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Building and construction to the USA
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(Last updated: 22 May 2008)
Trends and opportunities
The market
The US building and construction industry is largely reliant on the vagaries of the overall US economy. As the economy retracted over the past two years the building industry resisted the slower-growth pressures, however, it has recently showed signs of softening.
Although it is difficult to predict how housing demand will evolve by structure type, the age and regional distribution of the population would seem to favour gains in the multi-family and manufactured housing shares. Over the next decade, the 80 million members of the echo baby boom born since 1977 will move into their 20’s — the stage of life when apartment living is most popular. Indeed, about 63 per cent of household heads between the ages of 15 to 24 reside in apartments. The share drops to 37 per cent among those aged 25 to 34, and then just 20 per cent for those who have reached their 40's.
According to McGraw-Hill Construction, during the first three months of 2004, total construction was up seven per cent (unadjusted) compared to the previous year. Residential building was up 18 per cent, non-residential building down three per cent and non-building construction down seven per cent.
In March 2004, new home sales increased by 8.9 per cent (National Retail Hardware Assocation). The home improvement sector has also maintained growth in the first quarter of 2004.
The top 10 home improvement chains according to Do-It-Yourself-Retailing are: Home Depot, Lowe's Cos, Menard Inc, Stock Building Supply, 84 Lumber, Sears Hardware, Lanoga, BMHC, Sutherland Lumber, and Wickes.
Opportunities
The main construction machinery imports to the USA include:
- earthmoving equipment (eg. bulldozers, shovel loaders, and excavators)
- off-highway trucks
- power cranes
- crawlers
- draglines
- trenchers
- compactors
- mixers
- pavers
- graders
- scrapers
- components and parts
- attachments
This equipment is used for the construction of residential and non-residential buildings, for new power and manufacturing plants, and for adding to or renovating infrastructures such as sewerage and water lines, roads and bridges.
Building materials imports include:
- cement
- roofing shingles
- lumber and millwork
- fabricated structured metal
- flat glass
- stoneware
- mobile homes
- pre-fabricated metal buildings
- plumbing products
(Source: IBIS research) |
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Tariffs, regulations and customs
The Australia-United States Free Trade Agreement (AUSFTA) came into force on 1 January 2005. The AUSFTA is a landmark agreement that gives Australian businesses expanded access to the world’s largest importer and investor. Significant export opportunities have been created through the reduction of tariffs, the increase of specific quotas, the easing of market restrictions and the streamlining of investment processes.
Australian suppliers should consider the effect of the tariff rates that will be imposed on their products when selling to the USA. Australian exporters should also seek confirmation from a US law firm on the extent of their product liability.
Regulations are different in each state in the USA so it is important to research your product. CMD First Source has information about the regulations in each state according to the product. (Select 'Building Codes', in the left column and then your target state. Although you will need to register as a user, registration is free.)
Industry standards
One area of difficulty may be achieving compliance with US building codes. Building construction has historically been regulated with the assistance of codes published by three regional groups, but which now have been combined into the International Code Council. However there are a number of other code writing organisations that are peculiar to specific aspects of the building & construction industry. Some examples are:
- International Organisation of Plumbing & Mechanical Officials (IAPMO) - www.iapmo.org
- Underwriters Laboratories (UL) - www.ul.com
- Consumer Product Safety Commission (CPSC) - www.cpsc.gov
- Occupational Safety & Health Administration (OSHA) - www.osha.gov
- American National Standards Institute (ANSI) - www.ansi.org
- National Spa & Pool Institute (NSPI) - www.nspi.org
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Marketing your products and services
Market entry
Typically your market entry strategy will require a solid business and marketing plan which includes a local presence plus warehousing. It is advisable to visit the US prior to finalising your plan. Market entry strategies will vary according to the product and service; however, they will incorporate elements such as:
- pricing
- competition
- positioning
- strengths, weaknesses, opportunities, threats (SWOT analysis)
- promotion
- after-sales service (back up services and site repairs for machinery are considered essential in this industry)
A good initial step is attending two of the major US tradeshows where industry contacts and distribution opportunities can be established. A few tradeshows are listed below:
Competition in the building and construction industry is based on price, the ability to provide equipment at short notice, access to the latest equipment and customer service.
To compete with current US suppliers, Australian companies will have to offer a very price competitive product and demonstrate key competitive advantages over competing products. Some possible strategies include:
- Setting up local/regional warehousing and hiring a local person to market and support the product/buyers.
- Setting up local/regional warehousing and relocating a company official to market the product line.
- Buying an existing medium-sized US manufacturer and inserting your company’s technology or product into the pre-existing product line, with an existing consumer base.
- Manufacturing under licence.
- Being able to assist customers to design suitable financial packaging.
Distribution channels
The two most common distribution channels for building and construction products are:
- Importer to warehouse to distributor or retailer in each of the major segments, ie. residential, industrial or do-it-yourself (DIY) sectors. A manufacturer's representative will often play an important role in promoting products to distributors or retailers.
- Importer/distributor to DIY retail sector, contractors, wholesalers.
The three main issues for both of these channels will be:
- Warehousing — this will be especially important if the main buyers are contractors because timeframes for delivery can be critical and tend to operate with short lead times.
- Pricing — the cost of shipping expensive and heavy materials/equipment, mark-ups along the distribution chain, warehousing, etc, often increase the costs beyond the competition.
- After-sales and warranties — all the major competitors in the marketplace provide after-sales service and/or strong warranties. Australian suppliers would need to be in a position to provide similar support if they are to be considered a viable alternative to some of the leading suppliers.
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Contact details
The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.
Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.
Austrade:
- Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
- Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
- Administers the Export Market Development Grants scheme.
- Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
- Provides advice to the Australian Government on its trade and investment development activities.
- Delivers consular, passport and other government services in designated overseas locations.
A list of Austrade offices (in alphabetical order of country) is available.
More information
For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au |
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