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Home Depot, Lowe’s Squeeze Independent Contractors

| Written by Stacy Mitchell | 6 Comments | Updated on Jul 26, 2005 The content that follows was originally published on the Institute for Local Self-Reliance website at

Independent remodeling businesses are being increasingly squeezed by Home Depot and Lowe’s. Having captured nearly half of all hardware and building supply sales nationally, the two chains are now expanding aggressively into installation services.

Home Depot, which begin with carpet-fitting a few years ago, now installs everything from roofing and windows to decking and heating systems. Lowe’s is likewise moving into “do-it-for-me” services and together the two companies do about 26,000 installations a day.

Initially, both chains started by subcontracting the work to other firms, including some local, independent remodelers. But now they are bringing more and more of the business in-house. Home Depot recently acquired RMA, the third-biggest installer of replacement windows and external wall coverings, and also bought Installed Products USA, which installs roofing.

“Many [independent remodelers] thought they were invincible, that it would not affect them. Now Home Depot and Lowe’s want it all,” said Bob Sayre, who founded Max Equity, Inc. in 2002 to help independent remodeling businesses counter the mega-chains.

He says that Home Depot and Lowe’s have the advantage of massive advertising budgets and a widespread perception of lower prices. “They’re everywhere. That’s why they have the upper hand. They have the first shot at the customer,” he explained. A customer might go into Lowe’s to shop for a refrigerator, say, and then decide to have the whole kitchen installed by the chain, without getting bids from other remodelers.

What is particularly frustrating for independents is that mega-chains actually have substantially higher installation prices. “The customer is paying a significant premium,” said Sayre. Home Depot even admits as much. “We will never win on pure price,” Frank Blake, the company’s executive vice-president of business development told the London-based Financial Times. “The person operating in the neighborhood just on his or her own will be able to win.”

But people still assume that the big-boxes are less expensive. “They charge a premium now and once they own all the business, I can just imagine what they’ll do,” said Sayre.

Home Depot and Lowe’s also benefit from financing that allows customers no interest and no payments for six months to a year. Sayre tells the story of a countertop installer who lost a big job to Home Depot, because even though his price was 20 percent lower, he was unable to finance the deal.

“One of the things we’re doing is working with a bank to try to set something up so our members can offer that kind of financing,” said Sayre. Max Equity started with 70 independent remodelers in and around St. Louis. The association then went national and has now grown to more than 5,000 members. It hopes to reach 10,000 by the end of the year.

There’s no cost to join. The main benefit of membership is a rebate check. By pooling the purchasing power of thousands of remodelers, Max Equity is able to obtain volume discounts from suppliers. The company has negotiated deals with national suppliers of paint, flooring, siding, plumbing, and heating and air conditioning systems. It is also working to establish relationships with local vendors of lumber, kitchen cabinets, electrical supplies, and other products in every state.

The way it works is that, at the end of each quarter, the vendors add up the total purchases made by Max Equity’s members and then provide a rebate of 2-3 percent. Max Equity distributes 70 percent of the rebate back to its members, keeping the remaining 30 percent to run the program. (Members buy directly with the vendors, not through Max Equity.)

The average remodeler purchases more than $1 million in supplies each year, so the annual rebate can amount to more than $20,000.

Selected vendors benefit from the relationship, because they stand to become the first choice for remodelers that belong to Max Equity. Many also have a keen interest in making sure independent remodelers survive: the big-boxes either do not stock their products or demand such low margins that they cannot operate profitably.

Max Equity also plans to help members market their services through web sites in 52 local markets that enable customers to locate remodelers for virtually any home improvement job.

Having grown to dominate retail sales of hardware and building supplies, Home Depot and Lowe’s are turning to new avenues for growth.

Home Depot plans not only to compete with independent remodelers, but recently became a major supplier to this industry. Last year, the company acquired White Cap Construction Supply, a distributor of specialty hardware, tools, and materials for the construction trades. White Cap has 70 outlets, a staff of 1,700, and an extensive fleet of trucks for job-site deliveries.

On another front, Home Depot may soon be replacing your city’s waterworks, having acquired a leading supplier of water systems. Home Depot says half of all municipal water infrastructure in the US will need to be replaced over the next 15 years.


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About Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance, and directs its Community-Scaled Economy Initiative, which produces research and analysis, and partners with a range of allies to design and implement policies that curb economic consolidation and strengthen community-rooted enterprise.  She is the author of Big-Box Swindle and also produces a popular monthly newsletter, the Hometown Advantage Bulletin.  Connect with her on twitter and catch her TEDx Talk: Why We Can’t Shop Our Way to a Better Economy. More

Contact Stacy   |   View all articles by Stacy Mitchell

  • As an independent contractor I can see this “big box” trend happening all over, and not just in our industry. Local book stores, local coffee shops and even local doctors are being absorbed by “big box” names we all know. However, remodeling is not a commodity and the level of service a homeowner receives depends largely on the specific people providing it. I had not heard of Equity Max before, and for that alone I’m glad I stumbled across this article. I’ve already submitted my online application to join. It is possible for a group of independent businesses to collectively work together for their mutual benefit, and I’m hoping Equity Max is helping do this for independent contractors. Many people do not realize that Ocean Spray, a very well known brand, is an agricultural cooperative of cranberry growers. If they can do it, we can do it.

  • It is possible for a group of independent businesses to collectively work together for their mutual benefit, and I’m hoping Equity Max is helping do this for independent contractors. The employees at Home Depot knew nothing about our product and couldn’t care less. They only wanted their money. Thank you.