The remodeling market definitely is a hot prospect this year. The majority of companies within its realm may be small, but their collective buying power is attracting the attention of many different supply channels, from traditional pro lumberyards to specialty distributors to big boxes. According to a new study from PROSALES, remodelers are overwhelmingly expecting growth in 2004 and those suppliers that want to win their business must be reliable and willing to cater to their unique needs.
According to the Harvard University Joint Center for Housing Studies, even though the sector saw only “sluggish gains” in the first quarter of this year, it's expected that renovation expenditures will remain steady as long as existing home sales remain healthy. So far, this year remains strong by historical standards and NAHB expects that single-family starts will post an all-time high in 2004, beating last year's record of 1.499 million units. Even though June's housing starts dropped to just above 1.8 million units—down 8.5 percent from May's upwardly revised rate of 1.97 million—single-family starts that month were up by 12.2 percent on a year-to-date basis.
This is good news for the growing number of pro dealers that are tapping into this potentially lucrative customer base, which can generate good margins and boost special order sales. Still, the remodeling market can be a challenge for many suppliers because companies in the sector typically are small and they do not make high-volume purchases, which makes economies of scale hard to achieve.
To help you better understand the remodeling market—including where remodelers purchase products and what they value in a supplier—PROSALES' Remodeling Study tapped 418 remodelers across the United States who are readers of REMODELING magazine, a sister publication of PROSALES. Here are some highlights of what they had to say about their supply sources and what wins their business:
Service shines. The top five criteria that the survey respondents deemed most important when selecting a supplier are all related to service. Ranking them either 9 or 10 on a 1-to-10 scale, with 1 being not at all important and 10 being very important, they are having products in stock (71.1 percent), timely delivery (67.7 percent), special order capabilities (65.6 percent), product selection (62.7 percent), and loyalty/past relationships (58.6 percent). Price, on the other hand, placed much farther down the list at 34.2 percent. As a result, when you are wooing new remodeling customers you need to promote the fact that you will meet their delivery needs on a timely basis and respect their business, regardless of their volume.
Price still counts. Even though price did not rank at the top of the list when the panel identified how they select their suppliers, don't let that fool you into thinking the cost of goods is not important in the grand scheme of customer relations with remodelers. When the panel respondents were asked to identify the top three things that traditional lumberyards can do to improve sales to them, lowering prices topped the list at 49.3 percent, followed by facilitating online ordering (35.9 percent), and offering before- and after-hours pickup (27.5 percent).
The key, these findings imply, is that remodelers do want fair pricing, but not at the expense of exceptional service. In this regard, 76.1 percent of the survey respondents said that if they had to choose between a supplier with lower-than-average prices and lower-than-average service and a supplier with higher-than-average prices and higher-than-average service, they would choose the higher prices and better service. It's a balancing act, for sure, but it's one more and more dealers are willing to juggle.
Lisa Clift, Editor