April 24, 2014
W14-2: Due to the many obstacles to scale economies facing the residential remodeling industry, such as low barriers to entry, volatile business cycles, highly customized work, and difficulty attracting capital, the industry continues to be highly fragmented, with the vast majority of remodeling companies operating as relatively small, single-location businesses that likely will not experience any significant growth over their life-cycles. Yet, evidence suggests that remodeling firms able to overcome these obstacles enjoy significant benefits from scale. Better understanding of the ways in which remodeling companies are overcoming the many hurdles to scale, as well as how industry manufacturers, distributors and franchisors are supporting scale and consolidation efforts in the remodeling industry, should provide insights into how the industry is likely to evolve over the next several decades. This research relies on in-depth interviews with remodeling industry leaders who have successfully established larger-scale companies or are otherwise supporting scaling and consolidation efforts within the industry. The perspectives, strategies and approaches described herein are by no means intended to be exhaustive, but are rather a sampling of key views and methods as discovered through interviewing. Since the remodeling industry is so diverse, with business segments and market niches that cover the spectrum from full-service firms to specialty replacements and handyman services, there is no one-size-fits-all approach to achieving scale. Remodeling companies are employing a variety of scaling strategies that often involve strategic partnerships with nationally-known manufacturing and retail brands, franchisors, or investors. Major industry manufacturers, retailers, and franchisors are also playing significant roles in supporting scale opportunities of remodeling contractors.
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