 In two years, we're going to have to really be established as a brand so that this loyalty or this trial that we've gained over the last two years doesn't erode. And so getting out of the survival mode today, I think, is what's really exciting for the chat. Welcome to the Smarter Building Materials Marketing Podcast, helping you find better ways to grow leads, sales, and outperform your competition. All right, everybody, welcome to Smarter Building Materials Marketing, where we believe your online presence should be your best salesperson. I am Zach Williams, alongside my co-host, Beth Poptiglove. And today, we are talking about how to sustain growth when the market dips. We're seeing incredible inflation right now. I think the last I saw CPI as I'm looking at today's episode was at price changes since January 2021. Lumber's up 21%. We saw a wild ride in 2021 with lumber, but gosh, coffee's up 92%. Financial gas 81%. List goes on. We can link to that in our show notes. But what we want to talk about today is, right now, if we look at the state of building products, things are hot. Incredible demand. Prices have gone up. Most manufacturers we talk to have increased price a number of times over the last year. But there's a question lingering in the back of all of our minds is, what do we do when things change? What do we do if the Fed increases the rate so much that demand dips? Or that if something, hopefully this doesn't happen, catastrophic happens and the demand we're seeing is no longer there because the market can't continue to go up and up and up. And so this presents a really interesting opportunity for manufacturers, not for us to be afraid, but to look at this opportunity or look at the thing in front of us and go, okay, how do we build our business for the next thing? We are really excited to welcome one of our favorites. We have the president of the Farnsworth Group, Grant Farnsworth with us. He is a wealth of knowledge when it comes to research and insights on the customers in your channel in the building materials industry. That's kind of you, Beth, thanks. This idea for today's show really came from something Home Depot did four or five years ago. We've talked about this before, but Home Depot started investing billions into infrastructure and logistics. And then COVID hit and look at the stock price and went through the roof. They were ready for that moment. The present day that they were looking at, they saw, hey, our business is strong, but Amazon is very, very strong. We need to make sure that we are ahead of them. We need to make sure that we're ready for the moment. And so I think manufacturers, it's very easy to get caught up in the now of, oh my gosh, how do we do with inflation and labor and shortages and demand all these different things that are in front of us, we can miss the opportunity to start to build our business for that next run, whatever happens next. Which frankly, if we look at where things are right now, it could be a pullback. But that's what we want to talk about today. Well, if you look at that Home Depot example, too, so Lowe's wasn't far behind. We see a mad amount of consolidation in the lumber dealer space. It was all really with that intent, Zach. I mean, yes, it was around logistics and billions into new distribution centers and their online piece, but I think it was all about meeting customer needs and expectations and out thinking what's around the corner when it comes to those needs. So it still revolves around the customer and they wanted to make sure that they were integrated so much into the customer's path of purchase and discovery and research that be it a homeowner, be it a pro, they didn't want to go anywhere else but Home Depot because of how well dialed in Depot was to the ecosystem of their entire front to back experience. Yeah, and I think to both of your points, we're coming out of a season where everything is extremely in the moment reactionary. Zach, I remember in I think summer 2020, we talked to a smaller lumber dealer on the East Coast who they stood up curbside delivery in multiple locations within 24 hours because of the demand, because that's the only way that they were going to be able to keep their doors open during the height of COVID when COVID really started to hit. And that's been the feeling over the last two years is scenario reaction, scenario reaction. We've just been in this constant flux and as we were talking, we're really seeing the potential for IBS 2022 to be that line in the sand moment. Are people going to return to trade shows? Absolutely they are. Or is there continue to demand in 2022 as we saw in 2021? Absolutely there is. However, it's shifting into those larger projects, right? It's not just anything and everything. It's becoming a bit more intentional. Some of those smaller projects are done availability. Is that going to still be a problem? Yes, it is. Things are becoming a bit more sustainable, a bit more predictable. So now the question is, what next? Now let's move into a place where we are, we're doing the Home Depot move. We're projecting three and five years out and going for the long term play. We know what's behind us. I dare not say the door is closed because that's just asking for trouble. But something's going to have to get a bit more normal, right? And with that in mind, the three of us has been having this conversation and talking about how do we help the industry and what do manufacturers need to be doing to plan farther out? Yep. I think what's interesting about too is we do the work with our clients, we do the work with you all. To your point, the challenges are now