Dear Friends:
I have good news and bad news. The good news is after months, if not years, of steadily increasing prices, the costs of many of the products we sell have begun to fall. The bad news is that prices have been falling due to a slowdown in commercial construction. Not all markets and not all segments of the commercial construction market are declining; some are still very strong, especially school construction. However, the near meltdown of the U.S. banking system is causing developers to rethink starting projects at this time and is also causing banks to be much tighter with their lending standards. All of this has culminated in a slowdown about which the chief economist of Associated Builders and Contractors (ABC), a nationwide trade group of mostly commercial contractors, said recently, “While non-residential construction activity may swell into the months ahead, the recovery from any period of weak demand for construction can be already spotted along the economic horizon.” He added, “The emerging view is that any downturn in non-residential construction activity could be significantly briefer than had been previously projected.” While we aren’t happy about a slowdown, I am relieved to see that many economists are calling for it to be brief.
For more information on prices of specific products, please see below:
As the worldwide price for commodities has fallen over the past few weeks, prices of many construction materials have leveled off or decreased. Metal alloys, scrap steel, polyvinyl chloride, oil, and natural gas prices all fell in September, due to decreased demand, both domestic and foreign and the decline in the price of many commodities.
Nucor announced on September 10th a price decrease of $70.00/ton for rebar effective immediately. This was the second price decrease by Nucor since their last increase on August 1st and reflects weakening demand as well as their decreased cost for scrap steel. As the price for scrap steel has leveled off, most industry experts believe that rebar will stay at or near the same prices for the next few months.
Prices for welded wire mesh have softened somewhat over the past month. It was expected that welded wire mesh manufacturers would increase prices in October, as wire rod manufacturers announced in August they would increase prices in September. As demand for wire rod continued to weaken, wire rod manufacturers rescinded the September price increase. Expect welded wire mesh prices to remain at or near their current prices through October.
As wire rod prices did not increase in September, masonry reinforcing and tie manufacturers, Wire Bond, Hohmann & Barnard, and Dayton Superior will hold prices at their current levels in October. This is the second month in a row that prices for masonry reinforcing and ties have remained unchanged. As with welded wire mesh prices, expect masonry reinforcing and tie prices to remain unchanged until at least November.
Copper thru wall flashing prices fell by nearly 11% in late August and early September, due to the drop in copper prices. This is the first time this year that copper thru wall flashing prices have fallen substantially. With copper prices expected to stay at or near current levels, copper thru wall flashing prices should remain at current levels for the next month or more.
Sonoco announced they would increase prices for their concrete forming tubes by 7% on October 1st. Increased costs for raw materials and transportation were cited as the reason for the price increase.
Prices for nearly all asphalt based construction materials, or materials that contain asphalt, have risen over the past several weeks. Items such as liquid membrane waterproofings, sheet membrane waterproofings, asphalt based primers, mastics, damproofings, and peel and stick thru wall flashings have seen increases of 5 to 12% since July. These price increases were due to the increased price for asphalt, which has been in short supply.
Polyethylene and plastic vapor barrier prices remained unchanged in September, as resin manufacturers did not raise prices. Weak demand caused polyethylene and plastic resin manufacturers to hold resin prices at August levels in September. Hurricane Rita in 2005 caused many resin plants to close for several weeks, which caused the price of resins to rise by 25%. If polyethylene and plastic resin manufacturers are shut down for several weeks due to Hurricane Ike, experts expect resin prices to spike. If this happens, then prices for polyethylene and plastic vapor barriers will increase drastically.
The latest Producer Price Index (PPI) tables are out, and they are available herefor your review.
On a brighter note, the first of our two annual charity golf tournaments benefitting the Make-A- Wish Foundation was held in Columbia, SC, on Monday, September 15. While the temperature was in the low 90s, everyone still had an outstanding time for a great cause. The auction generated over twice as much revenue as last year due to the addition of several new items which were of much interest to the attendees.
The director of the Make-A-Wish Foundation for Columbia was there, along with a “Wish Family,” and a check was presented to the Foundation for $5,000. This paid for one Wish, and once we settle up all of the bills any additional net proceeds will be going to Make-A-Wish as well. We hope to be able to grant 2-3 more wishes due to your support.
To see pictures from this tournament click here.
We have one more tournament coming up, and that’s at Sedgefield Country Club in Greensboro, NC, on Monday, October 20.
Sedgefield is the host course for the PGA Tour’s, Wyndham Championship which was held there a little over a month ago.
Sedgefield is one of Donald Ross’ best designs, and it recently received a top-to-bottom renovation and was brought up to PGA Tour
standards for the Wyndham Championship. This will be another great tournament, and we encourage you to register ASAP if you want
to play in this event.
To register click here.
This month, we are featuring the following three suppliers:
- Sandell Manufacturing is one of the top manufacturers of flashings, weep vents, brick and masonry cleaners, and several other concrete and masonry related products. For more information about their product line, please see below.
- Right Pointe is one of the most diversified manufacturers of concrete chemicals and accessories. Not only do they have a top quality line, but their products are priced right for a tough economy. To see more about some of their products, scroll down.
- Pecora is one of the oldest manufacturers of caulkings and sealants in the U.S. They have fiercely loyal customers because of the quality of their products and their service. To get a price on any Pecora products, just contact your nearest New South branch.
This month’s management article is entitled This Recession is not My Recession.
