New Product Mix
Revamping inventory became a necessity in the past 16 months. Buck Lumber of Charleston, S.C., picked up stainless steel cable rail systems used in docks and decks and saw architects and consumers alike begin embracing the product. “We focused our sales staff on it, and it has been a very good product line for us,” says company president Glen Hoy. “We grabbed a few hundred thousand in sales that we didn’t have a year ago.”
Tindell’s eliminated paint sales altogether, took out one-third of its hardware items, and reduced the number of trim items in stock. Roofing lines on hand also were severely diminished, but that doesn’t mean it has stopped selling those goods.
“With supply chains being relatively short, we’re not going to stock those products but we are not going to tell the customer ‘no’ either,” van Tilburg says. In the case of roofing, Tindell’s distributor is just two hours away and promises next-day delivery.
“The product comes from the vendor or distributor, it comes in the morning, we deliver it in the afternoon, and the customer still thinks you are stocking it,” explains van Tilburg. “The customer doesn’t know the difference.”
Although National Home Centers did not eliminate product–the dealer carries everything from furniture to appliances–it did make cuts across the board regarding how much inventory it kept in stock. As of April, the dealer had conducted eight monthly inventory reviews, and it planned to continue them for another four or five months.
Other dealers trimmed spending levels for information technology, typically to less than a half percent of revenue. And planned web-based services such as customer account access, online purchase orders, and online payment and invoicing remain undone.
New Products
Honsador Lumber of Kapolei, Hawaii, started to import cabinets from China and sell them under the company’s “Islander” private label line, which already includes vinyl windows. CEO Carl Liliequist says the margins the cabinets provide “are substantially better than what you get from a U.S. manufacturer” and the quality was “incredibly good.” Stock has an extensive sourcing program in China that it sells under a private label, and ProBuild is co-branding a circular saw blade.
As steel prices rose until the end of last year, the Hawaiian dealer used the opportunity to sway customers to wood joists. “We took a hard look at our engineered wood and made sure we had the right program in place. That has worked out well,” Liliequist says.
“In a very competitive market, it’s easy to get concerned about sales that you forget that you need to have the right programs in place with your suppliers,” he explains. “We were competitive and we managed our margins.”
R.P. Lumber of Edwardsville, Ill., found staying on top of the constant slide in lumber prices to be a challenge last year. “You’re bidding jobs and you’re never sure if the lumber is going to be constant or go up,” says owner Robert Plummer. Oil’s Not Well
Gas and oil prices proved to be a thorn in more ways than one in 2008 as well. Shingles, vinyl siding, nails, fasteners, and rebar were also affected, Plummer notes. “It was amazing how many metal products were impacted by oil prices.”
Outside the top 10, one of the few dealers to make any noise acquisition-wise in 2008 was Alpine Lumber of Westminster, Colo., which took over five locations from Las Vegas?based A.C. Houston. Alpine Lumber climbed to No. 25 on this year’s rankings while A.C. Houston, No. 52 on the 2008 list, chose not to participate this time, but it remains in business and in fact recently purchased another Las Vegas dealer, Sandlin Lumber.
“We have a very strong balance sheet, good quality people, and good quality systems in place,” says Bill Miller, Alpine Lumber’s president. “That’s what allowed us to grow the company. And frankly, we were acquiring first-rate acquisitions, not broken-down businesses.”
Last year, Ridout expanded into the commercial sector when it made drywall sales an in-house process and part of its Arkansas Wholesale division. While it did help offset a decline in the residential market last year, commercial sales have slowed since.
National Lumber Co. of Mansfield, Mass., didn’t do anything all that different in 2008, says company CEO Steven Kaitz, but he also notes that “we did a lot leading up to last year.”
The eight-unit dealer emphasized commercial and multifamily sales, expanding into the New York and New Jersey markets. Two years ago, National Lumber also bought a yard in Worcester, Mass., along with another in 2008 in Boscawen, N.H. Both lumberyards are capitalizing on remodeler and residential sales.
“That’s what we will look to do in the future,” Kaitz says. “We feel we need a presence with a lumberyard along with a kitchen showroom and store that is adequate enough to service contractors that want to come for a quick response.”
Honsador knew ’08 was going to be an off year, but the fourth quarter became “disastrous,” according to Liliequist.
An electrical distribution company acquired in 2007 helped garner more maintenance and repair sales as well as commercial business. Military construction on the Hawaiian islands continues to be an opportunity for Honsador that most dealers on the mainland don’t have either, with 15,000 units in line to be built or rebuilt.
As others downsize, R.P. Lumber has its sights on expansion as early as this year with the opening of its 45th location.
“Our goal is to get to 50 yards in the near future,” says Plummer. “We have some physically good locations in decent economic areas.” Despite tough times, sales at R.P. Lumber slid just 2.3% last year to $167 million.
R.P. Lumber ramped up its fleet with the addition of eight more vehicles, including 36-foot ladder trucks. The Illinois dealer has been selling a lot of roofing materials and the “large investment” allowed for quicker deliveries, Plummer says.
The dealer also put in a new takeoff system that allowed it to transfer information straight into its computer system, providing more efficiency.
In the meantime, R.P. Lumber took a close look at road sales. With new-home construction down, the dealer took salesmen off the road in several territories and the transferred them into management or takeoff positions.
Erie Materials held its annual power sales meeting two months earlier this year and is emphasizing a “back to basics” approach. The dealer has doubled its amount of sales blitzes while revamping its quoting and estimating system. A better follow-up system allows Erie to keep track of every job, whether it is a $500 window or $50,000 project. “We will know the details of every job we quote,” Neumann says. “Why we got it and, more importantly, why we didn’t get some.”
Buck Lumber recently switched from a six-month to three-month budget system. According to Hoy, the new method presents a more accurate picture of how the business is doing in relation to the market.
“It allows a little more flexibility and psychologically, it brings you into a tighter focus,” Hoy says.
Others remain more than curious about what 2009 will bring: more of the same or an upswing. “Now we are waiting to see,” Liliequist says. “Are we going to see some signs of recovery?”
There are indications that the housing crisis has, at the least, bottomed out. Sales have risen in recent months in states like California, where home prices had fallen so much they brought new buyers onto the market. There also are indications that foreclosed homes slowly are working their way back onto the market and getting sold, eventually reducing the backlog of existing homes to the point where new ones will need to be build.
And the RISI research group predicts housing starts will rebound in 2010 to 1.09 million starts from about 600,000 this year.
But that’s next year. “The goal this year is not necessarily a profit,” van Tilburg says. “The goal is cash flow.”
Download 2009 ProSales 100 List (PDF)
