ls home improvement recession resistant?

By James Halpin President HomeClub, Inc.

A S WE move into the new fil decade, the home improvement industry faces the continuing challenge of maximizing its efficiency while dealing with the complexitites of the '90s economy.Amidst rumors of a recession - a slumplng economy, nsing oil prices and high interestrates every business needs to take notice. While no one is ever recession-proof, the home improvement industry is, to a large degree, recession resistant. As the real estate market softens and houses become harder to sell, people tend to spend more time and money repairiqg and remodeling existing homes. Since a

By William E. Baugh President William E. Baugh & Associates

I OOKING for good news in the L year ahead will require patience as the Middle East situation. which appears to be dormant as this is written, could result in turmoil on a moment's notice.

Nevertheless. regardless of a conflict. home building on a national basis will probably remain in the doldrums for at least the first two quarters of 1991. Many blame the slowdown on interest rates, but the main problem lies in the demographics of our nation with the baby boomers now in the declining years of household formations. They are housed and not yet ready to trade up. The cost of new housing has risen higher than their present housing which is curreqtly declining in value. Their children are still too young to enter home represents a principle investment, there are strong economic reasons to enhance and preserve it.

In our industry, we sell lumber mainly for additions or repairs, whereas lumber yards are traditionally more dependent on the number of housing starts. Our locations carry broad assortments of materials and brand name products that make the home improvement process simpler and more productive. With this in mind, I feel that one of the largest growth areas in the next year will be the warehouse segment of the home improvement industry. Warehouse formats have built-in economics that allow them to operate with lower expense ratios while providing a convenient, one-stop resource.

This is not to imply that there will not be room in the industry for more traditional home centers and mom and pop hardware stores. The key to success for each type of retailer in the industry is to establish a comfortable niche. While small hardware

The Merchant Magazine operations cannot compete with the large home centers on price or selection, they have the advantage of knowing their customers on a first name basis and initiating long-term relationships.

Retail leaders in the '90s will be those that maintain excellence. not just in planning, but in execution. Customer service will be an important factor, as will the ability to maintain a competitive price policy. Informational programs, that help customers gain both the confidence and skills necessary to become do-ityourselfers, are a necessary part of educating and expanding your customer base. The most successful retailers will tailor their businesses to be area-specifii with both marketing programs and merchandise mix indi. vidualized for each geographic region. The challenge will be to add service features while maintaining a healthy profit margin,

Biggest growth in warehouse re tail, though well run traditional and small operators can prosper if they serve a niche. excellence in execution will mark the leaders.