Building materials grow despite disruptive year

The productivity of many Victorian builders was sorely tested during the 15-week lockdown in metropolitan Melbourne, according to the Independent Hardware Group’s (IHG) General Manager of Merchandise, Geoff Harris.

Some segments of building supplies were barely impacted, however those trades involved with in-home renovations were severely hampered, which in turn challenged sales of heavy trade building supplies to that particular segment, according to Mr Harris. 

“Interestingly though, if you look at the retail component of building supplies, including silicones and concrete products, these sales benefitted from people at home completing DIY jobs, when they would usually be spending money on holidays and restaurants,” Mr Harris said.

When discussing how sales of building supplies fared within the independent market during lockdown, Mr Harris said some of the metropolitan Melbourne members did say they felt like they were doing twice the amount of work compared to normal. 

“Enforcing a safe COVID plan meant asking our trade customers to use a QR scanning regimen when they entered a store. Builders and trades were escorted through the store when seeking product to ensure that everyone was in and out as quickly as possible and with minimal exposure to other visitors. At the other end of the store, retail teams fulfilled ‘Click and Collect’ and ‘Dial and Collect’ orders, ensuring contactless curbside delivery to customers’ cars. Servicing customers over the phone was challenging, particularly when the shopper was not quite sure what item they needed to complete their project,” he said.

“Many stores anticipated that they would send staff home however most brought all their casuals back and some even advertised for more team members, just to keep the workload manageable.  Independents encouraged phone orders and were rewarded for offering this service with constant sales,” Mr Harris said.

Construction industry

Mr Harris pointed out that while construction had been difficult to service during the Victorian lockdown, the building sector continues to grow in general across Australia. 

“The Federal Government released its $25,000 HomeBuilder grant in recent months which has helped stimulate the market, and this has been boosted further in some states such as Tasmania to $40,000 with very few conditions on what type of build is undertaken. This is really driving sales across the island and delivering results for our trade stores,” Mr Harris said.

However, there are issues beyond the pandemic that are now affecting the structural and general timber supplies market, according to Mr Harris, particularly due to the current worldwide tightening of timber availability.

“This is due partly to COVID, because some of the engineered products are developed in Europe where many factories had to close during the pandemic, particularly in the LVL space. On the other side of it, the US price paid for lumber products has increased considerably. This means that those global producers outside of Europe and America, that traditionally put product into Australia, are now diverting to America because of the value proposition. Therefore, with global demand and prices increasing, Australia is being impacted through availability or price and likely both in the coming months. Most of the key players have flagged price increases for next year,” he said.

“There are also a number of other compounding factors impacting price and availably which include Australian terminal industrial action and cargo space availability, particularly from Asia. Pricing volatility can make it hard for a builder who quotes a job and then prices inflate half way through the job, but we are doing our best for our stores to keep them in the game,” Mr Harris said.

New market offers

More recently IHG teamed up with Cement Australia to complete a concrete and rapid set deal which has seen over three million kilograms of concrete moved across 183 stores, as IHG pushes to sell a better product at competitive rates, as explained by IHG Category Manager for Structural Timber and Building Supplies, Richard Walker.

“The new deal has been implemented across the eastern seaboard and Tasmania, which is the type of thing we are doing to keep our stores as the preferred destination for the trade. The concrete and rapid set deal has now also seen stores in far north Queensland benefit greatly from a better price per bag, plus a significant logistics advantage. Our strategic supply partners, like Cement Australia, are committed to joint activities with us so that our independent members can support the trade market in their local communities and continue to grow,” he said.

IHG also recently rolled out a complete new range of silicone and sealant products in partnership with Selleys. The products, under the banner of Pro-trade, have already received a very high level of support and success through the IHG trade network, Mr Walker said.

“It is a fantastic range of products that Selleys has not traditionally sold. They have added a new business into their portfolio which has given them access to new sales opportunities amongst our trade customers. These are 100 per cent silicone products for heavy trade, form work and glazing uses,” Mr Walker said.

Looking ahead

Forecasting building materials sales for the months ahead continues to be very challenging, particularly with industry reports often being at odds with each other, according to Mr Harris. Some states will show continued growth, he thinks, but the impacts of JobKeeper, reduced immigration, tree-change trends and other COVID related issues mean that it is anyone’s guess really, particularly what it means for the Sydney and Melbourne residential markets.  

“Non-residential construction is an area that looks like it will take the biggest hit. You just have to look at all those empty high-rise buildings in the city and wonder what this will mean for the future,” Mr Harris said.