Paint, Glass, and Wallpaper Stores

SIC 5231

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in selling paint, glass, and wallpaper, or any combination of these lines, to the general public. While these establishments may sell primarily to construction contractors, they are known as retail in the trade. Establishments that do not sell to the general public, or that are known in the trade as wholesale, are classified in the wholesale trade industries.

Industry Snapshot

There are two types of retail outlets for paint, glass, and wallpaper. One is the independently operated store, which purchases products from manufacturers that operate distribution centers and warehouses. The second is the manufacturer-operated store, which offers factory-direct products and generally uses its own distribution center.

Paint, glass, and wallpaper stores are distinguished as either warehouse stores, also called discount houses, or small retail outlets. Typically, the warehouse stores purchase large quantities of products from manufacturers and sell them at discount prices. The small retail stores, many of which are owned by manufacturers, emphasize service and personalized attention.

Traditional paint, wallpaper, and glass stores have faced increasing competition from big-box home centers and discounters, but they continue to maintain a market niche by offering superior selection and service to customers. While Sherwin-Williams Co. remains the leader in the paint industry, other outlets are trying to capitalize on trends. Lowe's has coupled with Martha Stewart to offer and exclusive paint line, while a premium paint brand named Aura by Benjamin Moore entered the market in California in 2007. Such moves indicate an effort to market to women.

In 2009 Dun & Bradstreet listed 20,898 establishments in the paint, glass, and wallpaper stores industry valued at nearly $4 billion with industry-wide employment of 74,646 workers. Of the 20,898 establishments, 1,990 were specifically listed as paint, glass, and wallpaper stores capturing 9.6 percent in market share with sales totaling $270.7 million.

According to the National Paint & Coating Association, architectural coatings, including consumer paints constitute about half of the total coatings produced annually in the United States. In 2007, the industry shipped more than 756 million gallons of architectural coatings valued at $8.82 billion. The faltering economy brought down shipment totals to 682 million gallons valued at $8.69 billion in 2008.

Background and Development

By the early 1900s, establishments in this industry were emerging on a small scale. These establishments grew steadily as the country's population increased. In the early 1930s, many stores were adversely affected by the Great Depression. Public works projects, however, helped to boost paint and glass sales for these small companies. World War II saw another decline in home sales that affected the industry. Nevertheless, the growth of suburban America during the 1950s and 1960s created a period of tremendous growth for industry establishments. Many small companies expanded into chain stores, and manufacturers entered the retail market. An economic recession in the 1970s caused a decrease in new home construction and a slump in paint, glass, and wallpaper sales. During the 1980s, the industry experienced another boom period in sales, engendered by an active real estate market and home renovations.

The major product sold by this industry was paint. Other products sold by companies in the industry were paint supplies; wallpaper; wallpaper adhesives and supplies; varnishes for wood, anti--rust coatings for metal, glass, glass sealants; and hardware tools. Many stores in this industry also offered services ranging from decorating advice to glass window and door installation. With a greater emphasis placed on the do-it-yourself market in the late 1980s, paint, glass, and wallpaper stores offered painting clinics that taught customers how to paint professionally. Standard Brand stores, for instance, also had test walls for customers to see how certain paint looked on a wall.

The paint, glass, and wallpaper retail industry was characterized by strong brand loyalty among its customers. Most independent retail outlets relied on the manufacturers' advertising to promote their products. In response to a sales slump in the late 1980s, industry leaders started advertising campaigns to give products high visibility.

Environmental legislation affected manufacturer--owned retail outlets through hazardous waste restrictions for paint factories, which increased the cost of materials and factory produced items. In 1993, the Environmental Protection Agency (EPA) sued Sherwin-Williams for failure to obtain a hazardous waste permit. This action followed a two-year investigation by the EPA.

An economic recession in the late 1980s and early 1990s put an end to eight years of consecutive growth in the paint, glass, and wallpaper retail industry. This trend primarily was caused by a decline in new home construction.

Retailers shifted from selling to industries and the architectural market toward the do-it-yourself market. While the market for new home construction dropped during the recession, the industry experienced an increase in sales as a result of property renovations and rehabilitations.

From 1990 to 1992, competition intensified greatly in the industry because of higher raw material prices and the money spent by manufacturers on research and development to comply with vital organic compound (VOC) restrictions. This dramatically reduced profit margins for many small companies. In the mid-1990s, companies in the industry suffered increased competition from mass retailers, such as Sears, Home Depot, and Wal-Mart, which operated paint and wallpaper departments. Paint manufacturers were using mass retailers instead of small paint retail chains as a way of cutting distribution costs. The giant retailers' purchasing power and ability to control prices increased sharply in the late 1990s. As a result they expected manufacturers to provide low prices and to help control inventory.

Despite the onslaught of competition from big-box home improvement centers and discount retailers, paint specialty stores held their own during the first years of the twenty-first century. Paint and home decor specialty stores offer a wider selection than general home improvement stores, stock more available products, and emphasize customer service. However, as of 2004 Home Depot and Lowe's, among other stores with a broader customer base, were noticing the trend and revamping their paint departments to lure customers back in.

A significant trend in the industry in the mid- to late 2000s is the recognition of women as important decision makers in the do-it-yourself (DIY) market, altering the way the industry does business. With an influx of women shoppers into the DIY market, home improvement and specialty stores alike are working hard to organize their stores to be bright, open, and attractive to women. New offerings include in-store design centers, more designer paint brands, and more extensive paint color samples. For example, Benjamin Moore & Co. offers approximately 3,200 colors of paint and can match almost any color using its Color Preview System.

