How Home Good Brands are Evolving to Engage Millennial Homeowners
Millennials are widely known as the generation who prefers to rent rather than buy. Whether it’s taking an Uber or Lyft instead of owning a car, or leasing a place rather than taking out a mortgage, millennials are approaching the concept of ownership in a markedly different way than their predecessors.
But it’s time to rethink that perception, at least when it comes to home ownership. More and more millennials are ditching the rent check in favor of a monthly mortgage payment. In fact, millennials now comprise 42% of all home buyers and 71% of first-time home buyers
Millennials bring their own set of needs, preferences and expectations around home ownership, which creates challenges — and opportunities — for home goods brands. As such, I believe the next wave of major home goods brands will no longer be defined by the convenience or optionality they provide, but rather their ability to inspire and educate their customers.
New types of homeowners
Let’s dive into how the market is changing with this new demographic of homeowners. Because millennials generally buy older homes that need fixing up, the vast majority (88%) are very interested in learning about home improvement and repair, and 86% have made at least one home improvement in the past year.
But they often need help to get these projects across the finish line. In a recent survey, millennials had the least experience of any generation when it came to 13 of 21 common home repairs. Fixing the Wi-Fi router is one thing, but fixing the kitchen sink is a far more daunting task.
It’s clear millennials are buying homes and want to improve them, but many don’t know how. They are in need of content and inspiration, but current offerings don’t always offer this, leading them to go hunting for it. Those searches often lead to YouTube. Channels like HouseImprovements, which boast over half a million subscribers and over 100 million views, demonstrate the appetite for this content. But even with free content at their fingertips, studies show millennials still bring in professionals after using the videos to gauge to the complexity of the project and the need to hire someone.
To appeal to these young homeowners, home goods brands need to hook them with a combination of inspirational and educational content. This will keep millennials coming back for more and create brand loyalty that drives repeat purchases and ultimately higher lifetime value.
Why incumbents aren’t enough for millennials
Let’s look at where incumbents in this space are falling short. The Home Depot built its business on being a one-stop shop for home improvement. It grew into the big-box retailer we know it as today because it provided anything and everything in one location. But it needs to do more to extend its impact beyond its stores and better educate and inspire its customers in the digital age. They have plenty of DIY videos on YouTube, although notably they have about half the number of subscribers as HouseImprovements. Additionally, classes they put on have a mixed reception, judging from online reviews.
Direct-to-consumer (D2C) brands like Casper and Peloton have also relied on convenience as their main value proposition. Their frictionless offerings are particularly appealing to millennial renters, who just want to get what they need into their place as easily as possible. Taking a mattress out of a box or getting a gym-class workout from home certainly addresses that need.
But in the age of one-click, same-day shipping, convenience has become table stakes. As more millennials become homeowners, they don’t want to just make incremental improvements with easy-to-buy products, they want to change the build, function, and look of their homes.
As a result, we’re seeing a new wave of companies focus on providing inspirational content and full-service offerings around the home. These D2C brands like Houzz and Casper have huge penetration and are part of the broader group of over 400 DTC companies that have raised $3 billion since 2012.
Where we’re headed
If incumbents used convenience and optionality to become industry leaders, the next generation of home goods and e-commerce companies will focus on cultivating a community where everyone can learn, easily communicate with one another, share inspiration, and get help. At Signia, we’re particularly looking at areas that lend themselves to content, such as indoor and outdoor gardening, growing your own food, home decor (art, furniture, etc.), and renovation (patios, bathrooms, etc.).
There are already a number of companies using this playbook to great success, which run the gamut across the home goods space. Block Renovation, which counts NEA and others as investors, is a platform for end-to-end home renovation services for bathrooms and kitchens. It assembles beautiful content like the shots below to drive interest.
In the kitchen, Made In Cookware is a cookware startup that partners with celebrity chefs and creates both video and written content on how to cook, clean, and utilize their tools. Outside the home, innovators include The Sill, a gardening startup that provides content on how to pot, fertilize, and care for plants; Hometalk, a DIY home and garden knowledge hub centered on content and community, which raised $15M from NFX and others last year after bootstrapping for seven years; and Sunday, a lawn care subscription service, that invests heavily in its content hub called The Shed.
While there is no shortage of headwinds going against millennials in their quest for home ownership, more and more are overcoming these challenges and buying a place to call their own. As this generation takes over the housing market, the home goods brands that cater to this group’s insatiable need for inspiration and content will be well positioned for success.
Written by: David Bloom