October 15, 2025 • 41 mins
The market may be down in Q3 2025, but the data tells a different story about what's coming in 2026.
Stefanie and Todd unpack why home‑equity access is up 38% this year, why that capital hasn’t hit jobsites yet, and how a surge in windows and doors could create a 2021-style scramble as early as next year. If you sell to or through pros, this is the map for what’s about to move.
Stefanie shares her five-part BLEND playbook for independents to stay relevant, which you won't want to miss.
Topics we cover:
• Market softness set against rising home-equity extraction
• Deferred demand building in windows and doors through 2027
• Pros as channel kingmakers and the labor bottleneck
• Independents’ path: brand, leverage, experience, niche, digital
• E‑commerce up despite softer orders; research shifts online
• Decentralization vs scale in post-acquisition execution
• QXO vendor simplification, price leadership, AI investment
• Lowe’s marketplace, builder focus, and footprint advantage
• Measure pro digital draw rate and close the loop with AI search
• Training to de-risk complex, high-margin installs
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Todd Tomalak (00:00):
Every pro 10 years from now starts their initial
job with online being theanchor, probably with AI being
the anchor.
And the route of like wherethat goes, it had better not be
bypassed.
Stefanie Couch (00:11):
You can't just be a good hitter and win World
Series.
You gotta have the whole thing.
They have to go digital.
They have to be where customersare looking for them.
That's gonna include AI, chat,all those searches.
Todd Tomalak (00:22):
The message is clear.
Home equity extraction's up 38%right now.
It hasn't been deployed yet.
And you have 2x larger pool ofwindow and doors that will have
to be done.
What we're basically saying issome of them will be funded by
Helock, and whoever gets thatwill get a whole bunch of other
dollars.
That's a great spot to be.
Thank you.
(01:23):
It's a pleasure to join.
Stefanie Couch (01:25):
And it's been a wild year or so in the industry.
Today we're gonna dive intosome things.
You got a lot of new data aboutmarket conditions.
We're gonna dive into that.
We are gonna talk about whatwe're calling the clash of the
Titans with QXO, HD, and Lowe's.
And then we're gonna talk aboutthe future of the channel and
just and the distributionchannel specifically and what it
(01:47):
might look like in a few years.
Todd Tomalak (01:49):
Well, excited to talk.
There's a lot of changehappening.
Stefanie Couch (01:52):
Yes.
And it feels more rapid thanit.
There's been so manyacquisitions and things like
that.
But with the influx of AI andmarket conditions, it feels like
the stakes are pretty highright now.
You told me on a call the otherday you were talking about how
soft the market conditions areright now.
And you've got a ton of data.
You're here at Paradigm, you'regoing to present in about an
hour.
And so I'm excited to hear yourpresentation.
(02:13):
But you also told me that itwas going to turn on a dime.
And I want you to expand uponthat and tell tell me a little
bit about what you see.
What's the mirror, mirroredball telling you?
Todd Tomalak (02:24):
Yeah.
Um, you know, so so sometimesyou see conditions begin to thaw
or change before before theypivot.
And I think I think 2025 hasbeen the year, the year of that.
So we've had high interestrates and high mortgage rates
for for three years now.
Salesmen softening and slowing,but kind of powering through
(02:44):
until it coughed right now.
Uh, what we've seen happen inthe last two quarters is you
know, we we we do a lot of workmeasuring orders and pricing and
backlogs and all these things.
Basically, pro jobs that arethat are coming in the door are
down about 20% sequentially, Q3versus Q1.
So, so far.
At the same time, what's reallyinteresting to see is that the
(03:08):
the high-income homeowners uhare doing something that we've
never seen them do in the dataever.
Not during the GFC, uh, notduring COVID, not during uh we
we don't have data back in theearly 80s on this, but uh what
what we're seeing happen isbasically they're we're calling
it deer in the headlights.
So they're they're freezing upuh a lot of reports of uh worry
(03:29):
about losing their job in thenext five years.
So you don't do any spendingyou're worried about losing your
job.
And so we've essentially seenthings freeze.
In the last uh six weeks or so,we've seen builder foot traffic
improve sequentially, which isreally unusual.
Cancellation rates have kind ofsteadied out, and uh, we are
seeing some indications thatthis this kind of goes to the
(03:50):
point about turning on a dime.
There's a whole lot ofdeferral, which we we we we can
talk about, but uh there is moreaccess being set up to accrued
home equity right now.
So off of a very, very lowlevel, uh the equity tapped out
right now this year is up 38%.
That's with a bad macro.
That's with a lot ofuncertainty.
And it's just and a lot of it'ssuper prime.
(04:12):
So these are these are peoplewith great balance sheets,
strong income.
We think that's gonna start todollarize for the space
beginning about Q2 next year.
It should be 3x higher thanwhere it is right now.
So um a lot of deferral, that'sthe story.
We're starting to see it, youknow, pivot now, which it wasn't
pivoting three over the lastthree years.
Stefanie Couch (04:30):
That's exciting, but it's also still scary
because all these are what ifs,which everything always is.
I mean, nobody knows.
No one could have predictedwhat was gonna happen during
COVID.
I mean, I remember thinking theworld was going to come to an
end.
We had just hired a bunch ofpeople for a new door shop we
were opening.
I was like, I'm gonna have tofire a hundred people that we
just hired two months ago.
That's a bad feeling.
Yeah.
And five months later, we werelike, oh my gosh, we need more
(04:52):
supplies, we need more people,we don't know what we're gonna
do.
So no one really knows.
But you actually mentionedseeing possibly double digit
growth in 2027, especially incategories like Windows and
Doors.
What is the data that's tellingyou that?
Todd Tomalak (05:06):
Yeah, yeah.
So we we've seen this before inin other categories.
So uh let me let me pick on,let's pick on roofing.
Stefanie Couch (05:15):
Okay.
Todd Tomalak (05:15):
Um, we're not talking about roofing today, but
but but it the analogy isreally important.
So if we went back in time 10years ago uh and we talked to
industry, you know, insidersabout roofing, there was a
feeling that roofing was broken.
You know, housing's improving,rates are going the right
direction, everything's going,and roofing's flat to down and
uh just not coming along.
Well, what was happening was aa shift in in the type of things
(05:39):
roofs are made out of, theshift in asphalt type, uh
basically moved the window ofwhen all these roofs were were
done.
So pushed it to now, you know,2023 to 2025.
And so now we've got Depotjumping on SRS and QXO jumping
on beacon and and re-roof issignificantly higher than it was
during that team.
Uh what we're seeing now isbasically the same story play
(06:01):
out with with windows and doors.
So what windows are made of nowis not the same thing they were
made of, you know, 15 yearsago.
Stefanie Couch (06:07):
Yeah.
Todd Tomalak (06:08):
And uh just some quick math.
Well, I'll show a slide on thislater on today.
But if you just look at, youknow, the count of say how many
homes are you know over 20 yearsold, haven't had window and
door jobs done within the last20 years.
So, you know, conceivably ripefor a window job, it's gonna be
two to three X historical normsby 2027.
Stefanie Couch (06:30):
Yeah.
Todd Tomalak (06:30):
So I I think calling for like 15% growth
sounds like a lot, but not whenyou've got the pie growing 2x or
3x bigger.
So that's a pretty if thingscome together as we think they
might, especially on the homeequity side, uh, we could see it
could feel a bit like it did in2021, where you can't get a
pro.
Stefanie Couch (06:48):
Yeah.
Todd Tomalak (06:48):
You know, you can't get a window that you
want.
So um it's tough to call thetiming, but the but the levels,
the story for the levels isthere.
Stefanie Couch (06:55):
Well, here's really how I see it is that the
pros are kind of the rulers ofthe channel, and they're going
to be the pro contractor.
There's already not enough.
There's going to definitely notbe enough if what we're saying
is going to happen happens,especially in things like
windows and doors.
Windows and doors are somethingyou need to know what you're
doing to install.
It's not like uh, you know,something where you can just do
(07:18):
a DIY project that can goreally, really wrong.
I mean, people try and you cando it with some products, but
you really need to be aprofessional.
So it feels like with the warwe're seeing, you already
mentioned the roofing, peoplebuying those companies.
The same war is happening overthe business with the pro
contractor, and they're kind ofcalling the shots.
(07:38):
Do you agree with that?
Todd Tomalak (07:39):
The message is clear.
I I don't think anything thatyou said is is even a stretch.
Uh, we can go to Home Depot'sinvestor relations to see how
they're looking at it.
And uh, you know, their theirlast investor day presentation,
I was struck by there's astrategy slide where they say,
you know, in our base case, howwe're gonna grow was, you know,
we used to just grow by growingshares and some MA and you know,
(08:01):
adding some more stores and andgaining some pro market share.
That's there.
But then their plus cases we'regonna gain even more
pro-market.
So it's all about pro-marketshare growth.
And uh we're pretty clearlyseeing the SRS deal as the the
onus of them going after thepart of the business.
Uh, I mean, I've seen this realtime in the last few years, but
(08:24):
we've even seen this, I think,before that.
This is this shouldn't besurprising where when the labor
market gets tight, uh, suddenlythe builders are willing to look
the other way.
They won't admit it, butthey're willing to look the
other way.
If they're you know strained ontiming, they don't want any
delays on the homes, they don'twant any problems with callback.
What they're basically buyingis a finished home with the
products that they wantinstalled without a headache.
(08:47):
And a good pro who can do that,uh they can swap in other
products that they want.
Even no one will admit it, butthey do.
We've seen it happen.
Uh, they can make a lot moremargin, their pricing's all over
the map.
That's why, that's why the prois the that's where the battle
will be won.
Stefanie Couch (09:01):
Yeah, and even if they don't do that secondary
project today in a year, if theydo a good job, they'll call
back and they'll come and dotheir siding or they'll come and
do their roof or whatever theyoffer.
Todd Tomalak (09:13):
We we know we we did a really interesting
analysis looking at um this isyou can't you can't make this,
this is what the data says.
If so, let's think about thatwindow, that window story.
So, so you know, choose thenumber, but it's gonna be bigger
because we've got more homesthat have to have windows done.
If you take uh a home thatneeds a home improvement and you
don't change anything else butjust fund it with HELOC, that's
(09:36):
it.
That's it.
The chance that it overlapswith an uh another home
improvement, uh kitchen or adecking project or you know,
something else uh grows bybetween four and seven X.
Four and seven X.
Wow.
So so you know, I'll say thisagain.
People uh get skeptical whenthey hear double digit growth,
and then I'm like, well, well,home equity extraction's up 38%
(09:59):
right now.
