In today’s volatile construction and building materials market, protecting and improving gross margin is one of the most critical priorities for distributors, dealers, and suppliers. With rising input costs, unpredictable demand, and intense competition, growing revenue isn’t enough—you need to earn more from every sale.
Here are the top 10 proven strategies to increase gross margin in the building supply business—without sacrificing customer relationships or service quality.
- Implement Tiered Pricing Structures
Not all customers—or orders—should be priced the same. Use tiered pricing to charge more for rush orders, small volumes, or low-margin customers while rewarding loyalty and volume with better rates.
✅ Action Tip: Classify customers into pricing tiers (e.g., contractor, GC, walk-in retail) and apply margin floors by tier.
- Focus on Value-Based Selling, Not Just Cost-Plus
Shift the conversation from “price per unit” to total job value. Help customers see the cost savings from reduced waste, faster install times, or fewer callbacks with better products.
✅ Action Tip: Train your sales team to upsell on performance, longevity, and service—not just price.
- Optimize Product Mix for Higher-Margin Items
Every catalog has winners and margin-killers. Audit your SKUs and focus on promoting products with higher gross margin or private label alternatives.
✅ Action Tip: Use sales reports to identify high-volume, low-margin SKUs and suggest substitutes with stronger markup.
- Improve Inventory Accuracy to Minimize Waste
Miscalculated stock levels lead to overbuying, spoilage, and stockouts—all of which erode margin. Tighten inventory controls to reduce waste and optimize turns.
✅ Action Tip: Implement cycle counting and invest in a modern WMS (Warehouse Management System).
- Consolidate Vendor Spend and Negotiate Better Terms
By consolidating your purchasing power with fewer suppliers, you can unlock volume discounts, rebates, and better payment terms.
✅ Action Tip: Identify your top 10 vendors and initiate a strategic sourcing review—ask for improved pricing or incentives in exchange for more business.
- Add Value-Added Services
Services like jobsite delivery, kitting, or cutting materials to spec can command a premium—and improve your margin without increasing product cost.
✅ Action Tip: Bundle services into your quotes and highlight time or labor savings to justify premium pricing.
- Leverage Technology for Dynamic Pricing
Use data to adjust pricing in real-time based on demand, availability, and market volatility. Static pricing leaves margin on the table.
✅ Action Tip: Use pricing software or rules in your ERP to automatically adjust pricing on key SKUs as costs or demand shift.
- Reduce Freight and Logistics Costs
Shipping and delivery eat into margins. Optimize routes, consolidate deliveries, or implement delivery fees where appropriate.
✅ Action Tip: Analyze delivery cost per order and introduce a minimum order size or delivery fee for small, low-margin deliveries.
- Monitor and Enforce Discount Discipline
Discount creep—especially in sales-driven organizations—can silently erode margins. Set margin floors, require approval for exceptions, and track discounting patterns.
✅ Action Tip: Set up pricing guardrails in your quoting tools and review margin performance by rep monthly.
- Review and Adjust Product Pricing Regularly
In a volatile market, prices can’t stay static. Review cost changes, competitive pricing, and margin performance monthly to stay ahead.
✅ Action Tip: Create a pricing committee or assign ownership to a pricing manager who updates and audits pricing strategy regularly.
Final Thoughts: Margin is the Mission
Increasing gross margin isn’t just about cutting costs—it’s about selling smarter, operating leaner, and adding more value with every transaction.
In a competitive market, the businesses that master margin discipline will have the financial flexibility to invest in growth, weather downturns, and outlast the competition.
