That’s a reality echoed by Gill. “We still service the field [of Chase’s tract-builder customers], but a lot of the business is done internally,” he says. “We’re not calling on them every day as we might a custom or semi-custom builder.”
Myth No.2: Big builders only sell affordable housing As the average price of a new home nationwide approaches $250,000, the concept of “affordable” housing itself is becoming something of a myth. Regardless, while many tract builders started out in the first-time buyer market, they’ve diversified into move-up and luxury segments, as well—providing dealers with opportunities to up-sell higher-margin products. “We don’t build for first-time buyers,” says Jennifer Shearon, director of purchasing and pricing for Atlanta-based John Wieland Homes & Neighborhoods, which builds in Atlanta and Charlotte and Raleigh-Durham, N.C. “We look for partners with brand names we can leverage, not to jump to the best deal.”
Chambers, for one, recently purchased a townhouse from Bloomfield Hills, Mich.–based Pulte Homes, the nation’s second-largest builder, featuring granite countertops, authentic wood floors, heavyweight roofing, and fiber-cement siding, among other upgrades. “A big builder may have 15 communities in a market, each at a different price point,” he says. “They’re willing to buy products that help them deliver quality units.”
Categories are limited, however, especially among dealers with scaled-down and commodity-based inventories. Flooring, cabinetry, and appliances—products sacrificed by many dealers to specialty retailers and one-step or direct distribution—are among the most likely options and upgrades sought by big builders, with entry doors, molding, and locksets—categories more likely in two-step distribution—much farther down the list.
Myth No. 3: You can’t serve both big and small builders The key to overcoming an all-or-none perception, says Monroe, is to develop a strategy capable of fulfilling the expectations of both small- and large-volume customers. “Ask and determine how often a small-volume builder needs to be seen and commit to it,” he says. “If you stay in contact, they won’t feel orphaned,” which, he says, also sets up a dealer to keep that customer’s business should a small builder grow into something bigger.
As a matter of philosophy and smart business, Chase Lumber avoids corralling all the big builder business it can get in favor of a healthy mix of customers. “It’s an amount we feel comfortable with,” says Gill about the company’s large volume–builder base. “To offset the lower margins [of those customers], you have to be diverse.”
To manage both masters, Chase Lumber segments its sales staff to focus primarily on one or the other. “It takes a different type of person for each market,” Gill says, from those who are better at managing paper for tract builders to others who can hand-hold custom builders on the jobsite. Chase Lumber also benefits from truss, door, and millwork manufacturing capabilities, which are available to all of its customers.
“Lumber is lumber,” says Chambers. “Little guys still need studs and OSB and the other things the big guys use. I see dealers taking sides, but those who commit to both [market segments] can be successful.”
For dealers looking for a piece of the big builder pie, but not fully committed to manufacturing or other capital investments sometimes required to do so, Erwin recommends supplying fill-ins to supplement onestep LBM contracts some tract customers have with large, regional distributors. “Invariably, something’s left out [of the delivery], and the distributor has little interest in going back,” he says. “It’s an opportunity to capture some revenue without having big builders take over the business.”
Myth No.4: Big builders resist change Shearon admits that Wieland and other Southern builders, especially production operations, are slower on the new product bandwagon than their coastal counterparts, which makes it difficult for dealers to offer alternatives and upgrades. But she also keeps a “Top 10” hot list of current issues garnered from the company’s sales, construction, and customer service departments, and if a dealer calls with a product that addresses a top concern, such as mold, she’ll take the call. “We may ask for a presentation right away if it’s on my list,” she says.
