Building Contractors Shift Their Purchasing Behaviors, According to L.E.K. Consulting Survey
Growth is returning to the residential building and construction market for the first time since the recession. The second annual L.E.K. Consulting Contractor Behavior Survey reports a projected 7% increase in revenue per residential job within the next three years, compared with a 3% decline expected in last year's survey. L.E.K. Consulting surveyed more than 500 residential contractors across the United States to examine their purchasing priorities, preferences and strategies for the future.
However, pricing pressure continues despite market optimism, with 34% of contractors losing bids due to price in 2011 -- double the percentage in 2006. Contractors are responding by looking for their preferred products at competitive prices. They are also more than twice as likely to channel shop for the best price on trusted, high-quality products rather than trade down and purchase less expensive alternatives or lower-grade products from a popular product line or other manufacturer.
"For the first time since the recession, contractors are planning for growth, which is an important bellwether for the building products industry," said Chris Kenney, Vice President and Head of L.E.K. Consulting's North American Basic Industries Practice.
"Building products manufacturers have an opportunity to capitalize on growth by continuing to promote trusted brands, introducing product features that will command a premium and reevaluating how they reach their customers across traditional and online channels."
Growing Demand for Energy Efficiency and SustainabilityEnergy efficient and sustainable products are increasingly important factors in product selection decisions. More than half of the contractors surveyed will pay more than a 10% premium for these product attributes. However, the importance of these two features varies significantly between residential and commercial contractors.
Residential contractors are willing to pay a premium for energy-efficient products and consider it the second most important purchasing criterion behind price. But they are generally unwilling to pay more for sustainable products. By contrast, commercial contractor purchasing decisions are equally influenced by both energy efficiency and sustainability.
Low Loyalty to Big Boxes, Growing Online Activity When respondents were asked about their loyalty to sales channels, big boxes remained at the bottom for the second consecutive year. Contractors indicate that big boxes underperform compared to the competition on the three most important channel selection criteria other than price: delivery speed, stock on-hand for immediate purchase and contractor services.
Contractors' loyalty to two-steppers increased the most from 2010 to 2011.
"As the building and construction market rebounds, OEMs that overly rely on big boxes may struggle to grow as contractors increasingly return to the pro channel and continue to look for products that demonstrate additional value," said Robert Rourke,
Vice President of L.E.K. Consulting. "Companies have an opportunity right now to get ahead of the growth curve, and their actions today will largely dictate tomorrow's winners."
Online sales of building products continue to grow and the Internet is also playing a larger role in contractors' decision-making processes. More than 50% of contractors indicate they have used the Internet for price comparisons and 40% expect to conduct more purchasing online during the next three years. Thirty percent of contractors said they are using social media more than they were a year ago to follow suppliers and brands, and 35% expect to be more active on social media in 2012.