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The Death of an Industry (or not)

April 8th, 2011

 According to IBISWorld, a respected economic, demographic and government research company, Manufactured Home Dealers are one of the top 10 key industries that are dying in the United States. In their special report dated March 2011, over 700 industries were researched. The report stated that there are life cycles that industries go through, which are growth, maturity, and decline, and that even in a recovery declining industries will continue to underperform.

Of those identified as the top ten, Manufactured Home Dealers ranked 3rd in revenue fall off, declining 73.7% from 2000 to 2010, only behind apparel manufacturing at 77.1% and Record stores at 76.3%. Projections from 2010 to 2016 propel Manufactured Home Dealers to number 1 on the list, projecting a further decline of 62%, with Record Stores and Photofinishing a distant 2nd and 3rd at 39.7% and 39.1%.

Evaluating these Industries based on number of establishments, Manufactured Home Dealers had 3,968 in 2010. From 2000 to 2010, Manufactured Home establishments declined 56.7%, ranking 4th on the list. The forecast from 2010 to 2016 places Manufactured Home Dealers at the top of the list again with a projected decline of an additional 58.7%, with Video postproduction services trailing at 37.8% and photofinishing at 33.3%. If this prediction holds true, less than 1,700 Manufactured home establishments will remain by 2016!

The report singles out the Manufactured Home Dealer’s demise based on lack of product change, stating manufacturers have only made cosmetic changes and these changes have not been significant enough to lengthen the life cycle. This industry stagnation doesn’t delegate all players to extinction though. Those that focus on niche markets and dominate the markets of where the competition has diminished could gather some profits.

More importantly, how will manufacturer’s respond with product evolution that buyers, lenders, and appraisers will support? The Manufactured Home Dealer network has historically been a successful channel of distribution for manufacturers. Without it, sales numbers will continue to dwindle and more manufacturing facilities will close. There are thousands of capable career professionals working at these Dealerships. Product innovation and development could resuscitate the patient and stabilize an industry that, by the opinion of those that report to business decision makers, is a dying breed. Does this new widget rise from the ashes as a manufactured home? What is that innovation, that paradigm in factory-built housing that will wake up the giant searching for evolution? We have an idea, now will the industry embrace it? What ideas do you have to advance the industry’s cause?

By Otis Orsburn
hybridCore Homes

Otis is 40+ year veteran of the factory-built housing industry and is Vice President of hybridCore Homes, an innovative startup company offering site built homes with factory built cores. He can be reached at 707-523-3673 x 109, email: otis@hybridcorehomes.com. The company website is www.hybridcorehomes.com

  • Dustinyoungdahl

    As owner of Youngdahl Homes and someone who grew up in the mobile home…manufactured home…modular home industry I’m excited about the future. With all down cycles and shakeups newer, better and more creative products & services will arise. The profits at the top of the bubble were great, but the challenges we face now will make us survivors that much stronger, more prepared to better help our clients and smarter at doing all the right things.nnThe engineered housing industry will only grow and improve because our quality & efficiencies cannot and will not be ignored. The stereotypical metal on metal mobile home will be equated with great grandma & nostalgia rather than present day reality. The future of factory built housing is at the intersection of efficiency, quality and creativity.nnHybrid Core Homes is poised to be a leader in the housing industry and I applaud their creativity. At the age of 39 Iu2019m looking forward to my next 30 years and the exciting times ahead.nnDustin YoungdahlnYoungdahl Homesn916-275-8168ndustinyoungdahl@gmail.comn

  • Steve Guluk

    Retailers need adapt or face the plight of any business not keeping up with the times. Being that so many retailers are entrenched in the methods of the past, this gives greater opportunity to those that embrace change as an opportunity.nnFor instance, how many Retailer still expect walk in traffic as their main means of sales? How many do not have viable websites that list their current listings? How many understand that SEO is just as important as having a website (if you don’t come up on the 1st page of Search Results, you virtually don’t exist).nnHow much of a Retailers operating budget is slated for their online marketing?nnThe internet is a daunting series of technical tasks for many Retailers. One thing Retailers can do to modernize and compete are subscribe to the Retailer Toolkit (RTK).nhttp://RetailerToolkit.comnnThe benefits of the RTK are listings are posted without the need of a webmaster. nThe RTK resizes photos and creates slideshows.nAnyone of the office sales force can update listings and deploy marketing methods (adding Sold signs or just listed to encourage “buy before their all gone” mentality).nand many other basic features that can be managed by office staff rather than hiring webmasters. Check the link above for more details.nnLastly, I don’t think Retailers are destine to the path of the dinosaur, they just need understand that they need complete on the current playing field.nnRegards, nnnSteve GuluknSGDesignnn

