Honsador Lumber, like most dealers working reloads on the side, makes no distinction between customers. “They have an account and we deliver per order,” says Inglett, as opposed to bringing in extra inventory to serve small and consumer-focused dealers. “They have a price expectation so they can make a retail markup, but it’s no less than anyone else [who buys from us].”
Even those playing the other side of the coin—dabbling in pro sales from a base of two-step distribution—handle the pressure similarly. “No one gets a deeper discount than anyone else,” says Geoff Berwick, manager of Sherwood Lumber in Islandia, N.Y., which traffics to a customer base of 400-plus retailers and builders. “We do that so no dealer [customer] gets too bent out of shape [about losing the sale].”
Indeed, as an informal venture two-step distribution can have advantages far more beneficial than trying to squeeze extra margin out of a lumber load or stepping on a contractor’s toes by giving another dealer a better price.
Small-market suppliers, for instance, might act as a weigh station to dole out material and share the volume discounts of a large load with neighboring pro and retail dealers, or horse-trade extra inventory for a niche product, such as engineered decking.
Larger dealers, meanwhile, can spill off excess stock to noncompetitive outlets or serve large-volume pros in need of a supplemental lumber load that is too small for a dedicated wholesaler. “As long as you treat everyone the same, those deals will be out there,” says Berwick.
Special Circumstances If it weren’t for its remote location in the middle of the Pacific Ocean, Honsador Lumber may have neither the opportunity nor the interest to fulfill requests for specialty products or short orders by other dealers on the islands—and would certainly be competing with other dealers for the same product lines. “We deal in enough volume and provide enough marketing support to satisfy our manufacturers,” says Inglett. “There’s no one else to give them the distribution and product support we do.”
Under different circumstances, Inglett would likely work hard to avoid sharing inventory, especially among high-margin, market-distinctive product lines—for the same reason Tague Lumber stays away (when it can) from the same brands carried by big box home improvement retailers. “If we have a choice of three window lines and Lowe’s or Home Depot is carrying two of them, we’ll probably go with the third line to avoid competing for a small margin,” says McAndrew.
No doubt, knowing where and when a two-step operation is viable in a market is critical to making sound business decisions. For example, despite having a healthy two-step operation in the late 1980s, Tague has watched its market change to where dedicated distributors and niche retailers have removed opportunities for the dealer to succeed in that realm and the company pulled back. “For this area, for our type of building materials [lumber and related categories], the players that have succeeded in two-step distribution are those that have mastered that mentality,” says McAndrew.
This two-step mind-set, while starting to mirror the service-oriented model of contractor sales, requires an operation willing and able to not only traffic a large volume of material (Sherwood Lumber, for instance, stocks up to 66 million board feet), but manage a wider range of customers, restock misorders and excess inventory returns from dealers, engage in speculative contracts with timber suppliers, and compete with a highly competitive industry where the largest players generate revenues in the billions.
Williams also says success depends on maintaining market distinction. “There are two or three other reloads in town now, but RLI is unique in how it serves its customers,” he says, with large-load and truck-mounted forklifts (among other upgraded equipment and vehicles) and a blend of products—including a recently launched window division to go along with a full range of building materials, trusses, and insulation—that enable one-stop shopping. “RLI adds value by doing more for its customers and has the knowledge to pull and create a proper package.”
