Green retailing enters the big time
The idea of a nationwide chain of green building material outlets has been dreamed about by many eco-minded business people and investors. But it’s never gotten past the one-off stage, where successful green retailers push past their local markets with a successful model that can work in multiple cities across the country. Until now.
The merger of Ecohaus and Green Depot, announced on Feb. 7, is a West-meets-East event that unites three of the pioneers in the green-building movement. Four, if you count Greenmaker in Chicago, which Green Depot purchased in 2008.
Ecohaus, which has locations in Portland, Ore.; Seattle; and San Francisco, was probably the first LBM dealer in the United States to offer only eco-friendly and sustainable building products to contractors and builders. (Ecohaus was originally two separate companies in Seattle and Portland that merged in 2009; both had been in business for more than 15 years.)
The stand-alone stores focused on products such as certified lumber, tiles made from recycled glass, low-VOC paint, non-toxic caulking and adhesives, formaldehyde-free insulation, reclaimed flooring and other products that were hard to find in the 1990s but have now entered the manufacturing mainstream.
Founded in 2005 by Sarah Beatty, Green Depot now has 10 stores: a Manhattan flagship; Brooklyn; Chicago; Boston; Philadelphia; Long Island, N.Y.; Newark, N.J.; Albany N.Y.; Manchester N.H.; and Newark, Del.
In between cross-country flights and Skype meetings with her new West Coast stores, Beatty, who now holds the title of president over the entire operation, took a few minutes to answer some questions about the merger, her plans for the company and where the green building industry is heading.
Home Channel News: How did the acquisition deal come about?
Sarah Beatty, founder and CEO, Green Depot: We’ve known and respected the people at Ecohaus for a long time. We have very similar missions. We’ve always joked that, like the American railroad back in the [19th] century, at one point there would be that golden spike that would link the East Coast to the West Coast.
HCN: Will you rename the Ecohaus stores in Seattle, Portland and San Francisco?
Beatty: [Eventually] we’ll bring everything under the Green Depot umbrella. Ecohaus has an incredible loyal customer base, and [first] we want to make sure that those customers understand that they’ll be served, and there’s even more opportunity for us to help them as we move forward.
HCN: Can you explain your business model and your relationship to MarJam Supply Co.?
Beatty: We have the knowledge and the insight about green products and how they have to be applied in a building setting. But you also have to be able to plug yourself into a supply chain that will get the products on a truck within 24 hours and get it to a building site. So we’ve aligned ourselves with a logistics provider, one that also allows me to leverage their warehouse structure. Seven out of 10 of our showrooms are next to a MarJam location.
HCN: Will you do the same for Ecohaus?
Beatty: It’s possible that I’ll be looking for a logistics providers on the West Coast.
HCN: The West Coast stores carry a lot of building materials, while the East Coast focuses more on consumer goods. Will there be much cross-pollination?
Beatty: We’ll have to look at that on a case-by-case basis, and look at the markets. It’s not a ‘one size fits all’ equation. We have to maximize the end benefit for builders and consumers, and [factor in] logistics costs for each product. But with positions on both coasts, we’ll be able to develop certain local and regional relationships with product developers, and also from a distribution perspective.
HCN: Surveys show a lot of consumer resistance to buying green building materials because of the price difference.
Beatty: The cost has come down considerably in the last five years. In many categories there’s parity. Eventually green products are going to be the most cost-effective solution. And don’t forget the [green] building codes around the country, plus water conservation stipulations. We’re seeing a shift in the marketplace now. It’s a sea change.
HCN: Where do you stand on this FSC versus SFI controversy?
Beatty: No comment.
HCN: Which do you offer?
Beatty: Currently we carry FSC-certified products.
HCN: Who exactly are your pro customers?
Beatty: We deal with custom builders, institutions, but I’d say our sweet spot is custom builders who are mid-sized shops. When they approach a job, they usually establish their own relationships with the vendors.
HCN: Are you required to do a lot of product knowledge with your pro customers?
Beatty: An immense amount. But once a builder has tried something and they have a good result, that’s another arrow for their quiver on their next job. And it’s not lost on that community when they’re not coughing or sick or have their eyes burning at the end of the job.
Survey points to surprises among home buyers
Consumers still want bigger houses. Plus, design is more important than price.
Those were two of the somewhat surprising results of a consumer survey shared by the keynote speaker during the 2011 Building and Infrastructure Conference last week.
John Burns, the keynote speaker and president and CEO of John Burns Real Estate Consulting, said 44% of consumers said they would want to buy a bigger house in the future, compared with only 22% who said they want a smaller house.
Those numbers seem to contradict a survey of builders conducted recently by the National Association of Home Builders (NAHB). In that survey, the average size of a new single-family home completed in 2010 declined from 2,438 sq. ft. to 2,377 sq. ft. And looking forward, builders are already expecting smaller homes in 2011.
Burns also explained that the buyers’ market for housing today puts a premium on home design and features — a more important consideration than price, he said
And another surprise: While green technology is expected and demanded by today’s home buyers, Generation Y was revealed by the survey to be the least likely age group to spend more for green features. "They are eco-conscious," Burns said. "But they are also very cost-conscious."
The remodeling business is going to boom, Burns said.
He said the fact that people aren’t buying new homes will naturally promote spending on remodeling. "Remodeling business is going to boom, because people are staying in their homes."
Looking ahead to recovery, sort of
New York City — The theme of the 2011 Building and Infrastructure Conference was posed as a question: "Is the recovery upon us?"
The answer was a variation of, "well, sort of."
At the 2011 Building and Infrastructure Conference hosted by Lincoln International and L.E.K. Consulting, keynote speaker John Burns, said the long-term prospects are bright for building products, but there are some caveats. Construction will double, said Burns, president and CEO of John Burns Real Estate Consulting, but not until 2015. He used the phrase "slow churn" to describe the recovery.
And for historical precedent, he looked at the long declines in housing that hit Houston in the 1980s and Southern California in the 1990s — both regions took several years to recover from the kind of unprecedented housing slump that the national market is currently working through.
Burns said job growth will be the key to the return. "It’s not housing leading us out, it’s the economy leading us out," said Burns.
On a regional basis, Burns pointed to Texas, New England and Florida as areas leading the recovery and adding jobs. At the other end of the spectrum California is struggling, he said (with exceptions, including Orange County).
The recovery in building product sales is being weighed down by certain factors, including the 5 million delinquent homeowners who have little hope of remaining in their homes, he said. Of the 55 million mortgages in the U.S., 5 million are more than 90 days delinquent, he said.
Another concern is that new home sales are low, despite extremely attractive levels of affordability and low interest rates. For those selling houses, expect another 3.5 years of "pain," Burns said.