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Analyzing the Home Improvement Market Market Sizing and Forecasting Mike Sweet Senior Consultant, Business Planning Solutions [email protected] 781-301-9039 Copyright ©2004 Global Insight, Inc. Agenda Capabilities and Approach Case Studies Copyright ©2004 Global Insight, Inc. Overview We segment the market across a number of different dimensions: Products and Services End Purchasers – DIY, BIY, Contractors and Builders Structure Types – New Residential, Residential Remodel, Non-Residential Store Types/Distribution Channels Geographic markets – Global, National, Regional, State and County Copyright ©2004 Global Insight, Inc. Premier economic analysis & consulting organization with 3,300 clients, 600 employees and 24 offices worldwide Most comprehensive coverage of countries, regions and industries available from any single source Common analytical framework and a consistent set of assumptions applied to diverse capabilities and products The BEST track record among commercial forecasters. Wall Street Journal, January 2, 2004 Expertise Serving the Home Improvement Industry Home Improvement Research Institute (HIRI) Global Construction Study Sizing and Forecasting construction activity by structure type in 55 country markets U.S. Construction Services Developing an Outlook for the Home Improvement Market for over 10 years Detailed forecasts and analysis on the U.S. construction market by structure type with state-level detail Home Improvement Retailers and Manufacturers Product line forecasts and geographic market potential models Copyright ©2004 Global Insight, Inc. Unique Value Proposition We explain how demographics, income, the macro economy and customer trends influence future demand for your products Copyright ©2004 Global Insight, Inc. Transforming Information into Planning Solutions Copyright ©2004 Global Insight, Inc. Where We Fit Into the Planning Process Copyright ©2004 Global Insight, Inc. Developing Business Planning Solutions – A Proven Process Copyright ©2004 Global Insight, Inc. Agenda Capabilities and Approach Case Studies Copyright ©2004 Global Insight, Inc. Case Study #1 – Segmenting a Retailer’s Geographic End Markets Recovering Markets High Growth Markets Atlanta Average Annual Growth 2003-2006 Orange County New York Tampa -St. Petersburg Los Angeles Seattle Average US Service X Growth 2003-2006 Detroit Denver Newark Washington DC San Francisco Philadelphia Cleveland Kansas Baltimore Minneapolis St. Paul St. Louis Phoenix Houston Oakland Pittsburgh Dallas Chicago San Diego Boston Average US Service X Growth 1997-2003 Lagging Markets Slowing Markets Average Annual Growth 1997-2003 Copyright ©2004 Global Insight, Inc. Case Study #2 – Paint Manufacturer Total Industry Paint Sales by Retail Channel 10% Decelerating 9% Hist Cagr 1997 - 2003 8% Accelerating 7% Home Centers 6% Other General Merchandise Stores 5% Paint Stores 4% Hardware Stores 3% 2% 1% Department Stores Bubble Size = Value of industry paint sales in 2003. 0% 0% 1% 2% 3% 4% 5% 6% Fcst Cagr 2003 - 2008 Copyright ©2004 Global Insight, Inc. 7% 8% 9% 10% Case Study #2 – Paint Manufacturer Company X's Paint Market Share By Retail Channel 6.0% Other General Merchandise Stores 5.0% Market Share By Retail Channel Will over exposure in this channel hurt performance? Department Stores 4.0% Higher Segment Penetration Overall Market Share 3.0% Lower Segment Penetration 2.0% Paint Stores Hardware Stores 1.0% Does lower penetration signal a potential growth opportunity? Bubble Size = $ Value of Company X's paint sales to store-type in 2003. Home Centers 0.0% 0% 5% 10% 15% 20% 25% 30% 35% % of Company X's Total Paint Sales Copyright ©2004 Global Insight, Inc. 40% 45% 50% Case Study #2 – Paint Manufacturer Company X's Historical and Future Market Opportunity 10% 9% Slowing Markets S to re T y p e Hist Cagr 1997 - 2003 8% 7% High Growth Markets Future Market Opportunity % o f S a le s FCST CAG R 41% 7% 2 .8 % H o m e C e n te rs 10% 5% 0 .5 % 5% 2% 0 .1 % D e p a rtm e n t S to re s 34% 3% 1 .0 % O th e r G e n e ra l M e rc h a n d is e S to re s 10% 2% 0 .2 % T o ta l 4 .7 % H a rd w a re S to re s 6% Home Centers W e ig h t P a in t S to re s Other General Merchandise Stores 5% Paint Stores 4% Historical performance benchmark based on weighted sales distribution 3% Hardware Stores 2% Department Stores 1% Lagging Markets 0% 0% 1% Recovering Markets 2% 3% 4% 5% Fcst Cagr 2003 - 2008 Copyright ©2004 Global Insight, Inc. 6% 7% 8% Bubble Size = $ Value of Company X's paint sales to store-type in 2003. 9% Case Study #3 – Analyzing the Demographics of the Home Market 2.5% 2.0% 1.5% 1.0% 0.5% First Time Purchase Second Home Purchase Copyright ©2004 Global Insight, Inc. 12 20 10 20 08 20 06 20 04 20 02 20 00 20 98 19 96 19 94 19 92 19 19 90 0.0% 88 Demographic Demand Growth 19 Second home demographic demand is growing nearly twice as fast as repeat demand and four times as fast as first time purchase demand As the baby boom ages, second home demographic demand growth will remain strong. First time demographic demand growth edges up as Generation Y starts forming households. % growth in demographic index Repeat Purchase All Home Buyers Source: U.S. Census Bureau & Global Insight; age distribution data from The National Association of Realtors.