As you'll read in this special big builder issue, it's projected that by the year 2010 the 10 largest builders will control 50 percent of the new-home market, up from an estimated 30 percent this year and only 8 percent in 1993, according to Margaret Whelan, housing analyst for the investment firm UBS. She also noted that this growth is being fueled in part by strategies to expand geographic reach, make acquisitions to gain access to more land, and diversify product lines (types of homes), as well as a focus on cost reductions to drive higher margins. For dealers, these evolving trends are signaling the need for new two-tiered strategies that not only consider the overall size and market reach of big builders but also take into account their varied business models, such as whether they have centralized or decentralized purchasing and how much labor is subcontracted and/or outsourced through installed sales by LBM suppliers.

These points also were supported in a late-January big builder Webinar titled “The BIG Issue: Capacity Management,” which was hosted by Symbius Corp. (you can access a recording of the event at Luis Solis, the Webinar's moderator and president and managing partner of Symbius, pointed out that there are four primary ways that big builders are reengineering their purchasing flows: expanding geographic reach that is shifting purchasing from being community based to regionally centric; expanding production time and procurement horizons from months to years; developing new supplier relationships that shift from transactional to strategic alliances focused on the sharing of information; and adopting new terms for product purchasing and construction services that are less ad hoc and more measurable by quarterly reviews and surveys.

Many progressive dealers that you will read about in this issue are responding to these cues and jockeying for positions to better serve big builders going forward. Examples include:

  • The acquisition of Redmond, Wash.–based Lanoga Corp. by Fidelity Capital, which was announced in mid-January at the International Builders' Show in Orlando, Fla., merges the dealer with South Plainfield, N.J.–based The Strober Organization to create a truly national company that is expected to have sales of $5 billion this year. The new united powerhouse will focus on pursuing larger builders in most U.S. markets while still effectively servicing and maintaining their smaller accounts (see “Perfect Couple,” page 26).
  • Market Matters (see “Inside Installs,” page 79), reports that the nation's top 100 dealers are focusing on installed sales to increase market share, sell more of the housing package, and provide value-added services and much-needed skilled labor to big builders. Backing the trend, in the 2005 PROSALES 100, 73 of the companies on the list reported offering at least one installed sales category, a 9 percent increase over just two years prior.
  • This month's profile of Stock Building Supply—which recently has made a number of acquisitions focused on construction services, including Elgin, Ill.–based Seigle's and Las Vegas–based framing contractor Vegas General—discusses how the company is reorganizing its business model into 10 separate market districts with some yards focused exclusively on serving the needs of production builders (see “Preferred Source,” page 68).
  • Yet while many dealers are on the path to establishing better alliances with big builders, there still is a long way to go according to our cover story, “Big Expectations” (page 56), which presents the results of the most recent BIG BUILDER Study, which is conducted by BIG BUILDER magazine, a sister publication of PROSALES. Interviews with 11 of the top 100 builders in the United States confirm that while pro dealers and distributors still are the primary intermediate suppliers for builders and manufacturers, they often are caught in the middle between trade partners that are often not on the same page.

    Hence, we hope this special issue will give you more insight on how to develop and refine a strategy to grow alongside big builders rather than being squeezed between them and manufacturers.