When I spotted this article, I thought nothing could be more timely. As I said a few months ago in our newsletter,
we have bumper stickers available for free at any of our branches which state, “We Refuse to take part in a Recession.”
If you would like one, either stop by any of our branches or email Linda Townes
(linda.townes@newsouthsupply.com), and we’ll be happy to send you one.
In closing, while we appear to be experiencing a slight slowdown, there are still a lot of bright spots in the construction economy, and we, like you, will be pursuing them aggressively. Please let us know how we can be of service to your company.
Best Regards,
Jim
Jim Sobeck
President
(864) 325-6518
jim.sobeck@newsouthsupply.com
This Recession Is Not My Recession
Practical suggestions on not behaving like a lemming.
by Andrew A.G. Szabo
Few would argue that we are now in an economic recession. The pundits’ endless debate now centers on whether it’s going to be long or short, the landing hard or soft, the impact on the financial markets, the effect on other economies and their effect on America and so on. My first question is: so what? The problem of this macro-perspective is that it speaks little of your business or mine, yet we often wallow in the media’s doom-and-gloom forecast.
Like lemmings, too many business leaders accept these editorials as a foregone diagnosis of the state of their business. It is a self-fulfilling prophecy: They become a contributing statistic to the depressed economy. Like lemmings mimicking another’s behavior, they react identically and fall off the cliff together.
Yet every downturn, crash, recession, or even depression has winners that succeed. Companies not only survive, but thrive, in the negative environment. What are they doing differently? If misery loves company, do the joyful seek a different path? I would suggest two key ideas that can significantly contribute to making this recession not your recession.
Stay out of it
First, resolve not to contribute to the recession. Make a choice not to suffer like everyone else. Instead, be proactive and prosper. Hyatt Hotels in the early ’80s is a classic case study in this behavior. The recession, never good news for luxury hotels, hit its peak during 1981-1982. Several cities already had a glut of hotel rooms but Hyatt resolutely went after new guests, rewarded loyal clients, made cuts only where they were not visible to the guest experience. They opened new properties, hitting the competition hard in several new markets where aging competitors were unable or unwilling to reinvest in their existing properties.
Get on the offensive
Second, take business away from your competition, which will increase your market share despite the total pie shrinking.
Sounds simple enough, but the challenge is in the implementation. There are only three effective ways to get more business.
- Gain share of wallet. Increase business from your existing customers.
- Promote loyalty. Encourage clients to continue to engage in profitable behavior.
- Target customer acquisition. Acquire new business from your competition that looks like your best customers.
Effectiveness in each of these areas is highly dependent on the quality of the relationship. Customer relationships are no different from marriages or friendships. They require an understanding of the other party (which entails investing time and other resources). Understanding your customer requires knowledge – gathering comprehensive information, behavioral knowledge and transactional data. It requires a disciplined investment of time and resources in an intelligent process. The technology that holds this all together is often categorized as Customer Relationship Management (CRM).
Practical solutions
Working with Sony soon after its successful launch of PlayStation, we ascertained that to increase market share and sell more games (their bread-and-butter in terms of margins), Sony would have to learn about their customers. Since it sold both the hardware and software through retailers, it had no direct contact or knowledge of its customers, except for the few warranty cards that purchasers returned.
By developing a cutting-edge relationship program that tapped into the psyche of gamers, we challenged the gamers to tell us who they conquered in what game. As a reward, they were admitted into the PS Underground, a “stealth” Web site and loyalty program that gave them inside information on new developments and tips on existing games.
Within 12 months, Sony built a base of 40,000 customer names into a comprehensive customer knowledge bank of 500,000 enthusiastic gamers with known genre preferences. This information was then leveraged into targeted, personalized, marketing campaigns that both gained a greater share of wallet and engendered loyalty, making them resistant to new game launches such as Nintendo 64. Sony crushed Sega, and greatly mitigated the threat from Nintendo’s launch of N64.
Although the implementation specifics are certain to be different from your industry, the underlying principles are directly relevant. Understand your customer by investing in the relationship: leverage the knowledge relevantly.
So how do you go about this?
- Walk in your customer’s footsteps. What does a day (or days) in the life of your customer look like? By analyzing the interactions between your organization and the customer, you can identify key touch-points where data and information are gathered or exchanged.
- What would the ideal path look like? Dialogues with an organization’s different stakeholders yield mission-critical customer knowledge requirements. Interviews with customers breed greater understanding of the customer's needs.
- Perform a gap analysis between the current and the ideal.
- Throughout the process it is important to identify the systems (both processes and technology) that may aid or hinder the relationship and the ability to assimilate or leverage customer knowledge.
- Finally, isolate key points of inflection, areas that are critically important and have significant economic impact. Improving these areas will yield the best return on investment.
Technology is not the ultimate panacea for cultivating effective customer relationships. Technology implementations, like CRM solutions, must be accompanied by a strategic process that examines the organization’s customer relationship practices and incorporates communication.
Whether you are a veteran player or a new entrant, experience reveals most have yet to master this combination of art and science called CRM. For example, the marketing department of a relatively new bank entered vital information about their customers into a contact management program. Loan information was entered into a custom-built system, and the regular banking information was entered into a third application. Despite professing a client-centric philosophy, the systems were disintegrated. No one performed a comprehensive analysis of the bank's customers.
In summary, make this recession not your recession by choosing to grow your business wisely through the intelligent practice of effective customer cultivation.