  • Otis

    Thank you Dustin for the accolades. Understanding where the housing market is going and in what way will the factory-built segment participate in its future is the first step. As Doug Gorman so aptly stated in a separate article, how many buggy whip factories are in business today? Traditional home builders accounted for over 497,000 (87.65%) of new homes in 2010. Manufactured homes accounted for 50,046 (9.85%) and Modular homes were 12,709 (2.5%). If factories were building product that traditional homebuilders would use and the public accepts, I firmly believe that a tipping point will be achieved that will benefit the entire factory built housing industry, including manufactured home dealers. We have that vision and the experience to execute it with the right partners too. Thanks for your input.

  • http://BobStovall.com Bob Stovall

    Amen, Steve.nnNot only do the factories need to keep up with the latest technologies, everyone in the sales chain needs to also. Retailers and communities that refuse to communicate with their customers using the new tools will fall by the wayside.nnThose who believe that using the new technologies is only for the very young are not only missing the opportunity to acclimate a new generation (one that doesn’t yet subscribe to past stereotypes) to the benefits of factory-built housing, they are also thumbing their noses at another huge potential market of retiring baby boomers. People 55 and over now constitute the biggest growth segment for Facebook.nnThose who haven’t seen your “Dominate Your Local Market” presentation yet need to know we’ll be presenting it at Congress in Las Vegas and at the Great Southwest Home Show in Tulsa in just a few weeks.nnNow is the time to have your online marketing strategy thoroughly reviewed with an eye to making more efficient and more cost-effective. That is just one of the things we do here at MHMSM.com to help ensure a health future for the manufactured housing industry.nnPlease see:nhttp://www.mhmsm.com/website-reviews

  • Otis

    You know Bob, it goes farther than just technologies. Future homeowners want a sustainable home that is beautiful, affordable, and reflects their successes in life. It is still one of the most important decisions of their life. Social acceptance is still very important. When the industry is building the same floor plans and elevations that were prevalent 20 years ago, what do you expect? I KNOW that there are professionals that will propel us to the next paradigm that is severely overdue. Roberto Kritzer of Champion Homebuilders is an example of the elite, and I know there are many more that, if allowed to address the true desires of the homeowner with value engineering as a compliment instead of the dominant element in home designs, factory built home technology will get the attention and business it deserves. It’s time to think outside of the BOX.nnnnnnnnnnnnnnnnnnnnnnnnn

  • http://BobStovall.com Bob Stovall

    I agree 100%, Otis. But once the items you mention are in place, it comes down to being where your potential homebuyers are and, more and more, that means having – and using – a well thought out online marketing program.

  • Steve Guluk

    The well thought out marketing plan and the product that backs up that plan is what is needed. The market has a very entrenched negative stereotype that will take some serious work to over come.nnMarketing is perspective. The current perspective obviously needs to be changed. On Retailer lot homes should be displayed in a manner so they mimic their site built competition (raised parameter or sunken base area would be ideal). Retailer websites should reflect the same commitment and professionalism / investment stick-built tract homes produce.nnThe golden ticket may be a new market wide re-branding. A new product title. A different buzz word. For instance, ” cloud computing “… which is an enigmatic word that in reality is a simple re-branding of “shared resources”. It’s fresh, it sounds new but is simply a distributed network method that has been around for a years. nnMy business is Design and Marketing online so forgive my lack of understanding in some of these areas related to manufactured homes, but was not “Modular” the key that was supposed to bridge manufactured homes and foundation based stick built homes. Again, from my consumer perspective, we have considered dropping a manufactured home on a lot in an ideal location as a vacation home. But what concerns us as an investment is the stigma and expected lower returns when re-sold. But if that home transformed into a regular stick built home as soon as it was anchored to a proper foundation, we could appreciate the best of both worlds. The efficiency of a home built on a production line, the low cost of initial purchase and then the relative appreciation based on true product quality and location. That, is the bridge that needs to be spanned to really help this industry.nnThe day we can drive through a neighborhood and not be able to recognize a manufactured home from a stick built home, and at selling time, two homes side by side, one manufactured and one built on site, sell for their market value based on location and quality alone, is when the stigma of trailer homes will be overcome.nnRegards, nnnSteve Guluknhttp://SGDesign.comn(949) 661-9333

  • Tony

    Steve,nJust curious, what experience do you have marketing HUD Code MH product? How long a history associated with HUD Code marketing and sales?nnInsights (from inside, or outside) and ideas about the industry do deserve consideration. What is really compelling is when a success story is available. You would be pleased to know that Bob has those success stories to share.

