Home Centers & Hardware Stores
Description
Companies in this industry sell building supplies, lumber, hardware, tools, and other home repair and improvement products. Major companies include Home Depot, Lowe's, Menards, and True Value (all based in the US), as well as Kingfisher (UK), Leroy Merlin (France), OBI (Germany), and RONA (Canada).
The global home improvement market is projected to reach about $1.3 trillion by 2034 from about $900 billion in 2024, with a compound annual growth rate (CAGR) of 4%, according to Global Market Insights (GMI). Surging focus of people on zero-waste DIY projects to create an eco-friendly home is likely to reveal rewarding opportunities for the market growth.
The US home centers and hardware stores industry includes about 21,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $195 billion.
Home centers and hardware stores sell many of the same products, but home centers typically offer more building supplies (such as lumber and flooring) and appliances than hardware stores.
COMPETITIVE LANDSCAPE
Home remodeling and repair and new homebuilding drive demand. The profitability of individual companies depends on low-cost purchasing, effective merchandising, and competitive pricing. Large companies can offer wide selections, supply high-volume goods to builders, and have advantages in purchasing, finance, distribution, and marketing. Small companies can compete by offering specialty products, providing superior service, or serving a local market. The home center segment of the industry is highly concentrated: the top two companies dominate. The hardware stores segment of the industry is fragmented: the 50 largest firms account for about 40% of industry revenue.
Competition includes building supply wholesalers and distributors, lumberyards, mass merchandisers, warehouse clubs, and internet retailers. US home improvement sales are moving increasingly online, positioning Amazon to take market share from legacy players and spurring home centers Home Depot and Lowes to build out their omnichannel retail models.
Many of the products sold in home centers and hardware stores are imported, with China being a major source. The escalating trade war between the US and China resulted in the imposition in May 2019 of a 25% tariff on imported building material. Additional tariffs imposed in September on some $300 billion in Chinese products, when combined with previous tariffs, tax nearly all Chinese goods, including cabinets, flooring, plumbing, major appliances, and tile. Higher materials costs due to tariffs are dampening demand for new home construction and remodeling projects and may result in lower sales and higher prices at home centers and hardware stores.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products for US home centers and hardware stores include hardware, nonpower hand tools, and other building materials and supplies (about 35% of revenue); plumbing, electrical, and HVAC supplies (about 15%); and home lawn and garden goods (about 10%). Building supplies include doors, windows, masonry supplies, cabinets, and countertops. Lawn and garden supplies include lawn care machinery; outdoor nursery stock (trees and shrubs); and fertilizers. Home centers often carry a full line of appliances. Companies may also offer installation, delivery, design, or tool rental services.
The industry includes national and regional chains and independent retailers. Membership in a cooperative, such as True Value or Ace, allows independent retailers to leverage a national name and benefit from volume discounts. Cooperative members may receive payouts or dividends based on how well the co-op performs.
Do-it-yourself (DIY) projects generally refer to customers buying products and performing work themselves. Do-it-for-me (DIFM) refers to projects where home improvement retailers supply and install products. Companies typically rely on third-party contractors for installations.
Large stores require significant amounts of real estate and are typically located in major retail centers to capitalize on heavy traffic. Locations for independent retailers include secondary strip malls and small town centers.
Inventory varies according to store type. Home centers stock more lumber and building supplies because many customers are building contractors. Large home centers carry between 30,000 and 40,000 stock-keeping units (SKUs) and typically have wide selections within product categories. While independent hardware retailers offer a more limited selection in stores, cooperatives offer members access to a broad range of inventory. Companies using a "good-better-best" merchandising strategy may carry products at different price/quality levels, including national brand names, exclusive brands, and private-label products. Periodically, companies may have line reviews for a category to decide which products or brands to add or drop.
Companies buy inventory from manufacturers, cooperatives, distributors, and importers. The supply side of the industry is fragmented. Large chains and cooperatives typically have extensive distribution networks to facilitate shipping from suppliers to stores. Special distribution centers may stock large items, items requiring special handling, imports, special orders, or internet sales. Effective supply chain management has allowed large companies to realize significant cost savings and keep prices low. Imports are an important source of supply in the power tool, hardware, and lumber categories. Imported power tools and hardware come primarily from China and Mexico and softwood lumber imports come primarily from Canada.
