This letter to the editor was received today:
Having spent 12 years with a national chain (Wickes), formerly No. 1 [in the ProSales 100], seven years with a regional supplier and buying group (BMA), and 26 years as an independent I know a little about how each group operate. I have participated for 26 years in round tables seeing hundreds of P&Ls. Formerly I was a board member and chairman of the Construction Suppliers Association and the board of the NLBMDA.
I am amused that ProSales is constantly awe-struck by the bigger companies. I was in Savannah, Ga., a few years ago, when the dealer of the year was presented to a company that had filed bankruptcy and wiped away their debt.* In that room were many dealers who had fought through the great recession and still had debt to pay off. They were the real winners in my opinion that night. It’s a whole lot easier to look good when you can throw off your debt.
With that thought, I read Craig Webb’s editor notes “congratulating” the top 10. Webb even writes, “You’re generating results, certainly on the top line and sometimes on the bottom line as well. “ Frankly, you are congratulating a group of dealers who some not only wrote off their debt but still couldn’t make a profit for years! This industry seems to be have a mentality against making money! Dealers are constantly selling at a level that is not profitable only to get the sale. As an example, what other industry would not see an opportunity in charge delivery/fuel fees but ours? Today a dealer that charges these fees might find a competitor using it as a selling tool against them, instead both dealers should see it as an opportunity to reduce some cost.
Articles like this only help reinforce this mentality. In addition, you mention small dealers “struggle to generate even a 3% net profit.” I’ll bet quite a few of those big guys would love to have a 3% bottom line. I have no problem with bigger companies that can be efficient and produce meaningful profits. There are some that do so. A number of companies struggle to be profitable because they have had to compete with large companies that did not have to be profitable. It’s hard to compete with someone that has an owner with deep pockets to bail them out or one that files bankruptcy to shed its debt.
For the record, I am not in a market that competes with the top 10. I am in a very rural area of Georgia. I believe the industry success will be found in companies that are holding cost down through efficiencies to produce a good bottom line, no matter what size the company is. Constantly delivering good value to their customer charging a fair price. As for the Top 10, look back 10, 20, and even 30 years ago and see whose names were there then vs now. The marketplace will eventually take care of those that cannot produce a sustaining profit.
Sandersville (Ga.) Builders Supply
* -- Editor's Note: The dealer of the year award referenced above wasn't given by ProSales but rather by another publication. And to see the ProSales 100's Top 10 through the years, click here.