In a survey of 71 building product manufacturers and service providers conducted by Home Innovation Research Labs in mid-April, almost half of respondents – 46% - reported that they had slowed their overall product research and development activity, either somewhat or to a great extent, as a result of the COVID-19 pandemic and business disruption.
Of this share of respondents, 35% reported decreasing their R&D operations “somewhat”, while only 11% reported a more major decrease. The majority of building product manufacturers – 56% - have decreased their marketing, promotion and advertising activity either somewhat or to a greater extent. Thirty-nine percent have decreased new funding for product and technology development, and 39% have pulled back on new product research.
Ed Hudson director of market research at Home Innovation Research Labs, notes that these results reflect a tendency for companies to “retrench, preserve cash, and focus on short-term, revenue-generating functions” in the event of a downturn, which drives efforts away from new research and development. Hudson compares the current situation to the Great Recession, where companies cautiously continued R&D spending as housing starts fell from 2007 to 2009, then pulled back on development as the Recession began.
“Building product manufacturers’ response to COVID-19 seems to reflect a widespread wait-and-see position, particularly among new product and technology initiatives, market expansion efforts, and new advertising campaigns,” Hudson says. “The focus for most responding companies has shifted to adapting to new restrictions and operating changes in the COVID-19 environment — establishing the best business position to weather the inevitable economic downturn.”
When asked about the impact of COVID-19 on sales of products and services to the single-family, multifamily, home remodeling, and commercial construction industries, 78% of respondents reported a decline in sales to single-family home builders – 48% to a smaller extent and 30% to a greater extent. Seventy-one percent reported a decline in sales to residential remodelers, 68% a decline in sales to non-residential activity, and 69% a decline in sales to multifamily.
“I believe, in the short-term, construction types with longer project cycles, such as multifamily and non-residential building construction will be less significantly affected,” Hudson says. “My biggest concern is for the remodeling segment, since it very often features in-home visits to design, sell, and service a project.”