pretty known and pretty static. So there's not this what's happening today and let's just pivot and account for that. But what's going to be really, really interesting is what we see around the corner changing some of the behaviors and decisions being made within building products, either at the homeowner level or the contractor level, is this price discussion. I think for a while now, everyone's been willing to pay whatever's asked of them if it's on the shelf. Availability was driving so much of the conversation, driving so much of the choice of, you know, fine, I'll pay 2X if it's there, great. Homeowners have a boatload of equity in their home. Yeah, I'll pay a little bit more. But what is that tipping point, right? Like we just saw affordability index come out last week. We are at a 10-year low for homeowner affordability buying new homes, so that's the average American being able to afford the average home. So we see these prices continue to go up, up, up. Average median home prices have been increasing an insane amount over the last 18, 24 months. That's continuing as well. So I think for us, the question really is what is that tipping point at what point in time because it's going to happen? Do contractors say, all right, yeah, availability is still important. But you know what, like enough is enough with these price increases, I'm going to start looking around. I'm going to start shopping a little bit more on price than I have been for the past two years. And so I think, Zach, as we think about the stickiness and we've been talking about this as well, what do manufacturers need to be out thinking today for tomorrow's reaction to price from the contractor and homeowner? So the goal here is for our listeners for you to walk away with a couple of ideas after today's show that's going to help you in your company be stickier with your audience. The reason why this is important is because things are not always going to be like they are right now. We're not always going to be on allocation or we're not always going to have incredible price hikes. There might be more competition around price. There might be more competition from other competitors than there are right now. And what we need to do and that the foresight we need to have as companies is to start to build our brand in other ways, not just the actual product itself but the things around our product. So we've got a couple ideas we want to share with you, things that we're seeing that you can be planning like Home Depot did without that billion dollar investment. But the flip side of this, the reason why I'm really excited about it is the flip side is it not only going to make you stickier but it also presents opportunities for new revenue. Because if you can solve your audience's pain points, there's additional revenue that can be had that's not just in the offering of your product itself but the additional things that your brand offers. And I like staying on this topic too of a lot of manufacturers we're talking with kind of collectively I think for the last couple of years have almost been in survival mode. Just trying to cheat up with everything that they've got coming at them, the demand they have coming at them, the suppliers saying I need more on shelf that the PLRs that they're now getting asked to do more of because the depots and Lowe's and dealers are stocking more brands so they're now just trying to fight for this space and maintain. So it just seems like there's this survival mode that's been happening for the last 12 months rather than this forward thinking, hey, in two years it is gonna be more about price. In two years we're gonna have to really be established as a brand so that this loyalty or this trial that we've gained over the last two years doesn't erode. And so getting out of the survival mode today I think is what's really exciting for the chat. The main challenges that the industry are facing it really the same as they were in 2021. It's availability, it's price slash inflation, it's labor now and always and it's concerns about dips in demand driving down growth. And whether that dip in demand means I'm not, I'm just literally not gonna pay you four times what this project would have cost two years ago. I'm just, I'm at the end of either my budget or my ability to swallow that level of price increase or it's dip in demand because of other economic impacts. Those are really the pieces that we're looking at. I think for the sake of time today we're not gonna tackle availability because that is a mountain of complexity. And we talk about it quite a lot in other podcasts and other blogs and things like that. But so today we're gonna dig into how can you support them? How can you think about the things outside of just your product features and benefits to help your customer base get more ingrained in your customer base's business so that it is impossible for them to leave you? So if we break down the areas where we see manufacturers and this is true outside of the building product space, you know, if you look at anywhere, any company that's really, really sticky, it really focuses on three main areas. There's operations, number one, sales is number two and labor is number three. If you can help insert yourself into solving a problem or making your customer's life easier in those three areas, we're gonna break this down here for you, you're going to create that moat, if you will, that warm-buffet mode as he talks about, improve your ability to create that moat around your offering, around your brand in a way that insulates you against that competition or changes in the market, right? So let's start