The Future Of The Home Service Industry
The home services industry is worth more than $105 billion in the U.S. Learn what the future could hold for this sector.
The last two years have been challenging for every industry. The pandemic, supply chain issues, labor shortages, and economic uncertainty have made an impact everywhere. But many analysts believe the home services industry is set to bounce back, albeit with some changes.
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What Does The Future Hold?
The home services sector is predicted to grow from a worth of $105.55 billion in 2018 to $1,219.07 billion in 2026. Those predictions, of course, were made before the start of the pandemic, but the overall prediction of growth still holds true. While many households put their spending on hold due to economic uncertainty, the desire for home improvements hasn't dampened.
Some recent surveys suggest 71% of degree-educated people are working from home, and that means those workers want their homes to be a nice place to spend their time.
That increase in demand doesn't necessarily mean home services businesses are in for an easy time, however. While the desire to spend money is there, supply chain issues and a difficult labor market mean contractors are facing new difficulties. In addition, consumers are more price-conscious and profit margins are getting tighter, meaning home services businesses need to manage their cash flows carefully.
A New Focus On Customer Experiences
Over the last few years, customer service has changed a lot. Today, 64% of consumers say they'd rather message a business on social media than pick up the phone. Communication has become less formal, yet consumers are becoming more demanding.
Homeowners expect regular updates and expect to have more control over their home renovation projects. A shopper who's looking for a new kitchen or even a greenhouse may not be content with a simple brochure or viewing the design in a showroom. Rather, they expect to be able to explore 3D or VR mockups of the project or use AR technology to see what that new paint or flooring would look like in their own home.
The home services contractors that are going to grow or thrive over the next few years are the ones that understand this desire and offer consumers a personalized, attentive, and flexible service.
The good news for business owners is that the customer experience is one area that can be improved without huge expenditure, making it a smart choice for those who are looking to grow their business and stand out from the crowd but don't have a lot of money to invest.
Consumers today expect to be able to access the services they need when they need them. Amazon offers 24-hour delivery across the country, with some products in certain areas available same-day. Ride-sharing services offer the ability to summon a vehicle more quickly than traditional taxi firms, and streaming services mean viewers can watch TV when they please, rather than following the schedule set by the channel.
This on-demand availability is shifting into other areas of day-to-day life and means consumers expect to be able to hire contractors or book other services with the same level of speed and convenience.
New Money Rushing Into The Marketplace
When COVID-19 hit, many people put house moves or renovations on hold due to uncertainty surrounding their long-term finances. As life returned to normal, the United States saw house prices rise at the fastest annual rate since 2005.
The housing market is booming, and consumers who've spent a year at home, spending less money on travel, tourism, socializing, and other hobbies, now have money to put into other things. One area that money is expected to flow into is home renovations.
Tradespeople can expect to have their schedules fully booked as people rush to have long-outstanding repairs done or simply embark on new projects. The year-long backlog of projects means demand is likely to remain elevated for a long time to come, giving business owners the chance to rebuild their savings after a difficult year that put a lot of stress on their balance sheets.
Supply Chain Challenges Could Make Some Services Hard To Deliver
In an ideal world, service providers would be able to deliver exactly what consumers want without delay. Unfortunately, the products and services offered by most contractors take time to deliver. Installing a new bathroom requires materials and skilled labor, for example. Most contractors can't keep the materials required for every job they can offer in stock at all times.
The supply chain issues we saw during the pandemic are expected to continue for months, if not years. The causes of those issues are more complex than they first appear. The pandemic may have been the catalyst for them, but climate issues, labor shortages, surges in demand, delays in manufacturing, and even political instability all contribute to stress on the supply chain.
This means home services contractors may struggle to get the tools and materials they need to do their jobs. The manufacturing of electronic goods is being held up by chip shortages, and shipping delays mean even more mundane products can be hard to get hold of. While most clients will be understanding about those issues, there's always the risk of a customer canceling their order because they don't want to wait several months for what they see as a small project.
