The Top 300 Scoreboard
Home Depot is No. 1, again, on the HBSDealer Top 300 Scoreboard, which tracks the leading retailers of the home improvement industry.
Lowe’s is No. 2, again.
But don’t be misled by the consistency of the front-runners. There is nothing static about the way home improvement products and building materials work their way from the manufacturer to the homeowner or home builder. It’s an overused word, but it applies in spades: Get ready for “disruption.”
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Consolidation is one of the big disrupters, and no area is seeing more than building products. Two of the previous list leaders, Stock Building Supply and ProBuild Holdings — perennial top 20 dealers — find themselves off the list as they were swallowed by BMC and Builders FirstSource, respectively.
Both companies last month described the integration programs as ahead of the duel.
Also moving up the Top 300 list is the biggest disrupter of them all: Amazon.com.
“If someone does $600 million in one day, they are your competitor,” Ace Hardware CEO John Venhuizen said. “They’re pretty good at what they do. They’re becoming everyone’s competition in almost every category to some degree.”
The Seattle-based retailer is on pace to become the world’s No. 2 global retailer next year, with 14% growth year-over-year. Forget drone delivery. It’s the company’s Amazon Home Services that’s the likely game-changer, according to Kantar Retail’s Laura Kennedy.
The Amazon Home Services concept was piloted in 2015 and now operates in 25 cities, connecting homeowners to an expanding pool of high-quality pros. Combine that with the company’s experimentation in two-hour delivery, and there’s a real case for impact, Kennedy said.
“Amazon is a prime example of a retailer that may be outside the traditional realm of your channel of home improvement but has the potential to have a really big impact on what shoppers expect and the way you approach retail,” she said.
Grant Farnsworth of The Farnsworth Group research firm has a phrase to describe another interesting phenomenon: “the uberization” of home improvement. And it’s not just DIY that faces a disruption, he said.
“The still-evolving space of online home services could mean a significant opportunity for building products companies and contractors alike as the “uberization” of sourcing, scheduling and communicating with service professionals continues to
gain traction.
“Like GM [General Motors] and Google investing in Lyft and Uber, [respectively], building product retailers and manufacturers have invested in online service platforms like Porch, Redbeacon, Paintzen and TaskEasy,” Farnsworth said.
The growth of these points to two things: the expectation of additional services-oriented revenues and the need to stay ahead of the competitors.
And then there’s the next generation of consumers.
“Younger homeowners have an increased awareness and usage of online home services, moreso than any previous generation,” Farnsworth said. “And as those in their 20s and 30s continue to enter the housing market, it’s only natural this evolving platform will grow with them.”
In addition to new competitors and new kinds of competitors, the Top 300 are feeling new pressure from existing retailers who are expanding their products and blurring traditional retail channels.
One prime example is at the top of the list, where Home Depot is working to boost its sales to pros. And it appears to be working, according to Ted Decker, executive VP of merchandising.
“We continue to see notable strength with our pro customers,” Decker recently told investors. “Pro sales grew faster than the company comp, led by our high-spend pro customers.”
For every location and business model of the Top 300, there’s a challenge. Those who made the list in 2016 are to be congratulated, but there’s an old saying in business: Results are no guarantee of future performance. And that applies more in an industry of shifting goal lines.