It hasn't been deployed yet,and you have 2x larger pool of
window and doors that will haveto be done.
What we're basically saying issome of them would be funded by
HELOC, and whoever gets thatwill get a whole bunch of other
dollars.
That's a great spot to be.
Stefanie Couch (10:13):
Yeah, absolutely.
If I had a pretty big bucket ofmoney and I wanted to go invest
right now, I would go buy someolder, boring businesses in the
window and door installationcategory, and I would get them
up to speed with marketing andcustomer service and all of the
things that will make themamazing, and I would be ready
for 2026, 2027 because thatmarket is ripe for disruption.
(10:39):
Most of these people are guysand trucks, they're great guys
and trucks, but there's not alot of people that have that
together where they have all thethings to make it really be
able to be scalable.
Well, there is so manyconversations going on in the
market about the Titans, butthere's a lot of independents
out there.
(11:00):
And it seems scary to thinkabout going up against Goliath
three times, maybe more thanthat, because you got BFS, you
got other people that are huge.
What do you think theindependent should be doing?
Is there space for them in fiveyears?
What what does that even looklike?
Yeah.
Todd Tomalak (11:20):
And that's the question that all these
independents should be asking.
So I think there's a place.
I do, I do think there's aplace for them in five years.
I think the place is differentand they have to they have to
adapt.
If this was the three littlepigs.
So there there is a group ofindependents that that really
have not uh adapted much.
They don't have much of an onand even an online presence like
(11:42):
a 90s style website is notreally an online presence.
Stefanie Couch (11:45):
Right.
Todd Tomalak (11:45):
Right.
What I what I would have themdo, and I'm I'm not a marketer.
I'm not a marketer, so there'sother people that are closer to
this than than than myself.
Um but I would mentally imaginethe next generation of pro.
What we know is happening rightnow, you know, Q2.
We just talked about how badthe market uh the conditions
(12:05):
are, just coming apart, pushbackorders, you know, 20% worse
than uh than what we saw at Q1.
Online revenue for buildingproducts is up 9.9%.
Holy cow.
Stefanie Couch (12:17):
Yeah.
Todd Tomalak (12:17):
So so that's important.
That's important.
And I think that uh they haveto have a sense.
There's a small independentlumber yard that I think of that
is the number one distributorfor things like Fez Tool,
SawStop.
How do they do that?
They don't have any scale.
But they did something right.
Yeah.
So I think they have to getsuper niche, they have to uh be
(12:39):
really effective at a wideraudience and uh and kind of own
their space.
How they do that is they needpeople to to help them to help
them navigate that.
But um, if they don't doanything, you know, we're gonna
run into a situation wherethey're fine for five years, but
there's you know, the the thethe labor math on this is really
it's really clear.
We're losing a generation ofhighly competent pro contractors
(13:00):
that's worth a lot that lovesthe independent, better service,
legitimately so, betterrelationship, but they're
retiring.
Yeah, and and their buddy whoworks at the independent or owns
it is also kind of on the cuspof retiring.
And then what happens?
Well, he's got a 30-year-oldson, you know, or daughter,
that's thinking about uh howthey want to buy and they like
(13:21):
buying things online, they do itall the time.
And so maybe so what we we justput out a report that looked at
kind of who's eating whosecookie.
So online shopping's way up.
Where is it coming from?
Okay, so pros, pros areshopping online.
Some of them are going and thenconverting at Manufacture
(13:41):
Direct, like going right to themanufacturer's website.
Some of them are going toBiller's first source, you know.
So they'll go and shop andthey'll learn and they'll
discover.
Yeah.
I don't think you can afford tonot be in that early kind of
top of funnel online shoppingstage.
You're gonna lose some,non-zero.
Stefanie Couch (13:56):
So I think that's one of the things that
people miss the most, especiallyin the in the independent
channel, is that you can't justbe thinking about the moment
someone comes in and hands youtheir card to buy.
And for me, it's really afive-stage process that they can
think of to actually continueto win and thrive.
And I call it blend just so Ican remember it, but it's brand.
(14:18):
So it's being memorable, beingout there.
You have to be found to be ableto be chosen, right?
So if you're not out there, youdon't have a brand, you don't
have anything out there, you'renot gonna be found.
L is leverage.
So can you leveragepartnerships with bigger people,
like a co-op, a partnershipwith a distributor, something
like that to be able to be a bigguy or gal without having to be
(14:40):
one.
E is customer experience.
So experience, I think that iswhere even if the it changes
from the older generation to thenewer, these contractors still
want the service and theexperience that they know they
can trust no matter how manytimes they order.
N is niche, which you mentionedearlier.
I don't think they can win onevery category, but they can
(15:02):
probably win on two or three bigcategories that they really
want to live and die by.
And then D, you mentioned it,digital.
So they have to go digital.
They have to be where customersare looking for them.
That's gonna include AI, chat,all those searches because
people are already not justsearching on Google.
Todd Tomalak (15:19):
Is there anyone that you within building
products that you feel is doingthat?
Stefanie Couch (15:24):
Is doing it well.
Todd Tomalak (15:25):
Yeah.
Stefanie Couch (15:26):
Um, I think some of the bigger people are doing
it pretty well.
I think there's a few nichecustomers that are are doing the
niche part really, reallyexceptionally well.
Like, for instance, I'll giveyou a few examples.
A few weeks ago, I was at theindependent home improvement
conference in Orlando.
I met a wild man named PatSullivan that owns some hardware
stores, Sullivan's hardware inIndianapolis.
(15:47):
He has four stores.
And when I say wild man, he isliterally a comic.
He has a radio show.
He's hilarious, but he hasniche down.
So he has a lot of cool thingsthat happen at his store, a lot
of experiences that people bringtheir kids, Santa shops,
pumpkin things, things likethat.
He has a bar and a, I think alunch store in his in his
location.
(16:08):
He does Instagram, YouTube,millions of views on these
videos they make.
He's getting a buzz.
So he's doing branding.
He's got the leverage, he's apart of a co-op.
So he can buy like a biggerperson.
He's doing customer experienceniche and he's online.
So yeah, he's kind of hittingall of them.
There's a few people that I'vemet um through that that are
doing it.
They're mostly four or fivestore chains, and they're
(16:31):
working really hard to do it,and they're not scared to.
I think one of the things isbeing able to not be scared to
do something that might make youlook stupid to all the people
that are like, What are youdoing?
Because it is still sodifferent.
You know, I wear a pink hat andI look totally different.
And there are some people thatare like, What are you doing?
Um, but then there are somepeople that are like, Whoa, what
(16:53):
are you doing?
I'm curious.
And so I would rather be thatway than be like just lukewarm.
Yeah, where no one cares.
Todd Tomalak (17:00):
So, so what what what what I what I heard you
just say, okay, I I I thinkabout this more and more.
So after COVID, there was this,like we all remember it,
there's this window where no onecould get nothing.
Yeah, you're not gonna getwindows and doors.
I don't care where you want toshop or who you like to buy
from.
Yeah, they don't have it.
You know, and if you do findsomeone, they're gonna you're
(17:21):
gonna install whatever theyhave.
Stefanie Couch (17:23):
Yep.
Todd Tomalak (17:23):
Right.
And you're not gonna like name,name, and so we saw all these
pros go to places that theynever would have even admitted
going to.
We went to Home Depot, youknow.
We had a large single familyrental developer frantically
approach us and saying, like,we've got all these homes that
we can't we can't let peoplelive in them unless we put
windows in.
Who can we go to?
So we're throwing connectingthem with big box retailers.
Stefanie Couch (17:44):
Yeah.
Todd Tomalak (17:45):
And then once supply chain's normalized, and
they're they're really horrificsounding anecdotes that came in,
but like we the whining, thewhining of, you know, I had to
deal with a teenager, uh, andI'm not trying to bash
teenagers, they're great.
Sure.
But at the pro desk, and theyhad no idea about this and this
and this and this and this.
And so I'm so thrilled that Icould finally go back to my, you
(18:05):
know, traditional.
That's why they like the prochannel.
Stefanie Couch (18:08):
Yeah.
Todd Tomalak (18:09):
But then they told us that every time I go to the
lumber yard to buy, but I stillcheck online.
Stefanie Couch (18:14):
You got to connect all the dots.
And that's the thing that Ithink is so important is it is a
lot of things that you have todo.
You've got to be, it's sort oflike if you were on the baseball
team and you're trying to hitand field and catch at the same
time, you got to be able to doall of it.
You can't just be a good hitterand win World Series.
You got to have the wholething.
And you also have to have benchstrength coming through because
(18:36):
if that really great team is 50to 60 and in 10 years, they
will not be there, then you'regonna be toast in 10 years.
And how do you train?
This is something that at GritBlueprint, we talk about this
all the time.
I think this is the biggestproblem in the industry for
everyone, the Titans and the onestore owner.
Is when you think aboutproducts, especially like a
(18:58):
window and door product line, oryou think about composite
decking and railing or somethingthat's pretty complicated,
especially product, those arethe things you make the most
margins on that you want to sellthe most.
They're also the easiest thingsto screw up.
They have the most componentsand they're coming out with new
product lines every day, everyyear.
How do you remember and teach a20-year-old?
(19:20):
You mentioned, you know, theyoung the young kid straight out
of college that's working at astore.
Right.
How do you teach them those onemillion things to remember?
They also need to know theconstruction context by place,
by region, because if I'mselling a door in Atlanta versus
Texas, totally different ballgame.
And then they got to know howto sell, communicate like an
(19:40):
actual human, and be able todeal with sometimes a lot of
hardships, like somebody messesup something and they come in
screaming at you.
It's a lot of things to cover.
Todd Tomalak (19:49):
Yeah.
No, it for sure is.
If someone can master that, Ithink that that's kind of the
golden t.
So, so you know, so sometimes Ithink about other industries.
What are the parallels to otherindustries?
Because you do see this shiftbetween channels and products,
and it's not the same.
But but it's kind of worthsaying out loud.
I think a film.
My goodness.
So you know, there there was aperiod.
(20:11):
I didn't when I when I firstheard this, it just blew my
mind.
There is a period, this this ison record in the nine early
1920s, maybe even to the mid tolate 1920s, where you know,
movies were new and and theywere silent films.
And if you wanted to to go out,you know, on the town and go to
a cinema, um, the owner of thatchannel, that's a channel,
(20:33):
right?
The product, the product is thefilm.
They had so much market power.
Stefanie Couch (20:37):
Yeah.
Todd Tomalak (20:37):
They they would play whatever film they wanted.
