If you’ve been following me for a while, you know that I’m all about focus.
That shouldn’t be controversial, but a lot of people are hesitant to follow that advice. Everyone thinks their products are great and that they would be the right choice for anyone and everyone. But “anyone and everyone” is a terrible target market. If you’re selling to everybody, you’re really selling to nobody in particular.
It’s better to have a very clear idea of who your customers are. Are they builders or architects? Are they contractors or dealers? And more importantly, what kind of construction are they involved in?
There’s a world of difference between residential and commercial construction. The right materials to create a comfortable living space might not be up to the task for large, high-traffic commercial buildings.
But you can dig even further than that, and I strongly encourage you to. If you want to sell building materials for the commercial market, ask yourself what kind of commercial projects you want to zero in on.
That way, you’re not just focused – you’re laser-focused.
But laser-focused on what? What kind of buildings should you concentrate your efforts on?
Your answer to that question will depend on the kind of product you’re selling and what it’s best suited for. But in general, it boils down to two things: what kind of construction projects are growing and what type of buildings are a good fit for your product?
There are over 300 different types of commercial buildings. These include everything from a veterinarian’s office to a hotel, an office building to a convenience store or a college dormitory to a distribution center.
Many building materials companies will focus on the largest opportunities. The problem is that the largest opportunities are also the most obvious ones, meaning that your competitors are also setting their sights on them. With everyone clamoring to get these customers’ attention, it becomes harder and harder to make a sale.
To stand out and make a sale on these larger projects, you’ll probably have to lower your price. When you do that, word gets around. Other customers will expect the same lower price from you.
Instead of going after these obvious opportunities, you should shift your focus to commercial buildings that are expected to do well in the next few years. Not everyone sees the potential in them yet, so there will be less competition for the sale but still plenty of profit to be made.
I’m going to give you two examples of these opportunities. One is a distribution center that basically requires walls, roofs, and floors. That’s a great prospect if you sell those – not so much if you specialize in materials for the interiors of buildings.
The other example is the hospitality industry, which requires quality doors, flooring and windows. Like multifamily housing, it also needs to be remodeled on a regular basis, giving you an opportunity for ongoing sales.
Commercial Buildings Types That Are Growing Today
A couple of decades ago, you couldn’t go wrong selling building materials for commercial retail spaces.
The retail landscape was undergoing some major changes. The shopping malls that became the symbol of commerce in the 1980s were starting to lose their shine. Indoor foot traffic was thinning out and stores were closing without any new ones to take their place. It wasn’t the age of the dead mall quite yet, but we were taking the first steps toward it.
The new business model was the big box store. Instead of cramming lots of businesses under one roof, consumers could go to Walmart or Target and get everything they needed from a single store. Instead of new malls, we were seeing large patches of real estate filling up with rows of big boxes sharing giant parking lots.
It was a new retail model and it needed new buildings to accommodate it. The existing commercial real estate simply wasn’t up to the job – a Walmart Supercenter might technically be a store but it was more the size of a giant warehouse. That meant steady work for construction companies across the country, along with a steady supply of building materials that were needed for that type of building.
Things are different now.
The big box stores are still around, but they’re not spreading anymore. The ones that are growing are doing it with online sales, not new locations. And the same thing is happening across every single retail sector.
Since the big box boom, we’ve been through another retail revolution. This one, however, doesn’t come with a surge in retail construction. Shopping moved online, so if anything, we now have too many retail spaces.
It’s important to understand this, because it means targeting retail is no longer a viable strategy. If that’s where you’re focusing your sales efforts, you’ll earn very slim returns at best.
However, it can also point you in the right direction. Retail construction might be slowing to a crawl now that online shopping is the default for most people, but fulfilling all those online orders doesn’t happen in the cloud. It still involves a lot of activity on the ground – it just takes place in a different kind of building.
The shopping mall isn’t coming back. Big boxes probably won’t boom again, either. Instead of selling materials for retail operations, you may want to focus on industrial buildings.
There are two reasons these will likely keep growing in the near future.
First, those are the buildings that power online shopping. The name of the game in ecommerce is getting the right product from the manufacturer to the customer – and getting it there as quickly as possible. That can’t be done without a vast network of industrial buildings like warehouses and distribution centers.
Second, industrial buildings can take advantage of very affordable real estate.
For the most part, retail spaces had to go where the people already were. They cropped up in convenient, high traffic locations and had rents to match. Paying a premium for the location often took a large bite out of a company’s profits.
Industrial buildings are the opposite. They tend to be built in low-density areas where the people aren’t. They’re clustered in industrial parks, off lonely stretches of highway, or on the edge of town.
In other words, they’re built on land that’s cheap and there’s nothing to stop them operating day and night. That makes them a great investment because even a modestly profitable industrial operation can earn high returns.
There’s nothing slowing the growth of industrial buildings and we’re relying on them more than ever before. So it’s a great time to specialize in them.
Commercial Buildings That Need Premium Products
Another great area of focus is buildings that need premium building materials. They’re the types where owners won’t settle for cheaper materials, either because they have highly specific needs or because they’re willing to pay more upfront to minimize long-term costs.
Hotels are a good example of this.
The building materials used in hotels need to hold up under heavy use from a constant stream of people checking in and out. To stay competitive, hotels also need to ensure that everything looks pristine and clean. That means nothing chipping, peeling, or looking anything short of perfect. On top of that, the rooms have to be easy to clean so they can be quickly turned over between guests.
They also can’t afford to deal with a lot of complications. Hotels operate 24/7, 365 days a year. Any problem that requires them to shut down a significant part of the establishment for renovations could be devastating for their earnings and could cost them customers.
Because of all this, hotel construction and renovation projects will usually go for top-quality materials. Selling to them might not always result in high sales volumes, but you’ll always get healthy margins by supplying them with premium products.
Hotels also need to stay fashionable. If the look and feel of the space or the amenities offered feel outdated, customers will stay elsewhere. Staying current involves remodeling on a somewhat regular basis, which translates to repeat sales for you.
Hospitals and other healthcare facilities are the same. Keeping a sterile environment is a top priority for them, so they will only use building materials that help them achieve that goal. They won’t try to save on costs by using porous materials that could house bacteria or surfaces that can’t be disinfected easily.
We might not see a boom in construction for those either. But because they need high-performance products, focusing on them can still be worth your while.
Focus Your Efforts
Your resources are limited, so you need to use them wisely. In this case, that means understanding two things: how the commercial landscape is changing and what different types of customers need.
If you pay attention to the way the market is moving, you can get a better sense of what kind of construction is on the horizon. Logistics will matter more than retail. With more people being priced out of home ownership, we’re likely to see a lot of growth in multi-family housing as well.
And no one will ever go broke understanding their customers. Not only does it make you better at selling to them, it also helps you figure out who you should sell to. Not every buyer is willing to spend more for quality materials, but you can focus your efforts on projects where quality always trumps price.
There’s plenty of room to become more successful selling to the commercial market. It’s just a matter of setting your sights on the right kinds of buildings by focusing on the best opportunities.