Update: Retailers in Roofing A New “Major”Enters the Game
Roofing contractors who make their living selling retrofit roofing in the residential markets of this country have their share of challenges. The potential customer often starts the process scared and confused; only to end up angry and frustrated. It is not uncommon to hear two or three different bids with wildly varied solutions being offered, and prices that bear absolutely no resemblance to one another. Increasingly, consumers are seeking the safety of dealing with contractors who put themselves forward as tied to nationally recognized brand names, or nationally recognized retailers. This article takes a look at the latter: retailers in roofing.
Then and Now: Sears, Roebuck & Co.For years, Roofing Contractor has been following major retailers who offer their customers installed construction products, particularly residential reroofing. Our most recent update was in the March 2000 issue of Roofing Contractor. At that time, the venerable Sears, Roebuck & Co., was “temporarily exiting” the installed roofing business. On the other hand, Home Depot was busy rolling out a new, nationwide agreement with Installed Products USA, which would serve as exclusive provider of residential roofing services for Home Depot’s stores throughout the continental United States.
Last year, we pointed out that with the strong economy, retailers had the cash to explore these new opportunities. This year, they continue to pursue installed roofing, even though the retail sector of the economy has been through some fairly rough times in recent history.
As of this writing, Sears has remained on the sidelines. Its term, “temporarily exiting” the installed roofing business continues to leave the impression that Sears may return. In October 2000, Sears’ board of directors elected Alan J. Lacy to succeed Arthur C. Martinez as president and chief executive officer. This could be significant, since Lacy had been president of services for Sears since September 1999. As president of services, he led the company’s Home Services division, among others.
Expansion Continues: Home DepotInstalled Products USA continues to do business as Home Depot Installed Roofing. Roofing Contractor recently spoke with its chairman and chief executive officer, C. Michael Verble, for an update. The basic business plan and product offerings have not changed from the original. Last March, we reported that Home Depot Installed Roofing was operating out of 350 Home Depot retail locations and 14 regional offices. As of this writing, it is operating out of 700 locations, and 21 regional offices. Verble reports that, “Everything to date is on plan … revenues … profitability.”
While other installed products are under consideration, the goal remains to have a presence in all of the Home Depot markets. By the end of 2001, the company projects that 1,000 Home Depot retail locations will offer installed residential reroofing. As Home Depot continues to aggressively open new locations, this will not represent 100 percent penetration into all retail locations. Says Verble: “We are the single largest residential roofing company in the United States. We are continuing to expand geographically at an aggressive rate and anticipate being able to service the majority of the country by the end of 2002.”
The relationship between Verble and Home Depot did not begin last year, but it did take a significant “leap” when they contracted for a nationwide program for installed roofing. Asked what the biggest challenges have been, Verble responds, “Hiring quality people with a background that would be appropriate to what we do.” The other monumental task with which they continue to struggle is building infrastructure. Verble has laid out a vision that involves a tremendous investment in people by way of training, evaluation, and promoting from within.
Interestingly enough, Verble says finding quality roofing contractors has not been a huge problem. While Installed Products USA does employ its own sales, management, and field inspectors, it significantly subcontracts the roofing work to roofing contractors in its local markets. One of the reasons Verble cites for this is the fact that the market is so large. For some roofing contractors, there is enough room to include Home Depot business in with their other work.
As for Home Depot’s plan to get business, it resembles the same one we have seen in the residential roofing business for years. It does not have plans for aggressive marketing campaigns or promotional initiatives. Rather, Verble sees this business being built on referrals.
Next Up: Lowes and Home BaseHome Depot enjoys competition from many directions, but it would have to acknowledge that Lowes is the number one thorn in its side. In our report last March, we wondered that since Home Depot was entering the installed roofing business in a big way, would Lowes be far behind? Lowes would not talk to us about it at the time, but it turns out that its plans were already taking shape long before our report hit the streets.
Around 18 months ago, building products manufacturer Owens Corning wanted to investigate how to “best service” the residential remodeling markets that used its products, including roofing, siding, insulation and vinyl windows. A six-month study was conducted which revealed that there was a value in “managing service” — in other words, managing the sale, financing, and installation of the project. Following the study, OC began to test market a sell-furnish-install program with some Lowes locations in southern Ohio.