It didn't matter what theyadvertised, they'd run it 2x,
sometimes 2.5x speed, like superspeed it up, so they could they
could get more ticket salesthrough talk about I can't
imagine you know, going to payfor a Marvel movie and they play
something else.
And they play whatever the heckthey want.
And now we've seen that kind ofswing the other way, but I
(20:58):
don't know.
Now with Netflix producingtheir own, being able to
control.
So if if uh in buildingproducts, maybe the analogy
would be uh there will someonewill will crack this this nut of
being able to do all the thingsthat you just mentioned and uh
deliver a pro install.
Stefanie Couch (21:15):
Yeah, I believe vertical integration is actually
the number one thing thatpeople are trying to solve for.
I see people already doingthat, like wood grain is a great
example of that.
Um, they are, you know, theyhave a two-step distributor
platform in a few differentplaces now.
They have the manufacturing,they just bought the Tawanda
plant in Pennsylvania, andthey're trying to vertically
(21:37):
integrate.
And I think there's a lot ofpeople that are doing that.
COVID scared a lot of peoplebecause their whole supply chain
was wrapped up and you know, wecan't get this, we can't get
that.
And they were just one of manythat were trying to get it.
Todd Tomalak (21:48):
But that's scary.
Yeah, it is it's scary toobecause there's a lot more risk.
It is that you bite off, yeah.
That's the case for the bigboys.
Stefanie Couch (21:55):
But Elon, the richest man of the world, right?
No, did the same thing.
Todd Tomalak (21:58):
Right.
Stefanie Couch (21:59):
You know, he said, Hey, why am I waiting and
paying X, Y, and Z for a partthat I could go get for, you
know, $500.
I'm paying $250,000 becauseit's a rocket part and it's just
rocket parts are expensive.
Let's just make that.
Todd Tomalak (22:14):
Elon's an interesting example because it's
an example of someone who'swell capitalized and who's
willing to break the mold and totear the whole process down to
take a fresh look.
And I think that's that's beena the housing pain point for a
long time.
Uh we're at an exciting pointin time to see who does that.
Stefanie Couch (22:33):
Well, that's a good segue to our next
conversation point because I dofeel like we have someone who's
quite Elon-esque that has justentered the scene.
Um, I don't know for sure ifthat's a good comparison.
Todd Tomalak (22:44):
What a comparison.
I've there's few human beingsthat I would that that's a uh
fantastic business comparison.
I think I know where you'regoing.
Stefanie Couch (22:51):
Yes.
So I'm calling this the Clashof the Titans, and it feels like
the last year has been morelike an episode of HBO secession
than probably the buildingindustry has been historically
in my life.
It's been it's beeninteresting, but not this
interesting.
Brad Jacobs, the founder of alot of different companies that
(23:11):
have gone to a billion dollars.
This is his eighth one, hasentered the scene in the
building industry in a very boldfashion, we'll say.
And now the three Titans thatI'm comparing really is Home
Depot, Lowe's, and QXO.
You've also got Builders forSource in there.
You've got people like ABC.
There's there's several otherones.
But I want to talk today aboutthose three.
(23:33):
And so comparing him to Elon,he is a disruptor.
He is very direct with what heis going to do.
He literally wrote a playbook,which I know we've both read.
I've read it multiple timescalled How to Make a Few Billion
Dollars.
What do you think is going onright now in the market with
these three?
SRS has been purchased by HomeDepot.
(23:56):
Lowe's just announced that theypurchased FBM.
Beacon was purchased by QXO.
There's been multiple others,GMS by Home Depot, crazy times.
Todd Tomalak (24:06):
This is a really interesting time in history, I
think, for building productsdistribution.
Um because you know, two ofthese companies, Lowe's and Home
Depot, are not new companies.
They've been around for a lot,you know, for a for a long time,
you know, almost 40 years.
And yet the amount of change intheir general go-to-business
model that maybe we've seen inthe last three years that's
(24:31):
that's pretty significant tolook at.
So to your point about SRS anduh you know what we saw happen
with Foundation too, uh withLowe's, it's tricky because I
think uh Fred Jacobs is clearlya fantastic, brilliant
entrepreneur who's done thismany times before in other
industries.
Even difficult, like like youknow, trucking and other things
like that.
Um what he needs to do is heneeds to do more acquisitions.
(24:56):
And uh there's a case to bemade that he's not bidding, you
know, he's not the largest, he'snot the whale yet.
Uh Home Depot is there, Lowe'sare there, and they're they're
actively bidding against him.
So he's he's got to get moreactive.
Uh this isn't my own my ownperception.
We would have to see that.
We'd also have to see himrecruit and uh and kind of set
(25:17):
up the right team with the righttools to make the improvements
that he's done in in otherindustries in building products.
He's what he's he's done that.
There's pretty pretty goodevidence that he's on that.
Stefanie Couch (25:26):
I mean, he's hired a bunch of people from
USLBM.
Yeah, he's hired AI from Targetand yeah, the Walmart supply
purchasing person who's very AIsavvy.
I mean, if people think, youknow, we talked a little bit
about AI on our call we hadbefore this.
AI is not gonna be like theinternet where we have this like
little rev-up period, you know,oh, let's see if I want to get
(25:49):
a computer.
No, it's it is here.
And I believe there is anarbitrage moment that we have
about 18 to 24 months before theentire category in any
business, not just the buildingindustry, changes.
If people think they have time,they don't.
And so, especially for peoplethat are smaller, they're like,
well, we'll just wait and seehow it plays out.
You you shouldn't do that.
(26:10):
Bad advice.
Todd Tomalak (26:12):
I'm so excited to watch all this develop.
Stefanie Couch (26:14):
It is like an HBO show.
It is a little bit.
Todd Tomalak (26:17):
So Home Depot bought a best of breed roofing
operator, SRS's top scoresacross the board.
Stefanie Couch (26:23):
Yeah.
Todd Tomalak (26:23):
Beacon's a different animal.
Beacon didn't have the samebeacon would have been in like a
four out of five, you know,rating as opposed to like a 4.9
out of five.
If it was an Amazon score, wegot some data on this.
And so what I'm watching for,you know, is basically Brad
mentioned he can doubleearnings.
Double earnings.
Stefanie Couch (26:42):
He's also cut the vendors already from 2,300
vendors to only 20 key vendors,which is that's very to me.
I mean, I'm giving Brad a lotof credit.
I'm comparing him to Elon andSteve because that's the very
first thing that Steve Jobs didwhen he went back to Apple is he
said, we have 300 products, wewill sell 10.
He went right back and cut thefat.
Todd Tomalak (27:04):
And I have a sense with their investment in AI, or
at least where they're going.
We heard both of the bigretailers on their on their
earnings mentioned.
So the tariff wall hit, right?
In April, we had LiberationDay, and then there's some
initial chatter around we'regonna try to do zero price
increases.
No one can do zero priceincreases.
Maybe in aggregate, you cankind of try to swap something
for another as a portfolio.
(27:24):
That's what they're trying todo.
Stefanie Couch (27:25):
Yeah.
Todd Tomalak (27:26):
It shifted to being price leaders.
And so what would beinteresting to see is if Brad
can find a way uh to become aprice leader and you know, prove
that he can buy like a kind ofgood but mediocre company and
double its earnings.
And if you can do that, now youcan buy a lot and you can go
really, really fast.
(27:46):
I think we need to see thatmiddle piece come in.
I'm very excited to watch.
Stefanie Couch (27:50):
Do you think there's people that just do not
want him to win so badly thatthey would turn down a better
offer from him and take one fromHome Depot or Lowe's or someone
else like BFS just to not lethim win?
Todd Tomalak (28:03):
No, people that I like uh with I I think I think
um a lot would depend on the thething that Brad seems to offer
is he offers a lot of upside andskin in the game.
And I think if you become abeliever that he's building
something amazing, like Tesla,let's pick on Elon again.
Stefanie Couch (28:18):
Yeah.
Todd Tomalak (28:19):
Yeah, who doesn't want a piece of skin in that
early on?
Right.
Stefanie Couch (28:22):
Well, and people need a purpose.
And it feels like he needs toprove the dream.
Yeah, he he is selling thedream pretty hard.
And I believe that I actuallybelieve he will be successful
because he's he's done it seventimes before in very antiquated
industries.
I mean, you know, trucking,garbage, um, equipment.
They're I mean, they're prettyboring, just like the building
(28:43):
industry.
I don't think it's a boringindustry, but historically it
has been relatively hard tochange, we'll say.
Todd Tomalak (28:51):
Right.
Yeah, he's not afraid to movefast and break things.
And I think he's smart and he'shiring a very competent team.
I also think Home Depot areincredibly competent at what
they do and they've got a greatcost of capital.
And they can follow things up,they can ruin things.
Stefanie Couch (29:06):
Yeah.
Todd Tomalak (29:07):
If they if they do, that's a big window for for
for Brad.
Um that kind of is the otherthing to kind of see is like how
how well disciplined they are,whether or not um, you know,
they're able to scale and kindof cross-sell what they've been
doing in SR.
It looks good so far.
Stefanie Couch (29:21):
Yeah.
Todd Tomalak (29:22):
Um, but but we'll see.
Stefanie Couch (29:23):
Well, one of the things that we talked about
that I think is a reallyinteresting thing to watch play
out with SRS and Home Depot.
SRS has a pretty amazingleadership team.
Todd Tomalak (29:31):
Yeah.
Stefanie Couch (29:31):
And you mentioned that they're the data
tells the same story.
It's not just a gut feeling.
But I'm actually curious to seedo they continue to leave that
like it is?
Because a lot of times when wesee these acquisitions, the
first few months of thathoneymoon period period feel
pretty good.
It's like, hey, we're gonna letall the salespeople stay and
everything's gonna be good.
We're not gonna the worsen inthe business, mess with your
(29:54):
money.
Todd Tomalak (29:54):
Right.
Stefanie Couch (29:55):
And then they take these hunter salespeople,
they give them rules, they makethem use technology.
Technology and then they messwith their paycheck.
Todd Tomalak (30:02):
Right, we've seen that.
Stefanie Couch (30:02):
And then they say bye-bye and go somewhere
else.
Do you think that Home Depotwill be able to do that at SRS
and leave them to play in thesandbox like they've got?
Todd Tomalak (30:12):
Yeah, I think time will tell.
I have not heard so far thatthey've they've that they've
ruined SRS.
I've heard that they've giventhem a lot of autonomy.
