Market Measure 2024: The Industry’s Annual Report

While few might call what the home improvement industry experienced during the pandemic a party, 2023 had all the feelings of a day-after hangover as businesses struggled to find their footing and were left dealing with the aftermath of three years of outsized growth.

It’s not fair to blame the industry’s woes in 2023 solely on the explosion in business experienced during the pandemic or the subsequent supply chain issues. Rather, three factors provided the major headwinds that seemed to stall growth throughout the year: Weather, deflation and slowing sales on big-ticket items.

Before we dive into the causes, however, let’s take a look at the numbers.

While the U.S. Census Bureau was tracking industry sales down about 2.8% through the first three-quarters of the year, NHPA’s prediction was that the year would finish down about 3.8%. This would put overall industry sales in 2023 at approximately $544.6 billion and would mark the first year-over-year decline in sales the industry has experienced since 2008-2009* when sales dropped nearly 10%.

Now, it is important to point out that this backslide comes on the heels of three straight years of extremely strong growth that averaged about 10% a year—significantly higher than the 3% or so that the industry would average in a typical year. So, while the industry undoubtedly stumbled a bit in 2023, it was from a much higher platform than it had ever seen.

In fact, there were many in the industry that predicted a “reckoning” was due in 2022 and yet the industry still charged forward.

Headwinds

As pandemic spending cooled and supply chains began to normalize, the previously mentioned challenges proved too much for the industry to overcome in 2023. Among all the difficulties faced throughout 2023, weather may have been the most vexing. In a typical year, the home improvement industry will always face its share of weather related issues. In most cases, these impacts are typically felt regionally, and any negative weather trends tend to be offset by positive weather cycles later in the year.

This simply wasn’t the case in 2023. Were it not so trite to say it, you might label 2023 as “the perfect storm” of weather challenges for home improvement. Too mild a winter, too wet of a spring, too hot of a summer all seemed to play out this year, all of which postponed homeowner projects that simply never came to pass.

When you add to the weather woes the fact that many homeowners also curtailed spending on big-ticket items for the home, it’s easy to see why industry sales slipped. One retailer summed up consumer attitudes toward spending rather succinctly early in the year when he said, “Everyone bought that fancy grill or patio furniture over the last two years. They just aren’t going to rush out and buy new ones now.”

Consumers also, as expected, began spending money on other discretionary pursuits such as travel (which saw record highs during the year), concerts and dining out. And inflation had them spending more on essentials like fuel, food, vehicles and more.

Lastly, while inflation was being felt across many areas of the economy, in 2023, it was pricing deflation among building materials products that also contributed to overall lower sales versus 2022.

Looking Ahead

Most economists are still looking at 2024 with caution. Some are even predicting a brief and somewhat gentle recession to occur toward the middle of the year.

Whether an actual recession is in the cards remains to be seen. However, NHPA is predicting that home improvement will still struggle against some of the challenges that dampened growth this year.

In fact, NHPA is forecasting relatively flat sales for the industry in 2024 with an anticipated growth of only about 0.9%. This projection is closely aligned with the predictions of other organizations like the Home Improvement Research Institute, which predicted growth for the industry of about 0.8% in its latest size-of-market report.

Over the next five-year period, NHPA is also dialing back its growth predictions for the industry, anticipating a slower slog back to the typical growth rates we see in this industry. NHPA’s latest estimates put the five-year compound annual growth rate for the industry at just 1.3%. This is somewhat more conservative than HIRI’s five-year outlook, which pegs growth at about 1.9%.

Another factor worth noting as we look toward the next five years is a continued decline in the number of store units across the industry. While consolidation continues to offer a solution for many independent retailers looking to exit the industry as they head into retirement, NHPA feels that store counts will continue to decline as independent owners age out of their businesses.

To read our complete 2024 Market Measure, click here.

This Market Measure report is compiled by NHPA staff from a variety of sources that are attributed throughout.

*Source: 2011 Market Measure Report, North American Retail Hardware Association