Building Contractor Optimism Shifts Purchasing Priorities

December 13, 2012

Renewed optimism has residential contractors projecting revenue growth during the coming years, which is changing their strategies for how they bid jobs and select products, and where they shop for building products, according to new study from L.E.K. Consulting. The company's third Contractor Behavior Survey finds contractors are slightly less price sensitive when choosing building products and more likely to turn to pro channels.

Contractors’ behaviors reflect a restored positive outlook, according to L.E.K. Many are simply walking away from jobs that they don’t expect will provide appropriate margins. They are also increasingly finding non-price mechanisms to address pricing pressures, with nearly half of those surveyed performing extra services rather than reducing their quotes.

When selecting products, contractors prefer to remain loyal to trusted brands and high-quality products rather than trade down and purchase less expensive alternatives or lower-grade products from a popular product line or less trusted brand, according to the study. Most contractors (72 percent) said durability was a key purchasing driver, followed by price at 69 percent. Reputation (66 percent), manufacturer guarantees (63 percent) and energy efficiency (57 percemt) also ranked high in importance.

As the importance of price becomes slightly deemphasized among contractors, survey findings indicated that purchasing frequency at the big box channel has plateaued and is subsequently expected to decline over the next three years and shift to pro channels, including specialty independent stores and chains. While price was the major factor driving contractors to spend more at big box stores during 2010 and 2011, this year, more than half of contractors said that convenience was the major factor. Contractors are also decreasing their searches across multiple retailers to purchase preferred products at the lowest prices.

"It's difficult for pro channels to trump big box stores on the convenience factor; but what they can offer contractors in terms of reliability, guarantees and staff knowledge are favorable attributes that will win customers over the long term," says Robert Rourke, VP and head of L.E.K. Consulting's Chicago office. "Building products manufacturers can gain share by refining their pro channel sales strategy--where profits and differentiation are more sustainable than in big box channels--to sell new and premium products that contractors highly value, with factors such as durability and energy efficiency."