I can tell you though, thatpre-SRS, uh, we had people write
in letter, long, long letters,like in in email form, uh, of
all their beefs about how howthe pros are being mismanaged at
(30:34):
Home Depot and theirperspectives on this.
So I think um this this isprobably a great example of uh
we will see the quality of ofmanagement decisions.
And if if they're able to notbreak SRS and they're able to
use like the credits been beenpretty effective so far, if
they're able to to kind of notbreak what's working well, and
(30:55):
and you some often to your toyour point, that means uh being
yielding, being flexible, notdemanding conformity for
everything.
And uh and Brad, my myintuition on this is that one,
you know, to to his credit, heseems like he's willing to
reward the white elephanthunters, yeah.
So so someone who goes out anddoes something fantastic, that's
(31:16):
what he wants.
Unfortunately, withintegrations, that's usually
what gets you know quashed.
Is we want to we want to removecost and we want to kind of
standardize and and that worksin the short term in that you
you've killed all your whiteelephant hunters.
So yeah, that that is thequestion.
I don't know.
I don't know.
Stefanie Couch (31:31):
Well, and historically throughout my
career, you know, I've been inthis my entire life.
And I've worked at somedifferent places and I've worked
with a lot of different peopleas vendor partners and stuff.
And I've seen mostly thatdecentralization is where people
really win, where you can runyour market like you need to.
You can bring the products inthat work for you, you can make
the calls on the floor rightthere in your market.
(31:54):
And it feels like the biggerthings get, that that's almost
impossible to allow because thecentralization that you need to
have to homogenize to be able towork at scale at a big company
like Home Depot or any of theseplaces, it also doesn't allow
for that on the floordecentralized, make the call
where it matters type idea.
I'm not sure how you balancethose two.
Todd Tomalak (32:16):
I think that's that's the battle.
You just articulated thebattle.
So um, and and I think, youknow, to your point of like Ken,
is there a place for some ofthese traditional that's where
their place will be if if thereis.
Yeah.
Um and they'll probably makeridiculous margins, yeah.
Do really, really well and behard to displace.
I just I just had a friend, youcan't make this up.
I just had a friend who runs acabinet production facility tell
(32:41):
me that uh they are shippingtruckload after truckload of
custom cabinets in Nantucketevery week.
The market's down.
Yeah.
There's there's we're in, theydon't even have a website.
I'm like, what?
What?
You don't even, but um there isthere is a niche.
Yeah.
And I think that's that thatthat'll be interesting to see.
And they they're able to dowhat you just said.
Just, you know, a lot of awhole lot of like decentralized,
(33:02):
flexible, because it's allcustom.
Stefanie Couch (33:04):
That's how my dad ran his business.
You know, when we had a lumberyard, we were in a really
high-end market.
We're servicing, we live, welive near and we're on the lake
that Nick Saban from Alabama andAlan Jackson, all those guys
have a house on.
It's called Lake Burton inNorth Georgia.
So we did a lot of superhigh-end custom homes.
And when they called, we saidyes.
Todd Tomalak (33:23):
Yeah.
Stefanie Couch (33:23):
I mean, that was that was the business.
Todd Tomalak (33:25):
Yeah.
Stefanie Couch (33:26):
We we got you, period.
End of story.
Whether that was in my dad'sF-250 or on the lumber truck or
or whatever needed to happen,happened.
And I don't know if a bigcompany they can try that.
It's really hard to do that ifyou're not decentralized enough.
So I'm I'm curious to see howthat works out.
With this clash of the Titans,we mentioned three people.
We have not said Lowe's veryoften.
(33:46):
They're kind of seen as theunderdog, but you actually have
some data that maybe says thatmight not be true.
Todd Tomalak (33:53):
So we we we spent a lot of time trying to
decompose why.
Why?
So so Lowe's did a you know, Iwould say both Home Depot and
Lowe's this last quarter hadbetter top line results than
than at least our team expected,way better e-commerce results
than we expected, way better.
Um because we're seeing allthis all this tough macro
(34:15):
housing data roll in.
Uh what's interesting to meabout Lowe's is this marketplace
that they've they've, you know,in addition to some of the
other acquisitions that they'redoing that they're working
directly with home builders,which hasn't been the focus of
the other two as much.
Uh this marketplace thatthey're opening, which is uh
pretty much a direct challengeto Amazon.
If you sell to Amazon today,you could sell a doohickey.
(34:38):
And uh you probably can sellthat same.
There used to be a lot of uhvery clear boundaries among
within distribution of there'sthe channel products and the
channel prices for pros, andthat's a different thing than
retail.
Uh we're seeing products thatuh originally were designed for
showroom only.
Like, you know, I'll pick on$10,000 Japanese toilet.
(35:01):
You could only buy theshowroom.
Stefanie Couch (35:02):
Yeah.
Todd Tomalak (35:03):
Like while it's at lowest marketplace right now,
today.
That's interesting.
So it it makes me get just geta sense that we've we've kind of
taken this the snow globe of uhwhere people play within
building products distribution.
You've you've shaken it up andwe're seeing what what works,
what settles out.
Um, I think the formula of whatworks in a down market versus
(35:26):
what works when that marketsnaps starts turning back.
And if if we do start seeingthese you know HELOC HELOC
funded projects, that's adifferent, that's a different
animal.
So so right now it's aboutorganic market share gains of
search, uh landing a percentageof those and then capturing them
with whatever products are youryou know your your your
preferred product.
(35:46):
So yeah, it's it's interestingto watch.
Well one nugget on on lows thatwe saw.
So we have uh this is gonna bea whole new data product that we
released, but we've got uhperfect permit data as close as
you can get to it.
You could do interesting thingswith AI.
It turns out if you drawcircles around all the Home
Depot locations and all theLowe's location, we're gonna do
(36:08):
this for like BFS and ABC andall these other ones too.
But Lowe's had a better betterfootprint, better footprint, at
least this year, despite all thedifficulties.
And so what I what I'm kind ofwatching for is you know how
much of their performance is dueto like market conditions, just
being around the right placesat the right time versus like
these operation things that arethe, you know, you get the pawn
(36:29):
to the end of the chessboard andnow it turns into a queen.
Yeah.
Um, which I know that is whatthey're shooting for.
Stefanie Couch (36:35):
Well, to quote Brad, capital is a weapon if you
know where to aim it.
If you had all the capital,Todd, and you could aim it
wherever you wanted to in one ofthese big businesses, where do
you think the place that theyreally need to focus in the most
is right now?
Todd Tomalak (36:51):
So if you put me on the the management or board
of one of these businesses, uh,I would say they need to be m
actively measuring their drawrate among um pro online
pro-online touch points.
Um they're not gonna convertall of them.
But that 9.9% number, I'll I'llshare the I'm I'm gonna talk
(37:13):
about this later on today.
Uh but the the growth that'shappening in e-commerce, that's
gonna funnel differently.
That's gonna funnel someplaceelse entirely.
Uh people were worried aboutAmazon just being a showroom.
I think what we're gonnadiscover is that every pro 10
years from now starts theirinitial job in some form of
electronic, you know, with withwith online being the anchor,
(37:37):
probably with AI being theanchor.
Stefanie Couch (37:38):
Yeah.
Todd Tomalak (37:39):
And the route of like where that goes, you had
better not be bypassed.
Um, so I I think you know,among among that group, that
would be, you know, the the thesingle biggest touch point of,
you know, so great, your onlinesales are up 11% or 8%,
depending on which party you'reat.
What's your draw rate?
Where are they going?
We're seeing some, this is mypoint before about some of the
(38:00):
e-commerce pros.
So not just people goingonline, but pros going online
shopping, and then they go tomanufacture direct, like big
builders.
I want to know that.
That's important to know,right?
Versus, so um, I haven't heardany of those three solve that
problem yet.
That's where they should bespending their time.
Stefanie Couch (38:19):
I think I think that's a really good point.
And figuring out how people aregoing to be searching in the
future and what they're lookingfor, because that's changing
really quickly, too.
Of you know, long tail searcheswith AI, people are being way
more in depth and how we'reactually how it's being found is
so different.
I mean, I don't search onGoogle anymore.
I do everything I search onChat GPT.
Todd Tomalak (38:40):
Sure.
100%.
Take my preferred, preferredpunch list for every product
that I like to use when I builda home.
Start there, give me the giveme optimal pricing.
What other things can I likejust these are all things that
couldn't be done five years ago.
Stefanie Couch (38:53):
What other products should I think about
instead of this one I've beenusing for five years or you
know, for sure.
Right.
All right.
Well, one big question I'mgonna put you on the spot.
If you had to pick a winner forthe Clash of the Titans, who is
it?
Todd Tomalak (39:06):
Oh, are we are we calling individual names?
Stefanie Couch (39:09):
If you're thinking of an individual, then
I guess I maybe know youranswer.
Todd Tomalak (39:12):
So I think in terms of pure upside, uh QXO is
interesting simply because toyour analogy before about
getting involved with with Teslaand Elon very, very early.
If you buy the dream, you'revery early.
Yeah.
Stefanie Couch (39:29):
Right.
And if he's right, he's reallyright.
Todd Tomalak (39:31):
I need to see him double, I need to see him double
earnings.
I need to see him do that andprove that he can organically
draw like this digital pro tohis if he can do that.
Ooh, there's a lot of upside.
Stefanie Couch (39:41):
Yeah.
Todd Tomalak (39:41):
We need to see that.
Um if he can't do that, youknow, or if we see Home Depot
prove that they can scale SRSreally, really well without
without squishing, you know, allof the soul and spirit, um,
then then I think it turnsreally quick.
So I I say the jury is stillout, uh, but I I do believe that
(40:02):
the dollars, the dollars arethere and will be allocated uh
probably closer to like winnertake all, you know, at least in
terms of margin dollars.
It'll look like Apple's, youknow, share of share of uh uh of
of phone revenue versus shareof phone margin.
Stefanie Couch (40:17):
It feels a little bit like betting against
him.
It's like betting against TomBrady at the Super Bowl.
I mean, the odds are verysimilar.
Todd Tomalak (40:24):
Yeah, maybe, maybe uh Belichick, right?
So he was good at building,building kind of franchises of
of people that were were underundervalued, but were were
willing to be there, includingBrady for the dream.
Um, yeah, so that that we weneed to see the ring, the first
one, and then probably the thethe next ones will come.
Stefanie Couch (40:43):
Yeah, it's gonna be a really interesting thing
to watch play out.
Well, thank you so much forjoining me today, Todd.
I hope that we can watch thistogether, have another
conversation to keep on trackabout where we are in the
market, because it's gonna be acrazy next year or two.
