Slow Housing Market Creates Opportunities for Dealers

The downturn in the U.S. housing market has created apprehension among builders and building suppliers, including central vacuum dealers. New housing starts are off substantially from previous years, as are sales of existing homes. Builders are cutting back on personnel and supplies. And expectations for a rebound have been pushed back well into 2008 or beyond.

But all is not doom and gloom for central vacuum dealers. In fact, the dismal housing market provides dealers with a number of opportunities to both improve and increase their businesses.

The Bad News
Total housing starts for the first half of 2007 were down 25% from the previous year. New home sales fell more than 20%. Sales of existing homes declined by nearly 9%. In addition, the averages sale price of both new and existing homes is on the decline. The inventory of houses for sale has risen above 500,000 and looks to continue upward with increased foreclosures and tightened lending practices in the wake of the sub-prime lending crisis.

For the first half of 2007 builder revenue was down 28% and home deliveries off 27%. Builders are laying off workers, with staffing levels down 20-25% from the beginning of 2006. According to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence declined for the seventh consecutive month in September. The HMI dropped two points to 20, tying its record low, reached in January 1991. (see chart)

The Good News
The housing downturn provides central vacuum dealers with ample opportunity to improve and increase their business. Successful dealers have responded to the dip in the housing market by adding new products, stepping up sales efforts and hiring new personnel.

Adding New Products —
One of the surest ways to increase sales is to add new products to sell to existing customers. Central vacuum dealers know their customers are already interested in clean indoor air, so adding air purifiers to their product line would be a natural extension. Other products that could be added to enhance the indoor environment include zone heaters, portable air conditioners, or even water purification systems.

Because many central vacuum customers are concerned about allergies, dealers can also create an “allergy relief center” in their stores, stocking a compact display with anti-allergen sprays, dust mite spray, allergen resistant bedding, etc.

And there are existing central vacuum products available to add to a dealer’s product mix. Retractable hose management systems, modular hoses, automatic dust pans, lint attachments and upgraded powerteams are just some of the items dealers can offer their existing customers.

Many of these items allow for higher profits and do not require installation. A diversified product line means more items to sell to existing customers.

Stepping Up Sales Efforts —
With the slower housing market and decreasing builder business, both new and existing products need to be more heavily promoted to potential customers. There are a number of things that can be done.

Advertising that highlights not only the convenience and environmental benefits of central vacuums, but also the sales appeal of a home with a central vacuum system should be more effective in a slow housing market. The more homeowners and builders hear that message, the more likely they are to become customers.

A monthly newsletter that features new products and upgrades, as well as central vacuum maintenance tips and other interesting information can be sent to existing customers. Periodic mailings can accomplish the same goal.

Network with potential customers by joining local business groups, especially the chamber of commerce and home builders association. Participate in home shows, fairs, and other events that can promote your products to potential customers.

Hire new employees —
Home builders are laying off experienced construction personnel. They can fill the need for installers and sales people. Who better to sell to home builders than one of their own. Designating one or more employees to concentrate on the builder trade can improve relations with local companies and allow more companies to be contacted. Builders who are sitting on an excess inventory of homes need to add more amenities to help them sell. According to the National Association of Realtors central vacuum systems help a house sell faster and for a higher price.

Go after more retrofit business. Just as builders need more selling points for their new homes, so do homeowners wanting to sell their existing houses in a down market.

Pursue more commercial business. Adding central vacuum systems to small office buildings, restaurants, strip malls and other retail buildings helps differentiate these locations and can be a good selling point for potential tenants. Having a designated sales staff working with builders should help bring in more commercial business as well.

The housing market will recover eventually. By taking action during the down times to improve and expand their business, central vacuum dealers can not only weather the storm, but come out the other side with a more diversified product mix, higher market share, and better profits.

Reprinted from Central Vac Professional, October 2007