Changes in Home Improvement Retail Logistics
Home and Houseware September 16, 2016
Though Canada’s economy continues to be soft compared to pre-Great Recession times, our red-hot housing market and existing homeowners’ desire to beautify and improve their homes, has benefitted the home improvement retail industry. But as home improvement retailers react to the impacts of online shopping, shifting consumer demand, and the need to provide what’s known as the omnichannel experience, it’s fragmenting their supply chains.
The goal of improving the delivery-to-shelf process through collaborative forecasting remains elusive for many retailers in this industry vertical. Though there are some product mainstays such as lumber, some home improvement retailers are expanding their inventories to retain and expand their customer bases. Consumers have an ever-widening selection of goods at fair prices at their fingertips that are comparable to what you can order from afar online.
That, in turn, is hurting some major home improvement brands in Canada. If there’s good news to be had for any of the national chains in this sector, it’s there is no clear-cut market leader presently. It’s this industry fragmentation that’s keeping them within a reasonable distance from each other, but that situation won’t last for long.
The One-Stop-Shop Solution
Some retailers such as Home Depot and Lowe’s are adapting to shifting market forces by changing how they’re managing their supply chain. For example, whereas all of Home Depot’s retail locations used to accept shipments individually, now they have distribution centres that receive the shipments, and products are subsequently delivered to their stores. That may add to the delivery time, but it certainly saves them a lot of money in transportation costs. It also helps them reduce in-store inventory levels to ensure customer demand is met while keeping inventory costs low.
The so-called ‘one-stop-shop’ solution is itself an industry shift to housing days of inventory instead of weeks of inventory. In fact, there’s a growing retail industry drive afoot to slash inventory levels in both stores and warehouses. The goal is to try to boost sales, improve margins, and respond to marketplace changes. But it’s also producing a more agile and intelligent supply chain that’s driven entirely by consumer demand. Additionally, the one-stop-shop methodology is proving a differentiator for some chains as they offer home appliances, decorative items, and other products in addition to tools and building materials.
The Great Unknown: Millennials
Meanwhile, on the near horizon lurks what may be a greater dilemma for Canada’s home improvement retail industry to adapt to: Millennials and their apparent disinterest in home ownership.
Think about it: younger generations are scoffing at the notion of home ownership for many reasons. This reality is not unique to Canada. Part of the problem can be attributed to scorching real estate markets in Canadians cities that put the cost of home ownership out of reach for younger people. The other is the lingering effects of the Great Recession have torn up the established rulebook.
That may change in time, but what if it doesn’t? What impacts will it have on home improvement retailers if today’s younger generations largely steer clear of earlier generations’ desire for homeownership and pride of aesthetics that comes with the territory?
It is, after all, the so-called “share generation”: they share cars, use Airbnb, and couch surf rather than purchase a vehicle, rent a hotel room, or rent an apartment or buy a home. It’s a completely different mentality which retailers will need to try to understand, and it’s going to have a dramatic impact on the home improvement retail industry.
But herein lies hope: According to a PricewaterhouseCoopers report on millennials’ impacts on the overall Canadian retail landscape, do-it-yourself/home improvement products are No. 1 among all product categories this younger generation purchases in-store.
Do you need a 3PL partner to help you transform your supply chain to meet customer demand efficiently now and in the future? We can help. Canadian retailers big and small have relied on our services since 1950. Tell us what your supply chain and transportation issues are, and we’ll provide you with a cost-effective solution.