Fortress Building Products

Part
01
of three
Part
01

Fortress Building Products - Trends in Decking Railing, and Framing

Distressed hardwood and natural bold colors are examples of current trends in decking railing, and framing, while roof top decking and customized railings through personal touches are examples of emerging trends in decking railing, and framing.

MARKET OVERVIEW

  • According to residential construction data providers — Metrostudy, the 2018 economic conditions point to a 4.6% increase in the number of decks installed this year, translating to approximately 158,000 more deck jobs nationwide. Homeowners are investing more in outdoor spaces than ever before with 85% of those renovating opting for a major remodel or a complete overhaul.
  • Houzz noted that 39% of landscaping projects take place in the front yard, 18% of homeowners remodeling updated outdoor entertainment items, and 88% upgrade outdoor living elements with 43% of them upgrading lounge furniture, 38% fire pits, 35% lights, 34% dining furniture, and 27% benches.
  • A report by IBIS Research predicts the non-wood segment to continue growing at a CAGR of 4.5% and will reach 17.9% by 2020 while wood decking is predicted to grow at a CAGR of 1.3% annually through the same period. Remodeling projects are also on the rise as homeowners gravitate from traditional decking products toward low-maintenance composite decking alternatives.
CURRENT TRENDS

1. DISTRESSED HARDWOOD

  • Most homeowners prefer the ‘look and feel’ of natural wood — they just do not like the time and effort consumed to keep lumber looking its best.
  • According to Trex, composite decking is expected to grow at above average annual rate in demand through 2020. Experts predict this segment will experience the biggest gains than traditional wood.
  • Trex, a high-performance composite is used instead of wood because it resists mold, scratching, staining and rot. Additionally, most of these composites are made using recycled materials, which is an ideal option for consumers who are eco-conscious.
  • According to Builder Online, several decking manufacturers have recently switched to traditional wood alternatives such as composite deck boards that are low-maintenance and share the same “look and feel of distressed, rustic hardwood flooring.”
  • Manufacturers like Duralife use a technique called ‘hot roll emboss process’ to imprint a wood grain on decking boards, giving the enduring composite, “a variegated texture mimicking the appearance of real wood.”

2. NATURAL BOLD COLORS

  • Luxurious color tones blended to match the entire architecture are finding their way into the deck board color options. These rich colors are also available for railing and natural railing shades to facilitate a smooth natural flow in outdoor space.
  • Aqua Smoke, Faulkland, Copper Henna, and Carisbad Canyon are examples of trending wood stain colors that blend well with other colors to give the outdoors a natural yet refreshing look with a relaxing feel.
  • Other colors anticipated to take hold in outdoor living spaces in 2019, include rich cappuccino, chocolate, and chili pepper. Equally, picture framing options, textured embossing, unique variegation, and fresh railing hues will provide attractive options to contrast these bold colors.
  • Companies such as DuraLife now offer color-matched decking board end caps that help to polish the edges of boards and enhance the overall appearance of the deck space. These options are also cost effective compared to traditional “picture framing” options.
EMERGING TRENDS

1. ROOF TOP DECKING

  • Urban areas are now switching to roof top decking to create more usable outdoor spaces. The trend is notable across many new condo and townhouse properties which are incorporating rooftop decks into their designs, especially in areas with aesthetically appealing nature such as water views or other impressive vistas.
  • According to Timbertech, the trend of rooftop decking is growing fast, adding a vertical option for urban-dwellers without enough room for expansion. Regarding design and pattern, experts are using pavers to accentuate unique pattered design elements on rooftop spaces.
  • Encore, a seven-story apartment building; 4th West, a 500-unit luxurious mixed-use project, and CityScape, a six-story building are examples of urban residential buildings in Salt Lake City with unique roof top decks.

2. CUSTOMIZING RAILINGS — Personal Touches

  • Today’s homeowners are seeking to personalize railings and want their decks custom-made to their expectations. Homeowners want decks and rails customized to enable their spaces to speak to and cater to their family’s unique lifestyles.
  • A report on LBM Journal notes that homeowners are designing custom decks which gives them a unique space for entertaining, dining and cooking. This is achieved by using materials such as railing to achieve a custom look.
  • Lou Maglio, President of Walpole Outdoors noted that homeowners are migrating a lot of the architecture and details you normally see in their home out to the decks and patios. Walpole, for example, is selling pergolas for rooftop decks.
  • Personal touches are increasing in popularity as homeowners continue to customize their decks with unique elements including high-end entertainment installations, wrapping columns in stone or glass tiles, and a vast array of outdoor adornments.