with operations. This is different for each audience, whether you're a builder, contractor, pro, even homeowner. Operations, what we're talking about here is how are they running their business? People today are busier than they ever have been before. And when we think about operations, what we're saying here is there's an opportunity for people who are, let's say they're running their business, they're a builder. They're parts of their business that take time from them making money. And if there are things that you can provide them as simply as training is a simple one, all the way into providing technology that makes their life easier. And you know that better than anyone out there. You know your customer really well. But this starts with asking the question of what are some of the things that my audience spends time doing that holds them back from landing more jobs and doing those jobs, right? Like it's all the stuff on the back end of actually landing work and fulfilling that work, right? Well, and I think this is why we saw a lot of growth in online behaviors over the last 24 months, right? Because they started realizing some efficiencies in some cases, what be at homeowner or pro, being forced into behavior, but they realized quickly, like my gosh, that this saves me a chunk of time. Like I don't have to go drive 30 miles to go see what's in stock and place an order and have it delivered. If I'm working with someone that's worth their salt, I can just hop online, I can use an app, whatever the case may be, get it done right then and there and just save myself an hour and a half of driving around trying to locate something and get it back to the job site. So I mean, I think this is where digital comes into play as well as we see that as a great resource to being much more efficient. Because you're spot on, like when we're doing this type of research that we're doing for our building products guide in 2008, nine, even 2010, it was less about help me with operations and it was more about the pricing discussion because they weren't busy. I needed leads for crying out loud. I just needed cheap products so I could stay afloat. Like I don't have any jobs coming in. This is a total different model that we're in right now. Contractors, if you look at some of our research, right Zach, if you look at some of our research, over half of the contractors that we surveyed are booked out at least a week or a month or more. So depending on the trade, if you talk to some home builders, I mean, they're six months out from starting a new project. They're slammed. See, there's a thing though, Grant, like we look at that and we see them like, oh, they're really busy. Well, what are the things that are keeping them busy that are keeping them off the job site? A great example of this is like a company that I think is trying to solve this problem and I'd be curious to get your take on this. Beth and Grant is my tech. Are you familiar with them, Grant? Yeah, like go check out my tech's website. First thing on their website is products. Next thing is software. Next is automation. Yep. Like it's not just, hey, how do we get more people in the field? It's how do we make the people in the field more effective and more efficient, right? And that doesn't mean you need to go and start a software business or build your own technology. But there's gotta be things in there that you can do to equip your audience with tools, training, insights. Even like I think it was GAF, they hold a webinar for Hispanic tradespeople on how they can run a more effective business. You know, like that's simple. Like that's a simple thing that they can do to help people run that business more effectively. Yeah. I think there's a lot of good companies out there doing a lot of estimating tools like my tech, Simpson Strong Tie. GAF is doing some of that. There's a lot of Deccan companies out there that, you know, it's giving the control and the power to the contractor, saving them time. It's, I think a lot of that is happening right now for sure. I was gonna say that's an interesting way of thinking about Grant is time. Like I say operations here is like how do you operate more effectively? But it's really is how do you give time back to your customer? I mean, those estimator tools Grant that you're talking about, estimations on projects are so inefficient. I mean, if you think about what you have to do right now if I'm a contractor, I have to call someone at the estimating department, give them the details. We, you know, and you have to chat. How's your weekend? How's it going? You chat it up, give you the project details. They're like, okay, I'll get back to you. They hang up the phone. They go do their stuff. They talk to their peeps. Now, of course availability needs to be factored in and there's, I'm sure there's a lot of other factors that aren't always needed to be part of that conversation that are right now and that's fine. And we understand the complexities like we've worked on estimator tools. They're not an over the night solution. There's no out of the box solution because there's no nooks and crannies and there's all sorts of details that need to go into them. But the efficiency that can be earned on the part of the contractor and builder. I mean, who are you going to choose? Are you gonna choose the material that I've got a call and talk to your estimations department and give them my info and chat about their kid's birthday party or am I gonna choose the tool where I'm just gonna like type in the details of my project and I'm gonna get an instant quote that hopefully I can then just take to my local distributor and