Lately, I’ve been noticing a few trends in the building materials industry that remind me of 2006. And it’s got me worried.
If you were working in building materials back then, you’ll know exactly what I mean.
Here’s a quick history lesson for everyone else. 2006 was a boom year for building materials. The industry had hit a peak and everyone was feeling very confident. But the party didn’t last. Now, we know that this high point was really the precursor to the huge downturn that came just two years later in 2008.
And if 2006 is repeating itself, that means we might have another 2008 just around the corner. Even if there isn’t a recession, the changes in the market will hit some companies as if there is a recession.
Few Troubling Trends
Here are some of the recent trends that are making 2018 feel like a repeat of 2006.
Rise in High-Quality Employee Turnover
The first thing I’m noticing is how many people with experience in building materials are looking for a new job.
I’m hearing regularly from people looking for a career move, either because they lost their job or they’re unhappy at their current one.
That’s not new – people come to me for advice all the time. What’s new is the frequency. I used to get these inquiries about once a month. Now, they’re coming in at least once a week.
And it’s not just the number of inquiries I’m getting that’s unusual, but who I’m getting them from. I can’t vouch for everyone who reaches out to me, but a surprising number of them are people I’d consider rockstar marketers and salespeople.
I saw the same thing when sales were rising between 2002 and 2007, and my hunch is that it’s happening again for the same reason.
You might think that the rise in sales in the early 2000s would make companies value the people who made those sales happen. In fact, the opposite happened. Companies got so used to easy sales and rapid growth that they figured they could go on auto-pilot and get rid of high-quality sales and marketing people. After all, why keep them on when cutting them would reduce expenses and increase profit.
That worked for a little while. Then the 2008 recession hit them. Suddenly, every sale was much harder to make, and the companies who hadn’t held on to their most talented employees found themselves struggling in a challenging market.
Now, building material companies are getting too comfortable again. They’re getting rid of their best employees or losing them because they don’t bother making them feel valued. The changes happening in building materials are going to hit those companies especially hard.
Companies Are Acting Like Money Is Growing on Trees
I’ve also had more companies tell me that they’re practically printing money.
There is a big and growing demand for their products, and some of them have even managed to easily raise their prices while barely losing any customers.
Money flowing in is great news. The problem is what companies are doing with this money.
One company president recently told me that he wouldn’t hire me to grow their sales. Not because I wouldn’t help them grow, but because I would help them grow too much! His plants could handle the increased production, but his customer service functions couldn’t.
Growing too much, too fast would mean lags in order processing, delays in delivery, and more and more unhappy customers with each new order. He wouldn’t grow his sales unless he could invest in better customer service first.
That’s smart company leadership.
What worries me is that it’s so rare.
Instead, I’m seeing another repeat of 2006. Companies left and right are seeing windfalls, but most of them aren’t being strategic about this influx of earnings. They’re acting like lottery winners: taking all that money to the bottom line without reinvesting any of it for their future.
How to Prepare for the Coming Changes
First, you need to recognize that the industry is changing – and you need to change along with it. For large companies, that will mean investing in change. For smaller ones, that will mean pivoting and adapting.
The Sales Process Is Changing
The sales process is not going away, but it is changing.
Customers now want to engage with building material companies online and not in person. In-house salespeople are starting to outsell those that are out in the field.
But most marketing departments aren’t equipped to make this shift.
The Construction Process Is Changing
The building materials industry is finally addressing the tremendous amount of waste and inefficiency that has been baked into the system for too long.
Panelized or factory-built housing is also going to turn the industry upside down. It’s already happening in some markets, and it will spread across the nation in no time.
What is the future of dealers and distributors? More and more customers are going to be buying direct. If you won’t sell directly to them, they’ll find a competitor who will.
The Growth of Online Sales
I don’t know if Amazon will buy Lowe’s or Home Depot. But I am willing to bet that online sales of building materials are going to grow faster and faster.
And I don’t just mean boxes of screws or small packages for DIY projects. I’m talking about contractors ordering big, heavy, and hard-to-ship items online.
But if you observed most building material companies, you would have no idea that these changes are happening. Few companies are keeping up with these new realities. They’re pursuing day-to-day sales and not paying much attention to the changes that are coming – or those that are already happening.
Invest and Adapt
If you’re one of those companies that is fortunate enough to be making money hand over fist, you should be reinvesting some of it to ensure your future success.
If you’re one of the many companies that hasn’t seen that kind of growth, your best asset isn’t your resources – its your flexibility. Your best approach is to modernize your sales and marketing.
Things are changing fast for building materials, and that’s good news for the small companies that are used to struggling. They can outperform larger, more successful competitors by adapting to the changes in the industry. Customers will notice that they’re doing something new and offering a better experience, especially as bigger companies start looking outdated and difficult to deal with.
Make Yourself Future-Proof
Companies that cut employees when things are good or who ride high on profit instead of reinvesting it are putting themselves at risk.
Even if we’re not going to experience a recession tomorrow, the changes in the market will make it feel like a recession to some companies.
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