Research Strategy:

To find information on current and emerging trends in decking, railing, and framing, we explored industry reports such as IBIS Research along with reports published by top players in the industry such as Trex. We also examined numerous reports published by news providers specializing in outdoor lifestyle and architecture. To gather the most recent trends, we further sought information from niche specific companies such as Caldecks, a company that specializes in custom decks.

Most of the information uncovered for trends focused either on the design aspect, materials used, and customers tastes and preferences. In this regard, we have included trends that focus on each of those aspects, with some focusing more on decks while others on railings and framing. We also used information uncovered from construction companies such as Builder Online and Building Products.

In determining why each concept qualifies as a current or emerging trend, we checked the frequency with which they are mentioned across the reports we examined. Importantly, we checked what manufacturers such as Trex are saying about them along with the opinions of industry experts such as C-Level managers. Overall, we made sure that each trend is reported by a relevant company, i.e., news agency, construction companies, custom decks companies, decking boards manufacturers, and lumber companies.

Part
02
of three
Part
02

Fortress Building Products - Economic Factors

Supply shortages, tariffs, inflation, and lending requirements are among factors that affect contractors in the construction industry.

ECONOMIC FACTORS THAT IMPACT THE DEMAND FOR DECK AND PATIO CONSTRUCTION

Growth in the Housing Market

  • According to IBISWorld, the Deck and Patio Construction industry's growth has been driven by growth in the overall housing market. The improving housing market over the years has caused the industry to grow at an annual CAGR of about 3% to reach $783 million in 2019. The "robust growth in the national housing market has bolstered demand for industry contractor services."
  • A survey by Houzz corroborates this information by stating that new home purchases accounted for about 33% of the growth of outdoor updates and deck projects between 2016 and 2017.

Rising Income Levels

  • According to LBM Journal, rising income levels is one of the main factors that have contributed to the growth of the decking construction segment.
  • According to the Houzz survey, about 25% of decking projects were motivated by increased income levels among homeowners in recent times.
  • IBISWorld correlates the information provided by LBM Journal and Houzz by quoting rising income levels as one of the key economic factors that are driving the demand for contractor services in the decking and patio industry.

Improved Credit Conditions

  • LBM Journal says that thanks to "interest rates that remain low, the decking industry is poised to experience continued growth, and homeowners are poised to take advantage by incorporating more and more deck projects into their building and remodeling plans."
  • The IBISWorld report states that the decking industry experienced 5.4% overall growth in the last five years because of improving credit conditions, among others. Better credit conditions are also quoted as one of the reasons that have driven the demand for contractor services in the decking and patio industry.

Increased Return on Investment

  • LBM Journal reports that "deck remodeling continues to be strong as homeowners see investment in the outdoor space adding real value to their homes."
  • According to the Houzz survey, a need to improve the resale value accounted for about 25% of the growth of outdoor updates and deck projects between 2016 and 2017.


ECONOMIC FACTORS AFFECTING CONTRACTORS IN THE CONSTRUCTION INDUSTRY

Supply Shortages

  • Construction companies are adversely affected by supply shortages or supply failures since companies since "construction companies and construction suppliers have a circular effect on each other, and the state of the economy determines whether that effect is negative or positive." When suppliers are out of business, contractors are forced to pay more for construction supplies, which may affect their profitability or even sustainability.

Lending Requirements

  • Stringent lending requirements limit the number of Americans who can access construction loans. Also, fewer investors qualify for large construction loans. Therefore, the construction industry, including construction contractors, suffers negatively when lenders are not able or willing to finance new construction projects. This affects their ability to stay afloat.

Tariffs

  • According to Construction Equipment Guide, tax/tariffs have a direct effect on construction contractors. For example, the tax reforms of 2018 turned out to have positive impacts on the revenues of construction contractors in the United States. In essence, "lower corporate tax rate and quicker equipment depreciation schedules were reducing the cost of materials and equipment.

Inflation

  • According to Fine Homebuilding, construction is a cost-based business and inflation increases both the labor and material costs for construction contractors. The resulting decrease in cash flow, profits, and spending power forces construction companies to increase their prices, which affects their ability to retain their clients or acquire new ones.


