Still operating during a residential construction downturn, pro dealers are increasingly turning to remodeling to lift their top and bottom line. Spending on renovations is experiencing healthy growth in 2012, according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. In their most recent quarterly forecast, the researchers pointed to stronger pending home sales and continuing low interest rates as contributors to an expected 5.9% rise in spending on home remodeling projects this year.
The National Association of Home Builders, which also surveys remodelers, found that both kitchen and bathroom renovations have increased 17% from two years ago. Bathroom remodels were cited as a common job by 78% of remodelers and kitchen remodels at 69%.
The “let’s stay put” mindset of homeowners is certainly contributing to the trend, with barriers to move up home sales and purchases slowing down the pace of new construction. So home builders have morphed into home remodelers, and LBM dealers have watched their mix of customers shift. In some cases, this required a bit of tweaking in product assortments and a sharpening of services. In others, dealers served remodelers the way they always have — but made a few adjustments on price.
Of course, customers vary from region to region, which is why Home Channel News talked to five different LBM dealers in different areas of the country.
Here are our dealers, and what they had to say:
Justin Ellis, Corporate sales manager
Builders Do it Center, Roswell, N.M.
Builders Do it Center recently rebranded itself after operating its two stores under separate names: Roswell Lumber Do it Center and Artesia Lumber Do it Center.
Greg Belcher, Sales manager
Edward Hines Lumber, Buffalo Grove, Ill.
All four of Edward Hines locations are in the Chicago suburbs, although the company ships materials regularly into the city. Part of US LBM Holdings, Ed Hines serves remodelers, builders (custom and production) and commercial accounts.
Ron Labbe, President
Naples Lumber & Supply Co., Naples, Fla.
Naples has one of the highest concentrations of Fortune 500 individuals living within its city limits. So the recession had less of an impact on this one-unit dealer, which deals almost exclusively with designers or contractors.
Brandy Souza, Assistant general manager
National Lumber, Mansfield, Mass.
In addition to a millwork shop and truss plants, the eight-unit New England pro dealer operates kitchen design showrooms with their own website: kitchenviews.com. Brandy Souza oversees 11 other kitchen and bath designers.
Rick Roberts, Co-owner
Sunnyvale Lumber, Sunnyvale, Calif.
Located outside of San Jose, Sunnyvale Lumber’s fortunes are closely tied to those of Silicon Valley. Although they deal mostly with contractors, the end customers range from Google millionaires to IT executives who lost everything in the tech bust. Rick Roberts, who operates the lumberyard with his two brothers, is active in lobbying at the state capitol for a more business-friendly environment in California.
Are your remodeler customers becoming more demanding?
Greg Belcher: Yes. They’ve always been demanding on service, but now you have to hit the [right] price. More and more, remodelers have an open book with their customers; they line itemize their bids. They tell us. ‘My homeowners just went to Home Depot or Lowe’s or Menards.’
Justin Ellis: They’re becoming more conscientious about price. There’s been a real split between the high and the low, and it goes across all [product] categories. There’s not a lot of middle ground on price anymore.
Ron Labbe: I don’t believe so. The demand has always been there for quality and service from our customers, who specialize in high-end homes. We understand them and their timelines, so we didn’t have to adapt.
Brandy Souza: The biggest handholding is through the budget [process]. We’re sharing our cabinet and countertop [total spend] with the appliances. So we have to pay attention specifically to what they want and what their budget is.
Rick Roberts: Yes. All my service- and quality-oriented guys have become conscious of price. It’s a more competitive bidding environment out there.
Name one or two products that you’ve added to your assortment that has gotten your remodelers excited.
Belcher: Factory-finished siding, like LP SmartSide and HardiePlank. People are upgrading their siding, and they don’t want junk back on there. [Also], the wife can pick from 300 colors.
Ellis: MI Windows and Doors. We’ve had a good deal of luck with that. Around here people tend toward vinyl and aluminum, and it’s a very high-end vinyl.
Labbe: Andersen has come out with some new [window] products, the 100 series, that sold really well. They came and did a seminar for our customers. [Also] people are looking for different architectural hardware than [what’s on] their neighbor’s house. They don’t want brass anymore.
