Two-steppers can further strengthen their roles with suppliers, he says, by managing the dealer network and acting as conduits for sales and educational materials about products and their applications to that level on the manufacturer’s behalf. At BMD, for example, Tabor requires his sales representatives to conduct quarterly reviews with each of the company’s vendors to identify issues and opportunities, discuss code changes that might impact the product mix, and strategize how best to add value to the entire channel they mutually serve. “We also talk about what they want from us,” he says, including BMD posting product specialists at jobsites to pull demand through the dealer level. “It fosters a closer relationship, better communication, and trust so that everyone’s share goes up.”
For dealers, the benefits are obvious: A stronger relationship between their distributors and leading manufacturers—especially those with strong brands—means a broader product mix, more reliable supply, and sustainable sales at the one-step rung. “It also brings the dealer closer to the manufacturer,” says Tabor, in terms of brand loyalty and sales support. “It’s true teamwork.”
Dealer Impact Mention of a distributor rep at a jobsite hawking products can be a scary thought for dealers worried about protecting their place in the supply chain. But Marks says so-called “demand creation” is essential for the survival of both dealers and two-steppers in the current market environment. “Smart distributors will redeploy their sales forces to call on builders to pull them through the dealer,” he says. “It helps the lumberyard perform better.”
The scenario works best, Marks acknowledges, under certain conditions and with specific products. Windows, for instance, and other categories with significant upstream investment, dedicated distribution territories, and areas with the potential for large-scale sales are prime for demand creation by the two-stepper. “It allows the distributor to do the legwork and the dealer to secure the last mile,” with a high level of customer service, Marks says. “The dealer can create demand on the rest of the categories.”
That’s the strategy employed by Huttig Building Products, the $1.2 billion, St. Louis–based distributor serving 8,000 pro-oriented dealers in 48 states. “Our dealers’ outside salespeople are so busy handling the transactional stuff that we can provide value by keeping their builder-customers informed about new products and product changes and performance,” says COO Jon Vrabely. “Two or three years ago, we got some resistance to that [from dealers], but now our customers are embracing it because we’re selling on their behalf.”
Of course, distributors still serve their primary purpose of breaking down bulk purchases from mills and manufacturers and packaging them for dealers. But Beveridge senses that evolving market factors—from a housing slowdown to the impact of big box retailers getting into the two-step realm—signal a sea change. “Many distributors are stuck in a position that their only value [to dealers] is bringing competitively priced products delivered on time, a source rather than a resource,” he says.
If they intend to survive threats to that position, he says, two-steppers must get away from accepting a 10 percent annual bump in sales volume from each dealer as a measure of success and approach them with a more sustainable plan. “Instead of helping a dealer move more product, a distributor needs to help build that dealer’s business,” says Beveridge. “These companies need to do more than deliver products and create takeoffs if they want to survive a downturn in this market.”
Vrabely, however, sees both value-added and price-driven distributors thriving in a more competitive market so long as they select and follow one or the other strategy. “If you’re one of those two, there’s a place for you in the channel,” he says. “Those in the middle will either go out of business or get gobbled up.”