The program was similar to the Home Depot and the old Sears models: In-house personnel were responsible for sales, the product was furnished through normal distribution channels and the installation was performed by roofing contractors working under subcontract to the selling location. Next, the test market was moved to Lowes locations in Texas, then to Home Base, a home improvement retailer with around a hundred West Coast locations.
In December 2000, the announcement was made of the merger of Servicelane.com and the sell-furnish-install unit that OC had established to explore opportunities with Lowes and Home Base. Now the merged enterprise has been introduced as ServiceLane Home Improvements. Chuck Stein, formerly of Owens Corning, is chief executive officer of ServiceLane, and Roofing Contractor spoke with him recently to get his vision for the new company and the future of installed residential re-roofing.
While the basic business model for ServiceLane will look similar to the others, there are some differences. The most noticeable difference is its genesis from a building products manufacturer, home improvement retailers, and a home-improvement oriented technology firm. The result is an interesting combination with a similar vision to sell “managed service,” but with some new twists.
Moving beyond the study and testing phase, Stein says the decision to merge with ServiceLane.com stemmed from the realization that a strong technology infrastructure would be necessary for the new enterprise. ServiceLane.com had as its business model a system whereby it sought customers who wanted all types of home improvements, lawn care, maid service, catering, and other services without many limits. The technology the firm developed has the ability to match these “wants” with firms who provide the services.
ServiceLane.com had the technology, but needed a way to generate revenues. The “managed service” model that had been developed had a relationship with Lowes and Home Base to provide a way to find the customers (and therefore, the revenue). So together, the merger now known as ServiceLane Home Improvements has hung out its shingle (pun most definitely intended) in the installed residential reroofing business.
Hitting the ground running, ServiceLane will offer installed roofing as well as siding and windows. For now, they are contracted with Lowes in selected markets, including the primary test locations in southern Ohio and Texas. They are in discussion regarding other markets.
ServiceLane sales people will be equipped with laptops from which they can make presentations and print out quotations for the consumer on the spot. These quotations will convert through their computer systems into a bill of services and materials, a purchase order to the roofing contractor, a purchase order to the roofing distributor, and an invoice to the consumer. This technology is being “tweaked” and will make use of the Internet to keep everything moving in real time. While most material distributors are already equipped to do business online, or can be ready soon, roofing contractors will not be required to own computers to do business with ServiceLane. ServiceLane may ultimately provide its subcontractors with a wireless send/receive unit.
Sales leads will be channeled to the local sales representative through a national call center in Dallas. These “project coordinators” will remain as the telephone contact with the consumer throughout all phases from sale through installation.
As CEO of ServiceLane Home Improvements, Chuck Stein’s vision is simple: “We plan to be the market leader … our primary objective is to provide the best customer service.” He plans to accomplish this by leveraging the company’s expertise with the technology on the sales side, and by employing and contracting with the “best people.”
Now What?Roofing Contractor will continue to keep you posted on emerging changes in the residential reroofing market. Retailers have been in the installed roofing business for decades. Historically, large retailers have done business on their ability to finance jobs, or have simply traded on their own good name. Their job, as well as the job of the independent roofing contractor, is substantially more complex than that in today’s market. Consumers are becoming more educated about products and financing options. Their expectation for service is exceeded only by their demand for competitive pricing.
Studies reveal that home improvement contractors enjoy a low level of customer satisfaction ratings — the lowest by some accounts. Chuck Stein tells us this was one of the more important discoveries made as part of a study prior to the beginning of ServiceLane Home Improvements. Mike Verble, when asked about the new competition coming online says, “We welcome that … we look forward to it, actually.” His reason is fairly simple, “The more rapidly the industry expands with value-added service providers, the better it is for all the parties involved.”
Long term, all quality-conscious roofing contractors should do well. Roofing contractors who perceive these retailers in roofing as a threat should remember that even if these retailers succeed beyond their own wildest dreams, all of them combined can only control a miniscule percentage of the residential re-roofing market. This is now, has always been, and will most likely remain a fragmented market controlled by the residential roofing contractor whose knowledge of the local market, his customers, his product, and his own capabilities are nearly impossible to duplicate. Retailers in roofing, however, are also here to stay, and they are out to set new standards for customer satisfaction.