New construction boosts opportunity for LBM dealers.
BY: LOU ROSSI
Windows is one product category that’s expected to benefit all parts of the housing industry recovery. Demand for these products in North America reached $11 billion in 2013 driven by the resurgence in new construction and a pickup in remodeling demand.|
While specialty 1-step is the largest channel for window sales with nearly half of the value, lumberyards still account for roughly 20% of windows sold into the construction market. The box stores have similar sales volume as the pro dealer channel, with direct from manufacturer rounding out distribution and nearly 15% of product flow.
Lumberyards are expected to pick up share in windows over the next few years as new construction accounts for a larger portion of the overall revenue base, and lumberyards are particularly well positioned to serve the builder market. The demand balance will shift from two-thirds repair and remodel (R&R) today to a near even split between R&R and new construction over the next three years. So, what’s needed to serve the opportunity? Are you a full line dealer in windows, and do you have the right brands? Do you have a specific customer focus, and how does that affect your product and service?
The category is similar to other building materials in that the rise of the production builder has dampened profitability potential but is offset by volume. A singular focus on new construction will limit margins, so a mix between this segment and the R&R portion of the market would seem to represent a more profitable revenue mix. With that said, there are techniques you can do to secure your piece of the pie.
First, start by assessing your product line to ensure that you have the right mix to serve your builder and remodeler customer. National and regional lumberyards offer a variety of product choices. Vinyl windows are the largest product segment for windows in both new construction and remodeling projects, accounting for nearly 70% of the estimated 45 million units shipped last year. So, vinyl windows need to be a core offering sold to customers. Premium products, including traditional wood, clad wood, composite and aluminum round out a full offering for any dealer, and represent upsell opportunities aimed at the customer, as well as even the focus of a particular set of custom builders and highend remodelers.
Next, define customer care as mission critical to meet the product and service needs in a category where responsiveness delivers high marks with all customer segments. It’s about putting the custom back into customer. Today, 90% of windows are custom orders, which is unlike other categories where stocked inventory needs to be carefully managed to avoid slow movers and high carrying costs. But the flip side is that your customers expect orders to be delivered right the first time, as little room for error exists with a custom order. Delivery dates can be further extended by weeks if the original date is missed for any reason or product is poor quality, which can lead to returns and callbacks, negatively impacting margin at both points in the supply chain. Make sure that you have a brand that stands for customer focus and value, and work with suppliers who share similar views of their role in the market.
The quick-turn type of business in windows requires both dealer and supplier to be aligned with an “ease of doing business” model in terms of ordering, lead-time, correct pricing, and high quality. That’s how good business is done no matter the market condition. To loosely quote Alexander Graham Bell’s famous line, “When one window closes, another opens.” Find the right opening for your business.