Retailers Risk Losing Millennials’ Support If The Home Remodeling Industry Doesn’t Move Online
If you read part one of this series, The Home Remodeling Industry Will Fail Unless Retailers Do This, you know I strongly believe that retailers are in a position to help move the construction industry forward by embracing technology and educating homeowners and contractors. I also feel retailers have a lot to gain from taking on this role.
That said, if retailers don’t embrace this industry shift, they face certain dangers as we move into the future, with online retailers slowly munching bite by bite on the brick and mortar businesses. As seen in the chart below from Bloomberg Finance, it is only a matter of time before Amazon overtakes traditional brick and mortar retailers if they don’t evolve.
7 Dangers Facing Construction Retailers In 2017
Here are the trends retailers should be thinking about:
- Amazon. Amazon is the #1 threat to brick and mortar retailers. According toStatista, Amazon did over $107 billion in revenue in 2015. This is a company that has been widely successful in its ventures and if you look at its track record, does not fail. It’s quickly moving into the construction industry and has its sights set on retailers like Home Depot and Lowe’s in the same way it targeted home goods providers like Wal-Mart. It also recognizes and knows how to be a marketplace, not just a store.
- Online Presence. Most retailers rely on their brick and mortar stores and, unlike Amazon, have not figured out how to create a compelling digital experience. The Millennial demographic expects to be able to make purchases online and 24/7. If retailers don’t adjust, they will be left behind as Millennials advance to the next age group.
- Customer Retention. People who shop at Amazon become returning customers and almost never leave! Every time a customer buys something from Amazon, they are more likely to return to Amazon for their next purchase. Digital retention is very strong because it capitalizes on the fact that we are busier than ever, and doing things online is the number one choice. The same cannot be said for customers who shop in-store at Home Depot or Lowe’s. Oftentimes, customers will go to the retail store nearest them at the time of purchase and have little brand loyalty. The same applies to the contractors who shop there and represent a large part of the business.
- Customer Loyalty. Customers are loyal to those who make things both convenient and less expensive. Brick and mortar retailers are not as convenient as shopping online from the comfort of your couch and not always less expensive. Often times, exclusive online deals and free shipping on orders actually make it cheaper to stay at home.
- Follow Through (Nurturing). Once a customer buys from a retail store, the retailer has no way to contact the customer after they leave the store. When a purchase is made online, a brand can send follow-up notifications or emails to gauge your experience and provide you with future newsletters, discounts, and information on your project. Retailers need to care about what happens after the sale. Nurturing a customer is one of the key tenets of the digital experience. It is virtually impossible to nurture a customer at a store. Identifying a potential buyer and making them into a buyer is what digital achieves that traditional businesses cannot
- Anticipation. A retailer is not armed with any customer information until the customer walks into the store and starts a conversation. When shopping online, a retailer can track a customer’s purchase history and make recommendations. It can anticipate other products the customer might need for their intended project. By tracking trends, a retailer can also determine what items to keep in stock.
- Become the middleman. In other words, be a marketplace, not only a store. While retailers like Home Depot and Lowe’s often refer contractors to customers, their involvement in the process stops at the referral. Retailers should be helping to educate both customers and contractors on working together to create bids and purchase supplies. By providing extra value to homeowners and contractors, you ensure lifelong customers and renewed business. As a matter of fact, retailers are best equipped to be the broker of all these activities, yet they can only do that by becoming a marketplace where services and product align to make it convenient and simple for the user.
The Home Remodeling Industry Solution
It’s clear that, as the offline industry of construction moves online, big retailers will need to remodel themselves if they wish to remain competitive and acquire and retain new customers.
Retailers should look to companies like Amazon to find ways to make their companies more appealing—read sexy—to the Millennial generation!
According to Forbes, Millennials are “already spending significantly [in the home improvement category,] despite their delayed intentions to purchase a first home. Millennials estimate that they spend about $52 per month within this category, slightly higher than average ($49). Younger shoppers are also clocking a higher five-year compound annual growth rate of spending (+5.4%) compared to the general population (+4.9%). Millennials certainly have home improvement spending power currently, and this trend is likely to grow—making this demographic a lucrative consumer for retailers to target in both the short and long term.”
Going online has its appeal for contractors who purchase supplies from retailers as well. “As contractors, we look for convenience because customers have become more demanding, and we are short on qualified labor. Online retail services are just more convenient than going to store. We know that it will take time but we are all waiting for that moment when we can do most of our purchases online and have it delivered to the site on time,” said Nick Giobres, Construction Manager at Verity Homes.
By incorporating construction technology, retailers can transform themselves into a marketplace. This will allow them to beat Amazon because they also have the brick and mortar stores lending a visual and personal experience that Amazon does not have. In other words, to beat Amazon a retailer needs to be better than Amazon. With the right commitment to innovation, technology, and hiring the right teams and talents, they can certainly succeed and attract both contractors and homeowners as long term customers. If they don’t embrace these changes, retailers are in danger of finding themselves in need of repair.