Important Change for Building Product Manufacturers
The post-World War II building boom spawned a fragmented culture of building contractors and skilled tradesmen who built, rebuilt, modernized and improved America’s housing stock. That culture remained fragmented for more than seventy years. New technology may not be uniting that culture, but it is providing a uniform platform for a home improvement “sharing” economy that benefits contractors and homeowners alike. As home improvement product sales move online, new suppliers and service providers will join the party, and the old way of doing business will fall by the wayside.
Consider the examples cited by Rachel Lerman in her recent Seattle Times article. The homeowners she interviewed found contractors through online contractor listings from services such as Pro.com and Porch.com to do simple remodeling jobs. In one instance, the homeowner tested the waters first by hiring a contractor to do a small $400 job and then retaining him to do an entire $20,000 bathroom makeover. Without these online services, homeowners would be relegated to seeking referrals or looking through directory listings. Contractors traditionally had been reluctant to accept smaller jobs, or if they did accept them, they would charge higher fees to compensate for the time and energy required to handle the back office accounting and administration associated with many small jobs instead of a small number of large jobs. Online services remove some of those administrative burdens from the contractor and open them to doing small projects that could lead to larger engagements.
Building Materials Manufacturers Not Meeting Needs of Customers Online.
Homeowners and contractors are also much more likely to have made their product decision online whether or not they actually buy online. Most building materials manufacturers are not meeting the needs of their customers online.
Big online players like Amazon are beginning to take notice of the potential for online home improvement product and service sales. Amazon already provides services as an online store for thousands of smaller distributors who do not have the financing or back office staffing to form and maintain their own strong online presence. Big box stores like Lowe’s and Home Depot are focused on growing their online sales. Consumers who are looking for more customized or unique products can find them through any one of the thousands of online stores or Amazon, and they can have those products shipped directly to them without scrounging through showrooms and waiting weeks or months for a product to be shipped from a factory or manufacturer.
Who Will Benefit?
Consumers and contractors will see the greatest benefits of this shift to online sales for home improvement products and services, primarily with respect to greater product and service offerings and lower prices. Contractors, building product manufacturers, and suppliers will need to adjust their business models to accommodate the increased competition and lower prices that they will realize, but the expansion of their businesses should offset those lower prices. Following the Uber business model, online services will bill and collect payment for products and services and will withhold a commission (usually in the range of 20%) before forwarding payment to the contractor or supplier. Those contractors and suppliers realize additional savings through elimination of the administrative billing and collection sides of their own businesses.
The online home improvement product and sales market is still in its infancy, but its trajectory is definitely on the upswing. It is altogether possible that several alternative business models for this industry are currently under development, and newer and better structures will replace the models that companies like Pro.com are using.
A Real Threat or Opportunity for Building Materials Manufacturers
Please contact us for more information about the shift in this market, and on the implications of this shift for your business. You may be surprised to learn that those implications are largely positive and that your product sales can expand rapidly when you embrace the opportunities that they present.
What Others Are Saying
“Great article. Suppliers can benefit from going online.” Mark Meisner, President, and C0-founder, The Birch Group
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