Homeowners may need to wait weeks or months for the delivery of the materials they need for work to commence on their construction projects. Service providers may have their books filled up with orders for months to come but be unable to work on those projects because of missing materials. Since many contractors are paid based on project-related milestones, the cash-flow issues caused by this could be significant.
So how can a home services company in the U.S. stay competitive or even grow in this challenging environment? One option is to provide skills-focused services with smaller margins. Focus on things that can be delivered without requiring materials that must be imported.
This may mean taking on a larger number of smaller jobs and competing on speed, customer service, and aftercare rather than purely on price. It's a different working model but one that allows service providers to respond to the uncertain market conditions we face today.
Labor Is Also In Short Supply
Another challenge faced by home services contractors is the labor shortage. While life is relatively normal in some parts of the United States, there are others that still have COVID-19 issues. Outbreaks of new variants and localized pockets of infection mean people are being forced to take time off work due to positive tests.
In addition, the pandemic made some skilled workers consider changing industries, either to spend more time with their families or simply to get away from the risk of having to work in other people's homes. This wave of retirements has left a skills gap — one that some businesses are struggling to fill.
Analysts predict strong growth in many areas of home services, including plumbing/HVAC and landscaping. To support that growth, however, many new employees will need to be trained. The businesses that are most likely to succeed are those that invest in training new apprentices and manage to retain those apprentices in the long term.
Commoditization Of Services
Even as recently as 20 years ago, homeowners would rely on word of mouth, flyers, or the phone book to find tradespeople. Access to reviews and price comparison sites was limited, and getting quotes was an involved process that required arranging to have tradespeople visit the property. This meant home services contractors were competing with just a few other companies in their local areas, and they had the chance to meet their prospective customers and win them over face-to-face.
Millennials are not like baby boomers, however. They're more comfortable with technology, more willing to spend money on their homes, and more demanding in their shopping habits.
Today, community boards, social media sites with marketplaces, and even shopping services integrated into platforms such as Google Maps mean homeowners can find tradespeople much more easily. The growth in Craigslist is thought to have been a contributor in newspaper classified listings falling by 77%.
Homeowners can now browse ads from anywhere, at any time. They can send out form emails to multiple contractors. It's easy to find online reviews, compare prices, and get advice about how much various home renovation services might cost.
This means contractors need to compete not just on the quality of work but also on customer service, convenience, and price. If a home services provider doesn't respond quickly enough to a request or isn't competitive in one of those areas, the prospective customer has little to lose by choosing one of the other options. For service providers and tradespeople to compete, they need to be more agile, flexible, and aware of what consumers want.
Technology Drives Everything
Consumers increasingly turn to the internet (in the form of websites and mobile apps) for research and to reach their service providers. If a contractor wants to grow their business, they need to embrace those technologies.
It's no longer enough to post flyers and hand out business cards. Nor is relying on brand recognition and word of mouth enough. A homeowner is likely to search their favorite search engine not for "Mike's Painting Company" but for "painters and decorators near me."
To benefit from being seen in local search results, business owners will need to have a website that puts an emphasis on their presence in the local area. It's also worth maintaining social media profiles and claiming business profiles on tradespeople directories and review websites.
The way we do business is changing, and home services contractors must evolve with the needs of consumers. This may be a challenge for less tech-savvy contractors who prefer to focus on the skills or their own trade, but digital literacy is important for everyone.
The Value Of Your Brand's Reputation
Today's consumers are more tech-savvy and more discerning shoppers too. Rather than simply relying on the phone book or a recommendation from a family member, as their parents did, they're more inclined to shop around to get exactly what they want for a fair price.
The breadth of review sites, quotation sites, and skills marketplaces available for homeowners to find the services they need mean it's vital for home services businesses to manage their reputations carefully.
Contact us today to learn how we can help you grow your business.
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