Negotiating Pricing with Suppliers - Contractor Talk - Professional Construction and Remodeling Forum

Greg Di · 10-07-2008, 02:26 PM

Gentlemen,

Have any of you ever managed to negotiate the cost of your deck materials with your regular supplier? I already get pretty decent pricing because of my volume, but with the bad news permeating the airwaves, people are going to start getting very tight on spending. Last time I checked, replacing an old deck was not a life or death decision, so the price has to be very sweet to make it happen.

The costs of my materials have been skyrocketing via the manufacturers and I'm wondering what the heck they are thinking raising their prices now of all times. If anything, they should be offering us (contractors) incentives to install their products and by raising my costs NOW, they are pushing me into looking at other brands for the sake of overall cost.

I work in a very affluent area and people are already pulling out of jobs because they don't want to part with the money. I can only imagine what it's like in other parts of country right now. When I see extremely wealthy people, not wanting to spend $30k (lunch money to them), it worries me.

So, have any of you guys ever been able to cause a ruckus and get EVEN BETTER pricing than you were getting? I am looking to have my distributor cut their prices to my supplier to keep the material flowing.

I feel that I am a very competent salesperson, so if I'm having trouble selling these jobs, the average Joe must be dying.

I don't get the rationale....

redwood · 10-07-2008, 02:46 PM

Greg, I know that you use mostly composites, so that might be the difference, but my material costs for lumber, have come down a little.

My main decking supplier will match or beat any price I show to him. I don't usually have to resort to that, but I do check around.

Mike Finley · 10-07-2008, 02:49 PM

You should have as good a reception asking your suppliers to cut their prices as you give your customers when they ask you to cut yours.

If there is a material you can switch to that gives you the same quality you have now at a cheaper price you have found a better value, this is the same elusive game that your customers want to play when shopping for a deck builder.

Right after you get done asking your suppliers to cut their prices to get your business because it's slow, turn around and smile when your customer asks you to do the same thing.

Greg Di · 10-07-2008, 03:20 PM

Quote:

Originally Posted by Mike Finley

Right after you get done asking your suppliers to cut their prices to get your business because it's slow, turn around and smile when your customer asks you to do the same thing.

Mike,

What I am seeing is this:

The quantity of leads is diminishing due to the seasonality AND the economy. People are getting tight with money. Regardless of my selling and presentation ability (I have a darn good one), the issue is that several brand name manufacturers have RAISED their prices at this point, which is just stupid. Yes, they are good products, but now is not the time for any entity to be raising prices unnecessarily especially to contractors like myself who go out of their way to push/endorse/sell their product over another brand's.

If they want to keep the retail price for once-a-year buyers high, so be it, but it just doesn't make sense to hit "us" with a random price increase that makes their product all that much more difficult to sell in these times. My supplier even told me they are barely moving these products anymore because occasional purchasers who are not brand loyal are opting to go to lesser quality products (partly because they themselves are only going by price and really don't see beyond the price...a deck is a deck mentality).

Some manufacturers locked in a low prices through the end of 2008 to counteract the economy.

Basically, I feel like I am being forced to associate my company with lesser-quality materials because the manufacturers have their heads up their asses.

The squeaky wheel gets the oil is what I'm trying to accomplish I guess.

As far as lowering my prices when asked, I don't as a rule. I will add low-cost-to-me/easy throw-in features to sweeten the deal if necessary which people appreciate. I personally feel that there is no harm in giving someone $1000 in add-ons to lock-up a fat $30k+ job. I know you feel differently, but I've played the "I'm not gonna budge route" for a very long time and it doesn't work for me. Everybody loves to think they got a deal. I know I do when I buy something. For my own mental health it's so much less stressful to concede a couple of add-ons than to sell tooth and nail to get the perfect price and possibly turn-off a great job.

Again, Mike, you know I love ya.....I just do it differently...

DavidC · 10-07-2008, 03:32 PM

Quote:

Originally Posted by Mike Finley

You should have as good a reception asking your suppliers to cut their prices as you give your customers when they ask you to cut yours.

If there is a material you can switch to that gives you the same quality you have now at a cheaper price you have found a better value, this is the same elusive game that your customers want to play when shopping for a deck builder.

Right after you get done asking your suppliers to cut their prices to get your business because it's slow, turn around and smile when your customer asks you to do the same thing.

This is so very true. We should not play the games that we complain about when the customers try it.

The good news is that the bad news is across the board and everybody shares it. A 10% decrease in material might amount to an overall 3.5% decrease on your quote. I can't picture that making a difference to your clients.

