Home Improvement Retailer

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Analysis of Home Improvement Industry 1. The competitive forces in the industry Rivalry among competing sellers: Home improvement industry is a mature industry which contains thousands home centers and hardware stores. Among these competitors, Home Depot, Lowe’s, Menard’s, and also Ace Hardware are the major players. Home Depot, which holds more than 50% of the market share based on the revenue it generated, is the market leader. And Lowe’s ranks second as it has 34% market share. Almost 90% of the market share is in the major players’ hands. The other competitors include small national retailers and local retailers account for the rest. Therefore, the main competition in home improvement industry is between Home Depot and Lowe’s. These two retailers sell almost the same products and they have similar strategies which are low price and high-quality service. As the customers are price-oriented, the small companies and local retailers which are impossible to achieve the same low price can only compete through specialty products. For example: Frank’s Nursery focus on garden related products and Sears specializes in selling craftsman tools. What’s more, the home improvement industry’s expected revenue growth is only 5.39%. It means the competition will become more intensive. The other reasons which make rivalry strong are high fixed costs, high storage cost and high exit barriers especially for the leaders which has thousands stores in the US. Potential new entrants: The entry threats are weak in this industry. The first reason is high fixed cost. The new entrant has to build new warehouse, retail store and if it wants to enter the nation level, it also need distribution center. Next, the new entrant has to invest in their storage. To operate a home improvement retail store, the company has to offer large product selection. For example, Lowe’s provides more

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