Between the pandemic, supply chain challenges, and changes in consumer demand, it feels like prices everywhere have been increasing. Even with manufacturers and retailers trying to absorb some of the rising costs, costs incurred by buyers have been going up. In fact, TraQline has seen a 13% increase in average price paid between Spring 2019 and Spring 2022 across all categories. What does that mean for the brands and retailers selling in the Home Improvement Industry? Here’s a look at how the market has been affected.
Which categories of products saw the highest rate of change for Average Price Paid?
Certain categories have faced much higher pressure over the past few years. Perhaps unsurprisingly, many of these products rely on lumber costs to determine the price consumers will ultimately pay. The categories in TraQline that saw the highest rate of change include:
- Windows & Doors (36% increase between the average price pre and post pandemic)
- Kitchen Cabinets & Countertops (34%)
- Building Materials (32%)
- Flooring (25%)
What factors contributed to these stark increases in average price paid?
Building materials were significantly affected by the challenges created by the global Covid-19 pandemic. This category includes products such as drywall and gypsum, lumber and plywood, insulation, roofing, and gutters. Among these products, roofing and composite decking materials represented the two categories with the highest average price paid. However, the products that saw the largest rate of change in this category are lumber and plywood. Costs had been holding steady in 2018-2019, but Q1 2020 signaled the beginning of an increase in average prices. This increase in lumber costs reverberated throughout the home improvement industry. According to the IMF: “Truck drivers and ship crews couldn’t cross borders because of public health restrictions. Pent-up demand from huge stimulus programs during extended lockdowns overwhelmed the capacity of supply chains. Besides causing delays in getting goods to customers, the cost of getting them there surged.” In addition, tariffs on lumber from Canada complicated an already challenging manufacturing environment for companies manufacturing wood-based products.
For kitchen cabinets and countertops, the price consumers paid initially fell during the height of the pandemic in 2020. However, by Q1 2021, product prices were back on the rise. The kitchen cabinet and countertop industry faced the same challenges as other home improvement industries, including labor shortages, increased transportation costs, and lumber tariffs. The increased demand left mills unable to cope, driving the cost to consumers higher than ever.
Even though the flooring industry has seen a 25% increase in average price paid, demand for new flooring has been on an uptick among consumers who are eager to remodel their homes after having been stuck in them for the better part of two years. As with other categories dependent on lumber, hardwood flooring has seen the most volatile price changes over the course of the pandemic. There are also increases, although less remarkable, in prices paid for laminate, vinyl, and ceramic flooring. However, laminate and vinyl may see future costs start to fall as manufacturers have been investing in US factories for these products.
How have these prices affected consumer shopping behavior?
For the windows and doors market, the most notable – but expected – change has been in the number of buyers looking at other, smaller outlets rather than big box retailers such as Home Depot or making purchases through contractors. This change extends not only to purchases, but also to how consumers shop. While it may seem counterintuitive, consumers were more willing to shop around (online or in store) at two or more stores during the pandemic in order to find product in stock. As restrictions have eased and supply has started to return to pre-pandemic levels, consumers are shopping around less.
In the kitchen cabinets and countertop category, despite the average price paid in 2022 being 34% higher than it was in 2019, TraQline data does not show any real upheaval in how consumers shop. They’re going to the same places at the same rates and aren’t shopping any more stores than they did pre-pandemic.
Flooring retailers with a smaller percentage of the overall market (such as Menards, Walmart, Amazon, and Costco) saw a boost in their flooring sales during the pandemic. However, TraQline data shows that consumers went to the same number of stores as they did pre-pandemic.
Top building materials retailers, such as Home Depot and Lowe’s, have retained their positions despite the challenges that the pandemic has presented. However, purchases made through a contractor have had a lift since 2020. It’s likely that this is due to two reasons:
- Homeowners have been bullish on remodeling. In that case, it would be prudent to make orders through contractors since they’re doing the work already.
- There have been long lead times and limited availability of products such as 2x4s and plywood. Some pros indicate that their timelines are long, and will continue to be so since lockdown restrictions have lifted and as homeowners feel more at ease letting strangers come in to work in their homes.