  • Harry Karsten

    Otis,nVery well written. I disagree with your analysis of the problem. The products in many markets are well designed and very suitable for conventional home buyers. The problem lies with the disconnect between the manufactered home and delivery to the site, available sites, financing etc. There may or may not be a demise of retailers but it won’t be because of lack of innovation.nHarry Karsten

  • Otis

    Hi Harry,nI appreciate a person of your stature weighing in on this. There is no disagreement that the delivery system for manufactured homes is broken too. Clarifying my earlier opinion, some manufacturers have made some inroads, but everything seems to be prioritized based on price. I am the first one to admit that there are some exceptions. People that make business decisions based on reports like the one by IBIS are looking at what IBIS perceives the majority of manufacturers build and dealers offer nationally. I am quoting the report that states the lack of product change. I would like to affirm your acumen for creating some beautiful designs. My challenge is, if we honestly feel that our innovations are sufficient, then what must the dealer network do to stay alive? Doing the same thing they have always done is not working. I believe they should expand their factory-built product offerings beyond manufactured homes to capture more than just 10% of the single family housing market. Make good use of the experienced professionals that exist in our Dealer network. This will keep the dealer in business as well as the manufacturer.nRespectfully,nOtis

  • Ken Rishel

    This issue is another version of the blind men and the elephant. Based on what we do, we see different parts of the elephant. That retailers are dying out should be of no surprise to anyone as it has been happening for years.nnI would disagree that the manufacturers are solely responsible, especially based on their build quality. Manufacturers (in general) can turn out products superior to stick built today. They turn out what their market (retailers) thinks they need. They are, market driven, and they build what the retailers will buy, because they are not able to operate a push – pull marketing operation. nnWhere they could be faulted is in their slowness to react to the opportunities that communities provide and in their lack of effective use of their resources to help community organizations build effective marketing and sales operations. Like retailers and community operators, they have also been very slow to step up to the plate and provide captive floor plan organizations, which most of them could do with less trouble than retailers and community owners are having in setting up their own finance organizations. Both of these things would be in their best interests so I am always puzzled at the lack of effort.nnRetailers, for the most part, are still stuck in the 1990s, and their unwillingness to change is the reason for their decline. While financing is a problem, it is a problem they could solve if they would invest some money and a fair amount of effort in learning the things they need to know to solve the finance problem permanently. They also need desperately need to learn real marketing, which would, in turn lead them to better advertising. While the internet does provide real opportunity, most of them are doing exactly the wrong things and attracting people who will buy, but can’t pay for a home, while turning off the harder to sell, but more likely customers. In my opinion, independent retailers should be focused on modular homes, not HUD Code, unless they have a good community market to sell into. nnToo many communities are being operated by number crunchers today, and they are slowly destroying their asset base by failing to recognize a community should be a place people want to live in, rather than a place they have no choice but to live in. Still communities are the great hope of a HUD Code recovery. Community living is a fantastic choice for an aging population, if the community is not busy turning a meadow into a ghetto. There is terrific opportunity for 3.5 to 5 star communities either for existing communities or development of new communities to blow the roof off all the HUD Code sales numbers in the next 10 years, but it will not be done with repos and FEMA homes.nnOutside lenders are likely not going to change very much unless a few just give up the ghost, or MHI doesn’t get changes in the Dodd-Frank Act, which would pretty much sink most of the chattel financing by anyone. Are they financing everything that deserves to be financed? No, but that is what captive finance can solve if people are willing to work at it. Captive finance should be financing 80% of new homes sold. If they were, there would be a lot more new homes manufactured and sold, and we could begin to focus on the image campaigns that many think are necessary.nnAs far as image building, the best ideas I’ve heard were in an off calendar meeting in Las Vegas last year by Ed Hicks. Given a limited attendance, nothing has happened except Ed’s continued passion for a great idea.nnAre parts of our industry dying? Absolutely. Do I have hope for the future? Absolutely. The survivors that are left will be the very hard workers who possess both the tenacity and brains to work with others like them to rebuild a great industry once those who are just taking up space and complaining are out of the way.n

  • Steve Guluk

    Tony. I have at least 10 years working with Retailers and Manufacturers in this market. Additionally, I have a number of success stories. Do you need some help that I can assist you with?