like, I'm on my way. I mean, that's huge. That's like, that's days worth of time where I'm getting information back to my customer. I'm more likely to win that bid because of the efficiencies that I've gained. You're more likely to win that sale because of the efficiency that I've gained. And that person in the estimator's department has got loads of free time to work on other things that are heavy on their mind other than just answering the phone. I mean, it's so, it's so simple. Like that is a thing that every single manufacturer could do because we're, I think we're gonna talk about a lot of pretty big ideas in this podcast that if I'm a manufacturer, what we don't want is listeners to feel frustrated and be like, well, that's, that's a great idea. Let me just, you know, hire a team of 30 people and go train a bunch of people on site and do a road show. Like great ideas, Zach and Beth, thanks. But I mean, an estimator, you could solve that right now. And there's some off, off the shelf products that are there as well. I remember walking through IBS, looking at a lot of the software companies that are estimating companies and integrating into either manufacturer side or supplier side, they're getting pretty darn savvy. I was, you know, talking with the folks at BuildExact and what they're bringing to the market to allow home builders and mad amount of efficiency. It's going beyond just takeoffs. It's talking about availability. It's updated price sheets that are current within the week. So I mean, it's just all of these things that are helping me manage my business because Zach, I think you hit it earlier. I mean, these trades didn't get into the trades because they wanted to manage a bunch of people and manage, you know, an operational, you know, process. They're craftsmen, they're artists. It's true. So I think there's a lot of opportunities, Beth, to your point, even for small manufacturers to still have some solutions that are service and operation oriented to help, you know, the builder to help the homeowner, whatever the case may be. It doesn't have to be a wildly complex thing. Again, I think it goes back to just stop worrying about survival mode today and you better be thinking about what's coming in the next year or two because it is coming. At some point, availability is going to be solved. Then we're no longer all gonna be saying, well, I win because I'm on the shelf. What happens when everyone's on the shelf? What do you do then? Because it's going to happen. Wait, before we move on, what's your pulse on availability? 18, 24 months. Oh, I knew that's what you were gonna say. That's what I'm hearing consistently. And when I'm telling you, man, that... You're the man with the numbers. I happily default to you. No, no, it's all... I hope you're wrong. Don't think that. It's gonna rain somewhere. Like everyone's a weatherman with this stuff. You know what I mean? So next thing on the list is sales. You know, and this is an area where a lot of manufacturers feel comfortable because it's, hey, how do I drive leads? Hand those leads off. And then hope my contractor or my builder or my architect whoever might be, lands work from that, right? And I think we need to reframe and reshift this because a lot of the smartest manufacturers out there are trying to find ways to get even closer to that sale and actually land sales and hand them off. And that's why I think sales and labor is actually, those two things are almost combined because if you look at trends that are happening, a lot of the manufacturers are going, shoot, there's so much demand. People are moving more online. What if we were able to solve the sales problem and labor problem? And so you're seeing this on both the top end for manufacturers as well as dealers too, where they are literally landing the jobs and then fulfilling the jobs. And I'm not saying everyone needs to do this, but I'm just saying that that is where the industry is going because at a certain point there's, we're gonna see technology reach this critical inflection point where we go, oh, you know, I'll just choose somebody online. Like you see companies like Roofer doing this. And if you haven't checked out Roofer, it's R-O-O-F-R. There's no ER, it's R.com. They allow you to go and source a roof right there and I'll let you choose somebody. Eventually they're gonna have somebody that says, hey, this is a Roofer, Roofer, is gonna allow you to actually install the roof. And so I think finding ways that you can get closer into the sales process, whether that means you're actually landing the sale and handing it off, or just doing a better job at qualifying leads is really at a minimum, I think. Yeah, I mean, we've been talking about this for a while and this is a piece that we mentioned a lot, which is reducing friction. Am I going to go with the manufacturer who once I get the product, I've gotta figure out the shipping and the unloading and where I'm gonna store it and how I'm gonna store it and when it comes in my project timeline and finding subs to get it installed? Or am I gonna work with the manufacturer that's got that all seemed up? And all I have to do is tell you what I need and how much I need and when I need it and you handle the rest of it. I mean, that is just that simple, right? Like it's just a complete no-brainer. What's, I think an important piece there is how do you bring in the channel to be part of that solution versus feeling like you're cutting everybody out? So sourcing local contractors or that local contractor's reputation gets furthered and he wins more job. This is not rocket science, this is not new. It's also not simple. I know this is not a simple solution but it's what the customer wants. Like this is what the channel is asking for is this reduction in friction and these are the long-term solutions that manufacturers need to be looking into. Well, there's that third leg of the stool too is here talking to the contractor, the manufacturer and there's the supply side as well Beth and I think the integration and the supply side right now is a tremendous opportunity for our industry. 