Fewer Projects, Smarter Clients?

   Certainly everyone in the building trades will want to keep an eye on the performance of the U.S. housing market, which weakened considerably toward the end of last year.
   “The demand side is definitely governed by the housing market, and right now, it’s a little soft,” says Dan Rea of Cold Spring Granite Co. “As I talk with people they all feel pretty good that it will be back, and this is more of an adjustment rather than a decline in the market.”
   “The jury is still out on the housing market,” agrees Kurt Swenson of Rock of Ages. “Most people say it’s stabilizing, but we noticed the slowdown in spending by households this year. It wasn’t dramatic, but after the exuberance we saw in 2004 and even in 2005, it wasn’t there in 2006.”
   Jeffrey Matthews of Trade International isn’t confident it has stabilized. He’s forecasting as much as a 10-percent to 15-percent decline in stone demand, and a similar level of closing in industry businesses, especially in the fabrication end.
   While that may sound pessimistic, it’s hard to get a good handle on what sort of fallout is possible. Rea observes that the very newness of natural stone in the nation’s homes means this is the first time people brought into the industry by that part of the market have seen this happen.
   “We’ll find out what suppliers out there are able to take a shortfall in revenue and demand and stay in business, and also who will be able to ramp up when the market goes back up again,” he says.
   Swenson agrees. “The question is how serious will this be and what will happen to the guys in the countertop business if demand drops by 30 percent,” he says. “That probably won’t happen, but the question remains whether there will be a shakeout at the installation level and at the slab-warehouse level.”
   “Fabricators are most vulnerable at this time to loss in business, especially from the housing market,” says Matthews. “Some are pushing for larger projects like condominium sales which are very high end. Many of these condos use granite and other natural stones.”
   The industry has another saving grace, as well. People who aren’t buying new homes often consider doing renovations. Still, Swenson advises caution.
   “We all have to watch what happens over the next six months or so and be ready for a downturn on the residential side,” he says.
   Joe Dwyer of Dwyer Marble and Stone suggests on the fabrication and installation side that people will have to become more-aggressive in sales and more cost-conscious. On the distribution side, he says he’s already seeing some consolidation.
   “With the demand for stone continuing to rise, companies like Daltile have entered into the slab distribution segment of the market and have turned more of their attention to the natural-stone sector,” says Dwyer. “We’re seeing some larger, national-type distributors emerge.”
   Along with taking a more aggressive approach to sales, Scott Primmer of Dente Trading Co. suggests that the industry also needs to realize it’s dealing with a more-educated customer than in years past.
   “Even a couple years ago, a lot of consumers weren’t aware of the stones that were available, the types of quality, or how their countertop or floor should be installed,” says Primmer. “Now, they’re shopping over the Internet and getting all that information ahead of time.”
   Especially where they’re paying quality prices, fabricators and installers have to be prepared to defend the placement of seams, the smoothness of their edges and the overall quality of the stone they’re selling.
   “They’re seeing the way things should look,” he says. “They’re going to be asking for quality and craftsmanship, rather than a piece of cheap granite.”

This article first appeared in the February 2007 print edition of Stone Business. ©2007 Western Business Media Inc.