Benjamin Moore boasted that its premium Aura brand, introduced in 2007 retailing at about $55 per gallon, would be better than existing brands because of its "ColorLock" technology intended to reduce variability from can to can. Whereas it claims most paints have an accuracy level of 5 percent to 20 percent variation, Aura is supposed to be able to match colors within a 0.05 percent variance. The brand was being marketed toward women and other consumers who are driven by fashion and design.

Lowe's announced in 2006 that it would partner with Martha Stewart Living Omnimedia, Inc. (MSLO) to be the exclusive carrier of a Martha Stewart-branded interior and exterior paint program. Martha Stewart Colors was to feature a spectrum of 350 colors and retail for approximately $25 per gallon. Martha Stewart paint programs had previously sold at Sherwin-William stores as well as Kmart, Sears, and Orchard Supply stores.

Current Conditions

One of the latest marketing trends, launched by Benjamin Moore, expanded its exposure targeting shoppers at area malls opening its second "color station" kiosk at the Stoneridge mall located in Pleasanton, California, following the successful launch at Paramas Park mall in New Jersey. According to the company, the kiosks "...are meant to complement, not compete, with full-fledged paint stores," cited from The Business Journals in June 2007. While still in the test stage, if successful, the company will incorporate additional kiosks at area malls.

As the global recession took hold, the paint industry's "...revenue plunged across the board in the double-didgit ranges. From the leading multinationals to smaller regional players, no paint firm was immune." Tim Wright noted in Coatings World in July 2010, adding that "Twenty-to-thirty-year industry veterans told me the sales drops were unprecedented, the likes of which they had never seen before and hope to never see again."

Even the industry leader, Sherwin-Williams was not immune and experienced a 12.9 percent decline in revenues within its Paint Stores Group in 2009 compared to 2008 as the recession deepened. With residential and commercial construction practically at a crawl, paint sales plummeted forcing the company to idle various manufacturing facilities and distribution centers. In contrast, the DIY category boosted paint sales offsetting part of the idle professional paint contractors as homeowners opted to save money and tackle their painting needs themselves.

However, the U.S. Census Bureau painted a positive picture going forward as the industry began to slowly see some relief. There was a total of 328 million gallons of paint, varnish, and lacquer shipped during the second-quarter of 2010, according to the Current Industrial Report released in September 2010, up 8.4 percent compared to the second-quarter of 2009. Since the beginning of the year, the industry as a whole has climbed seven percent.

Industry Leaders

Industry giant the Sherwin-Williams Co. was founded by Henry A. Sherwin, a retail paint dealer in Cleveland, in 1884. The company recorded more than $7.8 billion in wholesale and retail sales in 2006 by selling paint, finishes, coatings, applicators, and varnishes. The company's products are geared toward the DIY market, but because of the acquisition of Cook Paint and Varnish Company in 1990, Sherwin-Williams also targets industrial customers. In 2006 the company owned more than 3,000 paint stores in North America.

Sherwin-Williams reported revenue of $7.97 billion in 2008 and $7.09 billion in 2009 with 29,220 employees. About 59 percent of the company's revenues were derived from their Paint Stores Group. Despite the economic downturn, the company still invested 17 percent of its annual revenues towards research and development in 2009 and was able to open eight new locations, which brought the total to 3,354 stores.

Workforce

According to the U.S. Department of Labor, Bureau of Labor Statistics, more than half of the jobs in the industry were related to sales. Sales associates totaled one-third of the entire workforce; managers, sales representatives, and cashiers made up most of the remainder of the sales category. Sales staff was usually given special training in working with paints and other chemical-based products, along with training in customer service. Generally, people with backgrounds in design, professional painting, or construction work are preferred.

Research and Technology

In the early 1990s, the leading areas of research and technology emanated from paint and coatings manufacturing areas, such as research in waterborne, high solids, powder, and radiation-cured coatings. These types of coatings were geared toward increasing sales in automotive and appliance coatings and furniture finishes. Developments also were underway for new products to be sold by retailers in this industry. Titanium dioxide, which was used as a paint pigment with great covering power and durability, was being developed for the commercial market.

As a result of environmental legislation, research continued on waste management from these products, both for manufacturers and wholesalers. Another technological development for this industry that intended to help protect the environment was products with no volatile organic compounds. These products were in demand because, in addition to being easier on the environment during production, they did not emit fumes when being applied to walls. In 1998 the U.S. Environmental Protection Agency announced national VOC limits for automotive refinished and architectural and industrial maintenance coatings, effective as of 1999. Eventually, these products were expected to help paint sales.

Like other retail businesses, establishments in this industry continued to increase their reliance on computers, simplifying many routine buying functions and improving the efficiency of in-store sales staff. The larger paint, glass, and wallpaper retailers were relying less on sales staff for inventory counts and more on point-of-sale computer terminals, which provided up-to-date inventory and sales information.

Computerized inventory controls greatly increased the efficiency of ordering merchandise. Some systems monitored inventory levels, automatically reordered selected merchandise, connected chain stores to one centralized system, and calculated turnover by product, store, and sales area. For sales staff, point-of-sale computer systems were useful in calculating discounts, approving credit, and scheduling deliveries.

A significant development in the distribution of paints and wallpaper was the use of electronic ordering and inventory control systems, known as electronic data interchange (EDI). Replacing the use of the postal service, EDI systems enabled retailers to order paints through a computer linked directly to manufacturers and independent distributors. This facilitated quicker ordering and more accurate inventory controls.

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