Contract Dealer Survey 2009 - December 2009

By Darius Helm

When this survey was last conducted, in 2007, the commercial market was strong, having fully rebounded from the recession earlier in the decade. This time around, the market is again in recession and the competitive climate, according to contract dealers, is often making partners into adversaries.

The contract dealer community has made real strides in the last four or five years toward building stronger relationships with the other players in the business—general contractors, facility managers, flooring manufacturers and their reps, and architects and designers. The effort, which developed during the last recession from a focus on re-examining and retooling business models, has helped raise the profile of the commercial contracting business, and the emphasis on communication has in many cases led to more streamlined and efficient processes.

However, the last 12 months have seen many commercial sectors grind to a virtual halt, and that has put a lot of pressure on all the players in commercial development, including dealers, GCs, reps, and architects and designers. The sense from this year’s survey respondents is that market pressures have led to an increase in practices many dealers find abhorrent, like manufacturers selling direct, along with a general decline in the spirit of cooperation that has at times been seen in building projects.

With yet another year to come of anticipated poor commercial performance, contract dealers are hoping that mutual respect and a sense of fair play will help guide the bidding process, cash flow, and onsite work, so that when the market finally recovers and regains its health, relationships between the different players will also recover.

WHO THEY ARE
This year, over two-thirds of those surveyed say that at least 95% of their business is contract—about the same as in the 2007 and 2005 surveys—and only 16%, exactly the same as in the last survey, say that contract accounts for less than half of their business. Taken as a whole, 75% of the business conducted by all the surveyed contract dealers is in the commercial contract market, while mainstreet business accounts for another 15%, and residential business makes up nearly 8%.

This year, nearly 60% of those surveyed say that their annual sales are below $10 million, compared to less than 50% in 2007. Back then, 12% reported sales of over $40 million, compared to 6% this year. Overall, this year’s contract dealers are making do with shrinking revenues and profits that are shrinking even faster.

About 70% of respondents reported that they are members of a group, in contrast to 56% in 2007 and more on par with 2005 and 2003 (lean years), when involvement was closer to 75%.

More or less unchanged is the number of salespeople on staff, averaging around eight compared to seven two years ago. About 90% of respondents reported that they have ten or fewer salespeople, essentially the same as in the last couple of surveys.

What’s interesting is salespeople’s involvement with designers. Back in 2003, when the commercial recession was still in full swing, 30% of those surveyed reported that over 75% of their salespeople worked with designers. That number dropped to 26% in 2005 and 20% in 2007. But this year, in another commercial recession, the number jumped to 38%, suggesting that when times are tough salespeople work more closely with the A&D community. We noticed at the fall Starnet meeting that a growing number of its larger members have added a business development person to focus on building relationships with architects and designers—giving them added visibility for future projects, and more knowledge on how to bid jobs.

For the complete Contract Dealer Survey 2009, see the December 2009 issue of Floor Focus Magazine.