Todd Tomalak (40:58):
Very exciting.
Thanks for having me.
Uh, excited for the conference,and we'll be listening in the
future.
Stefanie Couch (41:03):
We'll see you on the next episode.
Thanks for joining us on theParadigm Industry Insiders
Podcast.
If you enjoyed today'sconversation, be sure to
subscribe on your favoritepodcast platforms and follow
Paradigm on LinkedIn and YouTubeto catch more stories,
insights, and ideas from yourpeers across our industry.
See y'all.
Every pro 10 years from now starts their initial
job with online being theanchor, probably with AI being
the anchor.
And the route of like wherethat goes, it had better not be
bypassed.
Stefanie Couch (00:11):
You can't just be a good hitter and win World
Series.
You gotta have the whole thing.
They have to go digital.
They have to be where customersare looking for them.
That's gonna include AI, chat,all those searches.
Todd Tomalak (00:22):
The message is clear.
Home equity extraction's up 38%right now.
It hasn't been deployed yet.
And you have 2x larger pool ofwindow and doors that will have
to be done.
What we're basically saying issome of them will be funded by
Helock, and whoever gets thatwill get a whole bunch of other
dollars.
That's a great spot to be.
Thank you.
(01:23):
It's a pleasure to join.
Stefanie Couch (01:25):
And it's been a wild year or so in the industry.
Today we're gonna dive intosome things.
You got a lot of new data aboutmarket conditions.
We're gonna dive into that.
We are gonna talk about whatwe're calling the clash of the
Titans with QXO, HD, and Lowe's.
And then we're gonna talk aboutthe future of the channel and
just and the distributionchannel specifically and what it
(01:47):
might look like in a few years.
Todd Tomalak (01:49):
Well, excited to talk.
There's a lot of changehappening.
Stefanie Couch (01:52):
Yes.
And it feels more rapid thanit.
There's been so manyacquisitions and things like
that.
But with the influx of AI andmarket conditions, it feels like
the stakes are pretty highright now.
You told me on a call the otherday you were talking about how
soft the market conditions areright now.
And you've got a ton of data.
You're here at Paradigm, you'regoing to present in about an
hour.
And so I'm excited to hear yourpresentation.
(02:13):
But you also told me that itwas going to turn on a dime.
And I want you to expand uponthat and tell tell me a little
bit about what you see.
What's the mirror, mirroredball telling you?
Todd Tomalak (02:24):
Yeah.
Um, you know, so so sometimesyou see conditions begin to thaw
or change before before theypivot.
And I think I think 2025 hasbeen the year, the year of that.
So we've had high interestrates and high mortgage rates
for for three years now.
Salesmen softening and slowing,but kind of powering through
(02:44):
until it coughed right now.
Uh, what we've seen happen inthe last two quarters is you
know, we we we do a lot of workmeasuring orders and pricing and
backlogs and all these things.
Basically, pro jobs that arethat are coming in the door are
down about 20% sequentially, Q3versus Q1.
So, so far.
At the same time, what's reallyinteresting to see is that the
(03:08):
the high-income homeowners uhare doing something that we've
never seen them do in the dataever.
Not during the GFC, uh, notduring COVID, not during uh we
we don't have data back in theearly 80s on this, but uh what
what we're seeing happen isbasically they're we're calling
it deer in the headlights.
So they're they're freezing upuh a lot of reports of uh worry
(03:29):
about losing their job in thenext five years.
So you don't do any spendingyou're worried about losing your
job.
And so we've essentially seenthings freeze.
In the last uh six weeks or so,we've seen builder foot traffic
improve sequentially, which isreally unusual.
Cancellation rates have kind ofsteadied out, and uh, we are
seeing some indications thatthis this kind of goes to the
(03:50):
point about turning on a dime.
There's a whole lot ofdeferral, which we we we we can
talk about, but uh there is moreaccess being set up to accrued
home equity right now.
So off of a very, very lowlevel, uh the equity tapped out
right now this year is up 38%.
That's with a bad macro.
That's with a lot ofuncertainty.
And it's just and a lot of it'ssuper prime.
(04:12):
So these are these are peoplewith great balance sheets,
strong income.
We think that's gonna start todollarize for the space
beginning about Q2 next year.
It should be 3x higher thanwhere it is right now.
So um a lot of deferral, that'sthe story.
We're starting to see it, youknow, pivot now, which it wasn't
pivoting three over the lastthree years.
Stefanie Couch (04:30):
That's exciting, but it's also still scary
because all these are what ifs,which everything always is.
I mean, nobody knows.
No one could have predictedwhat was gonna happen during
COVID.
I mean, I remember thinking theworld was going to come to an
end.
We had just hired a bunch ofpeople for a new door shop we
were opening.
I was like, I'm gonna have tofire a hundred people that we
just hired two months ago.
That's a bad feeling.
Yeah.
And five months later, we werelike, oh my gosh, we need more
(04:52):
supplies, we need more people,we don't know what we're gonna
do.
So no one really knows.
But you actually mentionedseeing possibly double digit
growth in 2027, especially incategories like Windows and
Doors.
What is the data that's tellingyou that?
Todd Tomalak (05:06):
Yeah, yeah.
So we we've seen this before inin other categories.
So uh let me let me pick on,let's pick on roofing.
Stefanie Couch (05:15):
Okay.
Todd Tomalak (05:15):
Um, we're not talking about roofing today, but
but but it the analogy isreally important.
So if we went back in time 10years ago uh and we talked to
industry, you know, insidersabout roofing, there was a
feeling that roofing was broken.
You know, housing's improving,rates are going the right
direction, everything's going,and roofing's flat to down and
uh just not coming along.
Well, what was happening was aa shift in in the type of things
(05:39):
roofs are made out of, theshift in asphalt type, uh
basically moved the window ofwhen all these roofs were were
done.
So pushed it to now, you know,2023 to 2025.
And so now we've got Depotjumping on SRS and QXO jumping
on beacon and and re-roof issignificantly higher than it was
during that team.
Uh what we're seeing now isbasically the same story play
(06:01):
out with with windows and doors.
So what windows are made of nowis not the same thing they were
made of, you know, 15 yearsago.
Stefanie Couch (06:07):
Yeah.
Todd Tomalak (06:08):
And uh just some quick math.
Well, I'll show a slide on thislater on today.
But if you just look at, youknow, the count of say how many
homes are you know over 20 yearsold, haven't had window and
door jobs done within the last20 years.
So, you know, conceivably ripefor a window job, it's gonna be
two to three X historical normsby 2027.
Stefanie Couch (06:30):
Yeah.
Todd Tomalak (06:30):
So I I think calling for like 15% growth
sounds like a lot, but not whenyou've got the pie growing 2x or
3x bigger.
So that's a pretty if thingscome together as we think they
might, especially on the homeequity side, uh, we could see it
could feel a bit like it did in2021, where you can't get a
pro.
Stefanie Couch (06:48):
Yeah.
Todd Tomalak (06:48):
You know, you can't get a window that you
want.
So um it's tough to call thetiming, but the but the levels,
the story for the levels isthere.
Stefanie Couch (06:55):
Well, here's really how I see it is that the
pros are kind of the rulers ofthe channel, and they're going
to be the pro contractor.
There's already not enough.
There's going to definitely notbe enough if what we're saying
is going to happen happens,especially in things like
windows and doors.
Windows and doors are somethingyou need to know what you're
doing to install.
It's not like uh, you know,something where you can just do
(07:18):
a DIY project that can goreally, really wrong.
I mean, people try and you cando it with some products, but
you really need to be aprofessional.
So it feels like with the warwe're seeing, you already
mentioned the roofing, peoplebuying those companies.
The same war is happening overthe business with the pro
contractor, and they're kind ofcalling the shots.
(07:38):
Do you agree with that?
Todd Tomalak (07:39):
The message is clear.
I I don't think anything thatyou said is is even a stretch.
Uh, we can go to Home Depot'sinvestor relations to see how
they're looking at it.
And uh, you know, their theirlast investor day presentation,
I was struck by there's astrategy slide where they say,
you know, in our base case, howwe're gonna grow was, you know,
we used to just grow by growingshares and some MA and you know,
(08:01):
adding some more stores and andgaining some pro market share.
That's there.
But then their plus cases we'regonna gain even more
pro-market.
So it's all about pro-marketshare growth.
And uh we're pretty clearlyseeing the SRS deal as the the
onus of them going after thepart of the business.
Uh, I mean, I've seen this realtime in the last few years, but
(08:24):
we've even seen this, I think,before that.
This is this shouldn't besurprising where when the labor
market gets tight, uh, suddenlythe builders are willing to look
the other way.
They won't admit it, butthey're willing to look the
other way.
If they're you know strained ontiming, they don't want any
delays on the homes, they don'twant any problems with callback.
What they're basically buyingis a finished home with the
products that they wantinstalled without a headache.
(08:47):
And a good pro who can do that,uh they can swap in other
products that they want.
Even no one will admit it, butthey do.
We've seen it happen.
Uh, they can make a lot moremargin, their pricing's all over
the map.
That's why, that's why the prois the that's where the battle
will be won.
Stefanie Couch (09:01):
Yeah, and even if they don't do that secondary
project today in a year, if theydo a good job, they'll call
back and they'll come and dotheir siding or they'll come and
do their roof or whatever theyoffer.
Todd Tomalak (09:13):
We we know we we did a really interesting
analysis looking at um this isyou can't you can't make this,
this is what the data says.
If so, let's think about thatwindow, that window story.
So, so you know, choose thenumber, but it's gonna be bigger
because we've got more homesthat have to have windows done.
If you take uh a home thatneeds a home improvement and you
don't change anything else butjust fund it with HELOC, that's
(09:36):
it.
That's it.
The chance that it overlapswith an uh another home
improvement, uh kitchen or adecking project or you know,
something else uh grows bybetween four and seven X.
Four and seven X.
Wow.
So so you know, I'll say thisagain.
People uh get skeptical whenthey hear double digit growth,
and then I'm like, well, well,home equity extraction's up 38%
(09:59):
right now.
It hasn't been deployed yet,and you have 2x larger pool of
window and doors that will haveto be done.
What we're basically saying issome of them would be funded by
HELOC, and whoever gets thatwill get a whole bunch of other
dollars.
That's a great spot to be.
Stefanie Couch (10:13):
Yeah, absolutely.
If I had a pretty big bucket ofmoney and I wanted to go invest
right now, I would go buy someolder, boring businesses in the
window and door installationcategory, and I would get them
up to speed with marketing andcustomer service and all of the
things that will make themamazing, and I would be ready
for 2026, 2027 because thatmarket is ripe for disruption.