15 years ago, 20 years ago, it might have been, nope, it's manufacturers here in this camp and it's channel and suppliers in the other camp and we're all kind of fighting for the position. I think today is really about collaboration between the two and so an opportunity for manufacturers to start working with the channel partners in that sales process as well because the channel partners are going, the suppliers are gonna be really, really good in aspects that manufacturers just aren't and vice versa. So really, really good opportunity if you're a manufacturer out there, if you haven't started having some really in-depth conversations about where you can help facilitate that sales process for the contractor, for the homeowner, start having those conversations with your supplier as quick as you can. Suppliers are eating up content as well from a digital standpoint, whether it's videos or specs or just current models and imagery, whatever the case may be, this is I think a really critical time for manufacturers and channel the supplier side to be collaborating, to complete that whole sales process and make it a much more efficient, engaging process for the homeowner and the pro. And thinking also, Zach, I'm interested in what your opinion is about this, but thinking also about, you know, we talked about estimators for growing operations, I actually think like product visualizers are a really great way to help close sales, especially if your end-end consumer, whether or not you sell to them, but if your end consumer is a homeowner or your customer's end consumer is a homeowner, product visualizers are so key for them because we know that homeowners have a very difficult time understanding what a swatch of paint looks like on their wall or what a four by two plank of flooring looks like installed in their home. So if you can help them get the full picture of what it's gonna look like in a styled room and that can actually be a really great sales tool, not just for you, but also your contractor can use that sales tool in their homeowner conversations. Oh yeah, absolutely. I think, you know, any question somebody has about, hey, what is this gonna look like? Any kind of ambiguity about the final product is always a question, like that's always a hindrance to closing that sale. I think it's the same reason why I like, go to a completely different industry, you know, cars. Why do they allow you to change the color of the car on a 3D model? It's because they know that like, any kind of like, oh my gosh, what's that gonna look like or how's that gonna perform is one more step that could potentially stop you from closing that final sale. So I totally agree. Shifting to labor. Great, I'm really curious to get your perspective on this because we've kind of skirted around labor a bit. How much labor have we lost? The construction industry actually lost labor in January. Most other industries grew and increased labor. The number of openings we have, I think are over 300,000 in the construction industry as of January. That's after the fact that we've already have a shortage, right? Like, we already have a lack of labor to begin with, you know? I mean, you all know, I mean, Venvio focuses on the building products industry. The farms with group is solely focused on the building products industry. So we've all known well before COVID that there's been a labor issue. We have a high rate exiting the trades and a much lower rate entering the trade. What do you see is like the best thing a manufacturer can do there? Cause like obviously people talk about training. Like we've talked about Tecoblock for example, if you're not familiar with them, check out what they do. Phenomaly smart, they train people on how to get into the hardscape landscape industry. But Graham, I'm curious to get your take. Like what do you see is like the biggest thing manufacturers can do today to try to help this part of the process? You know, for us, I think there's two sides of the coin when we talk about labor. There's the warm bodies aspect and how do we get more of them into our industry? Ed Brady just had some great call to actions last week. Ed Brady's the CEO of Home Builder Institute. And a lot of it was around some very smart things which is changing the narrative about blue collar jobs and how great the industry is and getting earlier into the development of someone's psyche as far as what they wanna be when they grow up and all these great things. But that takes time. But it's also about, you know, reliant on population and fighting for a resource that every other industry is fighting for. So I think that is not only a longer play, I think that's just a much more difficult path, Zach. The other side of the coin is innovation from our perspective. And so what we've seen for a number of years, again, pre-COVID, are companies developing product, features, enhancing things so that it's a quicker install. It lasts longer, fewer callbacks. I only need one trade to install instead of three to do this install. So again, this goes back to the timing thing of helping their business but it's also addressing some of the labor stuff. I think that the product space