RESEARCH STRATEGY:

To provide the economic factors affecting the decking, railing, and framing industry for large contractors, we began our research by searching through market research resources, real estate resources, construction and home improvement resources, general media resources, financial magazines, academic journals, and statistics sites. Our initial research produced information on the economic factors that impact the demand for deck and patio construction. Notably, most resources only produced information on the 'decking industry' and several resources gave the indication that framing, decking, and railing are commonly referred to as the decking industry, or the decking and patio industry in some cases. Another source suggests that frames and railings are all components in decking construction. Therefore, there is a high probability that the "decking industry" is a representation of the "decking, railing, and framing industry."

While we had managed to find the economic factors that impact the 'demand' for deck and patio construction, we still had not found any information on whether these economic factors directly affect large contractors (e.g. their performance, profitability, or productivity) and if so, how they are affecting them.

Therefore, we shifted our focus to companies providing decking and patio construction materials and/or services such as Trex Deckers. Our hope was that these companies had conducted and provided research findings that would shed light on which and how economic factors affect large contractors in the industry. However, the resource that we found echoed the economic factors found in the aforementioned resources and provided that they affected demand for construction materials and services but again did not elaborate whether they affected the contractors directly.

Third, we decided to explore each economic factor identified in our previous strategies to determine whether and/or how they impact large contractors or contractors in general. The economic factors identified as the ones impacting the demand for decking and patio construction were increased income levels, improved credit conditions, increased ROI, and growth in the housing market. We searched in the public domain to determine how and whether each has any direct effect on contractors in the industry. However, the resources that we found only talked about their effects on the demand for contractors.

Fourth, we decided to expand our scope to the overall construction industry. We managed to find several resources providing information on how economic factors are affecting contractors in the overall construction industry. We then prepared an analysis based on the information we garnered. However, our research using all the aforementioned strategies and resources did not produce any findings that break down the factors that affected large and small contractors because the information is generalized. We have provided both the information from the expanded search and the information garnered from the initial research strategies.
Part
03
of three
Part
03

Fortress Building Products - Contractor Journey

The purchasing journey for large contractors buying decking, railing, and framing is largely unknown due to a lack of research; however, the purchase journey for smaller deck and general contractors includes a trigger phase, search phase, evaluation phase, and decision phase, which all look slightly different for the general contractor than for the dedicated deck contractor. In addition, our research indicated that architects often dictate the materials used in larger construction projects. While we were unable to find the purchasing journey for architects specific to decking, railing, and framing, we were able to provide insights into the general purchase path for architects when selecting and buying construction materials. Our detailed findings are below.

INSIGHTS INTO THE ARCHITECT CUSTOMER JOURNEY

  • Architects are becoming more involved with the construction process in terms of selecting materials.
  • During the design phase, the architect needs to be aware of the "variety of products and materials on the market" so they can suggest "constructive solutions" for each project.
  • Architects seek inspiration for materials through images of completed work, which they then file away for future projects.
  • For example, they may use trade publications and industry magazines that have published images of built projects to inform them of options for future projects.
  • When looking at these images, architects will then take note of the materials used to create the final look. For this reason, images that architects save "are not only formal references, but they also help by providing certain technical information."
  • Architects are also beginning to consider how they design for material efficiency and are becoming "advocates for materials transparency," which means they are more likely to select products that have their technical specifications readily available.
  • This is why it is critical for construction materials companies to "show their products in context, as part of a finished work of architecture."
  • After the design phase, the architect will then begin the product selection process by "choosing brands that will make [his] work come to life."
  • Architects are going to naturally select products that have the "highest standards and recognition," but client budgets will also have an impact on their choices.
  • Due to this impact, architects will often choose a product based on profitability, which means they will select products that are fast and simple to install.
  • The reason for this decision is that project costs can skyrocket if products are incorrectly installed, which can lead to the loss of materials, delays in delivery time, and all other associated costs.
  • Architects are more likely to choose products that do not require significant contractor training and appreciates companies that provide videos that help contractors and construction workers easily understand the installation process.
  • In addition, architects prefer companies that offer "technical information about the product and its behavior post-installation" so they can achieve the best constructive outcome.
  • Moreover, when designing projects for schools, hospitals, and other large public structures, they must take into account the "healthiness" of the product. They may use databases such as the Healthy Material Lab to find products that can be used in these environments.
  • The final stage of the architect's journey is to become a product spokesperson through reviews and personal recommendations if the project's result pleases them and their client.

