Contractor's discount - is there a standard?

dedtiredNovember 12, 2009

Hi. I went to Ferguson and picked out what I want for my new MB. The total was astronomical but I am repeatedly being assured that the contractor's price will be less.

I am wondering how much less. IS there a standard or usual discount for a contractor? What is that? I don't suppose it's 90 percent ;)?

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it depends on how much business the contractor does with the company. I know of some showrooms in the area where I'm told I can buy Daltile for less at retail, than I can buying with my contractor's discount at the Dal warehouse, because of the fact that I don't do nearly as much business with them as these showrooms do.

    Bookmark   November 12, 2009 at 11:27PM
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I like Bill's honesty and I will be very honest too. There is much written on this so I'm not divulging any trade secrets here.

Many contractors (and suppliers) don't want the end user to know the true costs of supplies. That's not to say they are devious but when these costs are known, it can cause the end customer tremendous anxiety. There are various reasons and philosophies for this, so we'll leave it alone. We all know what MSRP is and unless it's a fair trade item, you should never pay MSRP.

It does depend on what the products are and the line of work as to what a contractor may see in discounts. For example, a suppliers catalog that lists refrigeration or electrical parts and supplies, the contractor can expect to pay 50% of that. Higher volume users can expect to pay even less. To get an even bigger discount, the contractor would enter into a contractual agreement with the supplier with an estimate of the minimum qty to be purchased during the year. The supplier comes back with various costs for various qty's and then at the end of the year, everything gets settled up if less than minimum is realized.

Building supply companies are a bit less, usually around 10-15% if you make large and frequent purchases.

As Bill has mentioned, I can go to my supplier for an item and get a price that is more (wholesale!!!!) than what it would cost at a Big Box Store.

Here's a rule of the thumb that consumers won't like but, someone wondering what base line to use for charges when in or, starting a business. Whatever an item costs the business, mark it up 300%. So if you have a contractor who keeps reducing his labor rates, run away. If you get a contractor who makes recalculations on the cost of materials, he's working within that 300%. Some will be honest and only say "here's what I can do". Others might say "I found a different place to get the same thing cheaper". Many have found that perhaps a contractor may refuse to buy from anywhere other than his supplier or won't warranty anything from another source. This is a good deterrent ploy to help them keep their purchasing power with their supplier. Knowing that, can make it advantageous to the end consumer.

Companies need to pay their bills, meet payroll and make a profit. So don't expect to pay "cost".

A homeowner can get a contractors license in most localities, for their own work. That means pull your own permits, schedule inspections, contract with any subcontractors, make deals with suppliers and get the job done on time within budget. Or, just pay a good contractor to do all these things and get your best price after consulting several contractors.

I'm hoping this info might help to settle your mind a bit on "sticker shock" and, to make you aware of what's involved and what to expect when choosing a good contractor. Never be afraid to ask for some value added incentives. For example, an upgrade of a particular item. The difference in contractor costs isn't that much and unless they are a very busy company, will do that "if they get the job". A good contractor might charge a refundable fee (if they do the work) for estimates. That allows them to give a good rock bottom competitive price from the very beginning.

    Bookmark   November 13, 2009 at 10:54AM
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To answer your questin, no, there is no "standard". Any discounts can range from 2% to 50% for product, depending on where the contractor shops and what price that "discount" may be taken from A 2% discount at a big box store may yield a much better bottom line price than a 50% discount at some places, or vice versa. 50% of $100 is still $50, and so is 2% of $52.

However, unless your contractor figures in the time spent sourcing and transporting your products as labor, expect to pay markup for that sourcing and transportation on the materials that will eat up any "savings" to be had from discounts. If you count your time as worth nothing and do the shopping around sourcing and transporting your own products, be prepared to possibly encounter an upcharge in the actual labor costs that your contractor will charge to be able to cover his profit margin. Sometimes, part of that profit margin is in the product markup, and that is why you get a lower labor bid from some contractors. But, a certain job will cost a certain amount bottom line, and exactly how a contractor calculates that is unique to each contractor. You're better off comparing total bid cost when comparing contractor bids rather than chasing your tail comparing "materials cost".

    Bookmark   November 13, 2009 at 11:39AM
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Another issue with bargain shopping would be inconsistency in the availability and quality of products. The supply houses your contractor uses would be more apt to have replacement products consistent with what you have, later down the road. Using the big box stores, you'll see many items discontinued or obsolete and no way to procure replacements.

    Bookmark   November 13, 2009 at 3:02PM
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Wow. What amazing information. I have not been able to get a straight answer anywhere else.

When I remodeled my kitchen, I used a kitchen designer who managed all the purchases except the appliances which I ordered myself. So, working this way is new to me.

Now I have a much better perspective on how all of this works. Thank you all for taking the time to post these extremely helpful responses. I hope it helps others as well.

I'm going to print this and save it!

    Bookmark   November 14, 2009 at 8:13AM
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Thank you to the Poster who emailed information to me. I tried to respond but it bounced back. That was great info and I appreciate your message.

    Bookmark   November 15, 2009 at 3:05PM
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