is probably a more immediate solution. I think it's more of an attainable solution but not all manufacturers have, again, we're talking about thinking on the future and how to solve for what's needed. Not all manufacturers lay out their three-year product development cycle. Some of them don't even have a product development plan for their, forget about a roadmap, but what do we do once we reach the critical point? So I mean, again, for manufacturers, I think this is a really, really important time to think about what is gonna be coming down the pipe two or three years down the road. Labor is, I would assume that labor is not going to be much better in two years than it is today. Yeah, exactly. So what are you doing about it? If you're counting on more warm bodies being in the industry because you have a highly complex product that requires a lot of training, man, I'd be really, really nervous to make that bet. I'd much rather feel a lot of confidence around developing a product that still solves the needs and does it in a manner that says, you don't need more labor to do this. You don't need more training to do this. In fact, it's quite the opposite. You can do it quicker and it's much, much easier, whatever the case is. I think it's either innovation or it's warm bodies and I can tell you where I think there's gonna be more success. The point of everything that's being said is, yes, we're getting to a place of sustainability and predictability in the industry, but nothing's going back. And to your point, Grant, it's that if I don't have a three-year plan, this is the time, this is the moment to start putting those pieces into place. We've got to start making some long-term investments into this industry. I mean, we're getting burnt out from this constant reaction to fires and to the, I'm gonna say unprecedented, to the unprecedented times that we've been in and we're moving a little bit more into precedent, right? And so we've got a plan and then be the ones in the driver's seat for how is the industry gonna shift? Let's have a voice in that. Let's move some things, let's push some things, not just be like, oh, well, this is where we landed and so this is what we're gonna do and oh, we're at someplace else. And I think our industry reacted exceptionally for an industry that has been coined as laggard and slow to change and all of these other things. I think our industry was exceptional in the last two and a half years and I'm actually really excited to see how that momentum can be pushed into this long-term innovative vision and plan. That's great. On the product side, I was gonna say one last thing and so I know we're really talking about labor and that kind of shifted into maybe some solutions via product innovation. The other thing that can come with the innovation piece for the next two or three years is I think some really good sales opportunity because when you think about innovation on your product, you can also start designing product with the needed feature set at the desired price point that may not be there today. If you start thinking about that product development pipeline and what that looks like for the next two to three years, you can start developing kind of a good, better best so you have product in the right price positions but still have the feature combination that the contractor wants. We do a lot of research on that type of stuff day in and day out but again, when you're in reactionary mode, that's work that takes months. And it's maybe 18 months before it's even launched. If you're not thinking about that stuff today, I'm just worried manufacturers are just so stuck in the now. We know manufacturers just like Ford who are cutting lines, cutting skews, simply so they can focus on their core which is a great decision for now because you've got to get stuff out. Makes sense but what happens in two years when there is everything on the shelf and prices are still high and it now becomes more of a pricing discussion. Have you reintroduced your entry-level price point or did you just neglect it for the next two years and I think it's important that the product discussion, I think is really, really important because I think it's a trigger for the labor stuff. I think it's a trigger for the sales stuff. Well, I think boiling this down, what we're trying to get at is how do you develop value to your customer that's outside of your product just being available? Like that's what we're trying to distill down to is how do you make sure you're profitable regardless of market conditions? Grant, man, thank you so much for coming on the show as always, really great conversation, really great insight from you. For our listeners, if they don't already know who you are and they want to connect, what's the best way for them to do that? Well, it's always great chatting with you both. As always, fun having some discussions around what we're seeing in the building product space. To get ahold of us, check out thefarmsworthgroup.com. We do have a monthly home improvement tracker where we're looking at DIY, DIFM and contractor activities on a monthly basis. We're happy to give away that stuff. You can get that at thefarmsworthgroup.com slash tracker. And Zach and Beth, I know we've got some great materials from our building products customer guide. They're available to the industry as well. So here to help any way we can. Awesome, Grant, thanks so much again for coming on the show and for listeners. If you enjoyed this content, make sure you go to vanvio.com slash podcast to subscribe to get more. Until next time, I'm Zach Williams alongside Beth Popney-Glove. Thanks everybody.