(10:39):
Most of these people are guysand trucks, they're great guys
and trucks, but there's not alot of people that have that
together where they have all thethings to make it really be
able to be scalable.
Well, there is so manyconversations going on in the
market about the Titans, butthere's a lot of independents
out there.
(11:00):
And it seems scary to thinkabout going up against Goliath
three times, maybe more thanthat, because you got BFS, you
got other people that are huge.
What do you think theindependent should be doing?
Is there space for them in fiveyears?
What what does that even looklike?
Yeah.
Todd Tomalak (11:20):
And that's the question that all these
independents should be asking.
So I think there's a place.
I do, I do think there's aplace for them in five years.
I think the place is differentand they have to they have to
adapt.
If this was the three littlepigs.
So there there is a group ofindependents that that really
have not uh adapted much.
They don't have much of an onand even an online presence like
(11:42):
a 90s style website is notreally an online presence.
Stefanie Couch (11:45):
Right.
Todd Tomalak (11:45):
Right.
What I what I would have themdo, and I'm I'm not a marketer.
I'm not a marketer, so there'sother people that are closer to
this than than than myself.
Um but I would mentally imaginethe next generation of pro.
What we know is happening rightnow, you know, Q2.
We just talked about how badthe market uh the conditions
(12:05):
are, just coming apart, pushbackorders, you know, 20% worse
than uh than what we saw at Q1.
Online revenue for buildingproducts is up 9.9%.
Holy cow.
Stefanie Couch (12:17):
Yeah.
Todd Tomalak (12:17):
So so that's important.
That's important.
And I think that uh they haveto have a sense.
There's a small independentlumber yard that I think of that
is the number one distributorfor things like Fez Tool,
SawStop.
How do they do that?
They don't have any scale.
But they did something right.
Yeah.
So I think they have to getsuper niche, they have to uh be
(12:39):
really effective at a wideraudience and uh and kind of own
their space.
How they do that is they needpeople to to help them to help
them navigate that.
But um, if they don't doanything, you know, we're gonna
run into a situation wherethey're fine for five years, but
there's you know, the the thethe labor math on this is really
it's really clear.
We're losing a generation ofhighly competent pro contractors
(13:00):
that's worth a lot that lovesthe independent, better service,
legitimately so, betterrelationship, but they're
retiring.
Yeah, and and their buddy whoworks at the independent or owns
it is also kind of on the cuspof retiring.
And then what happens?
Well, he's got a 30-year-oldson, you know, or daughter,
that's thinking about uh howthey want to buy and they like
(13:21):
buying things online, they do itall the time.
And so maybe so what we we justput out a report that looked at
kind of who's eating whosecookie.
So online shopping's way up.
Where is it coming from?
Okay, so pros, pros areshopping online.
Some of them are going and thenconverting at Manufacture
(13:41):
Direct, like going right to themanufacturer's website.
Some of them are going toBiller's first source, you know.
So they'll go and shop andthey'll learn and they'll
discover.
Yeah.
I don't think you can afford tonot be in that early kind of
top of funnel online shoppingstage.
You're gonna lose some,non-zero.
Stefanie Couch (13:56):
So I think that's one of the things that
people miss the most, especiallyin the in the independent
channel, is that you can't justbe thinking about the moment
someone comes in and hands youtheir card to buy.
And for me, it's really afive-stage process that they can
think of to actually continueto win and thrive.
And I call it blend just so Ican remember it, but it's brand.
(14:18):
So it's being memorable, beingout there.
You have to be found to be ableto be chosen, right?
So if you're not out there, youdon't have a brand, you don't
have anything out there, you'renot gonna be found.
L is leverage.
So can you leveragepartnerships with bigger people,
like a co-op, a partnershipwith a distributor, something
like that to be able to be a bigguy or gal without having to be
(14:40):
one.
E is customer experience.
So experience, I think that iswhere even if the it changes
from the older generation to thenewer, these contractors still
want the service and theexperience that they know they
can trust no matter how manytimes they order.
N is niche, which you mentionedearlier.
I don't think they can win onevery category, but they can
(15:02):
probably win on two or three bigcategories that they really
want to live and die by.
And then D, you mentioned it,digital.
So they have to go digital.
They have to be where customersare looking for them.
That's gonna include AI, chat,all those searches because
people are already not justsearching on Google.
Todd Tomalak (15:19):
Is there anyone that you within building
products that you feel is doingthat?
Stefanie Couch (15:24):
Is doing it well.
Todd Tomalak (15:25):
Yeah.
Stefanie Couch (15:26):
Um, I think some of the bigger people are doing
it pretty well.
I think there's a few nichecustomers that are are doing the
niche part really, reallyexceptionally well.
Like, for instance, I'll giveyou a few examples.
A few weeks ago, I was at theindependent home improvement
conference in Orlando.
I met a wild man named PatSullivan that owns some hardware
stores, Sullivan's hardware inIndianapolis.
(15:47):
He has four stores.
And when I say wild man, he isliterally a comic.
He has a radio show.
He's hilarious, but he hasniche down.
So he has a lot of cool thingsthat happen at his store, a lot
of experiences that people bringtheir kids, Santa shops,
pumpkin things, things likethat.
He has a bar and a, I think alunch store in his in his
location.
(16:08):
He does Instagram, YouTube,millions of views on these
videos they make.
He's getting a buzz.
So he's doing branding.
He's got the leverage, he's apart of a co-op.
So he can buy like a biggerperson.
He's doing customer experienceniche and he's online.
So yeah, he's kind of hittingall of them.
There's a few people that I'vemet um through that that are
doing it.
They're mostly four or fivestore chains, and they're
(16:31):
working really hard to do it,and they're not scared to.
I think one of the things isbeing able to not be scared to
do something that might make youlook stupid to all the people
that are like, What are youdoing?
Because it is still sodifferent.
You know, I wear a pink hat andI look totally different.
And there are some people thatare like, What are you doing?
Um, but then there are somepeople that are like, Whoa, what
(16:53):
are you doing?
I'm curious.
And so I would rather be thatway than be like just lukewarm.
Yeah, where no one cares.
Todd Tomalak (17:00):
So, so what what what what I what I heard you
just say, okay, I I I thinkabout this more and more.
So after COVID, there was this,like we all remember it,
there's this window where no onecould get nothing.
Yeah, you're not gonna getwindows and doors.
I don't care where you want toshop or who you like to buy
from.
Yeah, they don't have it.
You know, and if you do findsomeone, they're gonna you're
(17:21):
gonna install whatever theyhave.
Stefanie Couch (17:23):
Yep.
Todd Tomalak (17:23):
Right.
And you're not gonna like name,name, and so we saw all these
pros go to places that theynever would have even admitted
going to.
We went to Home Depot, youknow.
We had a large single familyrental developer frantically
approach us and saying, like,we've got all these homes that
we can't we can't let peoplelive in them unless we put
windows in.
Who can we go to?
So we're throwing connectingthem with big box retailers.
Stefanie Couch (17:44):
Yeah.
Todd Tomalak (17:45):
And then once supply chain's normalized, and
they're they're really horrificsounding anecdotes that came in,
but like we the whining, thewhining of, you know, I had to
deal with a teenager, uh, andI'm not trying to bash
teenagers, they're great.
Sure.
But at the pro desk, and theyhad no idea about this and this
and this and this and this.
And so I'm so thrilled that Icould finally go back to my, you
(18:05):
know, traditional.
That's why they like the prochannel.
Stefanie Couch (18:08):
Yeah.
Todd Tomalak (18:09):
But then they told us that every time I go to the
lumber yard to buy, but I stillcheck online.
Stefanie Couch (18:14):
You got to connect all the dots.
And that's the thing that Ithink is so important is it is a
lot of things that you have todo.
You've got to be, it's sort oflike if you were on the baseball
team and you're trying to hitand field and catch at the same
time, you got to be able to doall of it.
You can't just be a good hitterand win World Series.
You got to have the wholething.
And you also have to have benchstrength coming through because
(18:36):
if that really great team is 50to 60 and in 10 years, they
will not be there, then you'regonna be toast in 10 years.
And how do you train?
This is something that at GritBlueprint, we talk about this
all the time.
I think this is the biggestproblem in the industry for
everyone, the Titans and the onestore owner.
Is when you think aboutproducts, especially like a
(18:58):
window and door product line, oryou think about composite
decking and railing or somethingthat's pretty complicated,
especially product, those arethe things you make the most
margins on that you want to sellthe most.
They're also the easiest thingsto screw up.
They have the most componentsand they're coming out with new
product lines every day, everyyear.
How do you remember and teach a20-year-old?
(19:20):
You mentioned, you know, theyoung the young kid straight out
of college that's working at astore.
Right.
How do you teach them those onemillion things to remember?
They also need to know theconstruction context by place,
by region, because if I'mselling a door in Atlanta versus
Texas, totally different ballgame.
And then they got to know howto sell, communicate like an
(19:40):
actual human, and be able todeal with sometimes a lot of
hardships, like somebody messesup something and they come in
screaming at you.
It's a lot of things to cover.
Todd Tomalak (19:49):
Yeah.
No, it for sure is.
If someone can master that, Ithink that that's kind of the
golden t.
So, so you know, so sometimes Ithink about other industries.
What are the parallels to otherindustries?
Because you do see this shiftbetween channels and products,
and it's not the same.
But but it's kind of worthsaying out loud.
I think a film.
My goodness.
So you know, there there was aperiod.
(20:11):
I didn't when I when I firstheard this, it just blew my
mind.
There is a period, this this ison record in the nine early
1920s, maybe even to the mid tolate 1920s, where you know,
movies were new and and theywere silent films.
And if you wanted to to go out,you know, on the town and go to
a cinema, um, the owner of thatchannel, that's a channel,
(20:33):
right?
The product, the product is thefilm.
They had so much market power.
Stefanie Couch (20:37):
Yeah.
Todd Tomalak (20:37):
They they would play whatever film they wanted.
It didn't matter what theyadvertised, they'd run it 2x,
sometimes 2.5x speed, like superspeed it up, so they could they
could get more ticket salesthrough talk about I can't
imagine you know, going to payfor a Marvel movie and they play
something else.
And they play whatever the heckthey want.
And now we've seen that kind ofswing the other way, but I
(20:58):
don't know.
Now with Netflix producingtheir own, being able to
control.
