Greg Gurley, VP Marketing, Product Management and National Accounts
If you’re reading this article, congratulations. It means you survived the worst housing recession of modern times. In 2005, new construction fell from a peak of more than 2 million starts to 586,000 starts in 2010—or 70% less housing opportunities to provide materials. Let’s not relive that, but I think everyone in the building industry can agree that having a broader mix of remodeling and replacement (R&R) to new construction would have made it easier during those lean, new construction years. Many in the building industry have been looking for ways to diversify their business, and many have accomplished that. Some have invested in updating showrooms, and some have expanded and added installed sales departments.
But what about the R&R segment? In 2010, everyone was focusing on anything that could generate profitable revenue, but was the R&R segment viewed as enough of a priority for most businesses?
Let’s take a look at just one product that goes into both new construction and R&R: exterior doors. Is there enough door business going into R&R to make it worth the time and investment? In 2014, nearly 10 million exterior doors were sold in the U.S. While 3.5 million units went into new construction, 6.5 million went into remodeling.
The opportunity in R&R is almost double that of new construction. The average price of a door going into new construction is $200-$250, while the average price of a door going into R&R is $1,200-$1,500. Margins on prefinished R&R entry doors are considerably higher than new construction. The R&R opportunity is twice the size of new construction, the revenue is six times that of new construction doors, and the gross profit is higher. Do I have your attention yet?
This opportunity may sound too good to be true. It’s important we understand selling into R&R requires a different approach. Many times, R&R products are sold in the home, in the evenings or on weekends. Providing the proper support and care to customers and remodelers servicing that segment will require providing them with tools that new construction customers may not need. These tools include sales samples of different types of products (corner sections of fiberglass vs. steel doors, decorative glass vs. clear, composite frames vs. primed wood) and the ability to sell the value and differences of these products.
Huttig is developing in-home selling kits that will provide these samples, as well as feature and benefit presentations your customers can use. Ease of pricing is another key element of successful R&R selling. Remodeling contractors making sales on-site should be able to quote any product their customer may want on the spot, accurately and with ease. Huttig Doorway allows for anyone in your organization to configure an entry door and quote any style for the customer immediately. Quotes are sent in directly and turned into an order, or kept as a quote until you’re ready to place the order.
A wise old man once told me, you can fall off a horse just as easily on the left side as you can on the right side; the key is staying balanced. So I’m not suggesting that you abandon any new construction business you have today, but rather that diversifying your business for more balance in both new construction and R&R will provide you higher revenues and margins—as well as provide you some protection when the next housing downturn arrives.
There is still time to add R&R to your business model, to maximize opportunities not only with current customers, but by developing relationships with new customers in segments you may not have considered or taken the time to actively support in the past. Let Huttig help you expand your remodeling business. I think you’ll find the juice is definitely worth the squeeze.