According to a housing market study conducted by Harvard University, residential construction has waned in the past decade, with just 8.98 million new units totaled between 2007 and 2016, well below the steady 15 million-plus average for decades since 1970. A lack of construction workers has detracted from the number of new homes for sale in the United States, and inventory is far from meeting current homebuyer demand. Due to the shortage of affordable homes, first-time homebuyers, many of which are Millennials, are opting to purchase homes in poor-condition with the intent of renovation.
Millennials are Powering the Renovation Boom
The results of the Houzz & Home annual survey confirm the uptick in renovation, as Millennials invested an average of $26,200 in 2016, seven percent more than they spent in 2015. The trend projects to increase pace into 2017, as over half of homeowners on the survey plan to continue or start renovations and the average expenditure on renovations is set to jump to $27,300. For first-time homebuyers and Millennials, renovation projects are not only economically feasible, but they also enable a healthy dosage of customization in the home design process.
More than Baby Boomers or Generation X, this new wave of homebuyers has grown up and matured with mobile technologies that provide convenience and flexibility. This new consumer culture not only expects but also demands a personalized experience out of brands and products. The ways Millennials have changed the retail industry are well documented. And, as the generation continues to mature and purchase houses, their tech-savvy, artistic, and acute preferences will profoundly shape the home improvement industry as well.
The Home Improvement Industry must Adapt
In order to keep pace with the ever-evolving market competition, home improvement companies must focus on embracing consumers and innovate according to their preferences. Today, new technologies and management platforms have facilitated the process of data acquisition. Likewise, new mediums of content have diversified the ways to delight customers. While advances have certainly been made towards consumerization, home improvement companies should continue to take advantage of several strategies:
1. Understanding and Engaging Consumers
Mining the right data and generating actionable insights allows companies to understand consumer preferences and develop market segmentations. This way, a company can predict the perfect time during renovation to market a specific product to a relevant consumer. Moreover, a company can use analytics to drive state-of-the-art innovation of new products. With influxes of data, implementing platforms to manage consumer data can allow companies to stay organized.
As companies better understand consumers, they can provide a more engaging experience through social media platforms. Instagram and Pinterest, specifically, provide gateways for home décor or interior design searches. Activity on these social media platforms can help build brand personality and funnel traffic to a company website. Social media also offers deeper benefits as new technologies emerge. For example, West Elm has debuted an AI-powered image search and recognition tool that scans Pinterest pages to provide users with product recommendations that match their styles. More than simply being on social media, companies need to consider whether they are leveraging the platforms to create advantages.
2. Varying Distribution Channels
In response to changing consumption habits and the rise of eCommerce, retail companies like Home Depot have adopted a “click and collect” approach to distribution. For consumers working on home renovations, the ability to measure and physically assess materials in-store remains critical to the buyer decision. Because of this, strategies like Home Depot’s allow for the best of both worlds – consumers can conduct research online and order everything from paint to hardwood flooring for easy pickup in-store.
For home improvement product suppliers, employing a “click and collect” model can change the approach to marketing products, too. Instead of poring over furniture catalogs and colors pamphlets in a retail store, a consumer first encounters products and branding on a company’s website and, ultimately, the buyer’s decisions are often solidified online. Companies must consider these changes in the buyer journey to maximize selling potential.
3. Creating Compelling Narratives
To further cater to the consumer’s buyer journey, companies can make their websites more “story-based.” As a result of increased renovation projects and trends in personalized consumer experience, the home improvement industry has been forced to transition from simply producing quality goods to also selling deep narratives that resonate with consumers who are often entering a new stage in life. Homebuyers want renovations to add layers of meaning and memories to the places where they will spend their lives. More than ever, the ability to empathize with consumers has become paramount for selling home improvement products that align with an aesthetic, “project-based” vision. Discussing where raw materials originate, a unique production process, or design motivations through blog posts, videos, or descriptions can draw in customers and add depth to a product. Similar to trends seen in lifestyle brands, as the home improvement industry continues to compete, the question of how to focus on the right narratives will be critical.
4. Adopting Experiential Technologies
The future is now for augmented reality. The ability to create an engrossing experience within the consumer’s physical environment is extremely powerful. Mixing and matching furniture, colors, and flooring can take the risk factor out of purchasing a home improvement product. In addition, the practicality of visualizing a home spatially can demonstrate how a certain product will fit into the environment. For example, this video of Wayfair’s app demonstrates how companies can utilize augmented reality to display furniture within a room. To provide a revolutionary experience, companies must ask themselves how they can incorporate the benefits of AR in ways that are different from the competition.
Don’t Forget that Execution is Key
While implementing these new strategies can be a trendy solution, the biggest challenge remains execution. For a company to be successful, cross-functional collaboration and alignment of goals are essential. To truly take advantage of the technologies and solutions available, a company must execute and implement the necessary infrastructure and support forward-thinking management.
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Co-author and contributions by Adam Kershner.