The labor shortage, supply chain issues and pricing continue to dominate conversations throughout various industries—especially in construction.
The Farnsworth Group conducts custom research exclusively for the building products, home improvement and lawn and ranch industries by providing strategic insights that help organizations better understand their customer, product, brand and the overall market.
Roofing & Exteriors spoke with Grant Farnsworth, president of The Farnsworth Group, to get his insights on the current situation.
1. How long have you been conducting industry research and has there ever been another time where skilled labor and supplies have been as scarce as they’ve been since the pandemic started?
The Farnsworth Group has been focused on building products research for over 30 years. While supply and labor challenges have manifested over the decades, the current supply chain environment is quite unique. It’s not just one category or sub-segment being impacted, rather it’s the entire industry. Unfortunately, labor challenges have been ongoing for many years leading up to the pandemic. The average age of a contractor is now over 42 years. We continue to see more contractors exit the industry than entering and the biggest need remains with skilled trades. In January, the construction sector actually lost employees as openings continue to rise.
2. What current trends will continue into the near- or long-term future?
Online, digital trends look to be holding strong. These were behaviors that were accelerated during the pandemic. In some categories, we saw ~10 years of online sales growth with 12-18 months. Consumers and Pros have found new ways to get information, shop, and purchase materials for their jobs. They have learned about new brands and new suppliers and found efficiencies that make their lives easier. While we may still be 18 months away from the supply chain getting significantly better, the labor challenges are likely to remain for many years to come despite industry efforts to change the narrative and recruit more skilled professionals. And be on the lookout for the role pricing will play on product and supplier decisions. While recent industry behaviors have been dominated by the availability of products, at some point that will resolve, and leave consumers to face decisions about higher-priced products resulting from inflation and a period of material shortages.
3. What should manufacturers be on the lookout for going forward?
Manufacturers must start planning and get beyond reacting to the crisis of today. What’s driving customer decisions? What does your product pipeline look like? How will you address the pricing concerns of customers? What is your product mix across price points? How does your product help contractors minimize their labor requirements? Pricing and labor will become more important over the next few years and availability will begin to take a back seat. For many manufacturers, it takes 2-3 years to develop, refine, and launch a new product that meets the needs of the market. Now is a critical time to understand what customers want, how they want it and needs that must be met so manufacturers can start building out their offering. It will be a great opportunity for companies to gain share if they can address pricing needs among others.
4. Even if availability returns, what effect will that have on the pricing of materials?
We’ve seen over 30% of contractors try a new supplier for the first time last year due to availability issues. We’ve seen over 20% of DIYers try a new brand because of availability. The supply chain has been the driving force of brand, product, and channel shift. That factor may soon change from availability to pricing. As material prices and labor costs continue to rise due to inflation and low supply, project budgets will go up. Homeowners, builders, developers will react. Once more products are on the shelves, they’ll look for less expensive alternatives that still deliver necessities. We’ve seen pricing drive decisions before, last was in 2008-2010. During that time, manufacturers and suppliers invested more in Good/Better products, with lower inventories of Best. It also caused manufacturers to re-evaluate their value propositions. Pricing impacts product development and marketing strategies to ensure you have an offering that aligns with current market conditions.
5. According to the Roofing & Exteriors readership poll conducted at IRE, 80% of respondents said that business has been up versus the prior year. How can roofing contractors keep up with the demand, despite also reporting labor and supply chain issues?
Look to manufacturers and suppliers to leverage their resources and tools that will help you manage your business: online ordering, product inventory, installed sales, delivery, product resolutions, etc. Look for products that address labor concerns and reduce callbacks. Leverage technology in business management and in products. Develop new hires, when possible, through well-thought-out training and incentivized pay. Communicate to your clients, be transparent, and provide frequent updates so you’re able to manage project timelines not stress over them, worried about the clients' reaction when you tell them the project is delayed two weeks. No homeowner will ever tell a contractor that there has been too much communication.