Early last year, Wheeler's, a Rome, Ga.?based pro dealer, reorganized its installation department, whose activities generate 20% of the company's annual revenue, "so that we'd be set up more like a builder," says Rick Ariail, Wheeler's director of installed sales. It established a deeper field hierarchy that now has 22 project managers, four territory managers, and one operations manager, all supported by teams of designers, estimators, and cost analysts who, says Ariail, can pinpoint "to the dime" a job's expense.

That move has positioned Wheeler's to achieve its ultimate goal: to be able to offer to build an entire house "from grading to handing over the keys to the owner" within a 90-day cycle, says Ariail. It recently added roofing to its menu of installation services, and is considering expanding into pouring foundations and hanging drywall.

Other pro dealers also are expanding their installation services to enhance their value to those builders that mostly prefer to farm out the actual construction of their products so they can concentrate on land development. Vidalia, Ga.-based VNS Corp. installs many of the building products it sells, and is talking about adding landscaping, plumbing, and electrical. Dallas-based Foxworth-Galbraith, whose installation services encompass the entire shell of a house as well as drywall and insulation, is considering getting into certain aspects of foundations. Its president Walter Foxworth states that his company's objective is for installation and construction services (it has 19 wall and truss plants) eventually to contribute half of the company's sales.

Virtually Turnkey

"In many parts of the country, LBM dealers are offering almost turnkey solutions, taking the house from foundation to 'dried in,' " said Mike Butts, president of the DeWitt, Mich.-based construction services consultant LBM Solutions, during a Webinar on installed sales hosted by www.prosalesonline.com. One dealer vice president predicts that it's only a matter of time before a large pro dealer, such as Pro-Build or Stock Building Supply, "which already installs quite a bit of the house, asks itself, 'What do we need the builder for?' " and takes over the entire process.

Being a home builder, however, isn't the bed of roses it had been in recent years, given the tepid buyer demand for the last year. So skeptics–dealers among them–question the timing and risks inherent in taking installation services to another level. Dealers contacted for this article, most of whom are doing installations for new-home construction, say the housing downturn hasn't cut too deeply into their installed sales; and even if it did, "that doesn't make us want to stop heading toward our goal, which is our long-term strategy," says Foxworth. Ariail notes that as production builders have downsized their operations, they are calling upon companies like his to fill in the supervisory and labor gaps. "Our siding and trim business has gone through the ceiling during the downturn," he says.

Some dealers still venture cautiously into installation, though, because they don't want to appear to be competing with contractors that are their primary customers. That's the main reason why Knoxville, Tenn.-based Tindell's, which gets around 8% of its revenue from installed sales, has stayed away from installing siding. Tindell's also has a policy of never hiring a contractor from a competitor "because we don't want that happening to us," says Steve Moore, this dealer's installed sales general manager. Dealers also are justifiably concerned about shortages of skilled labor as well as installation-related liability (see "On the Hook," page 56).

But these factors haven't kept dealers from boarding the installation train, for to stay on the platform is to cede competitive ground to giant pro dealers, to say nothing of The Home Depot and Lowe's, whose installation services (which are mostly on the repair and remodeling side) took in $3.8 billion and $2.82 billion, respectively, in 2006. The Home Depot alone offers installation for 40 product categories and handles more than 11,000 installations per business day, according to Gary White, its vice president of Home Services. ProSales also confirmed an Associated Press report in late May that Menards, the third-largest home-improvement retailer, is developing residential subdivisions near some of its stores in Illinois and Indiana, to encourage community growth, boost sales of building materials, and fortify its stores' relationship with local builders and trades, says Menards' attorney Garrett Caffee.

Going Beyond Price

With nearly three-quarters of the dealers among the ProSales 100 installing at least one product, and another 8% planning to do so in the future, it's clear that more dealers than ever are bundling products and installation services to appeal to builders seeking cycle-time and cost savings. "Our program has definitely helped us attract more builder business," says Don Morris, vice president of installed sales for The Carter Cos. of Kent, Ohio, which created an installed services division last year. By providing installation of framing lumber, trim, cabinets, siding, hardware, insulation, and the panels, trusses, and millwork it makes or assembles, Millard Lumber of Omaha, Neb., has reached beyond the markets served by its three yards to successfully bid jobs in Slidell, La., and Wichita, Kan., says vice president of operations Jeff Taake.

The growth of dealers' installation services is being abetted by turnkey programs developed at suppliers like iLevel by Weyerhaeuser, whose "NextPhase" Site Solutions program helps dealers get into the manufacturing and installation of structural products such as panels and trusses. Its turnkey floor package, which includes design software and fabrication equipment, gives installers the capability to lay 1,500 square feet of floor panels within half an hour. "NextPhase puts control into the dealer's hands, even more so when they are installing themselves," says Craig Meyer, iLevel's strategic development manager.

About 275 dealers participate in Guardian Fiberglass' insulation installation program, which provides market analysis and extensive training, as well as proprietary online software that allows dealers to calculate margins by product. To answer anyone who questions the profitability of installed sales in general, Guardian promises dealers 25% gross profit in their first year of the program, says Dan Olmer, vice president of retail sales.