Stop Racing to the Bottom

The housebuilding supply sector is small, everyone knows everyone, and on the whole, we co-exist and even help each other out from time to time.

But driving value out of our own sector? Really?

We all know times are tough. That whatever they say, the government are still getting nowhere near their housebuilding targets, and that no-one is focusing on the demand side of the market that would actually make builders build again (assuming they could get past all the other regulatory and planning guff that’s clogging up the process).

But if you’re going out with pricing that doesn’t cover your margins, you’re not helping anyone, just playing a short term game that will lead to long term pain for everyone.

We all know this particular game. When work is scarce, it’s tempting to start out low to win the work then push in additional costs further down the line when it’s too late for the housebuilder to change their mind.

But the damage this approach does to our sector and to all our businesses can be very hard to undo.

• Housebuilders very quickly lose trust in individuals and companies that play this game – when they’re putting their plans together, they need certainty around budgets as much as anyone.
• Once price expectations are lowered, it’s extremely hard for anyone to push them back up to a rate at which they make a viable margin – look at how many went out of business when timber prices were going through the roof (if you’ll excuse the expression) a few short years ago.
• For those selling at a loss, it’s going to be very hard to invest to rebuild capacity when the market does pick up. We fear some will not make it, sadly.

We’ve all worked long and hard to build trust with our customers. Trust in pricing transparency as well as quality and service. Racing to the bottom destroys this.

There are other ways to win work – selling at a loss is simply not sustainable for anyone. Time to stop driving all the value, all the margin and all the trust out of our sector.

At Scotts, we stand by our principles. We deliver excellent design, a high quality product backed by service that housebuilders take the trouble to thank us for. We are confident that there remains a market for this, and the steady flow of work coming our way tells us we are right.

So we walk away from the expectation that we will drop our prices to match a competitor who is selling at a loss, destroying the value in their own business and damaging a critical supply chain.

Head of Design, Lawrence Raven, explained the Scotts approach: “I don’t think many buyers like this approach, but often they have little choice. If they can report a saving on budget, the principle is the same — deal with the problems later. Of course, that’s a false economy,” he began. “The cheapest price isn’t the best value. We don’t cut corners, we’re like the John Lewis of timber engineering: never knowingly undersold.” He concluded “With bespoke products, you can approach them one of two ways: be the cheapest at all costs, or offer the best value. For us, it’s about value engineering — making sure the product is the best it can be for the build team and the end user.”

Lawrence Raven
Head of Design