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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (59822)	8/13/2006 4:18:47 PM
From: Don Earl	Read Replies (2) \| Respond to of 306849

RE: "National builder volume discount, pricing power and economy of scale gives them an incredible advantage these days" IMO, too much emphasis is being placed on wholesale pricing at the point of sale from the wholesaler. Yeah, they get a deal buying in volume, then the materials have to be transported to a warehouse, which has to be paid for and staffed, then the materials have to be invoiced out, sorted, and transported to the job site. At the end of the day, the main advantage is having the materials on hand to build a hundred houses vs. picking up materials locally in smaller quantities for a few projects. RE: "think WalMart versus small mom and pop" Indeed. The concept is quicker turns on lower margins. And speaking of Lowe's and Home Depot, do you suppose any builder, no matter how big, is moving enough inventory to get deeper discounts than the box stores? You could probably get a fairly good picture of the whole volume discount vs. retail theory simply by backing out a box store's net. Why do these discussions keep trying to support the theory that the wholesale price paid is what it costs to put 180 2X6s, 48 sheets of 3/4" plywood, 28 trusses, 136 sheets of 7/16 OSB, 149 2X4s, 100 pounds of nails, 2 toilets, etc. on a job site? Do you suppose the stuff just sort of shows up there after the builders cut checks to a few dozen wholesalers for supplies to build 20,000 houses? There's an unholy amount of organization and overhead required to get the right stuff to the right place at the right time. Otherwise your crew is sitting around like a bunch of dummies with nothing to do. It's not free.