There are two dynamics continuing to push against the building products industry, impacting manufacturers, distributors, and all the way down to the tradesmen and end users.

First, as we have been experiencing over the past 18 months, is the continuing cost volatility. While certain broad sweeping tariffs have been eliminated, others have replaced them and continue to place pressure on manufacturers to pass on at least some of the price to pros and homeowners. National Association of Home Builders' (NAHB) July survey of it’s builders showed that building material costs rose 6.7%. Given that, combined with certain one off items like kitchen cabinets getting a tariff hit at the start of the year, puts builders and tradesmen in a tight spot.

The other side of this duo of immovable objects is how the dynamics and landscape of the distribution network is consolidating to work to capture a more holistic share of pro’s wallets. Home Depot and Lowe's continue to invest heavily in expanding what their product offerings and services are as they acquire various specialty distributors, add on quoting tools, set up broader delivery networks, and installation services designed all in an effort tocapture the full contractor relationship, and moving more and more from capturing only a portion of a pros wallet ad they make a quick trip to the store due to is proximity to their jobsite.

Many times we look at these topics separately, but they both play a role in making conducting business more difficult for pros.

Price volatility also influences contractor loyalty, and this loyalty issue is being played out as the largest players in the channel have built the scale to capture it. For building products manufacturers, that raises the question, when costs will not sit still, who owns the pro?

Tariff Whiplash is Not Just a Cost Problem

The defining feature of these past 18 months of tariffs is not any single rate, rather it is the constant movement of the rate. Given all the back and forth from one country to the next, where certain products and materials get hit harder with tariffs in month, then at a moment’s notice, current tariffs get replaced with new ones, it is a wonder that any pro can confidently, let alone accurately provide quotes to their clients. Our market researchers at The Farnsworth Group continue to track this effect and we are seeing roughly 8 in 10 or more builders and contractors, across residential and commercial, report tariffs driving up material prices.

However, this is just a portion of the story. What gets less attention is how this pricing uncertainty moves through the various distribution channels and what loyalty effects it causes with pros. When costs can change between a quote and a delivery, every link in the chain adjusts its behavior.

• Dealers shorten quote expiration windows.
• Contractors absorb increases mid-project or go back to homeowners to renegotiate.
• Purchasing decisions get pulled forward or pushed back based on rumored effective dates.

Each of those moments is a point of friction, and friction is where the pro relationships get tested.

Combined with the fact that higher rates raise the cost for dealers to carry inventory and extend credit, it makes the homeowner project financing harder to justify. This then leaves pros squeezed on both costs and demand.

Volatility Drives Contractors to Shop Around

With this price volatility, pro are more willing to look beyond their primary supplier. We saw similar shopping and switching behaviors during the response to covid, just in regards to product availability. When product availability was an issue, pros learned that substituting one product or one brand for another is not as scary as they thought, and that perhaps they should be more open to shopping around.

In our forthcoming 2027 Building Products Customer Guide we found that 31% of generalist contractors had tried a new supplier in the previous 12 months, and as our team has discussed in our recent Shop Talk on supplier success, that does not mean pros are abandoning existing relationships, but what it does mean is that many pros are expanding the number of distributors they source from to gain access to more products, better price points, and reliable availability. This gives Pros operational strength through supplier diversification.

The 2027 version of the Building Products Customer Guide will become available in Q1 of 2027. You can also access the 2026 survey results in the meantime.

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What drives that behavior matters here, as pros do not try new suppliers out of idle curiosity. In our industry many times pros are set in their ways for two reasons: they need to be efficient and they have to be given a reason before they make a big change. This can come when a supplier fails them on price, availability, or support and those are exactly the failure points that tariff volatility creates.

“In a stable market, a supplier relationship might go years without being seriously tested. In a volatile one, it gets tested every time a price letter goes out. Each test is an opening for a competitor, and the competitors best equipped to step into that opening are getting bigger.” – Taylor Pence, Senior Advisor, The Farnsworth Group

Scale Players Are Built for Exactly This Moment

The big box retailers are moving ever and ever toward larger shares of the contractor’s wallet. With The Home Depot's acquisition of SRS Distribution, GMS, and Southeast HVAC distributor Mingledorff's and Lowe's acquisition of Artisan Design Group and Foundation Building Materials, both are continuing to build out their strategies around their product and price assortment, delivery, and digital tools.

