nient store hours, and by providing timely delivery.
The retail building supply industry supplies building materials and fixtures to the retail market; some large warehouse stores also serve local contractors. During the 1980s and early 1990s, companies such as Home Depot changed the traditional way that these stores operate by offering regional and national stores in a "warehouse" format. These giant home centers were able to effectively compete with smaller, older local suppliers by offering economies of scale and marketing support from a central base that the local merchants could not match. The result has been a growing trend toward the home centers and away from the smaller local retailer in many areas.
This industry is traditionally sensitive to the cyclical housing market, which means that the industry has historically tracked the performance of housing starts. Weak home construction activity leads to low demand for construction materials, and the home centers have begun to focus on carrying home decoration and home improvement materials as well as the construction materials which have traditionally formed the core of their business. This strategy has led to less dependence on the cyclical housing market, and enables stores to enjoy profits at a time when they might otherwise lose sales.
This market segment is in the mature phase of the lifecycle when there is considerable competition and since the market is sensitive to price pressure. This phase of the lifecycle is characterized by a shaking out of competitors, and this segment is no different. Intense competition among local merchants to maintain market share against regional and national retailers can be bitter and lead to lower profit margins across the industry. Another problem facing competitors in mature markets is the tendency for new stores to "cannibalize" from other stores; that is, that new stores take customers away from existing Home Depots rat...