Page 24 - HW June-July 2021

trade focus
Slow burn to digital, rapid
growth in direct to site
Fletcher Building’s Virtual Investor Day towards the end of May flew somewhat under the radar in the general media but we were interested in some of the comments relating to trade customers made by Bruce McEwen, during his presentation of the Distribution division.
No surprise that Bruce talked of having seen the “greatest [price] volatility for quite some time”, that last year saw “a change in the price environment” and that product and materials price increases of 2-3% rose to high single digits (a level which some of course have gone beyond).
In terms of Distribution’s significant investment over the last year plus in digital systems, while describing early uptake as “good”, he also admitted that “the trade industry in New Zealand has been slower to embrace digital tools.”
Still, lessons and experience from offshore indicate that “this will change, and it will accelerate”.
In terms of numbers currently using these digital channels, Bruce McEwen said 27% of his trade customers (i.e., almost 19,000 account holders) had registered for PlaceMakers’ digital platform and that digital sales had grown to more than 2% of total sales, from zero nine months ago.
In terms of this slow burn, to help drive awareness and speed up adoption of digital over the next 12-18 months, education is seen as a priority, so Distribution will be undertaking “regional test and learn experiences to help customers to migrate and understand what’s possible with these new tools.”
In terms of the physical branch network, with the adoption of a hub-based organisation, we were also interested to note an increase in product and materials shipped direct to site, to “roughly a thousand customer deliveries” a day.
And, in this respect, there is more to come. Indeed, Bruce McEwen forecast that as much as half of all sales would be delivered direct to customer sites within the next 18-24 months.
his pessimistic forecasts last year of 4-12 week zero cashflows simply did not eventuate.
Inevitably, April 2020 was a quiet month for everyone but, since May last year, it’s been “record numbers” for Signature.
Clearly, surging demand for new homes has been generalised, but some of Signature’s gains have also been thanks to the company regionalising its starting propositions.
How is the supply chain treating Paul Bull and his team during this boom time?
“We’re starting to really feel the pinch on a product-by- product basis,” he says candidly, before adding that, having “over- engaged” with suppliers, and forecasting volumes, “they tend to look after us.”
Frame & truss is not a widespread or significant issue for Signature Homes, but Paul Bull understands that a surprising number of his frame & truss supplier’s clients – mainly small builders – are giving false order dates and then postponing delivery, to the extent that storage at some frame & truss plants has become an issue.
This sort of nonsense “just soaks up demand and capacity,”
he says, to the point where Signature Homes too may have to “recalibrate” client expectations if build timelines extend for any reason.
Paul Bull’s outlook? “I’d expect some easing of demand later this year,” he says.
More boom and bust? “I don’t think it’ll be a bust. I think what we’ll probably see is a drop from 41,000 to less than 35-36,000 consents.”
Having said this the reality is that “Being at the peak of the market is a relatively risky position because it can only go down.”
Plus, he adds: “Things start to speed up when you’re pointing downhill...”
LIKE A RUSH ON TOILET PAPER
Alongside “a flight to better projects” seeing at this point little slowing of the new home market (but sharing a carefully posited outlook) is Aidan Jury, COO of Jennian Homes.
“We see people being a bit more cautious [but] we certainly don’t see the value of properties falling like some of the commentators are saying. A simple thing called demand and supply will prevail in New Zealand and we’ve yet to reach that equilibrium point.”
But in terms of products and materials, Aidan perceives that many small builders are being forced into “picking up what they can, where they can”, and he isn’t alone in having noticed many merchants’ trucks delivering into areas outside their normal catchments.
Although Signature’s COO sees builders “loading too much stock up unnecessarily”, likening it to the Covid-induced rush on toilet paper, Aidan Jury and team are providing orders and forecasts to its major product partners at least four months in advance.
“However, I know of builders buying three or four hundred toilets,” he says. “It’s unnecessary. Why would you commit your capital to pay for something so early when it’s not necessary?”
Aidan goes on to talk of what he sees as a growing gap between “rich and poor”, between well run building companies and those that are less well organised.
“The people that have systems are the people that are going to do very well in the future,” he says.
Soon, the “good old fashioned traditional builder” with a shopping list on a piece of four by two or on a piece of GIB is probably going to be “sniff out of luck”.
“The people that fly by the seat of their pants and then just expect to be helped up by the poor merchant are not going to do particularly well,” he says plainly.
“Stop treating the merchants like the ambulance at the bottom of the cliff!” exhorts Aidan Jury.
SQUEEZING THE SMALLER BUILDER?
Talking of ambulances, happy to be working in such a buoyant marketplace, Derek Heard, GM Trade at Mitre 10 NZ, is however also realistic about the fact that current material constraints inevitably mean business often trumps loyalty
22 NZHJ | JUNE/JULY 2021
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