The threat and promise of e-commerce, the continuing consolidation of distributors and manufacturers, and the opportunities for new upscale roofing and exterior products will put more resources at the contractor’s disposal.
E-commerceAt one level, every roofing products distributor has, or is working on, a basic Web site that establishes its online presence. But more importantly, distributors are trying to understand where they and the building materials industry are going with e-commerce.
The latest buzz is on the roofing industry’s versions of business-to-business e-commerce exchange sites. Will they make it in this industry? This type of site turns products into commodities and squeezes profits at every level. The wise distributor wants to go in the opposite direction of the business-to-business commodity Web site. He wants to become a partner with his contractor customer and sell quality, value-added products from established manufacturers to the end-user building owner. Commodity auction sites, on the other hand, are an e-commerce phase blurring the real potential that the Web offers distributors and their contractor customers.
E-commerce is much more than buying and selling in cyberspace. Distributors must first connect with their manufacturer “franchisers” to understand what their e-commerce strategy is and what the possibilities for strategic partnerships are. Then, they can help contractors understand the technology and achieve the same efficiencies. After establishing a technology framework with contractors, distributors can expand their Web-based services to include quoting, invoicing and data exchange – all customized to each contractor’s business. Ideally this will allow the contractor to quote more projects and to recover receivables more quickly. It will also aid the distributor in maintaining a value proposition with the contractor.
To illustrate this, one leading manufacturer has come up with autocad roof design and proposal writing software for the contractor. That manufacturer is looking to its distributor to help its contractor customer base become more proficient and effective with the new technology. It can then provide the contractor with labor and cost savings, as well as a higher level of professionalism from the owner’s perspective.
The residential lead-generation sites, such as ImproveNet.com and serviceMagic.com, are another e-commerce trend to watch in our industry. Roofing and other manufacturers are becoming involved in these sites as a means of lead generation for residential remodeling contractors.
Consolidation of Distribution OutletsToday, a second phase of consolidation of distribution outlets is underway. After the first wave, most regional distributors had competition from a local branch of a “national distributor.” Many successful, independent wholesale distributors possessed a solid, successful niche, but they knew they would be more efficient and safer from competition if they expanded.
With a good economy, the opportunity for regional firms to consolidate emerged in the late 90s. A lot of the independent regional distributors chose not to get rolled into a national distributor for cultural reasons and because they didn’t want to sell off or lose their local identity. In many cases, the local identity was successful; not everyone sells a business because it is unsuccessful. So, quality regional firms have been consolidating. The trend of regional distributors acquiring each other will continue in this decade.
This second phase of consolidation involves the national distributors and the new super-regional distributors. In some regions, the identity of a regional distributor is as strong as the identity of the national distributors competing in that same region. In every region, national and regional firms must compete on price, quality and service, and find their best-of-class competitive advantage. This increased competition can only benefit the contractor.
New Product Opportunities“More high-end products” are what the contractor is seeing and will see from distributors. Metal roofing, high-quality siding, vinyl siding that looks like cedar, cedar shakes, tile and other expensive specialty products offer more and more profit opportunities for distributors and contractors. Companies such as Carlisle, CertainTeed and GAF have developed proprietary specification roofing products, which can be a profitable alternative to price-driven products.
The sales mix of traditional three-tab asphalt shingles compared to the more expensive laminated shingle products is eye opening. And, the market share of laminated shingles continues to grow. The mix of laminates according to industry sources, will be 50 percent by 2001, an increase of almost seven-fold from 1980.
The more expensive value-added products are a win/win for the contractor and the owner. The message from the distributor to the contractor is, “You need to be able to promote these products because there is more profit in them. They cost more, but their application costs are similar to the lower-priced lines you have experienced. And, you need to learn the best way to sell and apply these high-profit systems.” These systems (system-selling to the end user is key) require a knowledge transfer from the manufacturer through the distributor or contractor.
Representation with SpecifiersRepresentation with architects, specifiers and sophisticated building owners is central to successfully selling large commercial roofing systems, the big-ticket items in our industry. Distributors who have good architectural representatives are able to match up their contractor customers with public and private bidding opportunities, selling the contractor as well as the system to the specifier and the owner. More than any other device, effective architectural representation makes the distributor the focal point for the sale of large commercial roofing systems.
Components of a good rep program include:
- Communicating with major building owners, architects and specifiers
- Subscribing to and tracking databases of upcoming building projects
- Conducting roofing specification seminars with architects and specifiers for continuing-education credits.
- Making good matches between contractors and specified projects
- Representing quality manufacturers
Rep programs work because the more professional, specialized architectural representative is more likely to develop a relationship with sophisticated owners and their representatives. A mastery of the roofing specification process enables the rep to dovetail his product offerings with the owner’s needs.
Contractor Education and TrainingAs distributors compete over the next few years, they will offer more branch seminars, system application workshops and regional speakers (as part of a year-long program, our firm staged three regional dinner presentations featuring FMI consultants) to contractors to build rapport and maintain loyalty. These events also benefit the distributor’s staff with both knowledge and the shared experiences that build rapport between contractor and salesperson.
System selling also requires that distributors continually train their staffs in the latest products to enable them to transfer the knowledge to the contractor.
Most forecasters predict that we are coming into a period of slower growth, which means more competition in the roofing industry. In this decade, the wise roofing contractor will use many criteria, other than price, to evaluate which roofing distributors he buys from. The striving roofing contractor will come to better understand the non-monetary, value-added resources roofing distributors offer him and will become comfortable partnering with those who provide value-added services.