Building Competitive Advantage in Next-Gen Contractor Workflow

For the first three decades of my career, I viewed contractors as just customer numbers in our distributor clients’ data feeds that they provide to SPARXiQ to optimize their pricing, purchasing, sales, and profit performance. In addition, we spent a lot of time helping our distributor clients’ sales teams to sell on value (instead of price) and to negotiate more effectively to get paid properly for the value they bring to their customers. I really didn’t know much about the contractor world.  

That has changed dramatically in the last few years. In 2022, my company acquired Material Management Software, a leading purchasing platform for purchasing managers and field technicians of electrical, mechanical, and plumbing contractors. Material Management streamlines, automates, and digitizes the sourcing process for larger commercial contractors. I started talking to our contractor customers, attending all the contractor associations and generally immersing myself in the world of construction purchasing and technology. Contrary to the urban legend propagated by distributor sellers, construction buyers described how much more important in-stock availability, proximity, and service are in their buying process. They note that, except for large projects and buyouts, price is a less important criterion, and that it’s generally difficult to get true apples-to-apples pricing comparisons.  

A new generation of these buyers is demanding an end to the tedious manual work involved in requesting pricing and availability, issuing POs, reconciling invoices, and integrating purchasing data into their accounting systems. Although less than 10 percent of contractor buyers are using purchasing platforms such as Material Management (or Kojo or Remarcable), over 70 percent are now exploring solutions to improve material management workflows.  

For distributors to build competitive advantage with Gen Z construction buyers, they need to not only support marketplace API integrations with their pricing and inventory systems but also improve their product information management infrastructure and discoverability.  

In 2023, SPARXiQ acquired Trade Hounds, the leading social marketplace for electricians, HVAC technicians, plumbers, and other construction and industrial workers. Trade Hounds users span contractor businesses of all sizes and all the key verticals of residential, commercial, industrial, utilities, etc. A majority of them are Gen Z digital natives. At the time of writing, about 400,000 users purchase over $20 billion per year in construction and industrial materials.  

Through regular surveys, our Trade Hounds members gave us great insights into their work lives — in particular the workflows that impact their financial performance and quality of life. They expressed great frustration at how much time they waste simply searching for and procuring the materials they need to do their work. They highlighted how poor their distributors’ websites were and how difficult it was to master multiple distributor accounts, passwords, navigation pathways, and back-office activities. Gen Z Trade Hounds users, like their buyer peers at Material Management, want everything digital and self-service. Increasingly they expect an infusion of AI to radically streamline work.  

Recently, SPARXiQ acquired WRANGLD, an upstart contractor workflow app, that manages the estimating, proposal, job management, and billing tasks for electrical, HVAC, and plumbing contractors. Interviewing the WRANGLD customer base, I learned just how important the distributor is in critical upstream and downstream stages of contractor workflow.  

Generally, construction contractors have two key types of work: projects and service calls. Projects are planned, estimated, proposed, awarded, managed, invoiced, and paid. Service calls may be planned or unplanned, but generally involve diagnosis first, then assessment, estimation, invoicing, and payment.  

For distributors, the critical step for WRANGLD customers is the estimating and invoicing step. Though it varies widely based on project size and time sensitivity, contractors’ customers generally reward those who are the fastest to quote and service — especially the new Gen Z buyers.  

There’s a saying that it’s better to be high and fast than slow and low.  I generate a speedy, accurate estimate, the contractor needs to establish the bill of materials (BOM) to be used in the project and also obtain their pricing and availability from distributors to be able to propose a project or service job, while factoring in labor, overhead, and profit.    

This is where the distributor can really streamline the process for the contractor. In the bad old days, contractors would call, email, visit the branch, wade through websites, and even text the distributors’ customer service representatives (CSRs). Sitting on hold waiting for a CSR to answer, listening to the click and clack of keyboards, sending multiple emails, wading through inboxes to sift through multiple message chains, opening disparate PDFs and spreadsheets — you get the picture.   

To the new generation of Gen Z digital natives, these archaic processes are exasperating and inane.  They want self-service digital tools to support the entire process. For those distributors connected via API to tools like WRANGLD (or Service Titan, Jobber, etc.), their contractors can easily generate the estimate, factor in labor, overhead, and profit to build the proposal, and schedule, manage, and execute the work.  

With over half of the construction workforce retiring and being replaced by Gen Z workers over the next five to ten years, a proportionate amount of market share is up for grabs for distributors who anticipate and lean into this digital migration. Material sourcing and logistics are hugely inefficient today and must improve to meet the needs of the future. First-mover advantages will accrue to the distributors who “get” the new ways and speed of doing business. Market-leading distributors are now embracing the trend by engaging (and even onboarding) their contractors on platforms with which they have integrated.  

Emerging social marketplaces like Trade Hounds create a space for buyers and outside and inside sellers to connect and engage in expert boards, chats, direct messaging, and resource libraries, while facilitating the digitized end-to-end commercial processes that drive revenue and profitability across the total value chain. With social and digital commerce converging, the market leaders of the future will bring increased knowledge, trust, speed, and profitability to their customers. For these distributors and their customers, the future is bright indeed. 

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