As interest rates remain elevated through 2025, construction customers are navigating tighter financing conditions, smaller margins, and delayed project timelines. These economic pressures are reshaping how contractors, builders, and developers make buying decisions — especially when it comes to material procurement and supplier relationships.
For regional distributors, these changes bring both challenges and opportunities. While price sensitivity and cautious spending may shrink some orders, shifting preferences are also opening the door for nimble, service-focused suppliers to stand out.
Here’s how rising interest rates are influencing customer preferences — and what that means for regional building materials distributors.
1. Increased Price Sensitivity Means More Competitive Pressure
When financing costs rise, customers scrutinize every material purchase more closely. They’re looking to reduce upfront costs, evaluate alternatives, and stretch project budgets.
Impact on Regional Distributors:
More price shopping among local and online competitors
Higher demand for mid-tier product lines and cost-effective substitutions
Greater focus on upfront pricing transparency and margin impact
How to Respond:
Equip your sales team to sell on value, not just price — and offer alternatives that balance cost and performance.
2. Smaller, Phase-Based Orders Are Becoming the Norm
Rather than placing large orders up front, many contractors now buy materials in phases that match project cash flow or financing release schedules.
Impact on Regional Distributors:
Higher frequency of smaller, just-in-time deliveries
Greater need for inventory availability and flexible fulfillment
Operational pressure to manage more transactions with the same staff
How to Respond:
Invest in delivery agility, inventory forecasting, and order automation tools to support project-based buying habits.
3. Flexible Payment Terms Are a Competitive Advantage
In a high-rate environment, customers prefer suppliers who can offer credit terms, staggered billing, or deferred payment options.
Impact on Regional Distributors:
Distributors without credit programs or extended terms risk losing business
Cash flow becomes a differentiator — not just a back-office function
Risk of A/R exposure increases for regional firms with limited financing capacity
How to Respond:
Explore partner financing solutions, early-pay incentives, and trade credit programs to remain competitive without taking on unmanageable risk.
4. Delivery Reliability Is More Valuable Than Ever
With higher interest costs, delays are more expensive for contractors. They want suppliers who can consistently deliver on time, in full, and on schedule.
Impact on Regional Distributors:
Expectations for accurate ETAs, proactive communication, and delivery tracking
Contractors may switch suppliers after one poorly timed order
Regional players with strong logistics networks can outperform national competitors
How to Respond:
Double down on last-mile delivery accuracy and jobsite logistics to become a trusted execution partner.
5. Loyalty Is Up for Grabs
Economic pressure is causing customers to re-evaluate vendor relationships. Even longtime customers are exploring other options if their current distributor isn’t aligned with new realities.
Impact on Regional Distributors:
Greater churn risk for distributors who fail to adapt to changing customer needs
New opportunity to win accounts from slower-moving competitors
Increased importance of service consistency and relationship building
How to Respond:
Proactively engage dormant or at-risk accounts, and invest in contractor education, onboarding, and outreach to strengthen loyalty.
6. Digital Expectations Are Growing at the Regional Level
Contractors and buyers want to research, quote, and order materials digitally — even from local distributors.
Impact on Regional Distributors:
More pressure to offer online access to pricing, inventory, and account history
Contractors compare your buying experience with digital-first competitors
Inside sales teams are expected to be more efficient and digitally enabled
How to Respond:
Implement self-service portals or mobile-friendly quote tools to improve convenience — without sacrificing personal service.
7. Regional Distributors Can Win on Service, Flexibility, and Speed
While large national suppliers may struggle to adjust quickly, regional distributors can pivot faster to meet local contractor needs.
Impact on Regional Distributors:
Opportunity to win accounts with fast answers, flexible deliveries, and personalized support
Competitive advantage in regions where trust and relationships still drive purchasing
Increased demand for problem-solving and responsive communication
How to Respond:
Leverage your local knowledge and operational agility to become the contractor’s go-to partner for fast-moving jobs.
Conclusion
Customer behavior is shifting in real time as contractors adapt to a high-interest rate environment. For regional distributors, the impact is clear: buyers are more cautious, but also more open to suppliers who can meet them where they are — financially, logistically, and strategically.
Distributors who focus on flexibility, speed, and service — backed by smart digital tools and adaptive pricing strategies — will not only retain their base, but expand it in a competitive, margin-conscious market.
