 12 subgroups, including carpentry, paint/wall covering, plumbing, electrical, roofing, siding/windows, and drywall/plaster.
Compared with previous years in the biannual survey, generalists bought significantly more lumber, drywall, doors, windows, hardware, roofing, siding, kitchen/bath, and installed finished materials, the study found. Phil Harriau of The Caney Group, a Monroe, Conn.-based marketing research firm that did the survey for HIRI, said he believes this is due in part to the economy.
In the past, generalists were more like general contractors that hired subcontractors to do various projects, Harriau said. That also meant it was the subcontractors--specialists, usually--that bought the building materials. Now that generalists are doing more of the work themselves, they also appear to buy more of the building materials, Harriau said. And because generalists tend to prefer building material dealers, LBMs benefited.
For instance, the percentage of generalists who said warehouse home centers were their first choice for buying goods dropped from 42% in 2003 to 39% in 2005, 34% in 2007 and 35% in 2009. Meanwhile, the percentage of generalists who preferred LBMs rose from 29% in 2003 to 34% in 2005, slumped to 22% in 2007 and shot up to 36% in 2009.
The study notes that while LBMs are back on top, it's not the big-box dealers that suffered. Rather, it was the wholesale distributors and specialty supply houses that appeared to lose market share. The percentage of generalists who made wholesale distributors their first choice for products sank from 22% in 2007 to 13% in 2009, while the drop at specialty supply houses went from 13% in 2007 to 8% this year.
In contrast, specialists were far less volatile in their choices over the year. In 2009, their top preference was, in order, wholesale distributors (34%), specialty supply houses (28%), warehouse home centers (17%), lumber and building supply dealerships (8%), direct from the manufacturer (6%) and other sources (7%).
Generalists said they used LBMs most often for three types of products:
- Lumber, drywall, decking, fencing and shutters
- Doors, windows and millwork
- Roofing, siding and insulation
In contrast, warehouse home centers were regarded as the favorite shopping place for generalists seeking tools, hardware, paints, electircal goods, kitchen/bath products, and landscaping supplies. Wholesale distributors didn't come out on top among generalists for any category, and specialty suppliers finished first among generalists in just one are: interior finish products like floor coverings, carpeting and tile.
Ironically, warehouse home centers were preferred over LBMs by generalists despite the fact that the remodelers gave dealers higher scores on 16 of 17 service factors, such as on-time delivery, competitive pricing and products in stock. Dealers even beat warehouse home centers for flexible credit programs and location. Specialists were just as partial toward dealers.
However, Harriau noted that the survey didn't ask remodelers to rate the relative importance of those service categories. As a result, while dealers might nip big boxes 44% to 42% on competitive pricing, this area might rank so much higher in importance among respondents that it overshadows the other factors, and thus helped warehouse home centers end up being so popular.
In one area, the big boxes dominated: appealing to Hispanic-owned firms. Roughly 64% of the Hispanic-owned general contractors said they used big-box stores most for their purchases vs. only 17% that went first to dealers.
HIRI's full survey results are restricted to members of the institute. To join, visit the HIRI website.