Installed sales are driven by pros (and cons)

In some ways, embarking on an installed sales program is kind of like launching an X-wing fighter attack on an enemy space station. There are risks and rewards. It's been done before. There may be a growing need to do it. But you better be prepared and know what you're doing.

That analogy is one way to look at the comments on the subject of installed sales by two leading lumberyard executives speaking recently during the Northeastern Retail Lumber Association LBM EXPO '16. While the dearth of contractor labor makes such programs increasingly attractive to some, the challenges of execution stops others in their tracks. Concern over alienating existing contractor customers adds another layer of complexity to installed sales.

quote-from-article] Steve Swinney, CEO of Kodiak Building Partners, says he appreciates the power of installed sales. It's a strategy the company is pursuing in several of its markets.

"We're relevant and we're important to our customers when we help them solve their problems," said Swinney. "And labor on the job sites -- that's a problem right now. If we can come in and solve that problem for them, that's a win for us."

While the idea of a Kodiak division actually building a house for a customer is very unlikely, he expects to play a more active role in helping the builder and providing installed sales programs.

"I encourage people to really think through the model, think how it works, what the pitfalls are and how to address those," Swinney said.

US LBM Holdings CEO L.T. Gibson said installed sales is right for some dealers and wrong for others. He cautioned that when you look at companies that have gone out of business in recent years, in many cases they were involved in installed sales (along with real estate speculation)

"If you are going to do it, you have do it right," Gibson said. "You have to do it in professional way. You have to understand the laws, and understand where you can add value. You can't just hire the same subcontractors that [the customers] were going to hire."

There is certainly a place for installed sales, Gibson said. But a company would be wise to ask itself if it can do the job more efficiently that it was being done before.

"If the answer is no, then don't do it," Gibson said.

Swinney seemed to agree: “I encourage people to really think through the model, think how it works, what the pitfalls are and how to address those,” he said.

Kodiak’s LBM brands include Zarsky Lumber in Texas and New England Building Supply in Massachusetts. US LBM is one of the largest collections of lumberyards in the country, with more than 25 divisions operating in 28 states.