Are installed sales for you

IITTH kitchens and baths top remodeling projects, UU should a retailer include them when he considers establishing an installed seryices program?

"Yes," answers William C. Olsen, WCO & Associates, a Troy, Mi., sales and marketing oompany, "if he resEicts involvement to installing products he sells and leaves the contracting business to contractors. Avoiding complicated jobs requiring structural changes reduces liability and the competitive threat an installed sales program represents to professional custometrs. "

The decision o add insalled sales requires careful consideration of the advancages and disadvantages. Some retailers consider installed sales a defensive move to match services offered by competitors. Others have watched distribution channels for products they sell change and see installed sales as a way to maintain or regain market share. Some view installed sales as a strategic move to bolster sales by addressing Oe demands of homeowners.

Although the repair and remodeling market is the faslest growing segment of the industry and an installed sales program the most direct participation, there are pros and cons to be considered, cautions Olsen, who specializes in developing and implementing installed sales programs.

ADYANTAGES:

O Increased sales for products you install without significantly inoeasing inventories.

O Tumkey solutions for homeowners with remodeling and replacement projects. This should increase the nunber of homeowners you sell and discourage existing customers from shopping elsewhere.

O Control. You can accomplish similar results by increasing your service level to professional remodeling contractors and offering a referral program to homeowners, but, the results are less reliable.

O lnproved gross profit margins. Sales will increase for higher quality, higher margin products and selling an insalled package should reduce the pressure to cut prices.

O Identity for your company as the source of home improvement prcducts and projects in your community.

O Differentiates your company from competitors and strengthens its position with manufacturers by adding value and increasing sales for products they sell you.

O Provides a convenient vehicle for selling service confacn and offering financing programs.

DISADVANTAGES: o Difficulty of finding a sufficient number of subcon- tractors willing to comply with the perfonnance standards you establish.

O Liability. Your company will sign the contract and assume responsibility for labor and product performance.

O Conhactor customers may perceive the program as a cwrpetitive threat.

O Since installed sales are more similar to the remodeling business than the retail business, a company becomes subject to the fatrlity rate experienced by remodeling conEactors.

O Your image may change from a low cost source of materials to a higher priced source for installed services. In order to succeed, you must sell at higher prices than most contractors you will be competing with. Selling at prices that don't yield an acceptable level of profit is the primary reason for the high rate of failure in the remodeling business. Your higber priced installed sales progran may affect the perception customers have of your prices for materials that don't require installation.

The decision to offer installed sales is a serious one. If you decide to do it, tread carefully, Olsen says.

SUGGESTIONS:

O Resfict your progmm to installing products you sell.

O Select subcontractors carefully. Their perforrrance will leave a lasting impression with customers.

O Minimize competitive threat by resficting progmms to products not generally sold to professional customers, subcontracting installations rather than hiring your own crews, communicating openly and honestly with your professional customers. Tell them what you are doing, why you are doing it and how they can participate or benefit before you do it.

O Start simple with single product/single trade installations (hot water heaters, garage doors and garage door openers) and fine tune your system before moving to more complicated projects.

O Position your program to compete primarily on quality and service rather than price. Many small contractors will sell for less, blt9L91%o of them will fail within their first five years of business.

O Make sure installers arc treated fairly and can make a profit on the installations they perfonn. If subcontractors can't make money, they will cut comers on the job or go broke. Neither alternative is good for you or your customers.

O Take time to learn the business. There are few similarities between the retail building products business and remodeling (installed sales) business. Recognize and address the differences to be successful.

Installed sales programs will be important to the funre of many building product retailers, but the decision to initiate a program should be made carefully, Olsen advises.

Story at a Glance

How to decide if your storo should do installed sales including kitchen and bath remodeling ... advantages and disadvantages... suggestions.