Then and now
The fact that home builders are asking for price cuts from their suppliers is no surprise to anyone these days. But builders are also ready to increase—not reduce—the number of vendors in their supply chain. And for many of them, neater job sites are more important than better market research, improved model homes and additional training for their sales staff.
These are just some of the findings of a survey conducted this year by the National Association of Home Builders (NAHB) Research Center. The 97-page study, entitled “Implications of the Soft Housing Market for Suppliers of Building Products,” looks at how the housing downturn has changed the way home builders purchase products, use technology and relate to their subcontractors and suppliers.
NAHB researchers embarked on the survey in late 2006, anticipating changes to the home-building supply chain after the market rebounded. Focus groups were set up, a questionnaire was developed and 320 home-builders of various sizes were surveyed around the country.
Then came the subprime mortgage meltdown, the credit crunch, housing depreciation and falling consumer confidence. The NAHB Research Center revised the survey and conducted it a second time in early 2008. By then, “Builders realized that the downturn was going to drag on much longer than they had expected,” said Ed Hudson, the lead researcher on the study.
“Many builders thought the changes they made to their businesses were going to be temporary,” Hudson explained. “By the second survey, they realized [the changes] were permanent. They had to adapt in order to survive.”
These changes touch every aspect of a home builder’s operation, and by extension, everyone in his or her supply chain. When asked how willing they were to change suppliers to get lower prices, more than 70 percent of the respondents said “very likely.” The trend toward decreasing the number of vendors to gain supply chain efficiency seems to have stalled; half of the builders surveyed said they were just as likely to increase the number of suppliers if it meant getting the right product at the right price.
Nearly half the respondents stated they are more likely now than before the downturn to use suppliers with installed sales. This was especially true for custom builders.
Builders were no more loyal to tradespeople than to suppliers: more than 70 percent are willing to shop around for lower priced subcontractors since the downturn. Builders are also less likely to rely on their subcontractor’s advice when it comes to new products, or allow their subcontractors to sell upgrades to new homeowners. This shift is more pronounced among production than custom home builders; the latter group indicated a higher level of trust in their subcontractors in every category.
“These days, I think many home builders prefer to keep the upgrades in house,” Hudson observed. “They don’t want to give up the margin or the control.”
Builders are willing to partner with their subs and suppliers in other ways, however. In fact, they need all the help they can get on their number one priority: selling homes. Home builders ranked this first among their business improvement efforts in both surveys, and the prolonged downturn only intensified its focus.
The NAHB study sheds light on several areas where suppliers can help builders market their projects. Approximately 35 percent of the home builders surveyed have adopted a home buyer referral program since the downturn, and manufacturers have begun using their Web sites to refer potential buyers to certain builders.
Supplying content to builders’ Web sites is another area where suppliers can set themselves apart. Contributions can range from a Web “shell” that the builder can brand as its own to articles on energy efficiency or disaster preparedness. “A lot of builders don’t have the time to prepare these articles,” Hudson said. As an added bonus, vendors who supply expertise along with product “appear to be more grounded in building science,” Hudson added.
Of course, builders still want the traditional perks liked co-op advertising, rebates, design center assistance and free materials for model homes. But the survey showed some regional differences here. Builders in the Midwest were most receptive to any manufacturer offerings, but more strongly in the lower-tiered offerings like free gifts and online product showrooms. Northeast builders were most likely to favor low-cost and free materials for model homes. In the West, builders valued rebates, loyalty programs and co-op advertising. Builders in the South were most likely to be motivated by products representing the best value.
One of the more surprising results of this year’s survey dealt with neatness at the job site. Builders are apparently worried that customers are going to drive by homes-in-progress and not like what they see. So worried that they ranked “neater job sites” third on their list of sales and marketing strategy changes since the downturn, right behind “watching competitors closely” and “develop closer relationship with [home] buyers.”
“Anecdotes received by the [researchers] indicate that the more scrutinizing home buyer is making judgments about builder quality based on a drive-by of job sites,” the report states. It notes with some irony that “improvements to model homes,” the place where most sales take place, finished a distant seventh in the rankings of sales and marketing strategies.
Anecdotal evidence would also point to builders embracing green building methods and products since the downturn. But when asked about changes they’ve made in home design and materials, survey respondents rated “green/environmentally friendly” in fifth place. It’s worth noting, Hudson said, that “increase energy efficiency” came in second. But while builders may not necessarily equate the two now, Hudson predicts that sustainable building methods will soon become known as “the smart way to build.”
Handy Hardware fully operational after Hurricane Ike
Less than a week after Hurricane Ike struck the Texas Gulf Coast, Handy Hardware Wholesale, is operating at full capacity, the Houston-based company announced.
“We have resumed all normal delivery schedules and continue to focus on the service to our member-dealers, as well as our employees in the aftermath of such a horrible natural disaster,” Handy Hardware president Tina Kirbie said.
According to Mickey Schulte, vp-marketing and purchasing, there was minimal damage to the operation, which allowed the distributor to focus on the needs of its member-dealers. “Our fleet suffered no damage, and we had limited damage to our inventory. The minor repairs to the roof of our 560,000-square-foot warehouse are already complete,” he said.
Established in 1961, Handy Hardware Wholesale operates in 10 states, mostly in the South and Southeast.
Lowe’s, NASCAR’s Johnson raising money for Ike victims
Lowe’s, along with NASCAR driver Jimmie Johnson, will be raising money for victims of Hurricane Ike when Johnson participates in the NASCAR Spring Cup Race this weekend at Dover International Speedway in Delaware.
Through “Racing for Relief,” Lowe’s will donate $48 for every lap of the scheduled 400 laps that Johnson completes to the American Red Cross to help provide shelter, food, counseling and other assistance to victims of Ike and other 2008 hurricanes. In addition, if Johnson wins the race, Lowe’s will donate an additional $4,800.
As part of the promotion, the Red Cross logo will be displayed on the deck lid of Johnson’s No. 48 Lowe’s Impala.
Funds raised through Lowe’s Racing for Relief will supplement an existing $1 million Lowe’s donation to the American Red Cross. More than 1,575 Lowe’s stores nationwide are serving as official cash donation sites to benefit the American Red Cross relief efforts throughout the 2008 hurricane season. Lowe’s will match in-store contributions dollar-for-dollar, up to $250,000.
Since partnering with the Red Cross in 1999, Lowe’s has raised more than $17.5 million for disaster relief.