Home-made vs. Factory-made - Emerging Implications on the Supply Chain ...

020-0746

"Home-made vs. Factory-made - Emerging Implications on the Supply Chain of the DIY Industry"

Jordania Le?n-Jord?n School of Business and Technology, University of Wisconsin-Parkside,

Kenosha, Wisconsin, 53144, leonj001@uwp.edu, 262-595-2020

Abey Kuruvilla School of Business and Technology, University of Wisconsin-Parkside, Kenosha, Wisconsin, 53144, abey.kuruvilla@uwp.edu, 262-595-2105

POMS 22nd Annual Conference Reno, Nevada, U.S.A. April 29 to May 2, 2011

Abstract

The Do-It-Yourself Industry, a relatively new one, is growing rapidly as the recent financial meltdown has moved cash-strapped home-owners to handle home projects themselves. This research examines the growth of the DIY industry to its present state and explores emerging trends among DIY retailers. It presents motivations for the do-it-yourselfer, and studies major drivers of this market with emphasis on internet, mainstream media and advertising. It then explores how the bigger chains have modified operations to adjust to the new needs of this segment. The study makes projections of how demand will have implications on supply chains in the future. It projects that the mainstream supply chain as we view it, will change from the traditional model of Supplier ? Manufacturer ? Distributor ? Retailer and Consumer, to a compact supply chain of Design and Raw Materials reaching the customer who is also the manufacturer. The study then suggests streams for future research. Key words: DIY industry, DIYers, DIY projects, DIY supply chain

BRIEF HISTORY OF DIY

The phrase Do-It-Yourself appeared as early as 1912 in US advertisement and became popular in

the US media in the 1950s. Then, the WWII and the Cold War Era aided the growth of Do-it-

yourself projects. After the U.S. entered WWII, shortage of skilled workers drove Americans to

learn how to repair and to decorate their own homes. During the cold war Americans were

fearful about their security, and shelter advocates sought to help Americans prepare for nuclear

war. They linked security with Do-it-yourself home improvement. Although home shelters were

initially intended to reassure, they became the object of anxiety. Shelters could only provide

symbolic security and were doomed to fail in reality (Lichtman, 2006). Post-war America

continued to engage in Do-it-yourself projects for one of two reasons: challenging economic

times for some and leisure activities for others. In the late 20th century Do-It-Yourself and its shortening to "DIY" appeared in the UK.

Homeowners took on home maintenance and improvement tasks to solve the problem of the

declining condition of the British housing stock (Watson & Shove, 2005). In 2006, 60 percent of

the UK adult population participated in DIY projects (Mintel, 2006). The DIY & gardening

sector in UK grew by 0.6% to ?12.7bn in 2009 (Datamonitor, 2010). The DIY Home Improvement movement also spread to the United States of America and retailer chains like Home Depot benefited from the surge on consumers engaging in DIY projects. In the U.S., DIY projects include home improvement, food gardening, financial services, automotive care, beauty care, among others. Around tens of millions of Americans engage themselves in DIY projects. (Brown & Washton, 2009).

DEFINITION As reflected in dictionary definitions, the DIY (Do-it-yourself) term conventionally refers specifically to "accomplishing home maintenance or modification tasks without the paid services of a professional" (Watson & Shove, 2005). Mintel, a well-known Market Research firm defines DIY as "repairs or additions to the home or garden, including installing a new bathroom or kitchen, central heating, putting up shelves, fixing a fence, building a barbecue, etc" (Mintel, 2005). In the last few years, the DIY idea is mostly referred to as the concept of "people providing for themselves services, which they could otherwise (be expected to) pay a professional to do" (Watson & Shove, 2005). For purposes of this paper we suggest that even though the roots of this industry date back to the 20th century, DIY as we know it today is a new phenomenon that not only includes home improvements, but a vast array of DIY projects.

DYIers There are two main types of DIYers. In the first group, consumers engage in DIY projects for pleasure or to seek self-identity (Williams, 2008). In this case, DIY projects allow DIYers to create a profile of who they are and how are they going to distinguish themselves from others

(Kimmelman, 2010). It allows DIYers to construct or maintain self-identity and self-esteem. Consumers pursue aesthetic coherence and distinction in their living spaces through DIY projects (Watson & Shove, 2005). These projects also feed in the ,,I-can-do-all-by-myself mentality that drives highly independent individuals. A banker may also be an accomplished carpenter or gardener. The second group of DYIers engages in DIY projects for economic reasons, or lack of suppliers for a given product. Given the economic recession, some argue that DIY is a survival strategy adopted by consumers to take on major projects themselves rather than paying others to do those (Brown & Washton, 2009). DIY projects avoid labor costs such as, gross wage payments, including taxes and social security contributions. In this case it is better for consumers to produce at home than to work and purchase goods and services that are subject to target pricing and taxation (Buehn, Karmann, & Schneider, 2009). According to Danish and German surveys done in the early 2000s, 80 percent of consumers engage in DIY projects to save money, while less than 25 percent do it because they enjoyed doing this type of work. These surveys showed that first economic motives play a role in the context of DIY activities and second that individuals significantly spent more time on DIY projects if they enjoyed it (Buehn, Karmann, & Schneider, 2009). For the first group DIY is a form of leisure, while for the latter, it is work. (Watson & Shove, 2005).

EMERGING TRENDS Home Improvement Home improvement still remains the most sought after projects in the DIY industry. For main retailers in the U.S. and U.K. see figure 1. Home Depot and Lowes are big chains in the DIY

industry in the US. For sales during the last four years see figure 2. In the last few years they had to face a challenging operating climate caused by weak housing and labor markets. New projects in housing have come to a stall, but in 2010 repair/remodeling projects started to return (Spencer, Retail Building Supply Industry, 2010). Home Depot It is the largest home-improvement retailer, operating 2,246 warehouse stores in U.S., Canada, China, and Mexico. Home Depot has faced a decent demand for maintenance, repair items, and seasonal products during the economic recession. Higher cost items still face pressure from weak housing and labor markets. Management continues to improve information technology and supply chain management, which will likely increase sales next year (Spencer, Home Depot, 2010). Lowe's Lowes operates 1,734 superstores in U.S., Canada, and Mexico. It faces the same challenges as Home Depot - weak labor and housing markets. Management is focused in long-term growth and is seeking to improve efficiency in supply chain, labor scheduling, product assortment, and utilizing technology to attract Web savvy millennial-generation customers. Management initiatives should help grow sales over the long-term (Spencer, Lowe's Cos., 2010 ). Sherwin-Williams It is the largest producer of paints and varnishes, and operates 3,370 retail-paint, wall-covering stores, and auto-coating outlets. In 2011, DIYers, who remain in their homes, are expected to drive up sales (Kaplan, 2010). In the past years Sherwin-Williams have felt the weakness in the house market. In the next year it is expected to underperform compared to its industry (Spencer, Retail Building Supply Industry, 2010).

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