According to a recent release of the Leading Indicator of Remodeling Activity (LIRA), from theRemodeling Futures Program at Harvard University, the home renovation industry accounts for over $300 billion a year in spending. That figure is divided between construction labor and materials, with the latter commanding over 60% of the total yearly amount.

The report predicts that American homeowners are expected to spend a total of $321 billion on renovations in the 12 months to mid-2017. As indicated in the graph below from the same study, the amount of spending on home remodeling and repair is expected to increase 8 percent year-over-year by the start of 2017, while the historical average is just 4.9 percent.

“As more homeowners are enticed to list their properties, we can expect increased remodeling and repair in preparation for sales, coupled with spending by the new owners who are looking to customize their homes to fit their needs,” said Chris Herbert, Managing Director of the Joint Center for Housing Studies.

Leading indicator of remodeling activityDespite this industry being so massive, most homeowners and potential buyers dread the thought of facing a renovation.

This is due to the chronic fragmentation of the industries that make a remodel happen and the lack of transparency in the construction industry, leading to the fear of renovations becoming a money pit.

While all of us have watched an episode of HGTV and seen how glamorous and easily attainable a renovation can be, most of us have anxiety that this would not be the case should we attempt a renovation ourselves.

That is because the home remodeling industry is still stuck in the 19th century and has not embraced technology and new business paradigms such as digital marketplaces in the same way other industries have.

The Homeowner Renovation Journey

When deciding on a renovation, most homeowners go through the same journey:

  • Homeowners get jealous. They are exposed to images of beautiful homes and products and become visually inspired to upgrade their own home.
  • They use a search engine like Google to find out more information on whatever inspired them and they explore the possibilities.
  • They do more thorough research. The homeowners are now looking into how much the renovation project is going to cost them, relying on their network of friends and family to refer someone they can trust to give them an initial rough estimate. If they don’t have the money, the homeowner either drops planning or looks into getting a loan.
  • The search for contractors begins. If the money to begin the renovation is secured, the homeowner must find a number of trustworthy contractors as they seek multiple quotes/bids on the project before choosing who to hire. This process can often be time consuming and confusing, as a non-professional does not how construction works, what drives costs up or down, or even whether the contractor has accurately captured their needs when they asked them for a quote. They do not how the bids compare apples to apples.
  • Once the project begins, the homeowner, often cluelessly, tries to manage the project. Without the proper education, the homeowner is forced to rely on the contractor to make most of the decisions, which can lead to misunderstanding, delays, and unexpected costs.  In a typical full home renovation, we counted at least 221 decisions that needed to be made, of which a reasonably educated homeowner will be aware of about 20.

From there, contractors take over. Once they set up the project, they shop for the supplies they need to complete the renovation, often at a major retail store like Home Depot or Lowe’s as well as a plethora of regional and smaller vendors.

Recently the shift to buying from online providers such as Amazon or Wayfair is becoming more prevalent, but online retailers still have some time to better understand how to make buying online the only place people should shop

The Homeowner’s Dilemma

During this process, the homeowner is sandwiched between the construction and retail industries.  A typical home remodeling budget is split 60/40, where 60% of the budget is used for buying materials in retail and 40% goes to the construction professionals and other taxes and fees.

The retail industry is at the center of this journey and is in the best position to help the customer make their project more manageable, predictable, and safe.

Retailers like Home Depot and Lowe’s often act as a conduit between the homeowner and the contractor.  They recommend to the homeowner certain pre-approved professionals to make it easier for the homeowner to buy products from their store.

However, that referral should not be enough! It leaves the customer and the contractor to deal with each other directly without providing any real support, and the retailers can and should do better. In addition, the retailer has literally lost control of that engagement once a referral has been made.

Retailers are in a strong position to take the lead in helping both contractors and homeowners by setting standards for remodeling quotes and acting as the middleman.

For example, instead of sending the customers straight to a contractor from their network, retailers should help the homeowner create a bid request and be sure the contractors bidding use a standard construction estimating software so that the homeowner can see details in an apples to apples comparison.

With all that said, the retailer should be responsible to help educate the customer on this process.

The Retailer Solution


You might be wondering why a retailer would want to spend additional time and resources helping the homeowner and contractor in this way?  The fact is that retailers have a lot to gain by acquiring the loyalty of customers- both homeowners and contractors. Here’s how the retailer benefits:

  • Retailers can create more jobs for contractors by reducing the hesitation and resistance of the homeowner to take on a remodeling job, generating customer loyalty in the process.
  • Retailers will be able to foresee and forecast demand when they see a quote created ahead of time. They can anticipate what the homeowner and contractor will need to buy, and the retailer can then use this knowledge to stock and fulfill that demand exclusively.
  • Retailers become an integral part of the construction process and effectively a sexy marketplace instead of just the place to buy materials, which will increase their value and allow them to continue to compete with the increased influence of online retailers like

The time has come for the big retailers and small retailer to transform their business and embrace the new digital world using the right tools and sophisticated talent to make sure they keep and grow their piece of the pie before it gets stale.


This article originally appeared on Capterra

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John Cunningham
John Cunningham