Moderate growth, immense potential
“Brands in this sector are putting more effort into developing emotional connections with consumers to take advantage of the “IKEA effect.”
The global home improvement market is growing. Mexico is emerging as a fertile and important market, thanks to its growing middle class. The Home Depot, the leading home improvement retailer in the U.S., is strengthening its existing operations south of the border in the expectation that Mexico is projected to add 14 million homes over the next 25 years.
Despite global opportunity for the sector based on population growth and an increase in dual income families, The Home Depot has only been successful in North America. It found its big box format to be a logistics challenge as well as a cultural mismatch in both China and South America. In China, for example, consumers aren’t particularly interested in DIY, how-to videos, or in-store remodeling forums. After closing its big box stores in the country, the chain is now shifting its focus to e-commerce in the hopes of winning over younger Chinese customers.
In Latin America, France-based Leroy Merlin is one of the largest home improvement brands based on sales, even though it has fewer stores than competitors C&C, Telhanorte, and Sodimac. Leroy Merlin credits its success to a rich merchandise mix, its online channel, and a clean, unique presentation style. Besides the usual home improvement tools and supplies, the store also carries home furnishings, ensuring that any household project—from renovation to redecorating—has a high probability of ending in a shopping trip to Leroy Merlin.
The biggest home improvement brand in Asia is Thailand’s HomePro. It stands out in an increasingly competitive market with an extensive footprint, as well as a commitment to meaningful customer service that helps do-it-yourselfers make more informed choices and get better results. It builds community through its quirky advertising as well as clever promotions like The Other Side Project, which was created to help local poor people who use sidewalk billboards to build or repair their street shelters. In this dual-purpose campaign, HomePro created billboards with its advertising message on one side, and wallpaper and a fixture—such as a shelf, reading light, or closet rod—on the other. As soon as the campaign ended, locals were free to use these signs to improve their homes.
Bunnings Warehouse continues to capitalize on Australia’s fascination with home improvement. Recently recognized as one of the country’s most trusted brands, it has built its reputation on community and authenticity. This year, Bunnings took a big, much-needed step in developing its e-commerce channel, bringing it more in line with the brand’s in-store experience. An omnichannel presence will help Bunnings compete against new entrant, Masters Home Improvement, a joint venture between Woolworths and U.S.-based Lowe’s.
While promotions and low-price offers are still the norm, brands in this sector are putting more effort into developing emotional connections with consumers to take advantage of the “IKEA effect,” the high value consumers place on products they partially create and projects they do themselves. High service levels are a must as is mobile technology, which gives customers and store associates access to more products and information. Overall, the global home improvement retail market will continue to grow, while its leading players get even better at meeting consumer demand.
To remain relevant in an increasingly competitive sector, top brands are creating meaningful experiences for their customers and communities. Shoppers are encouraged, inspired, and supported with service and instruction. Internationally, companies continue to experiment with the best way to expand.
Home Improvement Innovations and Opportunities
Engage the imagination with 3D visualization
Latin America’s Sodimac created a mobile app that lets shoppers view its catalog in 3D. Thailand’s HomePro helps aspiring home improvers via its in-house design consultation service, which features a 3D system for improved visualization.
Collect shopper insights continuously
Leroy Merlin launched a Housing Observatory to identify new trends and spur innovations. Insights gained into its customers’ lives will help the brand inspire its customers, stay relevant, and adapt to local markets.
Differentiate via display techniques
Recognizing that big box home improvement stores can be hard to shop, U.S.-based Lowe’s has changed is merchandising strategy to focus on highly innovative products, significant values, and its exclusive private and national brands. To remain relevant and drive high-margin sales, the retailer also revamped its seasonal promotional spaces.
Dynamic price tags lure shoppers
French DIY chain Castorama is using dynamic price tags to change the price of a product based on demand and time of day. Not only is the task of manually adjusting price stickers eliminated, the electronic tags can be changed in real time. Items can be made cheaper during off-peak hours to encourage shoppers to visit at those times.