September 2008 seemed like the end of business. The daily news feeds were full of stories about falling home values, faltering banks, frozen credit, and foreclosed mortgages. It hadn’t been a good year to begin with, but the true dimensions of what turned out to be the worst recession in more than 70 years hit home for remodelers when their voice-mail began filling up with messages from clients who were postponing or cancelling projects, many of which were just days away from starting. Some companies lost more than half of their 2009 project calendar in a matter of a few days. And then the phones stopped ringing altogether.
It is now clear that these events marked, not the end of business, but something nearly as unsettling: the end of business as we knew it. The country’s plunge off the economic cliff has changed everything. And while there are signs that conditions are improving, it seems clear that when prosperity returns, the remodeling business will look nothing like what we were used to.
In many ways, it is already unrecognizable compared with just a few years ago. For one thing, consumers have changed. Although it’s a buyer’s market, flooded with competition from idled home builders, homeowners are nervous about making a commitment and are much more price-minded. Short-term, bargain-priced maintenance and repair work dominate their concerns, and even the more discretionary projects have smaller price tags, reduced scope, and a scaled down selection of fixtures and finishes.
Keeping step with the new remodeling consumer won’t be easy (we’ll examine the topic more closely in our February cover story), but merely surviving the boom-to-bust transition will not be enough to guarantee success when the economy strengthens. The expense reductions and layoffs that many thought were stop-gap measures designed to keep cash flow positive while they waited out the storm are looking more and more like the first steps toward a permanent reorganization and a new way of doing business.
If there is a silver lining in the dark cloud that shrouds the new year, it is the opportunity to start over and get it right this time. Younger companies — those whose memory begins with the post-9/11 boom — were most surprised by this recession, but they may adapt more easily than better-established companies that remain inflexible or are too slow to change. It’s certainly not the future we imagined. What will make the difference is not the mess we’re in, but what we do to get out of it.
—Sal Alfano, editorial director, REMODELING.