Good Luck
Dave

Greg Di · 10-07-2008, 03:49 PM

David,

No game. It's just that I "think" some decisions are made by big companies while they sit around board room tables with not too much thought of the reality/ramifications of what they are doing with respect to what their competition is doing.

It would be like Bud lowering their prices 10% and Miller raising their prices 10%. Now there's a 20% difference.

20% makes a difference. Right?

dayspring · 10-07-2008, 04:03 PM

I'm sure some of the rise in material cost is due to the rise in fuel cost. I know that anything petro based or metal has risen a good bit around here.

Greg Di · 10-07-2008, 04:13 PM

Quote:

Originally Posted by dayspring

I'm sure some of the rise in material cost is due to the rise in fuel cost. I know that anything petro based or metal has risen a good bit around here.

It absolutely is no doubt. When gas prices were skyrocketing, I was literally afraid to see what the cost for 2009 were going to be for synthetics. Time will tell, but I am bracing.

I am trying to stay a little ahead of the curve right now so that I'm in a better position down the road when people who didn't pre-plan are really f-d.

rbsremodeling · 10-07-2008, 04:14 PM

Greg and Mike I understand both sides of this discussion. I really think most suppliers only raise prices in times like this when necessary.

I will say this Greg. I have 3 out of 8 supplies that have held pricing for me because of the volume that I do. On one occasion the product manufactures rep called me and I explained I was probably the biggest purchase of a product that my vendor supplied and they help me to hold the price with no profit lost to the vendor. Nothing pushy but I asked as kindly as I could, That may be worth a shot.

In the vendor game you have to become known to the owners, counter guys and vendor reps. It really makes a big difference when those friendships are created I get so much free stuff and perks it is unbelieveable. There are vendors that I go into and shoot the **** so much people think I work their

Mike Finley · 10-07-2008, 04:15 PM

If a customer has a pressure treated budget they can't get Ipe just because they think they deserve it.

Remodel Bud · 10-07-2008, 04:26 PM

.......

Mike Finley · 10-07-2008, 04:33 PM

Only difference this time is raw materials & transportation are decreasing in price right now due to the unique run up in commodities prior to all of this.

What's also decreasing is demand so we have a very unique set of circumstances going on.

rbsremodeling · 10-07-2008, 04:34 PM

Quote:

Originally Posted by Remodel Bud

good point Rbs.

Its called a recession. Manufacturing, transportation and raw materials are increasing in price. So distributors are buying it for more, hence the price increase.
Now, contractors material margins are increasing, cutting into profit margins. Consumers are spending less. So companies, downsize, contractors lay off and cut overhead, to keep prices near the consumers expectations.

Its called a recession.

Thanks Bud. Also Greg I give baseball/football tickets to my reps and invite the reps to my house for dinner and office parties and show them I appreciate them. You'd be surprise how many of them will adjust the pricing or go the extra mile for you with out even asking when they feel appreciated

Stone Mountain · 10-07-2008, 05:04 PM

All 3 of my lumber suppliers have different pricing structures. I show the cheapest one to the other 2 and they always match it.
Naturally, my 4th supplier, which is the one for my Home Depot jobs, is the most expensive and won't match prices.

SethHoldren · 10-07-2008, 05:48 PM

Get used to the idea of higher material prices soon. One of the effects of the bailout plan is supposed to be inflation. You might as well plan on it.

But I guess inflation is better than economic collapse, eh?

John Hyatt · 10-07-2008, 07:29 PM

Very Intersting All, it is a Bitch right now. I do all of the above my ace is East Teak for the S American lumber we have a very long standing friendship/business thing going on. My price for ipe/garapa installed is a lot lower than any composite bid with in 1000 miles of Cow Town still its plenty tight latlely.

Really any local supplier can not cut a deal no matter how much a Contractor runs thru the yard, I my very own self am in the lowest cost leval my local guy has and they have done a lot for me over the years so I woudent even ask.

I total agree with the Through Some Stuff In thing... I never toss anything my shop is covered up with shorts...Latley while I am at the Wallets I look around what would they really love to have along with my deck>>> a small trellis for the vine to grow on, planter boxes, benches, put a rondal detail in the posts, skirting for free, finish on the whole project, a shop built sun burst above the arbor..you get the idea.

Anything you can do in the Shop where you only have your Labor involved and a few scraps a lot of talent ya know.

Dont tell them you are just giving this away in so many words,of course you are,but just include it in the Bid. Word it any way thats good but put some cool stuff normaly included in the Hot Dammm job in the $50000 Job.

