In a tight economy, diversification can be a good idea, and Mike Schwarz, Manager of Pricing and Merchandise Analysis for ABC Supply, said distributors can help contractors expand their range of offerings as they keep them apprised of pricing issues.
“In 2008, residential new construction was way down, and I don’t think people realized how bad it was going to be,” he said. “Storm and hail activity at the end of the year sort of offset the lack of new construction. If you were in the right spot geographically, it might not have been so bad.”
In the commercial sector in 2009, financing could become an issue, along with building owners’ budget constraints, according to Schwarz. “A number of commercial projects could be put off,” he said. “Expect another year of slow to no growth, possibly contraction in some areas. It’s dependent on how things go. With the new administration, road and bridge construction could be increased, and that could put pricing pressure on asphalt. Transportation costs have come down, helping a bit, but asphalt prices have not. Commodity prices are ping-ponging around - aluminum and steel have dropped significantly.”
Working with distributors can help contractors stay on top of price fluctuations, noted Schwarz. “We always try to keep everyone informed about 60 days ahead about pricing issues,” he said. “We keep looking ahead at pricing, and it’s critical to communicate with our customers.”
He had this advice for contractors: “If things are tight on a cash basis, keep the distributor apprised and explore financing options.”
Diversifying can be a good strategy in this economy, said Schwarz, and distributors have manufacturer-sponsored training programs designed to help them make the transition. “Distributors can help contractors expand into other product areas, including areas they might not be familiar with,” he said. “We’ve seen a lot of roofing contractors expand into other areas - siding, windows, gutters, decks. We see them doing a lot more work, and they’re trying to do even more.”
There will be some regional variation in the economy in the coming year, according to Schwarz. “One of the things that will give an indication of how quickly or how slowly the economy will turn around is the amount of new home inventory. Until that moves, there could be slow to no growth in residential new construction. Each section of the country is feeling it at different points, depending on how overbuilt it is.”