GENERAL DECKING CONTRACTOR CUSTOMER JOURNEY

  • A general contractor has been defined as "a jack of all trades home improvement professional who focuses on anything for the house."
  • The goal for a general contractor is to find a decking partner who will reward his loyalty and help him grow his company.
  • The purchasing journey trigger for a general contractor is to offer just one composite product (his partner product) as he increases the number of deck installations he does.
  • Some considerations a general contractor thinks about at this stage is the benefits of one product or manufacturer over another and customer long-term satisfaction with a product.
  • This is the part of the journey where contractors want to "know why one product is better than another or what added value or benefits they will get with a higher-priced product."
  • The next step on the journey for a general contractor is to use consumer websites to discover the purchasing options available on the market.
  • At this stage, he will look for partnership benefits on manufacturers' websites and may pass up companies that don't provide this information directly.
  • General contractors may also discuss decking material options with other contractors, which is a benefit he has over consumers.
  • Once a general contractor has narrowed down his choices of decking material to one or two products, he will visit local lumberyards to look at those options himself.
  • He may also take advantage of the lumberyard's expertise and find out what other general contractors are using, but this could be a pain point because the lumberyard employee may not be well-versed in individual manufacturers and products.
  • Ultimately, a general contractor will make his choice on decking material based on which product he believes will give his customers the "best long-term experience."
  • It is his belief that using a quality decking product that will provide his clients with that long-term experience will generate more business for his company through word-of-mouth advertising.
  • "Good service and good quality products" keep customers returning to the contractor and the contractor returning to the manufacturer.

DECK CONTRACTOR CUSTOMER JOURNEY

  • A deck contractor has been defined as a "one-stop-shop deck implementation specialist [who] spends a lot of time in the market and knows materials well.
  • The goal for a deck contractor is to offer a composite product to his customers that offers the best combination of performance and price.
  • The purchasing journey trigger for a deck contractor is when a potential customer reaches out to him through an outlet like Angie's List, via email or telephone, or by way of a referral from another customer.
  • The deck contractor will meet with his potential customer and show them a variety of products to fit the project's budget.
  • If a deck contractor represents a single manufacturer, he will showcase the different deck products available from that manufacture.
  • Deck contractors will often use technology such as apps and tablets to show clients how the deck will look in its finished state, so companies with that capability offer deck contractors a better option for displaying their products.
  • Some manufacturers and retailers offer "design galleries" that allow contractors and clients to make all selections for their project from one place.
  • An example of this type of product is the AZEK's 3D Deck Designer Tool, which was "engineered to help dealers, contractors and homeowners visualize deck designs."
  • Another example is Seljax's 3D Deck Designer Software, which is designed for contractors to give their clients the ability to "choose the size, shape and color of their new deck—and to let them see their exact deck before it’s built."
  • If the deck contractor does not represent a single manufacturer, he will follow the purchase path of the general contractor outlined above.
  • For deck contractors that already represent a single manufacturer, the evaluation step is based on what the client decides to do. Most clients will receive several bids and select the one that is most attractive in terms of price and quality.
  • Once the client chooses the deck contractor to install their deck, the final step in the journey for the deck contractor is to install the product and deliver client satisfaction.
  • Deck contractors will then take pictures of the completed deck to add to their portfolio for future bids.

