The Forecast is Positive: A Review of Houzz State of the Industry

We are seeing exciting trends specifically for the decorating specialty firms ahead in the next year. In the latest Houzz report conducted in the first quarter of 2018, Houzz asked over 3,000 architects, interior designers, general contractors, and decorating specialty firms - amongst others - about trends they’re seeing across a host of categories. We’re focusing on the decorating specialty firms that consist of wallcovering installers for the trends that apply to our industry.

Broad Brushstrokes

From a broad brushstroke, we’re seeing over 70% of the companies surveyed specializing in residential renovation or design as reporting a good to very good outlook in 2018. And four out of seven industry groups surveyed expect annual gross revenue to grow 10-12% in 2018 as compared to a more conservative 7-10% in 2017. The specialty decorating group accounted for the largest increase in reported growth from 2017 at 7.2% to 2018 at 12.3% (that’s a 70% point growth from year to year). As we drill further down into reported trends for first-time home buyers, online leads, and challenges facing the market - to name a few areas the report focuses on - we’ll get an even greater idea into what to expect for wallcovering installers and specialty design companies in the year ahead.

Demand is on the Rise

The majority or over 70% of the companies surveyed, expect demands for their services to improve in 2018. Specialty home renovation companies to include decor industries and wallcovering installers should be optimistic for 2018 based on 2017 reported performance.

If you did well in 2017 in this industry, you should also expect to do as well or better in 2018; we’re finding as an overall theme from this Houzz report. To illustrate further the expectations for 2018, the same 70% of companies expect demand for their services to improve in the local economy.

We’re happy to share that skilled wallcovering professionals that fall under the design and construction related industries are secure as a profession when taking into account that two in five companies expect labor availability to worsen in 2018. While this poses as a challenge for larger organizations, it means the skills of seasoned wallcovering installers and apprentices starting out are in greater and greater demand with a declining pool of professionals to choose from. This fits in line with the trends the WIA is finding that 45% of wallcovering experts are retiring in the next ten years, and there is not an equal replacement of new craftsmen entering into the field.

At the same time that labor availability is expected to worsen, paving the way for greater job stability, the costs of labor and materials are expected to increase according to one in two companies interviewed. This may work to benefit, but also hurt wallcovering installers if they don’t adapt. On one side of the token the skills that wallcovering professionals possess are in demand, increasing the costs for their labor and potential for earnings; a positive. On the other side of the token, material costs are expected to increase as well. The savvy installer will be able to leverage the demand for their services, while also managing customer expectations against increased material costs.

Comparing Profits Against The Cost of Doing Business

Over half of specialty decorating companies reported increased profits for 2017 compared to 2016; and at a rate of 61% increase at that. In fact, the specialty decorating group in the report claimed the highest growth in 2017 compared to any other category to include: architects, interior designers, remodelers, design-build, and landscaping.

Perhaps a correlation, but in comparison to the 61% increase in profits reported, specialty decorators also reported a 60% rise in the cost of doing business. There is growth, but challenges with costs of getting the business may be canceling each other out. The determining factors and causes reported as responsible for the increase costs specifically for specialty designers and wallcovering installers are listed in the following order: products and materials, advertising and marketing, and employee wages or benefits. Most groups are reporting products and materials as the main drivers of increased costs of doing business. It is a mix of other factors next, but notably advertising and marketing was mentioned in the top three for many of the sectors interviewed. If you fall in the category of finding advertising and marketing as a growing challenge; we’ve produced an eBook specifically for our wallcovering installers for how to market and sell yourself.

Consistent with reports from 2016, the top business challenges in 2017 included managing customer expectations and budget concerns, rising business costs, and shortage of employees. It appears that the specialty decorators are the most concerned with managing consumer concerns about costs, but less so than reported in 2016. It was a 5% decrease reported from year to year, favoring 2017. So, perhaps, wallcovering installers are becoming more savvy at how to handle expectations. After increased costs and managing customers expectations, specialty decorators reported difficulty with finding prospective customers as the next challenge; and third was increased cost of doing business. If you find you haven’t figured out how to manage customer expectations in line with this state of the industry report, we have an eBook for how to manage customer expectations.

Volume of Projects and Project Sizes

While CNBC highlighted that first-time homebuyers spent over $30,000 on home renovations in 2016, the full Houzz state of the industry report shows that existing homes account for the majority of specialty decorating projects at 60% compared to just 14% for new homes. Also interesting, nearly one- in-two specialty decorating companies worked on 30 or more projects in 2017. Diving deeper we are finding that a similar proportion at 50% reported 10 or less of those leads originating from online inquiries.

Design-related companies reported smaller project sizes in 2017 with a third or fewer reporting projects amounting to over $50,000+ gross revenues. Roughly similar numbers reported $10,000+ gross profits for each project. Yearly gross revenue is reported at below $500,000 by 74% of survey respondents. Another 20% reported yearly profits under $3 million and just 4% reported profits exceeding $3 million. Usually the specialty design companies operate with 1-4 employees.

Conclusion

The Houzz State of the Industry report was conducted in the U.S. and consists of 3,378 respondents, with 405 of those - where we focused - coming from specialty decorating firms. When compared to findings found by Wallcovering Installers Association that there is a trend of a growing labor shortage due to seasoned wallcovering experts retiring at an accelerated rate over the next 10 years, we are finding reporting from those in this survey aligning.

The main areas for opportunity seem to be in how professionals are managing concerns with material costs and managing the expectations of clients. There may also be an area for opportunity in how wallcovering installers manage projects and either turn down work or communicate realistic timelines when their services are in high demand. Finally, it may be an interesting benchmark to drive towards of the reported online leads in proportion to overall work. Are you seeing a third of your leads coming from online resources? If not, there may be an area in which the wallcovering installer can leverage for potential lost leads using online channels such as social or web.