So if if uh in buildingproducts, maybe the analogy
would be uh there will someonewill will crack this this nut of
being able to do all the thingsthat you just mentioned and uh
deliver a pro install.
Stefanie Couch (21:15):
Yeah, I believe vertical integration is actually
the number one thing thatpeople are trying to solve for.
I see people already doingthat, like wood grain is a great
example of that.
Um, they are, you know, theyhave a two-step distributor
platform in a few differentplaces now.
They have the manufacturing,they just bought the Tawanda
plant in Pennsylvania, andthey're trying to vertically
(21:37):
integrate.
And I think there's a lot ofpeople that are doing that.
COVID scared a lot of peoplebecause their whole supply chain
was wrapped up and you know, wecan't get this, we can't get
that.
And they were just one of manythat were trying to get it.
Todd Tomalak (21:48):
But that's scary.
Yeah, it is it's scary toobecause there's a lot more risk.
It is that you bite off, yeah.
That's the case for the bigboys.
Stefanie Couch (21:55):
But Elon, the richest man of the world, right?
No, did the same thing.
Todd Tomalak (21:58):
Right.
Stefanie Couch (21:59):
You know, he said, Hey, why am I waiting and
paying X, Y, and Z for a partthat I could go get for, you
know, $500.
I'm paying $250,000 becauseit's a rocket part and it's just
rocket parts are expensive.
Let's just make that.
Todd Tomalak (22:14):
Elon's an interesting example because it's
an example of someone who'swell capitalized and who's
willing to break the mold and totear the whole process down to
take a fresh look.
And I think that's that's beena the housing pain point for a
long time.
Uh we're at an exciting pointin time to see who does that.
Stefanie Couch (22:33):
Well, that's a good segue to our next
conversation point because I dofeel like we have someone who's
quite Elon-esque that has justentered the scene.
Um, I don't know for sure ifthat's a good comparison.
Todd Tomalak (22:44):
What a comparison.
I've there's few human beingsthat I would that that's a uh
fantastic business comparison.
I think I know where you'regoing.
Stefanie Couch (22:51):
Yes.
So I'm calling this the Clashof the Titans, and it feels like
the last year has been morelike an episode of HBO secession
than probably the buildingindustry has been historically
in my life.
It's been it's beeninteresting, but not this
interesting.
Brad Jacobs, the founder of alot of different companies that
(23:11):
have gone to a billion dollars.
This is his eighth one, hasentered the scene in the
building industry in a very boldfashion, we'll say.
And now the three Titans thatI'm comparing really is Home
Depot, Lowe's, and QXO.
You've also got Builders forSource in there.
You've got people like ABC.
There's there's several otherones.
But I want to talk today aboutthose three.
(23:33):
And so comparing him to Elon,he is a disruptor.
He is very direct with what heis going to do.
He literally wrote a playbook,which I know we've both read.
I've read it multiple timescalled How to Make a Few Billion
Dollars.
What do you think is going onright now in the market with
these three?
SRS has been purchased by HomeDepot.
(23:56):
Lowe's just announced that theypurchased FBM.
Beacon was purchased by QXO.
There's been multiple others,GMS by Home Depot, crazy times.
Todd Tomalak (24:06):
This is a really interesting time in history, I
think, for building productsdistribution.
Um because you know, two ofthese companies, Lowe's and Home
Depot, are not new companies.
They've been around for a lot,you know, for a for a long time,
you know, almost 40 years.
And yet the amount of change intheir general go-to-business
model that maybe we've seen inthe last three years that's
(24:31):
that's pretty significant tolook at.
So to your point about SRS anduh you know what we saw happen
with Foundation too, uh withLowe's, it's tricky because I
think uh Fred Jacobs is clearlya fantastic, brilliant
entrepreneur who's done thismany times before in other
industries.
Even difficult, like like youknow, trucking and other things
like that.
Um what he needs to do is heneeds to do more acquisitions.
(24:56):
And uh there's a case to bemade that he's not bidding, you
know, he's not the largest, he'snot the whale yet.
Uh Home Depot is there, Lowe'sare there, and they're they're
actively bidding against him.
So he's he's got to get moreactive.
Uh this isn't my own my ownperception.
We would have to see that.
We'd also have to see himrecruit and uh and kind of set
(25:17):
up the right team with the righttools to make the improvements
that he's done in in otherindustries in building products.
He's what he's he's done that.
There's pretty pretty goodevidence that he's on that.
Stefanie Couch (25:26):
I mean, he's hired a bunch of people from
USLBM.
Yeah, he's hired AI from Targetand yeah, the Walmart supply
purchasing person who's very AIsavvy.
I mean, if people think, youknow, we talked a little bit
about AI on our call we hadbefore this.
AI is not gonna be like theinternet where we have this like
little rev-up period, you know,oh, let's see if I want to get
(25:49):
a computer.
No, it's it is here.
And I believe there is anarbitrage moment that we have
about 18 to 24 months before theentire category in any
business, not just the buildingindustry, changes.
If people think they have time,they don't.
And so, especially for peoplethat are smaller, they're like,
well, we'll just wait and seehow it plays out.
You you shouldn't do that.
(26:10):
Bad advice.
Todd Tomalak (26:12):
I'm so excited to watch all this develop.
Stefanie Couch (26:14):
It is like an HBO show.
It is a little bit.
Todd Tomalak (26:17):
So Home Depot bought a best of breed roofing
operator, SRS's top scoresacross the board.
Stefanie Couch (26:23):
Yeah.
Todd Tomalak (26:23):
Beacon's a different animal.
Beacon didn't have the samebeacon would have been in like a
four out of five, you know,rating as opposed to like a 4.9
out of five.
If it was an Amazon score, wegot some data on this.
And so what I'm watching for,you know, is basically Brad
mentioned he can doubleearnings.
Double earnings.
Stefanie Couch (26:42):
He's also cut the vendors already from 2,300
vendors to only 20 key vendors,which is that's very to me.
I mean, I'm giving Brad a lotof credit.
I'm comparing him to Elon andSteve because that's the very
first thing that Steve Jobs didwhen he went back to Apple is he
said, we have 300 products, wewill sell 10.
He went right back and cut thefat.
Todd Tomalak (27:04):
And I have a sense with their investment in AI, or
at least where they're going.
We heard both of the bigretailers on their on their
earnings mentioned.
So the tariff wall hit, right?
In April, we had LiberationDay, and then there's some
initial chatter around we'regonna try to do zero price
increases.
No one can do zero priceincreases.
Maybe in aggregate, you cankind of try to swap something
for another as a portfolio.
(27:24):
That's what they're trying todo.
Stefanie Couch (27:25):
Yeah.
Todd Tomalak (27:26):
It shifted to being price leaders.
And so what would beinteresting to see is if Brad
can find a way uh to become aprice leader and you know, prove
that he can buy like a kind ofgood but mediocre company and
double its earnings.
And if you can do that, now youcan buy a lot and you can go
really, really fast.
(27:46):
I think we need to see thatmiddle piece come in.
I'm very excited to watch.
Stefanie Couch (27:50):
Do you think there's people that just do not
want him to win so badly thatthey would turn down a better
offer from him and take one fromHome Depot or Lowe's or someone
else like BFS just to not lethim win?
Todd Tomalak (28:03):
No, people that I like uh with I I think I think
um a lot would depend on the thething that Brad seems to offer
is he offers a lot of upside andskin in the game.
And I think if you become abeliever that he's building
something amazing, like Tesla,let's pick on Elon again.
Stefanie Couch (28:18):
Yeah.
Todd Tomalak (28:19):
Yeah, who doesn't want a piece of skin in that
early on?
Right.
Stefanie Couch (28:22):
Well, and people need a purpose.
And it feels like he needs toprove the dream.
Yeah, he he is selling thedream pretty hard.
And I believe that I actuallybelieve he will be successful
because he's he's done it seventimes before in very antiquated
industries.
I mean, you know, trucking,garbage, um, equipment.
They're I mean, they're prettyboring, just like the building
(28:43):
industry.
I don't think it's a boringindustry, but historically it
has been relatively hard tochange, we'll say.
Todd Tomalak (28:51):
Right.
Yeah, he's not afraid to movefast and break things.
And I think he's smart and he'shiring a very competent team.
I also think Home Depot areincredibly competent at what
they do and they've got a greatcost of capital.
And they can follow things up,they can ruin things.
Stefanie Couch (29:06):
Yeah.
Todd Tomalak (29:07):
If they if they do, that's a big window for for
for Brad.
Um that kind of is the otherthing to kind of see is like how
how well disciplined they are,whether or not um, you know,
they're able to scale and kindof cross-sell what they've been
doing in SR.
It looks good so far.
Stefanie Couch (29:21):
Yeah.
Todd Tomalak (29:22):
Um, but but we'll see.
Stefanie Couch (29:23):
Well, one of the things that we talked about
that I think is a reallyinteresting thing to watch play
out with SRS and Home Depot.
SRS has a pretty amazingleadership team.
Todd Tomalak (29:31):
Yeah.
Stefanie Couch (29:31):
And you mentioned that they're the data
tells the same story.
It's not just a gut feeling.
But I'm actually curious to seedo they continue to leave that
like it is?
Because a lot of times when wesee these acquisitions, the
first few months of thathoneymoon period period feel
pretty good.
It's like, hey, we're gonna letall the salespeople stay and
everything's gonna be good.
We're not gonna the worsen inthe business, mess with your
(29:54):
money.
Todd Tomalak (29:54):
Right.
Stefanie Couch (29:55):
And then they take these hunter salespeople,
they give them rules, they makethem use technology.
Technology and then they messwith their paycheck.
Todd Tomalak (30:02):
Right, we've seen that.
Stefanie Couch (30:02):
And then they say bye-bye and go somewhere
else.
Do you think that Home Depotwill be able to do that at SRS
and leave them to play in thesandbox like they've got?
Todd Tomalak (30:12):
Yeah, I think time will tell.
I have not heard so far thatthey've they've that they've
ruined SRS.
I've heard that they've giventhem a lot of autonomy.
I can tell you though, thatpre-SRS, uh, we had people write
in letter, long, long letters,like in in email form, uh, of
all their beefs about how howthe pros are being mismanaged at
(30:34):
Home Depot and theirperspectives on this.
So I think um this this isprobably a great example of uh
we will see the quality of ofmanagement decisions.
And if if they're able to notbreak SRS and they're able to
use like the credits been beenpretty effective so far, if
they're able to to kind of notbreak what's working well, and
(30:55):
and you some often to your toyour point, that means uh being
yielding, being flexible, notdemanding conformity for
everything.
