Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
The Remodeling Industry Needs Larger Remodeling Companies Who Buy More Products
Editorial Director Paul Deffenbaugh argues that if remodelers want to get more respect from suppliers and other service providers, they need to be part of an industry that has larger companies so the supply chain will pay attention to them.
The remodeling industry often feels like the old Rodney Dangerfield quote, “I don't get no respect.” Government doesn't track the industry numbers. Local suppliers struggle to deliver the service professional remodelers need. And building product manufacturers give most of their love to builders.
A remodeling friend of mine from Chicago once told me that when building product manufacturers want to woo a builder, they give him a house. When they want to woo a remodeler, they give him a T-shirt.
The point is obvious. Suppliers sell a whole lot more product to builders than they do remodelers. The actual difference is hard to calculate, and, says Kermit Baker, can only be guessed at by making assumptions about certain spending habits. Baker is the director of the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University.
But here's what we do know. Any supplier is going to be interested in selling a lot of product to a single buyer because it makes it easier and focuses the sale. Last year, Pulte Homes in Bloomfield, Mich., built more than 20,000 homes, even in the downturn. They manage to attract a bit of attention from suppliers because those numbers translate into serious business. The largest remodeler in the country does a fraction of that many projects, and most of the product investment is in a limited line. Builders buy everything.
During the housing decline, though, more suppliers are looking to the remodeling market. This happens every downturn. All of a sudden suppliers, builders, trades and service providers consider remodelers potential clients to keep their businesses going happy. As soon as the next uptick in housing activity comes along, they go back to their love for builders.
So how do remodelers get respect? Aggregate. The associations, franchises and other aggregators of businesses in the remodeling industry get a lot of attention from suppliers (a lot by remodeling standards) because suppliers reduce the cost of sale by reaching out to groups of buyers rather than taking on onesy-twosies. That's simple.
But the problem for manufacturers is that nobody in those groups can compel the other members to buy a particular product. Even in franchise situations, the local franchisee may be able to get better service and pricing from a supplier on a product that is not in favor with the franchisor. Because the franchisor gets a percentage of the revenue from the franchisee, it's in everybody's interest to let the local company drive the decision.
So, what's the solution? We need bigger remodeling companies that buy more products and are professionally run. They have to maintain the same level of customer service and quality as the smaller guys, which with today's improved processes is completely achievable. But they have to be bigger.
You want a little lovin'? Grow your company.
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