One of the most noteworthy developments in 2025 is the shift in the distribution channels through which professional contracts are purchasing building products. Zonda’s building products team has long tracked pro contractor purchasing behavior, noting significant changes in the post-COVID environment.
In 2025, amid softening conditions, pricing pushback from customers, and tariff-driven price volatility, pro contractors are shopping very differently. In Zonda’s latest Building Product Outlook, the building products team highlights which channels are gaining and losing contractor loyalty in the current environment and other factors that will likely shift power dynamics in the building products sector. Todd Tomalak, principal, advisory of building products for Zonda, shared insights on what’s driving these market shifts and whether they are cyclical or secular.
What is an important industry shift playing out in the building materials market?
Pro contractors report shifting the channels they shop and purchase building materials from, which drives large differences in revenue to brands that sell through these channels, and may be a set up for meaningful differences in margin later in 2025.
What are the factors contributing to the shifts in pro contractor shopping behavior?
Three things are occurring that drive this shift:
- Softening industry conditions prompting contractors to search for value in other channels (elevated “pushback” on quoted jobs)
- A shift in strategy by companies like Home Depot, QXO, and others to target higher dollar pro contractors than in prior cycles
- “Echo” effect of pro contractors who shopped for products at new channels during 2021 supply chain shortages, who now are in the habit of price checking other channels via apps amid cost / tariff concerns.
What channels are emerging as the winners from this shift? What channels are losing market share?
Several trends emerging between price points:
- E-commerce and manufacturer-direct gained share of pro purchases, across all price tiers of product (premium and value-brands).
- Among “value priced” products, Home Depot and Lowe’s both appear to have gained market share (recall their strategy to manage costs via “portfolio approach,” which means they will pressure brands who attempt to raise prices but don’t command exceptional demand).
- Kitchen and bath dealers and hardware stores both are facing pressure across all price points.
Is there reason to believe these shifts are temporary due to market conditions or more permanent changes?
Pricing volatility definitely will drive some immediate share shift. There is a compelling case that the most tech-forward companies simply have more resources to adjust prices and suppliers to capture some additional market share over the next six months. What remains to be seen is how “manufacturer direct” plays out over the next 18 months. Some brands have unusually strong market power among pro contractors (we estimate ~5% of brands) and some manufacturers are capturing sales from other e-commerce platforms, which is strategically important (in addition to being great for margins).
Other changes are occurring too, which are not macro-related. For example, Builders FirstSource just recruited a new president of technology and digital solutions. Construction Resources (Home Depot owned) just opened up a massive 50,000 square foot showroom targeting high end custom homes (and potentially design-build remodels). This puts Home Depot into a tier of category that typically was outside their price point in earlier cycles.
QXO is also aiming to build a $50B platform, and is recruiting computer scientists and AI researchers heavily. Lowe’s launched a “marketplace” which allows it to offer a much larger scale of products than before. All this is “outside the sandbox” of how these channels competed last cycle. Our sense is that changes in distribution will accelerate in 2025, and look quite different.
The latest Building Product Outlook is available to clients of Zonda’s Building Product Outlook. You can learn more and subscribe here.
