U.S. Census Bureau Macro Regions
It has long been recognized that there are at least two divergent types of customers for architectural coatings: the professional painter and the DIY buyer. What is generally ignored, however, are the vast differences in customer buying behavior across the United States. It is the astute coatings manufacturer, both large and small, that embraces these differences and turns them into profits.

The United States Census Bureau identifies four macro regions (see Figure 1). These are the Northeast, South, Midwest and West. Recent studies by Orr & Boss, a Plymouth, MI-based consulting firm for the coatings industry, have revealed that there is significant variation in both customer segmentation and channel of distribution preferences across the census regions. Furthermore, these studies reveal that demographic, economic and end-use factors drive this variation.

U.S. Architectural Market Market Share - DIY vs. Contractor
Over the past 30 years a dramatic shift has occurred in the make-up of the customer base for architectural coatings in the United States. In the 1970s, the do-it-yourself (DIY) customer accounted for 60% of all paint sold. With the growth of dual income, along with an aging population and a general rise in the standard of living, has come an increase in the amount of architectural coatings applied by professional painters. The professional painter now accounts for approximately 65% of all architectural coatings purchases (see Figure 2).

U.S. Architectural Market DIY vs. Contractor - Regional Variation %
While this general trend toward the professional market has been recognized by the industry, what is often overlooked is that this trend is not universal. Significant deviation from the national mean exists across the census regions (see Figure 3).

The South and the West lead the U.S. in the amount of architectural painting performed by professionals, with nearly 70% of all architectural coatings revenues derived from professional painters. The Midwest, conversely, has the highest percentage of revenues from DIY customers. This variation in customer distribution is driven by demographic and economic factors. The U.S. as a whole is growing much more rapidly in the South and West (see Figure 4). The rapid growth in these regions fuels new construction of residential and commercial properties. By and large, the DIY customer is not involved in new construction. It is the professional painter who services this end-use segment.

Percent Change in Resident Population for the 50 States, the District of Columbia and Puerto Rico: 1999-2000
This variation in customer distribution has led to interesting differences in the predominant channel of distribution for architectural coatings companies across the census regions (see Figure 5). There are three primary channels of distribution for architectural paints: company-owned paint stores, mass merchants and independent dealers.

Each of these channels has unique characteristics. These include predominant clientele, price structure and customer key buying factors. Definitions of the channel members are listed in the table.

Company-owned paint stores dominate the South and West, where new construction has been heaviest. In contrast, the Northeast, with older buildings and a high percentage of repaint work, has the highest usage of the independent dealer channel. The Midwest, with its large DIY customer base, has the greatest percentage of paint sales through the mass merchants.

U.S. Architectural Market Channels of Distribution - Regional Variation %
Information on regional variation can be crucial to architectural coatings companies. Not only does it provide indications relative to optimal channel strategy, it also provides significant insight on how to best reach target customers. Clearly, the DIY customer has different buying criteria than does the professional painter. What has also been revealed by Orr & Boss, as part of its research for the National Paint and Coatings Association (NPCA)'s upcoming U.S. Paint & Coatings Market Analysis (2000 - 2005) report, is that specific buying criteria for professional painters exist based on whether they buy from a company-owned store or from an independent dealer. Regional variation and the key buying factors of architectural painting contractors is discussed in more detail in the NPCA report, which is targeted for publication during the fourth quarter of 2001.

Understanding variation in customer segmentation and in predominant channels of distribution can be crucial to the success of both regional and national architectural coatings suppliers. Regional suppliers must recognize their core customer base and align their channel strategy to meet those customers' needs. National companies must realize that the architectural coatings market in the United States is not one market and cannot be treated as such. Across the country, there are different customers, with different key buying factors, who buy through different channels. The companies that recognize these differences and act on them will be positioned for success. Those that don't will be left behind.

Definition of Distribution Channels for Architectural Paint

Company-Owned Stores
Retail outlets owned by paint manufacturers. In almost all cases, stores target the contractor market. Key examples are Sherwin-Williams, ICI, Duron, etc.

Mass Merchants
Major retail chains selling paint through multiple outlets. Key members of this channel are:

    (a) Home centers such as Home Depot and Lowes.
    (b) Discount stores like Wal*Mart or K-Mart.
    (c) Department stores such as Sears.

    Independently owned, smaller retailers selling Dealers paint. This channel splits into three sub-channels:

      (a) Contractor oriented specialty paint dealers, indistinguishable in their operations from paint company stores.
      (b) Hardware stores selling paint and a variety of other home improvement items, e.g., Tru-Serv and Ace.
      (c) Decorator centers selling window treatments, wall and floor coverings, and almost incidentally, a little paint.

      For more information on architectural coatings, contact Orr & Boss, 44450 Pinetree Drive, Plymouth, MI 48170-3869; call 734/453.3033; fax 734/453.4320; visit www.orrandboss.com; or Circle Number 75.