Healthy hardline sales ahead

By William P. Farrell Executive Director American Hardware Manufacturers Association

T -r \-Lrrvllr\\r yeau appears ar I this point to show promise of a continuation of the stable, healthy sales that characterized the U.S. hard- lines manufacturing industry in 1985. These stable, healthy sales translated into a good business year for most.

While consumers did not go wild with their purchases in 1985, and are not expected to do so in 1986, there is a convergence of opinion amongst forecasters who view our industry that overall do-ityourself product sales at retail should show average annual growth of over 590 for at least the next several years.

To support this view, forecasters point to a variety of key factors that

The distribution market, defined by APA as home repair and remodeling, do-it-yourself applications, and miscellaneous uses not elsewhere classified, is the panel industry's second largest outlet. It is projected next year to consume 6.2 billion sq. ft., or 27v/o of total production.

Repair and remodeling, according to APA estimates, offers an additional 60 million sq. ft. of market opportunity in 1986 and will be the key focus of next year's distribution market promotional efforts.

Several factors appear to favor a strong remodeling marketrelatively high mortgage interest rates, stringent

Story at a Glance

Industry capacity will exceed demand for 4th year housing expected to use 407o ol total production, home repair & remodeling, do-ityourself, 27o/o .. promotions will beef up these figures plus exports... will influence the market in coming years. As Bert C. McCammon, Jr., director, Distribution Research Program, College of Business Administration, the University of Oklahoma, notes, these factors include: The resurgence of housing turnover; the explosive growth of heavy spending households; the continued drive towards affluence; the growing

Story at a Glance

D-i-y product sales of 5o/o ...housing turnover resurgence ...continued household growth, home centered lifestyle, afflu. ence...more import competi. tion, lower profit margins.

home loan qualification requirements, a sizable group of homeowners able to convert appreciated equity into home improvement cash, a growing corp of do-it-yourselfers capable of larger and more costly repair and remodeling projects, and a substantial force of marketingminded professional remodelers.

The do-it-yourself market also appears to offer strong potential next year. It is an elastic market that responds to promotional efforts. APA intends to expand those efforts in close cooperation with the increasingly aggressive homecenter and retail network.

Other major 1986 market opportunities identified byAPA include nonresidential wood roof systems, materials handling, transportation and foreign markets.

International markets at present account for only 2o/o of total structural wood panel demand. However, exports are expected to play a critical role in APA's long-term campaign to ameliorate the over-capacity problem that currently confronts the industry.

That campaign includes a 1990 demand goal for all structural wood panel markets of 27.5 billion sq. ft., of which next yeal's projected 23.1 billion sq. ft. represents 8490 percent.

importance of home centered lifestyles, and the continuing commitment to the do-it-yourself ethic. Taken together, they lead to predictions of growth in real do-it-yourself sales ofover 590 a year through 1990.

This forecast for an expanding market at retail is, however, severely clouded for U.S. manufacturers due to marketplace factors that place downward pressure on profit margins. These factors include the continuing flowof lowcost imported hardline products into this country, primarily from the Far East, and the ever-increasing competition for the market share amongst the various players in the hardlines industry distribution channel. A major component of this competition within the channel, of course, is price, with the result that many manufacturers are experiencing increasing pressure from their customers for price reductions.

The downward pressure on price, and therefore profit margins, is further exacerbated by the continuing flood of low cost hardlines imports, particularly those which seek to gain market share through unfair, illegal and predatory competitive practices.

Manufacturers are responding aggressively to both situations. First and foremost, they are making a careful examination of their own operations with an eye towards achieving cost reductions wherever possible. Second, they are tailoring their programs and making them more flexible and responsive to the specific needs of their customers.

Where customers are looking for services and programs that will help them compete in their markets on a basis other than price, manufacturers are working closely with them to develop and refine their programs and services for maximum impact and productivity. Similarly, where price alone is the determining factor, manufacturers are working with customers to determine which services they need and which ones are not considered essential.

Through these continuing efforts to go to market "leaner and meaner," manufacturers are working to assure that the generally positive forecast for do-it-yourself product sales in the years ahead will translate directly into healthy margins and increased profitability.