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Home Improvement Competition Heating Up

Bracha Arnold
August 11, 2022
Home Improvement Competition Heating Up

Home improvement was one of the more successful sectors throughout the pandemic. With lockdowns keeping people at home, many found the time to tackle DIY projects sending visits to home improvement retailers to all-time highs, significantly outperforming pre-pandemic numbers.   

Now, as lockdowns begin to fade into our memories and with inflation and gas prices causing people to think twice before opening their wallets, we checked in to see how the sector is faring. 

The Bigger Picture

April 2020 saw the beginning of a dramatic spike in year-over-year (YoY) home improvement foot traffic, and those trends continued unabated until April 2021. With the easing of pandemic restrictions, YoY foot traffic dropped into the negative – but only relative to the previous year’s unusually high visit numbers. So what may seem like a negative slump for the home improvement sector should be understood as a correction from an unprecedented time. 

Store demographics also play a role in visit patterns – as explored in our home improvement white paper, Lowe’s Home Improvement and The Home Depot attract a lot of small-time contractors and DIYers. With skyrocketing construction costs, many would-be renovators are likely pushing projects off, adding to the foot traffic downturn. 

Tractor Supply Co., with its focus on farm supplies, has seen the smallest YoY visit gap out of the four chains analyzed. While some of Tractor Supply’s success is likely due to its continued expansion, the brand’s unique client base may also be playing a role in maintaining the small visit gaps. Farmers form a significant portion of the Tennessee-based company’s clientele, and these consumers may have less leeway in pushing off the purchase of animal feed or other farm essentials. The pandemic also led to a boom in farming as a hobby, with many adding gardens to their backyards, leading to a sustained need for farming provisions. 

Smaller Players Gaining Momentum

Home Depot and Lowe’s still dominate the space – but since March 2022, both brands are feeling inflation’s impact on consumer spending and seeing year-over-three-year (Yo3Y) drops in foot traffic. But now, visits to Home Depot and Lowe’s are starting to trend upward once again. July 2022 saw some of the strongest numbers since March’s inflation-related visit downturn, with Home Depot and Lowe’s narrowing their visit gaps to 1.4% and 5.7% fewer visits than July 2019, respectively. This is perhaps a sign that people are ready to tackle a home improvement project again.    

Meanwhile, Tractor Supply and Ace Hardware saw 44.6% and 12.6% more visitors than three years prior. Ace Hardware, known for its smaller store format, saw its monthly visits consistently exceed pre-pandemic levels despite the wider economic situation. Tractor Supply also experienced elevated Yo3Y foot traffic, fueled by its store expansion. Between 2020 and 2022, the chain grew from 1,923 stores to 2,003 stores, and it’s planning on opening more locations throughout FY 2022. 

So while Tractor Supply and Ace currently have a significantly smaller visit share than Home Depot and Lowe's, the success of these smaller brands indicates that the home improvement space is getting increasingly competitive. 

Trade Area Increases Driven by Shifting Demographics

Some brands are seeing more Yo3Y visit growth than others, but all four home improvement brands are seeing Yo3Y increases in True Trade Area (TTA), which measures how far 70% of a venue’s customers travel to reach the venue. 

The increase in TTA for Lowe’s and Home Depot may indicate that the decrease in Yo3Y visits is due to higher gas prices leading consumers to consolidate trips rather than a real drop in demand. The current economic challenges have been fueling mission-driven shopping behavior in other retail categories, and Home Depot confirmed this trend when it raised its 2022 yearly outlook after seeing fewer transactions, but larger spending per consumers in Q1 2022. 

While Lowe’s and Home Depot saw their TTA increase by only 14.1% and 11.1%, respectively, between Q2 2019 and Q2 2022, Tractor Supply and Ace Hardware saw their TTA increase by 41.7% and 21.8%, respectively, during the same period. This means that increases in both visits Yo3Y and YoY, as well as Yo3Y TTA were stronger for the smaller players in the space than they were for home improvement leaders Home Depot and Lowe’s. 

The past two years have created unprecedented demand for the home improvement category – and the pandemic home-improvement boom seems to have accelerated competition in the space. While Home Depot and Lowe’s are still the undisputed visit leaders, smaller players such as Tractor Supply and Ace Hardware are now gaining steam. 

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