In the competitive world of building supply, margins can feel razor-thin. With rising material costs, shifting customer demands, and constant pressure from both big-box retailers and digital platforms, increasing gross margin isn’t easy—but it’s far from impossible.
To optimize performance and drive profitability, supply companies need to look beyond volume and focus on strategic levers that directly impact gross margin. Here’s how forward-thinking building supply businesses are doing just that.
- Price Smarter, Not Just Higher
Pricing is the most direct lever for margin improvement, but it’s not about blindly raising prices. The key is strategic, data-driven pricing based on customer behavior, market dynamics, and product value.
🔧 Tactics:
Use tiered pricing models for different customer segments (e.g., contractors vs. walk-ins).
Regularly analyze margins by product category and adjust pricing accordingly.
Implement value-based pricing on high-demand or hard-to-source items.
💡 Pro Tip:
Don’t be afraid to raise prices on specialty products or items with limited local competition. Customers will often pay more for availability, speed, or service.
- Optimize Product Mix for Margin Performance
Not all products are created equal. Some drive volume, others drive margin. A smart mix increases gross profit without significantly increasing costs.
🔧 Tactics:
Promote private-label or exclusive brands that offer better margins than national names.
Upsell complementary high-margin items like fasteners, adhesives, or underlayments during checkout.
Reduce SKU clutter—streamline your catalog to focus on top-performing products.
💡 Pro Tip:
Use sales data to identify your “margin leaders” and train your sales team to push those first.
- Improve Purchasing and Supplier Relationships
Controlling your input costs is a key to protecting gross margin. Strategic procurement—built on strong vendor partnerships and forecasting—can give you a crucial edge.
🔧 Tactics:
Negotiate volume discounts or early-payment terms.
Consolidate purchases with fewer, more reliable suppliers for better leverage.
Take advantage of rebates, co-op marketing funds, or seasonal pre-buys.
💡 Pro Tip:
Form alliances with suppliers who share your data and goals. Strategic partners—not just vendors—can help you plan ahead and cut costs.
- Control Inventory to Minimize Waste and Shrink
Excess inventory ties up capital, while stockouts can kill sales. Both hurt your margins. Precision in inventory management improves efficiency and reduces margin bleed.
🔧 Tactics:
Use inventory forecasting tools based on historical sales and project demand.
Monitor shrinkage (theft, damage, misplacement) and implement strong controls.
Rotate inventory to avoid obsolescence, especially in seasonal or trend-sensitive items.
💡 Pro Tip:
A “just-right” inventory approach—lean but not thin—can free up cash and increase margin flexibility.
- Deliver More Value Without Increasing Cost
Gross margin is a function of perceived value vs. actual cost. The more value customers associate with your service, the more they’re willing to pay—and the less they focus on price alone.
🔧 Tactics:
Offer expert advice, on-site consultation, or jobsite delivery as value-adds.
Provide easy-to-navigate showrooms or digital catalogs to simplify the buying process.
Bundle products into project-ready kits for convenience and upsell opportunity.
💡 Pro Tip:
Train your team to be problem-solvers, not order-takers. Customers will pay more when they trust your expertise.
- Invest in Sales Training and Margin Accountability
Your sales team is on the front line of margin management. Empower them with the tools, data, and incentives to sell smarter.
🔧 Tactics:
Set margin-based sales goals—not just revenue targets.
Equip reps with margin visibility on quotes and proposals.
Recognize and reward high-margin deals and product recommendations.
💡 Pro Tip:
Incentivize gross profit instead of pure sales volume to align your team with margin growth.
Conclusion: Gross Margin Is a Performance Indicator—And a Strategic Lever
Increasing gross margin isn’t about just cutting costs or raising prices—it’s about running a smarter, more strategic business. By tightening your product mix, improving procurement, empowering your team, and delivering real customer value, you build a margin-driven culture that fuels long-term profitability.