Lowe’s for example, in May of this year launched Material Lists, which is an AI tool that converts handwritten notes, photos, spreadsheets, and other files into quote-ready orders in minutes, in English or Spanish. Their goal is to compete for the full contractor relationship, including planning, quoting, availability, and fulfillment, which has traditionally belonged to independent dealers and distributors.

It is fair to ask whether that scale translates into an advantage in a volatile cost environment. Advantages like sourcing flexibility, inventory depth, quoting capabilities, and cross-category product bundling are not guaranteed advantages. Integration is hard, especially in the fragmented building products industry, and scale can slow decision-making. This is exactly why independent retailers have long won on local expertise and relationships that are difficult to replicate. But the direction of the biggest players can’t be ignored due to a lack of personal connection and relationship, as they work to be the safe harbor of stability when the market gets rough.

What This Means for Building Products Manufacturers

Manufacturers sit in the middle of these two market dynamics. They can set the price increases that ripple through distribution channels, they sell through both independent retailers and big box stores, and they depend on contractors choosing their brand when the time comes to purchase. That position carries more leverage in your channel strategies than many manufacturers use.

As you lead your teams into a 2027 that is likely to feel similar to 2026 in many ways, consider the following:

Brand loyalty is leverage

Pro activity research from our team at The Farnsworth Group shows that pros are more likely to switch suppliers before they are willing to switch brands.

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At the same time, our prior research has shown that when a Pro does switch brands, they are satisfied with the new brand 9 out of 10 times. That is a meaningful finding in a channel where suppliers are consolidating. If a contractor is willing to follow a brand to a new supplier, the manufacturer holds influence over where that contractor's business lands.

Manufacturers that understand which of their brands carry that loyalty, and among which trades, are in a stronger position in channel negotiations. If you don’t know where your brand stands, conducting brand health research is an important step you should take to understand how to compete in the current market environment.

How a price increase is communicated matters as much as the increase itself

Factors like pricing notice periods, transparency on what is driving the price change, and consistency across distribution all shape whether a retailer or dealer can retain contractor loyalty through a price increase. 2025 research from our team at The Farnsworth Group has shown that contractors are typically willing to spend up to 19% more before they really feel the pressure to switch. A poorly communicated increase does not just hurt margin. It can push a contractor to a different supplier, and potentially to a competing brand stocked there.

Channel competition increases under cost pressure

When costs rise, independents and big box will compete hard on who absorbs cost increases versus who passes them through. Manufacturers selling through both will face pressure on pricing parity and inventory allocation during shortages. Consider to what degree your brands have a deliberate channel strategy in place, before deciding if the next round of pricing increases is necessary.

Category exposure is not uniform

Depending on what product categories you manufacture, you will be facing different degrees of pricing pressures. Cabinets and vanities manufacturers face upcoming tariff pressure in January, while lumber, drywall, and steel each have their own, different pressure points and timelines. It will be key to not only know how exposed your particular product categories, but also how much of that downstream effect is likely to reach the pro, and how their channel partners are likely to respond.

The manufacturers best positioned for 2027 will be the ones who treat pricing volatility not only as a margin problem, but as a customer-centric moment that decides which channel partners, and which brands, the contractor stays with.

Key Questions to Answer Going Into 2027’s Market

Pricing uncertainty and distribution consolidation are each significant on their own. Together, they create a market environment where pro relationships are tested more and more, especially by large competitors better equipped than ever to win them. As pricing volatility and distribution consolidation reshape the market, manufacturers need to understand where their brands are vulnerable, what drives contractor loyalty, and how to protect their competitive position

For manufacturer leadership teams, that poses important questions to examine:

1. When your next price increase is necessary, do you know which of your channel partners are positioned to keep the contractor and why?
2. How much pricing pressure can your brand withstand before contractors consider switching to a competitor?
3. Are your channel partners delivering the purchasing experience contractors need to remain loyal to your brand?

Get Answers With The Farnsworth Group

With roughly 40 years of custom market research expertise, our advisors and researchers at The Farnsworth Group provide extensive insights and recommendations across the Building Products, Home Improvement, and Lawn & Garden industries. Our research solutions span market sizing, customer segmentation, product development research, customer experience measurement, brand health tracking, and additional custom insights for strategic growth initiatives.

We will help you understand your customer's challenges, purchasing behaviors, channel dynamics, and market opportunities so that you can make more confident business decisions.