A Longer Reach
Despite reducing its overall size–no surprise given the Minneapolis-St. Paul market’s nearly 30% decline in building permits last year–Scherer Brothers says it actually increased market share. That’s partly due to the number of competitors that went out of business in the past few years, Pete Scherer says.
Numerous dealers who reported this year echoed those sentiments. ProSales’ list of facilities that have closed nationwide since January 2008 now tops 1,000.
In New Hampshire, Benson Lumber rolled up its sleeves to gain market share in 2009 and picked up as much as 20% in new business, it says. That 20% allowed Benson Lumber’s sales to remain steady at $19.6 million in back-to-back years.
“If we had not brought in that new business, we would have been down this year,” Brad Benson says.
“Tracking and bringing in new leads has been our life blood,” Benson explains. “Our salespeople have been very good at chasing and bringing in those new leads.”
In fact, Benson hired two new sales personnel this year and is planning to hire another in the next three months. Nationally, salespeople have been pretty easy to find. The decline and disappearance of some dealers has led to a steady flow of quality salespeople seeking work.
ProBuild, the nation’s largest dealer, says it has hired as many as 250 new salespeople in 2009, giving it a net gain of roughly 70 outside sales reps. In contrast, its overall staff count fell 14.3%, in part because it ended 2009 with 31 fewer facilities than it began.
Some dealers are finding new niches to tap. Central Valley Builders Supply (CVBS) was hindered not only by the burst of the housing bubble, but also by a downturn in northern California’s vineyards, to which CVBS sells irrigation supplies. The company has found success selling products to Asia. Napa Valley International, CVBS’s new export company, is marketing a variety of building products–including lighting fixtures, furniture, carpet, and dé cor items–to Japan, China, South Korea, the Philippines, and Australia.
“Every dealer out there is always looking for something innovative,” says Bob Jessell, vice president of CVBS. At this point, CVBS finds itself shipping a 35,000- to 40,000-square-foot container to Asian ports at least once a week. Recently the subsidiary shipped an entire container of medicine cabinets. The division pulled in about $2.5 million in additional sales during 2009, CVBS reports.
“It’s not huge, but it works out well for us,” Jessell says.
Ring Technicians
Despite tough times, dealers are not turning their backs on technology. Both ProBuild of Denver and Harvey Building Products of Waltham, Mass., introduced new enterprise resource planning (ERP) systems.
ProEdge, ProBuild’s internal version of an ERP system, was rolled into 70 locations last year, and the company is in the process of introducing the system to Northeastern facilities this year. Harvey began designing a new system last year, and it’s slated to be introduced this month.
According to Jodi Flodin, Harvey’s business analyst, the new system will streamline several systems into one, including purchasing and finance.
While many companies in this industry have a reputation of being slow to buy into new technology, Campbellsport doesn’t intend to be counted among them. The dealer has armed all its managers, cabinet sales personnel, and outside salespeople with Blackberry devices.
“That’s not normal for the Midwest,” Fleischman contends. “We believe strongly in technology and changed all our managers into sales people. It’s critical.”
Software written by Builders. programmers has assisted in increasing stock returns and stock positions in the company. Following the implementation of the program, inventory turnover has increased by one full turn this year, and the percentage of products in stock has increased to 98.2%.
“We’re trying to be more efficient and make sure we understand what our customer is looking for,” Andersen says. “Customers have more choices than ever before, and the Internet has opened a whole world to buying products.”
Getting off the Canvas
Bill Lummus, president and CEO of Lummus Supply in Atlanta, is tired of being in any sort of survival mode. Last year the company paid off all of its debts.
“It was a leap of faith, so to speak, but we felt it was something we needed to do,” Lummus says.
“I don’t want to survive, I want to make money,” he adds. “I have to be ready for the opportunity that’s out there.” Now Lummus is financially prepared for 2010. It has a good line of credit, and it’s in good standing with the banks.
At the same time, the company is pursuing more remodeler customers and has established a special pricing index for remodeler customers, which is more than 40% of Lummus Supply’s business. That’s not unusual. The share of sales that ProSales 100 members say they’re getting from remodelers has climbed from 10% in 2006’s survey to 15% this time.
“We are looking at all of our opportunities,” Lummus says. “And if I’ve learned anything in 38 years of business, I’ve learned you never say ‘no.'”
Hamilton, another dealer that focuses on remodelers, has taken a similar tack. “We’re creeping into the larger production builder and homeowner [segments] as well,” Coleman says. “There are gaps out there. There isn’t much between a big box and a Stock Building Supply, quite frankly.”
Dealers are learning to position themselves in a manner to garner as much business as possible from a market that is likely to take years before it reaches as little as 1 million single-family housing starts.
“We call this the ‘new normal,'” Fleischman says. “It’s not going to get a lot better, it’s not going to get a lot worse.
“All of us dealers just have to figure it out.”