These products have seen some of the most extreme increases in average price paid among our available data. However, other categories are not seeing such dramatic increases.
Not all increases are equal: Categories that saw smaller price increases when comparing post-pandemic prices to pre-pandemic prices
There are TraQline categories that saw moderate average price paid changes when comparing pre- and post-pandemic prices. Some of those categories include:
- Major Appliances (7% price increase between the average price paid pre- and post-pandemic)
- Nursery (7%)
- Lawn Power Equipment (5%)
- Heating/AC (4%)
What factors contributed to these price increases?
For consumers purchasing a major appliance, there were a variety of changes to their shopping experience. While most products saw a steady increase in average price paid, many consumers noticed supply side issues leading to low stock, long lead times, and the virtual elimination of the on-sale appliance. Some of the products with the most noteworthy increases include wall ovens, refrigerators, and built-in ranges. Major appliances have been hit particularly hard by the semiconductor shortage. These products rely on chips for vital functions, whether or not they are “smart” products. The ongoing chip shortage has affected production times, which is exacerbating the long wait times consumers now face to receive their products.
Nursery and lawn power equipment have likely seen increases in demand as homeowners have invested in outdoor living due to the pandemic. With outdoor gatherings being deemed safest, many consumers have prioritized spending more money and time on their outdoor spaces, whether that’s adding new plants to a yard or buying equipment needed to care for their space.
Have these price changes affected consumer shopping behavior?
For major appliances, more than half of all buyers shop only one store. Like all products that were hard to find in stores during the height of the pandemic, major appliances were also in short supply. As a result, there was an increase in shoppers visiting three or more stores, but that has tapered off in the past year. Lowe’s and Home Depot remain in the top positions, but outlets such as Costco and Amazon have seen increases in their appliance sales over the course of the pandemic. However, as restrictions have eased and more consumers are feeling comfortable going to brick-and-mortar stores, Amazon has lost some of the share it gained in 2020 and 2021.
Major retailers such as Home Depot and Lowe’s have been able to keep their place at the top for lawn power equipment, but since the start of the pandemic, Ace Hardware has experienced significant growth. Amazon also saw a lift in 2021, but its growth rate has slowed as pandemic restrictions have eased across the country. While the majority of lawn power equipment products are purchased in retail stores, online sales saw a significant lift during the pandemic that has remained high even as more consumers are willing to go out to shop again. Despite a rise in costs, consumers don’t appear to be eager to shop around, either. Nearly 62% of consumers shopped only one store.
Which categories have seen prices increase more slowly in the post-pandemic period?
Despite most categories seeing price increases, some products have had price declines over the past two years. It is important to note that these price changes have not been equal. Categories that saw decreased average price paid include:
- Tool Accessories (10% decrease between the average price paid pre- and post-pandemic)
- Cleaning Chemicals (4%)
- Personal Comfort – a category that includes humidifiers and air purifiers (2%)
What could be contributing to this decline in costs?
Cleaning chemicals and personal comfort products saw a surge in demand during the pandemic, and companies were able to rise to the challenge. Many companies were able to shift focus to new product categories, increasing competition and filling store shelves with new products. Some highlights include distilleries that were able to convert some of their product to hand sanitizer and other disinfectants.
Have these price changes affected consumer shopping behavior?
While Walmart remained the top retailer for personal comfort products, Amazon continued to gain steady ground during the pandemic, as did retailers with smaller shares of the market, including both Costco and Best Buy. Some of Amazon’s increase may be due to the rate at which consumers switched to purchasing online. While rates have fallen some, online shopping rates are still 10 points higher than they were pre-pandemic.
The past few years have caused both businesses and consumers to recalibrate to a new normal. For consumers, at least, part of that new normal is higher prices. While there are a variety of causes—from supply chain issues to staffing shortages to overall inflation—consumers have largely not changed their shopping behavior, except in being more willing to purchase online. However, savvy retailers and manufacturers can keep an eye on trends that matter to consumers. For more information on the “whys behind the buys” of home improvement shoppers, contact TraQline today!