Higher prices in fuel and food due to inflation are forcing all Americans to rethink spending habits, and discretionary purchase decisions from just a year ago are being modified so that families can buy groceries and fill gas tanks. A huge area that is going to be affected by the change in discretionary spending is the retail building supply industry which primarily deals with do-it-yourself projects and remodels. Nationally, the big box retailers account for more than $250 billion in sales and recent quarterly reports by these giant conglomerates suggest that some changes in consumer sentiment may be slowing down sales.
While housing starts have continued to remain good and overall demand in multi-family housing and commercial construction is holding up, the retail sector is underperforming, and this is a primary reason why there has been some retreat in the wood commodity markets. The issue for many of these large retail companies is that inventories for many retail products were purchased months prior to the Russian-Ukraine War, rising interest rates, the new shutdown in China, and the subsequent squeeze by inflation. While there will be many items in the supply chain that remain tight especially on the structural material side, you will probably see special deals pop up in early summer as these retailers work to dump sitting inventories.
Here are the areas to look for deals.
In the lawn and garden area, there appears to be a lot of trucks of mulch, pine bark, and potting soil sitting unused in parking lots. In the current market, installing or rehabbing flower beds at home does not rise to the same importance as filling the gas tank. Plus, bagged goods and other lawn and garden seasonal items have a shelf life and a short period to to be sold. There is a good chance that many lawn and garden products will have deep discounts as the summer progresses.
Decking material is another area that manufacturers have reported to have slowed to pre-pandemic levels. Over the last two years when people were confined to their homes, there were a lot of decks built to host outside COVID-19 events, and this summer, the need is not so great. Additionally, building a deck on your home is typically a want and not a need. Since winter is not a good time to build a deck, look for hot deals on decking and dock materials, as the summer progresses.
It goes without saying, if people start doing less do-it-yourself work around the house, then the demand for tools will decline. Most retailers have a problem with selling tools in good times because they buy too many, and with the strength of online tool sales, these products on the store shelves could be collecting a lot of dust in the next few months. If inflation has gotten all your discretionary money, then tools may be good items to buy in the summer as a Christmas gift. Tools, along with power lawn equipment, will probably see huge discounting as the summer season turns into fall.
Another area which will probably see some discounting is paint. Yes, paint remains tight, but a major slowdown in do-it-yourself projects will slow paint sales since most use some paint when doing a project in the home. While it is a petroleum-based product that manufacturers may be reluctant to discount, the problem will be the overstock situation at many store locations. Paint is susceptible to aging and freezing issues, and long-term, most retailers know it is a bad idea to store for extended periods. While supplies were tight, many retailers probably over-bought anticipating higher demand and are now looking for a way to move it off the shelves. Start looking for paint deals this summer if you want to enhance a room in the fall.
There is an adage in the supply business in markets such as this - the best markdown is your first markdown. Don’t be shocked to see real discounts on certain lines of lawn and garden as well as décor products as the summer progresses and overbuying collides with the selling season.
Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc., and he is also the host of the “Around the House” Show which can be seen at AroundtheHouse.TV.