August 21st, 2014
New Consumer Lens Opening Up Latent Demand for Home Center Purchases
Consumers are beginning to loosen their purse strings when it comes to spending on the home. Recent indicators suggest homeowners are beginning to shift sentiment around home goods purchases from a lens of expense to investment.
Varying economic news creates sensitivities for manufacturers and retailers regarding how they should invest in sales and marketing strategies in the foreseeable future. Consumer confidence levels are down to match levels from last November, while housing starts are positive. This mixed bag of economic indicators matches retail performance metrics. The basic consumer goods category faces barriers. Meanwhile, there is reason to believe pent up purchases around the home will continue to benefit those who can successfully position their goods and services around investing in consumer dwellings.
Recent second quarter earnings reports demonstrate a telling contrast between basic consumer-goods giants and home centers. While the Commerce Department reported flat retail spending in July, home center retailer The Home Depot is bucking the trend, turning in sales numbers good enough to drive its stock to a record high. In comparison, Walmart’s Q2 earnings sounded a consistent narrative for the world’s largest retailer. Traffic remains down since 2013, and increased average basket rings aren’t enough to push up comparable sales.
A key growth factor noted in this week’s positive numbers from The Home Depot includes purchases over $900, which are up 8.4% points, in contrast to $50 purchases, which saw only 3.1% growth (Q2 comps vs. prior year). Appliances, windows and flooring were noted as driving the big ticket basket rings. The Association of Home Appliance Manufacturers reports appliance shipments in July up 7.1% compared to last year. Laundry and dishwashers are key drivers within this category of growth.
Professional contractors, who work on the ground level with consumers around home investing corroborate the retailer data. A recent study of Pros by Sales Factory + Woodbine indicates 39% of Pros expect to be spending more over the next year (compared to only 8% who expect to spend less).