A global market gap
In 2010, when Refresh was first launched, extensive market research identified a gap in the global homebuilding industry. If you asked any member of the New Zealand public to name some new-build housing brands, they could probably recall at least two or three.
But if you asked them to name a renovation building brand, it was a different story. At that time, the market did not have a consolidated group of nationwide home renovation specialists that offered a full design-and-build service, anywhere in the world. This startling insight was the start of Refresh Renovations.
Further research into the international group home-building market revealed that the building industry was broadly divided along the same lines, regardless of country: approximately one-third of the industry, by revenue, is commercial building, with another third being new home building, and the final third being the renovations market.
“We found the shape of those markets, across all regions, was almost identical,” says Refresh director Jon Bridge.
“There is a broad 30 per cent split between commercial, new homes and renovations… with renovations accounting for a relatively higher percentage of total spend.”
The commercial third incorporated design-and-build processes, the residential home builds incorporated design-and-build processes… so why not the renovation market?
Consolidating a fragmented market
When you look more closely at the three different sectors, their differences become more apparent. Both the commercial and new-home building sectors are heavily consolidated, while the renovations market generally remains very fragmented.
“Around 95% of renovation building companies are very small operators; most of them are the proverbial one-man band,” says Bridge. This means that those small operators have no collective buying power, and less access to tools and resources to scale their business beyond their local reputations.
“The other critical difference is that – even among the larger renovation companies – they are servicing a regional area. Until Refresh, there were no nationwide offerings in the renovation space.”
Harvard University research supports this. In a 2014 research paper, the Joint Centre for Housing Studies reported the following:
“Unlike the national homebuilding industry, which saw significant increases in scale and consolidation in recent decades, the professional remodelling industry continues to be highly fragmented: the vast majority of companies are relatively small, single-location businesses that likely will not experience any significant growth over the course of the business’ life-cycle.”
Reaping the benefits of consolidation
“The large commercial and new-build firms all have a strong brand and market presence,” says Bridge. “Obviously, this is only possible when you consolidate…a small operator simply doesn’t have the resources or the skills to build a national brand.” Harvard’s research validates Bridge’s statement:
“Within such a large and fragmented [renovation] market, there is opportunity for companies that are organized, differentiated, and focused on brand building to capture market share and build large-scale businesses.”
There are many other benefits for consolidation, which have long been a feature of the new-build and commercial sectors. These include group buying power, quality management, and centralised resources for the benefit of both business owners and customers. Refresh Renovations was the first to deliver these same benefits to the renovation sector.
“It’s not as if we were launching a risky new business model,” explains Bridge. “We were simply following a proven model that has been highly successful in other sectors of the construction market for almost two decades. The only difference is that, until Refresh, no one had truly capitalised on that opportunity in the renovation market.”