GENERAL INSIGHTS INTO THE CONTRACTOR PURCHASING JOURNEY

  • Most buyers for large construction contractors are "not making purchasing decisions on their own anymore." This is because the decision-making process often involves "many different constituents in their companies, sweeping in a variety of functions, points of view and, often, time zones."
  • Large contractors often make materials purchases in bulk to save money and time, and to promote consistency in products.
  • The purchase process for building materials is a highly fragmented process, with several players involved in the supply chain, from manufacturers and wholesalers to retailers and contractors.
  • The fragmented nature of this process means that "purchases are made with little planning—job-by-job, day-by-day—pushing the purchasing decisions down to the last minute and smallest volume and sacrificing any kind of negotiating power that might help to control costs."
  • Many contractors currently purchase their materials for each job separately from retailers, which means they are paying more than if they purchased directly from suppliers or in bulk quantities.
  • Large contractors often have the luxury of conducting extensive searches for "deals on quality components and materials."
  • This allows them to control costs by purchasing "materials in bulk directly from suppliers."
  • Moreover, large contractors determine the materials they will need for future projects so they can aggregate their orders and "purchase the right quantities at the right time for the best prices."
  • Tim Doherty, Director and Principal Surveyor at Dobanti Chartered Surveyors, indicates that his first step in choosing a supplier is to meet with local vendors and select "one or two... as a general supplier." He then meets with the manager for each supplier and makes "a value judgment as to their level of interest, how helpful they are prepared to be and what kind of stock they tend to carry."
  • Based on the determination of that initial contact, Doherty then gets sample pricing, determines a discount, and agrees on credit terms with suppliers so that he is ready to place orders as they come in.
  • As illustrated in the purchase journey for the general contractor above, Doherty seeks out suppliers that reward him for his loyalty. He states, "Loyalty counts for a lot when unforeseen mistakes happen, and they will, as materials either need to be changed, re-stocked or extra supplies provided quickly."
  • According to Kevin Hofmann, CMO for Home Depot, "contractors are heavy mobile users — they’re hardly ever in front of a tablet or PC, and they’re more interested in product features, specifications, price, and if we have contractor-like quantities available." This indicates that contractors may use their mobile phones for product research more than any other device or channel.

RESEARCH STRATEGY

When searching for the purchasing journey for large contractors buying decking, railing, and framing, we started with consulting companies such as Deloitte, McKinsey, and Bain & Company because these sources often provide insights into how people make purchasing decisions. We found general customer journey research, recommended customer experience tools, and consumer journey analyses for other industries in other geographies, but we did not find anything specific to decking, railing, and framing, or even anything that pertained to construction in general. We narrowed our focus to construction consulting companies like Spire Consulting Group and DMS Construction Consulting Services, but we found that these companies have not published their research on purchasing journeys, if indeed they've actually conducted it. Instead, they only had portfolios that showcased their projects and information on why construction companies should hire them.

We moved on to searching for case studies of decking, railing, and framing companies that have hired marketing or advertising agencies for various business needs. We located a case study published by Cecily Mullen for Shift7 Digital, a digital experience agency, that outlined the customer journey for deck contractors and general contractors who install decks. Although this information was for smaller contractors and not those that work on subdivisions, schools, or hospitals, we believed the information about how contractors go about selecting decking products may be helpful, especially since it was the most specific data we could find. Thus, we included this case study in our findings. We continued searching for other marketing case studies on large contractors in the decking, railing, and framing industry, but even when we searched marketing companies that specialize in construction, we were unable to find any further case studies or examples that outlined the contractor's customer journey. We did, however, find some useful information from various industry articles, which we have provided as general insights into the contractor purchasing journey.

At this point, we began searching industry publications like Construction Executive, LBM Journal, Contractors Insurance, and others to see if we could find any information on large contractors and their purchase journey, either specifically for decking, framing, and railing, or in general. We found pieces of information in all these places, which we added to our general insights section, but we did not find a description of an end-to-end journey for contractors of any kind. We mostly found consumer journeys, tips for hiring contractors, and articles for installing decks without contractors. However, during this research, we discovered that in recent years, architects have been dictating supplies used for large construction projects rather than the contractors selecting the products themselves. As such, we pivoted our research to finding the purchasing journey for architects. We located several industry publications that outlined portions of this journey. There are still some holes along the way that we were unable to fill, but we did find quite a few details about how architects choose materials for their projects. As such, we included a section with detailed insights into the architect customer journey.
Sources
Sources

From Part 01
Quotes
  • "Construct a solid frame. Wood frames must carry 200 to 300 pounds of load per horizontal cable. That’s easily 2,000 to 3,000 pounds of tension on a typical installation. "
  • "homeowners are investing more in outdoor spaces than ever before with 85% of those renovating opting for a major remodel or a complete overhaul, according to the 2017 U.S. Houzz Landscape Trends Study."
Quotes
  • "Just because people are spending more time outdoors doesn’t mean they’re willing to put in extra hours for care and maintenance. In fact, high-maintenance materials, such as wood, are seeing a decrease in demand as people are opting for lower-maintenance offerings that deliver better performance and sustainability."
  • ""
Quotes
  • "In the Freedonia Group’s recent Wood and Competitive Decking report, demand will reach 3.55 billion linear feet by 2020, worth an estimated $7.1 billion, with growth anticipated for both wood and non-wood decking products."
From Part 03