Get Out, Stay Out
These tough times also mean that dealers have to review who they sell to, as well as what they peddle. While sales to remodelers have swelled this year to an average of 19% of survey members’ sales, single-family custom home builders continue to be the biggest source of business, averaging 34% of dealers’ sales. Two years ago, custom builders accounted for 38% of sales and remodelers just 14%. But even though the percentages have changed, often the faces of the customers often have not.
“A lot of builders just changed and, instead of getting out of the business altogether, went over to remodeling,” notes Bill Lummus, president of Atlanta-based Lummus Supply, one of seven companies on the survey that gets more than 50% of its sales from remodelers.
“We never closed to the public, like some of the people that have gone to the wayside here,” Lummus says. “Back in 2004, 2005, 2006, when the building trade was great for the builders, [some competitors] closed their stores to the public, and some to the remodeler. We never did that, even though at times it was a hassle to handle the building and remodeling and consumer trade. Right now, I’m so glad I did.”
“We also do a significant amount of business in retail,” says Central Valley’s Patterson, whose home facility in Napa is known locally for its garden section. “This is just your cash business; your John and Jane Q. Homeowner who walk in. Again, this is because of location and amount of time we’ve been in the community.” Indeed, more than 41% of survey respondents predict their retail sales will rise 5% to 10% annually over the next few years.
CVBS also exemplifies how dealers have widened their scope of business in recent years, both locally and globally. Being located in wine country enabled CVBS to build a business selling irrigation-related products, such as pipes and tubing for the vineyards. Now Patterson has set up a business that exports building products to Asia. “The clientele that we’re gearing our sales toward is much the clientele that we would have here in the United States,” says Patterson, who was in Tokyo when the massive earthquake struck Japan in March. “It’s going to be a more affluent individual, it’s going to be someone who is looking for certain products that complement the type of architectural appearance of the Western-style house.”
For many other dealers, installed sales and commercial business are seen as growth markets. Most ProSales 100 dealers predict sales in those categories will rise between 5% and 10% annually.
However, a number of dealers still believe there is hope for the new-home building market, as 34% expect that segment of their business to grow 5% to 10% over the next five years. They’re a bit less bullish on remodeling: 24% of responses predict that segment to increase 5% to 10%, while 43% expect it to show no change over the next five years. That may reflect the fact that dealers have expanded into that market already.
Going Up
The products and contractor services offered by dealers have changed little over the past year, though comparisons can be difficult here given how the participant mix changes annually. Roofing, which fell four percentage points this year as a product offered by 86% of ProSales 100 members, is expected to rebound well in the coming months, especially following the harsh winter many regions faced last year. It would not be too surprising to see the number of dealers carrying such products rise over the next few months.
“All indications are it’s going to be a really strong roofing year,” says Neumann, whose company specializes in roofing products. “The really harsh weather will cause [roofing] damage.”
Lumber and timber prices have been a hot-button topic for ProSales 100 dealers. Many a survey member has eyes and ears fixed on China, which has become a major importer of timber from Canada and the United States, often for making concrete forms. Dealers say they are worried about potential price hikes should China get hungrier for product or the domestic U.S. construction market start booming.
With many dealers pursuing remodelers, retail customers and commercial sales, one potential outcome is that dealers will have to increase the number of products they stock. Not everyone thinks that’s a good idea. “I would say product diversity hurts you during a down economy, while product focus helps you,” says SRS Acquisition’s Tinker, whose company’s inventory is 92% roofing products.
The services dealers offer have remained pretty much the same, with same-day delivery keeping its years-long hold at the top of the list. However, as gas prices have risen, contractors look for tricks to keep their own costs down, and remodelers take up a larger share of business, concerns about the cost of deliveries have grown. In a recent blog post, Jim Sobeck, president of West Columbia, S.C.-based New South Supply, says many dealers “aren’t aware that small orders are eating them alive.”
Regarding technology and online offerings, this year, 43% of the Top 100 say they plan to spend between a quarter percent to a half percent of sales on technology and computer system products and services. In constrast, last year only 33% of ProSales 100 dealers were willing to spend that much.
Websites remained the most popular online service, followed by customer account access, with third place going to inventory and pricing inquires sent via e-mail. These results show that dealers are becoming more aware of the benefits of technology and are willing to use them in ways that make their businesses more efficient and effective.
About the Survey
The ProSales 100 is a ranking of the nation’s top professional-oriented lumber and building material dealers based on the results of the 2011 ProSales 100 survey. Most of the data was submitted by dealers via an online poll created and managed by Specpan, part of the Farnsworth Group of Indianapolis, or through e-mailed responses from business owners themselves.
For virtually all dealers, the report is based on what the participating companies told us. The only major exception is Allied Building Products, whose figures are based on the yearly report filed by its parent company, CRH. In a few cases we have supplemented dealers’ incomplete reports with information taken from their websites or via e-mail requests. No estimates were made of sales, facilities, or personnel.
Any sections where a company was unwilling to provide specific information was marked down on the survey listing as not available or in the reports of aggregate data as no response.
Not all dealers answered every question, so the percentages shown in the tables and charts that appear throughout this report are based on the number of dealers that responded to that particular question.
The survey and its contents represent full-line lumberyards, lumberyards with manufacturing capabilities,and specialty dealers that sell various building materials. Dealers in the survey had to have at least 50% of sales go toward professional customers, which include homebuilders, commercial builders, remodelers, and other professional contractors.
If your firm would like to be considered for next year’s survey, please contact assistant editor Brendan Rimetz at brimetz@hanleywood.com or editor Craig Webb atcwebb@hanleywood.com.
