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Trends, Threats and Opportunities in the Building Materials Industry

As the construction landscape shifts, unforeseen challenges and innovations are redrawing the blueprint of success. Discover how emerging trends, from artificial intelligence pricing strategies to service-oriented product offerings, are shaping the building materials industry and could redefine your bottom line.

April 15th, 2024

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Episode Rundown

03:30 - How dealers are becoming more involved in the construction process

04:39 - The impact of artificial intelligence and technology on the industry

06:31 - The current state of lumber prices and why they are decreasing

09:12 - Why manufacturers are pushing services over products

12:50 - Updates on the current housing shortage 

18:16 - Craig’s predicted trends, threats and opportunities in the industry

Meet Craig Webb

Craig Webb stands at the forefront of market intelligence in the building materials space. With an extensive background as a reporter and editor, including an 18-year tenure with the renowned publication ProSales, he's an authority on industry dynamics. Craig's journey in journalism spans five decades, witnessing the ebb and flow of trends and threats within the field. 

Through his company Webb Analytics, he continues his mission to unveil the "incoming missiles" that dealers might miss due to their operational focus, giving them a fighting chance in a fiercely competitive market.

Market Dynamics and Operational Challenges

This episode starts by looking back at past threats that had a big impact on our industry. A classic example was the advent of Home Depot and its impact on traditional pro dealers. The Great Recession's devastating toll on the industry was another catastrophic event that saw business reductions by up to 75%. While those happened years ago, they’ve continued steadily over time and have become ongoing trends that never seem to stop. 

Looking forward to current trends in the market, Craig highlights how dealers have transformed into integral partners for builders, offering services that extend beyond mere product delivery. 

Dealers are far more than just people who bring the product into the town and drop it onto a rack for people to buy.” - Craig Webb

By adding these types of offerings, Craig sees an opportunity for dealers to redefine themselves as full-spectrum construction services, therefore enhancing their role and importance in the building process.

Craig also mentions how the application of AI in pricing and inventory management is a game-changer that offers a clear competitive edge. He draws attention to how dealers could tailor product prices for their vast array of customers, potentially generating significant additional profit margins. 

Similarly, AI-driven insights on inventory can inform smarter purchasing decisions, enabling dealers to optimally stock what's needed and increase profitability in an industry known for tight margins.

Artificial intelligence is definitely going to change the game. But there are people out there who are working on ways, for example, to price products based on the absolute individual.” - Craig Webb

The conversation leans to the current state of lumber prices. Craig states that lumber prices have decreased to the level they were around 2019, partially because builders are building smaller homes, which means less lumber is needed. 

The increasing amount of rentals also plays a role in the lumber price drop because the designs are not as complex.

The build-to-rent phenomenon also factors in there because those are simpler designs, longer lasting products and usually not upscale.” - Craig Webb

IBS 2024: Craig’s Takeaways

The group begins to talk about 2024’s IBS. What stood out to Craig was the optimism everyone had and the focus on new concepts and software. He also mentioned there was a desire to get more supplies from outside the United States, as there was a big turnout from other countries at this year’s event. 

Zach mentions that he saw a lot of manufacturers not just pushing their product but pushing their services to fully integrate with their customers. Craig adds how manufacturers want to get life-long customers that remain loyal to them, and services can be a great way to lock customers in while still bringing them value. 

Craig was also interested in how some siding companies were coming out with new versions of sidings made from new materials. When he went to the Greenbuild event, he saw a company using switchgrass and other grasses to produce an OSB equivalent that is more water resistant than OSB. 

Housing Market Updates

Beth highlights how this year, companies are leaning into product options versus product innovations, and how volume is the name of the game. However, this could indicate that companies aren’t necessarily sure of what their customer needs. 

Craig adds that the market is in need of new housing so much that innovation is not a concern — this speaks to why volume is becoming the priority. 

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Grab Your Ticket Before It’s Gone

45% of the consumer price index is housing-related rents, mortgages and repairs on housing. A huge percentage of builders are planning to raise their prices this year, so rents are only stabilizing. There is this belief that rents will go down once a whole bunch of multifamily is supposed to come in soon, but that hasn't happened yet.” - Craig Webb

While people are continuing to buy homes amidst the shortage and increased rates, they are purchasing houses that need upgrades to stay within their budget. This points to a potentially significant surge in remodeling and renovation projects. As the market shifts, there's immense potential for growth in catering to the upgrade and modernize segment of homeowners.

Trends, Threats & Opportunities: Craig’s Predictions

The episode wraps up with Craig listing a trend, threat and opportunity he sees on the horizon for the building materials industry.

Predicted Trend: 

The trend that Craig notes is the critical importance of operational efficiency and execution in the building materials industry. He emphasized that with reduced dependence on lumber profitability due to price fluctuations, dealers must focus on optimizing operations for maximum gains.

I'm seeing a lot of dealers realizing that lumber is not going to be a supporting device. They've got to figure out how to make as much money as possible.” - Craig Webb

Predicted Threat: 

The threat that Craig mentions is government regulations. However, officials have stated that they want to provide more affordable housing, so if the push for that continues, the industry may see some alleviation. 

A threat is frequently in the form of the government — a new code, a new regulation and things like that.” - Craig Webb

Predicted Opportunity: 

Craig highlights the opportunity for building material dealers to play a larger role in the whole building process and provide more construction services. He mentions an opportunity for manufacturers as well — manufacturers should monitor and adapt to distribution changes. Be aware of where and how your products are sold to ensure an efficient purchasing process for customers.  

I would love to see dealers actually start selling themselves on a time and materials basis.” - Craig Webb

Get in Touch with Guest 

Have more questions for Craig regarding the current market and industry trends? You can contact him on LinkedIn or on his website

More About The Smarter Building Materials Marketing PodShow

SBMM is co-hosted by Venveo’s Founder, Zach Williams and Venveo’s CEO, Beth PopNikolov.

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