And uh and Brad, my myintuition on this is that one,
you know, to to his credit, heseems like he's willing to
reward the white elephanthunters, yeah.
So so someone who goes out anddoes something fantastic, that's
(31:16):
what he wants.
Unfortunately, withintegrations, that's usually
what gets you know quashed.
Is we want to we want to removecost and we want to kind of
standardize and and that worksin the short term in that you
you've killed all your whiteelephant hunters.
So yeah, that that is thequestion.
I don't know.
I don't know.
Stefanie Couch (31:31):
Well, and historically throughout my
career, you know, I've been inthis my entire life.
And I've worked at somedifferent places and I've worked
with a lot of different peopleas vendor partners and stuff.
And I've seen mostly thatdecentralization is where people
really win, where you can runyour market like you need to.
You can bring the products inthat work for you, you can make
the calls on the floor rightthere in your market.
(31:54):
And it feels like the biggerthings get, that that's almost
impossible to allow because thecentralization that you need to
have to homogenize to be able towork at scale at a big company
like Home Depot or any of theseplaces, it also doesn't allow
for that on the floordecentralized, make the call
where it matters type idea.
I'm not sure how you balancethose two.
Todd Tomalak (32:16):
I think that's that's the battle.
You just articulated thebattle.
So um, and and I think, youknow, to your point of like Ken,
is there a place for some ofthese traditional that's where
their place will be if if thereis.
Yeah.
Um and they'll probably makeridiculous margins, yeah.
Do really, really well and behard to displace.
I just I just had a friend, youcan't make this up.
I just had a friend who runs acabinet production facility tell
(32:41):
me that uh they are shippingtruckload after truckload of
custom cabinets in Nantucketevery week.
The market's down.
Yeah.
There's there's we're in, theydon't even have a website.
I'm like, what?
What?
You don't even, but um there isthere is a niche.
Yeah.
And I think that's that thatthat'll be interesting to see.
And they they're able to dowhat you just said.
Just, you know, a lot of awhole lot of like decentralized,
(33:02):
flexible, because it's allcustom.
Stefanie Couch (33:04):
That's how my dad ran his business.
You know, when we had a lumberyard, we were in a really
high-end market.
We're servicing, we live, welive near and we're on the lake
that Nick Saban from Alabama andAlan Jackson, all those guys
have a house on.
It's called Lake Burton inNorth Georgia.
So we did a lot of superhigh-end custom homes.
And when they called, we saidyes.
Todd Tomalak (33:23):
Yeah.
Stefanie Couch (33:23):
I mean, that was that was the business.
Todd Tomalak (33:25):
Yeah.
Stefanie Couch (33:26):
We we got you, period.
End of story.
Whether that was in my dad'sF-250 or on the lumber truck or
or whatever needed to happen,happened.
And I don't know if a bigcompany they can try that.
It's really hard to do that ifyou're not decentralized enough.
So I'm I'm curious to see howthat works out.
With this clash of the Titans,we mentioned three people.
We have not said Lowe's veryoften.
(33:46):
They're kind of seen as theunderdog, but you actually have
some data that maybe says thatmight not be true.
Todd Tomalak (33:53):
So we we we spent a lot of time trying to
decompose why.
Why?
So so Lowe's did a you know, Iwould say both Home Depot and
Lowe's this last quarter hadbetter top line results than
than at least our team expected,way better e-commerce results
than we expected, way better.
Um because we're seeing allthis all this tough macro
(34:15):
housing data roll in.
Uh what's interesting to meabout Lowe's is this marketplace
that they've they've, you know,in addition to some of the
other acquisitions that they'redoing that they're working
directly with home builders,which hasn't been the focus of
the other two as much.
Uh this marketplace thatthey're opening, which is uh
pretty much a direct challengeto Amazon.
If you sell to Amazon today,you could sell a doohickey.
(34:38):
And uh you probably can sellthat same.
There used to be a lot of uhvery clear boundaries among
within distribution of there'sthe channel products and the
channel prices for pros, andthat's a different thing than
retail.
Uh we're seeing products thatuh originally were designed for
showroom only.
Like, you know, I'll pick on$10,000 Japanese toilet.
(35:01):
You could only buy theshowroom.
Stefanie Couch (35:02):
Yeah.
Todd Tomalak (35:03):
Like while it's at lowest marketplace right now,
today.
That's interesting.
So it it makes me get just geta sense that we've we've kind of
taken this the snow globe of uhwhere people play within
building products distribution.
You've you've shaken it up andwe're seeing what what works,
what settles out.
Um, I think the formula of whatworks in a down market versus
(35:26):
what works when that marketsnaps starts turning back.
And if if we do start seeingthese you know HELOC HELOC
funded projects, that's adifferent, that's a different
animal.
So so right now it's aboutorganic market share gains of
search, uh landing a percentageof those and then capturing them
with whatever products are youryou know your your your
preferred product.
(35:46):
So yeah, it's it's interestingto watch.
Well one nugget on on lows thatwe saw.
So we have uh this is gonna bea whole new data product that we
released, but we've got uhperfect permit data as close as
you can get to it.
You could do interesting thingswith AI.
It turns out if you drawcircles around all the Home
Depot locations and all theLowe's location, we're gonna do
(36:08):
this for like BFS and ABC andall these other ones too.
But Lowe's had a better betterfootprint, better footprint, at
least this year, despite all thedifficulties.
And so what I what I'm kind ofwatching for is you know how
much of their performance is dueto like market conditions, just
being around the right placesat the right time versus like
these operation things that arethe, you know, you get the pawn
(36:29):
to the end of the chessboard andnow it turns into a queen.
Yeah.
Um, which I know that is whatthey're shooting for.
Stefanie Couch (36:35):
Well, to quote Brad, capital is a weapon if you
know where to aim it.
If you had all the capital,Todd, and you could aim it
wherever you wanted to in one ofthese big businesses, where do
you think the place that theyreally need to focus in the most
is right now?
Todd Tomalak (36:51):
So if you put me on the the management or board
of one of these businesses, uh,I would say they need to be m
actively measuring their drawrate among um pro online
pro-online touch points.
Um they're not gonna convertall of them.
But that 9.9% number, I'll I'llshare the I'm I'm gonna talk
(37:13):
about this later on today.
Uh but the the growth that'shappening in e-commerce, that's
gonna funnel differently.
That's gonna funnel someplaceelse entirely.
Uh people were worried aboutAmazon just being a showroom.
I think what we're gonnadiscover is that every pro 10
years from now starts theirinitial job in some form of
electronic, you know, with withwith online being the anchor,
(37:37):
probably with AI being theanchor.
Stefanie Couch (37:38):
Yeah.
Todd Tomalak (37:39):
And the route of like where that goes, you had
better not be bypassed.
Um, so I I think you know,among among that group, that
would be, you know, the the thesingle biggest touch point of,
you know, so great, your onlinesales are up 11% or 8%,
depending on which party you'reat.
What's your draw rate?
Where are they going?
We're seeing some, this is mypoint before about some of the
(38:00):
e-commerce pros.
So not just people goingonline, but pros going online
shopping, and then they go tomanufacture direct, like big
builders.
I want to know that.
That's important to know,right?
Versus, so um, I haven't heardany of those three solve that
problem yet.
That's where they should bespending their time.
Stefanie Couch (38:19):
I think I think that's a really good point.
And figuring out how people aregoing to be searching in the
future and what they're lookingfor, because that's changing
really quickly, too.
Of you know, long tail searcheswith AI, people are being way
more in depth and how we'reactually how it's being found is
so different.
I mean, I don't search onGoogle anymore.
I do everything I search onChat GPT.
Todd Tomalak (38:40):
Sure.
100%.
Take my preferred, preferredpunch list for every product
that I like to use when I builda home.
Start there, give me the giveme optimal pricing.
What other things can I likejust these are all things that
couldn't be done five years ago.
Stefanie Couch (38:53):
What other products should I think about
instead of this one I've beenusing for five years or you
know, for sure.
Right.
All right.
Well, one big question I'mgonna put you on the spot.
If you had to pick a winner forthe Clash of the Titans, who is
it?
Todd Tomalak (39:06):
Oh, are we are we calling individual names?
Stefanie Couch (39:09):
If you're thinking of an individual, then
I guess I maybe know youranswer.
Todd Tomalak (39:12):
So I think in terms of pure upside, uh QXO is
interesting simply because toyour analogy before about
getting involved with with Teslaand Elon very, very early.
If you buy the dream, you'revery early.
Yeah.
Stefanie Couch (39:29):
Right.
And if he's right, he's reallyright.
Todd Tomalak (39:31):
I need to see him double, I need to see him double
earnings.
I need to see him do that andprove that he can organically
draw like this digital pro tohis if he can do that.
Ooh, there's a lot of upside.
Stefanie Couch (39:41):
Yeah.
Todd Tomalak (39:41):
We need to see that.
Um if he can't do that, youknow, or if we see Home Depot
prove that they can scale SRSreally, really well without
without squishing, you know, allof the soul and spirit, um,
then then I think it turnsreally quick.
So I I say the jury is stillout, uh, but I I do believe that
(40:02):
the dollars, the dollars arethere and will be allocated uh
probably closer to like winnertake all, you know, at least in
terms of margin dollars.
It'll look like Apple's, youknow, share of share of uh uh of
of phone revenue versus shareof phone margin.
Stefanie Couch (40:17):
It feels a little bit like betting against
him.
It's like betting against TomBrady at the Super Bowl.
I mean, the odds are verysimilar.
Todd Tomalak (40:24):
Yeah, maybe, maybe uh Belichick, right?
So he was good at building,building kind of franchises of
of people that were were underundervalued, but were were
willing to be there, includingBrady for the dream.
Um, yeah, so that that we weneed to see the ring, the first
one, and then probably the thethe next ones will come.
Stefanie Couch (40:43):
Yeah, it's gonna be a really interesting thing
to watch play out.
Well, thank you so much forjoining me today, Todd.
I hope that we can watch thistogether, have another
conversation to keep on trackabout where we are in the
market, because it's gonna be acrazy next year or two.
Todd Tomalak (40:58):
Very exciting.
Thanks for having me.
Uh, excited for the conference,and we'll be listening in the
future.
Stefanie Couch (41:03):
We'll see you on the next episode.
Thanks for joining us on theParadigm Industry Insiders
Podcast.
If you enjoyed today'sconversation, be sure to
subscribe on your favoritepodcast platforms and follow
Paradigm on LinkedIn and YouTubeto catch more stories,
insights, and ideas from yourpeers across our industry.
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