Back to Basics Deep inventory requires specialty distributors to make a commitment to product education beyond just the bell-and-whistle specs to both understand and sell into the job-specific applications of their various customers. Additionally, distributors must increasingly compete on both immediacy and quality of delivery as traditionally time-starved customers become even hungrier for superior—and quick—service. “Product knowledge on the part of our employees is definitely a key to success in our market,” explains John Stevens, assistant manager for Doylestown, Pa.–based Marvic Supply, a six-unit specialty distributor of windows and siding selling to accounts in New Jersey and eastern Pennsylvania. “Contractors call or come in with questions and they want an answer yesterday. Beyond that, you want to have competitive and correct pricing—not cheap pricing—and support that with correct billing.”
Luck suggests that the notion that specialty distributors—or their full-line pro dealer cousins—can sell on “value-added” service alone in the absence of consistently executing on the basics is completely inaccurate. ABC offers many services to its contractor customers, including lead generation, signage, and business development programs, but Luck argues that despite the service “plus” of these types of programs, they become filler without success on the business basics. “The fact is, if we don’t get that order to the jobsite on time, get it placed where it needs to be, in the right quantities, billed correctly, and in good condition, all the value-added stuff in the world is meaningless,” he says. “The idea that distribution has that down pat to where they can begin to differentiate their business just through value-added services alone is sheer nonsense.”
“When all you have to offer is service, service, and more service, you better get it right,” agrees Gagnon. “You better have the correct people answer the phone, you better have the correct product on the shelf, and you better have the product on the job today.”
As another example, Ted Lansing Corp., a 51-unit distributor of roofing, siding, and exterior products based in Richmond, Va., relies on a cadre of 600 associates to ensure product quality, availability, and responsiveness to contractor needs, according to company president and CEO Chris Lansing. “Our customers want quality products at competitive prices,” Lansing says. “They expect large inventories with flawless service, and they want to deal with trained, knowledgeable people.”
Customer research recently conducted by ABC Supply likewise confirmed that, above all, service was most important to customers. “Our customers have enough headaches to deal with in running their businesses, so our key focus is on making it easy so they have one less thing to worry about,” Luck explains. “In many ways, we are an extension of their image to their customer and they need to rely on us to deliver the right products, at the right price, at the right time, and in a professional way. They also need to know they can count on us when things go wrong on the jobsite, and that we’ll be there for them when they are short on J-channel or when they have to juggle their crews.”
Vendors Take Notice The specialty distributor’s ability to establish that type of service intimacy with its contractors has many product manufacturers taking notice, scrutinizing their supply chains and considering an increase in specialty distribution, especially as they bring new products to market. Although Portland, Ore.–based LP funnels roughly 90 percent of its SmartSide siding through its traditional pro dealer distribution base, SmartSide brand manager Ben Skoog says the option to move toward specialty houses is a compelling one. “There are two things that make it appealing from LP’s standpoint,” Skoog says. “The closer suppliers can get to decision makers, the better they can relate the value proposition of our product. When you go through additional steps [as in wholesaler to pro dealer], that [message] can become diluted and sometimes distorted.”
At Elyria, Ohio–based Ridge Tools, which includes the Ridgid-brand tool line, specialty distribution from pro tool supply houses is a key component of both contractor marketing and new product development. “It’s the pro tool and supply houses that have service and availability of parts that helps keep the contractor coming back from a tool perspective,” says Ridgid brand manager Jay Gatz. “It’s where I take my sales force and drive my marketing message.” Ridge has found great success with on-site product clinics where manufacturer reps can work together with specialty house salespeople in communicating product specs, job-site applications, and other benefits of their products to contractors. In turn, the manufacturer gets direct market intelligence on what contractors are looking for in next-generation products.
There are some caveats, however. “Generally speaking, the specialty distributor has higher service requirements such as shorter lead times and smaller order quantities when compared to traditional wholesale houses,” Skoog says. “Additionally, lumberyards typically have a larger sales force and wider market reach. However, the specialty distributor generally can assist greatly in reaching the key decision-makers in a market.” Skoog adds that LP market research indicates more specialty distributors—up to 30 percent—are starting to sell directly into new construction, and could become a powerful ally for manufacturers attempting to reach into production builder volume.
Price Sensitive Futures However, the manufacturers’ push to get closer to production building activity often brings an unintended margin squeeze that specialty houses are becoming acutely aware of. Through national supply deals and extreme volume purchasing, there can be a tendency to negotiate supply at extremely low prices, which could have a deleterious effect on company-wide margins for distributors and full-line pro dealers alike.
“One trend we see increasing is that many of the manufacturers are trying to win additional volume by cutting deals with the larger home builders,” explains Luck. “For us, that is a problem because it does not remove cost, it just squeezes margins from a high-cost business. As any distributor knows, big jobs or customers do not necessarily equate to low cost for the distributor. Often, these jobs require a higher level of service. Delivery coordination, product staging, priority times, product pickup, problem resolution, and longer terms are just a few of the service requirements.” According to Luck, ABC recently walked away from millions of dollars in large builder business because of extremely low margins. Luck doesn’t blame the builder for trying to negotiate the lowest price, but nevertheless he believes the “trend to reduce margin without reducing cost cannot be sustained over time.”
