Now that we are a full six months into 2021, I think we are finally getting our collective arms around the whirlwind that was 2020.
I have been observing, analyzing and reporting on this industry for a half century, and I can honestly say we have never seen a year like what we’ve all just come through.
Let’s just set aside the pandemic protocols, the supply shortages, the price increases and the fact that consumers fundamentally changed how they shop. (I know that’s a lot to set aside, but bear with me).
Let’s instead focus on the monumental, unparalleled growth the home improvement industry experienced during the last nine months of the year.
For all of us that are close to the industry, we knew spending on home improvement was up. We knew it was up a lot. But it is only with a bit of perspective that we can now really digest what we just went through.
Every year, NHPA puts together a size of market report. We call it our Annual Market Measure, and we typically publish this report in December.
That means we regularly gather data and information for this report roughly around the middle of the third quarter. To be able to predict how the year will end, we have built some pretty simple predictive models that take into account several factors to estimate how we see sales progressing during the final months of the year.
We normally plug data in—and whiz bang, snap crackle—we have our size of market estimate for the year. Historically, we have always felt these models are highly accurate.
Well, these models weren’t built for 2020. In fact, our models indicated that the industry was likely going to end up seeing about 12.5% growth in 2020.
Now that we have started to see 2020 actuals roll in, we think the industry growth was nearly twice that—roughly about 22.5%. That means our industry registered nearly $500 billion in sales last year.
It wasn’t just sales that grew, either.
While sales at independent home improvement retailers were up dramatically, these operators managed to maintain margins. They also didn’t see big increases in expenses that typically go along with sales growth.
So what does all of this mean?
In simple terms, it means independent home improvement retailers had a year that few have ever seen before in terms of topline sales and profits.
What it also means was that these retailers were up to their elbows just trying to keep up with demand. Covering shifts, sourcing products, tracking down orders and adjusting operations to meet new regulations and restrictions added to the breakneck speed of running a retail operation last year.
And so far, 2021 doesn’t seem to be providing much of a change from the pace of sales retailers experienced last year.
But, and it’s a big but, retailers are still coming off of a year where they saw business and profits boom. So, this also means that they are going to look for ways to put this hard-earned surplus to good use.
They are going to be looking for ways to invest these profits and grow their operations.
When you combine this favorable cash position with the fact that we are just starting to head into the prime buying season for 2022, you have a scenario that is ideal for companies wanting to market their products and services to independent retailers.
However, retailers are going to be more pressed for time heading into this fall than ever. So, to get their products and services in front of time-starved retailers, vendors will have to be proactive with their outreach and messaging.
They will have to support the industry’s buying shows, they will have to ramp up marketing programs and they will have to fight for retailers’ valuable attention.
For the vendors that do this and manage to position their products in the right way, this could be a once-in-a-lifetime opportunity to grow market share or establish new relationships with retailers who appear to be poised for even greater growth during the near term.