You Got To Give Before You Get, X 20 in this world wide cluster ***** going on now. J

deckman22 · 10-07-2008, 11:37 PM

I think the best thing you can do is shop around your take-off, you'd be amazed at the different quotes you'll get for basically the same thing. Now if your regular folks give you better service you give them the benefit of a change to match, if they don't buy it elsewhere. Case in point, this summer I was doing a pier in Corpus Christi, about 15K in materials. I shopped the 3 local lumber yards there & gave my Austin supplier a chance to match. Quotes varied almost 3K between the Corpus guys, my Austin guys declined to match. I bought it down there saving almost 3k than if I went with my regular supplier.

Another thing, you don't have to buy local, sometimes you can save big bucks buying lumber closer to the source then having it trucked in. Going to the next big city can even make a big difference. I can shop Dallas, Houston, San Antonio along with Austin & get delivery on the lumberyards own trucks, any farther I contact a trucking firm. If I can save 1000.00 on load coming from Dallas, but have to pay an extra 250.00 for delivery I'm going for it. Times are going to be tough for everyone, wallets ( as John says ) will be watching their dollars so you have to watch your cost moreso now then ever to stay competitve.

I would like to think with the price of oil going down that the cost of composites would go down, less manufacturing cost & less transpertation cost.

PA woodbutcher · 10-08-2008, 05:18 AM

Quote:

Originally Posted by deckman22

I would like to think with the price of oil going down that the cost of composites would go down, less manufacturing cost & less transpertation cost.

Yeah, I would like to think the same thing. Walmart seems to be the only one that rolls back prices. Oils was down to $87 a barrel, but by the time the gas stations catch up to the drop, oil will be back up.

I don't like to pressure my normal supplier, as things haven't been exactly rosy over there either.

DavidC · 10-08-2008, 08:03 AM

When we price shop our suppliers it is the same as our customers trying to play one contractor against another in a reverse auction. Sure, a 20% savings is attractive if it really exists but can you expect the same level of service you now receive by pinning your supplier to the wall? What will they have to remove from the table to achieve your pricing? How do you react when so squeezed by your customers?

Times may be tough and they may get tougher. Squeezing our partners is not the way to go. We pay more now than last year for many products and supplies that we use everyday, nails & screws are up 30% or more from 1 Jan. But our competition is also paying the same increase. It's still relative.

Continue to keep an eye on your costs and adjust accordingly. Continue to provide the outstanding service that keeps you in the customers mind when they do make their move. Continue the things that brought you the success you have enjoyed so far. As stated, there will be fewer of us when the smoke clears. What we do during these times will decide who is and isn't there afterward.

Good Luck
Dave

deckman22 · 10-08-2008, 10:27 AM

Quote:

Originally Posted by DavidC

When we price shop our suppliers it is the same as our customers trying to play one contractor against another in a reverse auction. Sure, a 20% savings is attractive if it really exists but can you expect the same level of service you now receive by pinning your supplier to the wall? What will they have to remove from the table to achieve your pricing? How do you react when so squeezed by your customers?

Times may be tough and they may get tougher. Squeezing our partners is not the way to go. We pay more now than last year for many products and supplies that we use everyday, nails & screws are up 30% or more from 1 Jan. But our competition is also paying the same increase. It's still relative.

When times get tough like they are now customers are going to shop around. If they feel they can get the same thing from either contractor A or contractor B that is 10% less who do think they're going to go with? Price is a deciding factor whether people buy or not. A lot of times past customers that trust me will not shop for another contractor, but new customers will.

Back in the eighties I had my own decking supply company so I know the mark up retailers put on lumber they get from wholesalers. I worked for my regular supplier for a year so I know their mark up. I know they try to squeeze every dollar they can out of every board that comes in their yard, but it doesn't have to be on the back of those that got them to where they are today. There's other things they can do to make money besides selling to me for the highest possible price. Don't you think they shop around when buying lumber? Heck yes they do.

Don't get fooled into thinking your competition is paying the same increases you are. The smart ones will be buying for less & be able to pass that savings on to their customers therefore getting the jobs. The lumber companies around here have been banking some fat cash for a long time, I am not going to feel sorry for them. The composite manufacturers & others in the decking industry have been riding a nice wave too. We, the deck builders in this country, have helped them make a lot of money. No reason we can't get some help from them too.

A piece of timbertech or treated lumber is the same thing no matter who you buy it from, it all comes from the same source. Do your homework guys, only the strong will survive this downturn. Once you've done this a while you will have perfected your building methods & can only do them so fast. You will not be able to cut cost on the labor end, the only place to cut cost is in material cost.