In a recent podcast, industry guru Mark Mitchell talked about how the growth of the internet has caused change in nearly every industry, and it’s no different for building materials manufacturers.
You can already see Lowe’s and Home Depot becoming very focused on growing their online presence, getting people to order online and have products shipped directly to their house or for an in-store pickup. These two industry giants serve as bellwethers for the rest of the industry and we’re seeing online sales growth in micro-niches as well. Efaucets.com, for example, sells completely online and is a huge resource to find everything in the world you could possibly want to know about faucets.
They’re an incredibly successful business. But most surprising is that you don’t have to be a company selling small, shippable building products to excel in this space. There’s even a custom staircase company that sells completely online.
The size of the product is becoming less relevant for onlines sales. People want to go to a website like Amazon, push a button, and buy.
In addition to sales moving online, we can also see the distribution process shifting. Even if your company isn’t selling online, your distributor might be. The concern is that most companies are going to end up behind the curve in building an online presence. It’s important not to wait until it causes a problem. Instead, be proactive about it.
So what are some things your company can do?
What to Change to Stay Ahead?
The number one thing is to be the online leader for information about your type of product. Think of any question someone could type into Google about your product category and your company should show up at the top of the page as an answer. The key is to start with information.
Next, have a person whose whole job is to explore and be on top of online sales for your entire type of product. Who is selling your product online today? What do you know about them? Is it being sold by the manufacturer, the dealer, or both?
Track and monitor this information, then develop your plan of what you’re going to do. Don’t wait until you're forced to react. Because realistically, you have two options when it comes to selling online.
You could sit back and do nothing for the next two years. But by year three, you’ll probably have no choice but to sell online. So be prepared. You may not need to sell online today. But you should at least be preparing some type of action plan to get ready, because that’s coming.
And if you’re worried about disrupting your dealer relationships, check out this strategy a manufacturer recently proposed. The company has an online buy button but intentionally makes the prices higher than the dealer’s. They’re not trying to grow their online sales today, but when the consumer goes to price compare online, they’ll buy from the dealer at what seems like a discount.
If at any point the manufacturer wants to shift their strategy, they just have to lower the price. Remember, if you can sell a staircase online, you can sell just about anything. You can either start now and figure out how to scale your sales online or wait three years and scramble to compete in a space that is overrun.
Having a website is no longer an option. But that doesn’t mean that all websites are created equal. Too many building product companies think having any website checks off the box. But you also need to invest in smart strategies for your SEO, social media, and content.
Simply put, building materials manufacturers are ten years behind the rest of the world when it comes to marketing. It’s vital that you start leading the way in what a successful company looks like online.
Move to Off-site Modular Construction
One of the biggest problems with the building materials industry has been its tremendous amount of waste and inefficiency. Every other industry has figured out how to make products more efficiently with consistent quality and lower costs.
But because the building materials industry is so fragmented, with thousands of homebuilders and contractors doing things differently across the country, it’s been difficult for the industry to move forward.
This is starting to shift, however, because of two major changes that have occurred over the last several years.
The first was an influx in real estate investment in the wake of the great recession. Major firms bought up thousands of foreclosure homes across the country and kept them as rentals. This caused investors to look at how they could better source materials for the construction industry.
The second was a shortage in construction labor. These two factors made some key influencers realize that the numbers work better when you build a house in a factory. It’s frequently cheaper, faster, and better than what you’d find on a jobsite. This is especially true if you’re building a high rise apartment structure that needs 100 bathrooms and kitchens, for example.
Some larger construction companies have created their own factories in order to move in this direction and this is will likely be a growing movement in the future. As a result, builders could move further into the design, marketing, and sales business.
A big player in the design build space is Katerra, one of the most futuristing companies in the building materials industry. They buy directly from manufacturers and have the opportunity to do what Uber did to the taxi industry.
One of Katerra’s goals is to be a more efficient source of supply in the construction industry compared to current methods. Their mindset requires a product with a certain performance. They don’t believe that brand names add value in a house.
Instead, they focus on design and performance. They deal directly with manufacturers in order to offer tremendous builder savings. They also now offer a wide scope of services that help make up for labor shortages, including architecture and engineering, construction management and general contracting, interior design, and of course, material supply.
Mark says that this means increased efficiency is going to be huge in the coming years. How can manufacturers stay ahead of this shift?
For starters, keep an eye on Katerra and similar companies. This movement is still small on the grand scale, but Mark predicts a shift will occur very quickly.
Manufacturers should start meeting with companies like Katerra right now. Understand how they work and what they’re all about so you can make a better, informed decision of how and where you sell a product. Learn what these companies need from a manufacturer, because it’s going to be different than what a builder or contractor needs.
If you can figure out how you can meet their needs, you could become the favored supplier early on.
Online sales and modular construction are two trends that will almost undoubtedly grow fast and furiously in the near future.
Want to talk to Mark about how your building materials company can stay ahead of the curve?
Visit his website at venveo.com for more information.
See more of the December edition of Dealer Digest here!
in Better Business
| November 01, 2018