The global home improvement market is projected to reach about $1.3 trillion by 2034 from about $900 billion in 2024, with a compound annual growth rate (CAGR) of 4%, according to Global Market Insights (GMI). Surging focus of people on zero-waste DIY projects to create an eco-friendly home is likely to reveal rewarding opportunities for the market growth.
The US home centers and hardware stores industry includes about 21,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $195 billion.
Home centers and hardware stores sell many of the same products, but home centers typically offer more building supplies (such as lumber and flooring) and appliances than hardware stores.
COMPETITIVE LANDSCAPE
Home remodeling and repair and new homebuilding drive demand. The profitability of individual companies depends on low-cost purchasing, effective merchandising, and competitive pricing. Large companies can offer wide selections, supply high-volume goods to builders, and have advantages in purchasing, finance, distribution, and marketing. Small companies can compete by offering specialty products, providing superior service, or serving a local market. The home center segment of the industry is highly concentrated: the top two companies dominate. The hardware stores segment of the industry is fragmented: the 50 largest firms account for about 40% of industry revenue.
Competition includes building supply wholesalers and distributors, lumberyards, mass merchandisers, warehouse clubs, and internet retailers. US home improvement sales are moving increasingly online, positioning Amazon to take market share from legacy players and spurring home centers Home Depot and Lowes to build out their omnichannel retail models.
Many of the products sold in home centers and hardware stores are imported, with China being a major source. The escalating trade war between the US and China resulted in the imposition in May 2019 of a 25% tariff on imported building material. Additional tariffs imposed in September on some $300 billion in Chinese products, when combined with previous tariffs, tax nearly all Chinese goods, including cabinets, flooring, plumbing, major appliances, and tile. Higher materials costs due to tariffs are dampening demand for new home construction and remodeling projects and may result in lower sales and higher prices at home centers and hardware stores.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products for US home centers and hardware stores include hardware, nonpower hand tools, and other building materials and supplies (about 35% of revenue); plumbing, electrical, and HVAC supplies (about 15%); and home lawn and garden goods (about 10%). Building supplies include doors, windows, masonry supplies, cabinets, and countertops. Lawn and garden supplies include lawn care machinery; outdoor nursery stock (trees and shrubs); and fertilizers. Home centers often carry a full line of appliances. Companies may also offer installation, delivery, design, or tool rental services.
The industry includes national and regional chains and independent retailers. Membership in a cooperative, such as True Value or Ace, allows independent retailers to leverage a national name and benefit from volume discounts. Cooperative members may receive payouts or dividends based on how well the co-op performs.
Do-it-yourself (DIY) projects generally refer to customers buying products and performing work themselves. Do-it-for-me (DIFM) refers to projects where home improvement retailers supply and install products. Companies typically rely on third-party contractors for installations.
Large stores require significant amounts of real estate and are typically located in major retail centers to capitalize on heavy traffic. Locations for independent retailers include secondary strip malls and small town centers.
Inventory varies according to store type. Home centers stock more lumber and building supplies because many customers are building contractors. Large home centers carry between 30,000 and 40,000 stock-keeping units (SKUs) and typically have wide selections within product categories. While independent hardware retailers offer a more limited selection in stores, cooperatives offer members access to a broad range of inventory. Companies using a "good-better-best" merchandising strategy may carry products at different price/quality levels, including national brand names, exclusive brands, and private-label products. Periodically, companies may have line reviews for a category to decide which products or brands to add or drop.
Companies buy inventory from manufacturers, cooperatives, distributors, and importers. The supply side of the industry is fragmented. Large chains and cooperatives typically have extensive distribution networks to facilitate shipping from suppliers to stores. Special distribution centers may stock large items, items requiring special handling, imports, special orders, or internet sales. Effective supply chain management has allowed large companies to realize significant cost savings and keep prices low. Imports are an important source of supply in the power tool, hardware, and lumber categories. Imported power tools and hardware come primarily from China and Mexico and softwood lumber imports come primarily from Canada.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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