Souza: We’ve done a lot more with our [kitchen and bath] hardware, like adding the Berenson & Schaub line. Customers no longer want stainless steel or brushed nickel [knobs and handles]. They want to put something on their cabinets that they like to see every day.
Roberts: Tube skylights — those sun tunnel things — were popular for a while. Kleer trim board has done well, especially for facia. Exotic hardwood decking, like ipe.
Do you think remodelers use social media for work purposes, and are you reaching out to them through those channels?
Belcher: We tried to push it, hoping our customers would want it, but they’re not interested. Most of our remodelers don’t know what Twitter is, and they use Facebook to get back in touch with their high school friends.
Ellis: We haven’t seen any really active use [of social media] by our customers. Sometimes we send our customers to YouTube for instructional videos on how to take on projects or solve problems. A lot of manufacturers have great product info and installation videos on there. Some customers are starting to use Pinterest to find and organize pictures and ideas of projects they’re planning, especially kitchen and bath. It’s really an exciting new tool. Photos are so powerful and useful to our customers. [Ellis also writes a blog about his experiences in the LBM industry at buildersknowledge.com.]
Labbe: No. We’ve tried to direct customers to our website, but we’ve found it to be marginally successful. But we still [promote] it. Contractors will put their projects up on YouTube, though.
Souza: We’re on Facebook, our designers blog every week, and we do have a Twitter following. We’re hoping customers can find us when they have specific questions, and sometimes they do. We can help with problems like [remodeling] an L-shaped kitchens or a small kitchen.
Roberts: It’s evolving, so we’re watching it. You get a complete cross-section in construction. Some guys are very [savvy], and other guys think voicemail is high-tech.
How do you compete with the big boxes?
Belcher: We have certain categories they can’t compete in. We give remodelers more options, and that’s where we seem to excel.
Ellis: Selection. Home Depot keeps seven or eight SKUs of shingles, and I have 32 in stock. We price aggressively on power tools. But we’re not in every category, and we use only two or three manufacturers.
Labbe: Most people know we’re a little less expensive than Home Depot and Lowe’s on moldings. They are definitely higher on special orders. That’s where they make their margins. For example, doors. We have a door shop right on the premises, [so] we’re much quicker to react.
Souza: We’re not order-takers. Our designers are all degreed, so you’re not getting someone from the plumbing department. We also keep up on the latest trends by going to trade shows.
Roberts: I compete with them on price. We sell stuff to Lowe’s and they mark it up and sell it to a customer [who] thinks he’s getting a great deal. [Although] they can be challenging on some items.
Tell me something about your local market.
Souza: Our customers have very specific tastes: white or gray cabinets, clean lines. No molding or raised panels on the drawers or cabinet [doors]. We call it the New England style. If we do something on Martha’s Vineyard or Cape Cod, it’s always white cabinets.
Labbe: We have a very sophisticated customer base. This is not their second home. This is their fifth or sixth home. Homes get remodeled even if they’re five years old. Our customers are not shy over spending $10 million or $15 million on upgrades when they move in.
Tell me something unique about your local market. You’re located in the heart of Silicon Valley.
Roberts: Our customers are doing a lot of tear-downs and thrasher houses, where they knock down the home and start new. My salesmen call them starter castles.
In Chicago, does all the [Teamsters] union unrest affect your business?
Belcher: Picketed job sites have limited our delivery and unloading service, so that’s been a challenge. But that’s closer to Chicago. Once you get outside the city, there are very few residential builders using union framers. It’s been really hard for the carpenters’ union.
Your market is already unique in one way: Many people believe that an alien spaceship crashed in Roswell in the 1940s, and the government covered it up. What do you think?
Ellis: Our Roswell store is two blocks from the International UFO Museum. I believe that something happened in Roswell, N.M., in July 1947. It could have been extra-terrestrials [landing]. Could have been a weather balloon. I just don’t know for sure. But we got rid of a bunch of fluorescent green hoses once when there was a UFO convention in town.