Let’s face it, a lot of the growth in the LBM industry today is happening through mergers and acquisitions. That usually, though not always, means that little yards get gobbled up by bigger yards which spreads the reach of the big dogs outside of the metro limits and into small town America. While that may be great for the stock holders in these larger companies, it can put an incredible amount of competitive stress on the mom and pop yard that is just getting by.
It is one thing to compete with another yard of similar size and with similar purchasing power, but when a local LBM starts competing with a Top 100 LBM that has moved into its town, competing from a price standpoint is no longer possible. These large companies have the ability to move the market when they buy, so a small yard cannot look to buying the next truck of OSB 20 dollars a thousand cheaper as a way get a leg up against the new mega-competition.
I am writing from experience. I work in small town America and we have the number one LBM in America in our backyard. I’ve had their quotes brought to me to bid against and what I find is that if I want to be competitive from a pricing standpoint, I’ll be below my cost on many items. I’m not complaining, just stating a fact. They are bigger and buy better. I can’t change that. So what is a small lumberyard to do? Give up and open a roadside vegetable stand? While that may be more relaxing, I think there is a more reasoned approach to the problem
The solution is not new. I didn’t invent it. It has been around as long as businesses have been competing with each other. The dilemma is: do I offer good service or cheap prices? While it has always been understood that an effective strategy is a combination of both, the competitive market today is making it increasingly more difficult to be a player on the cheap price side of the value equation if your business isn’t doing $50 million dollar a year or more. You simply don’t have the buying power to make a big difference.
But you can make a huge difference on the service side. You see, it doesn’t matter how big your firm is in order to be good at the people-pleasing business. As long as you have delivery trucks and building materials, you have the basic tools to make customers happy. So you can’t be the cheapest on every job; you can be available for first-outs more often than the big guy – if you want to. You can beat the competition by having great customer service people at your counter – people who are always smiling when the builder comes in the front door. You can have great customer service on the yard after the builder makes his purchase. Basically, you can create an environment for your builders that means more to them than price. I’ve got builders that are waiting on me at the gate a half hour before we open. I let them in, go inside and get the computers going, they go get what they want and come back to the counter. This may not be a great idea in the city, but in small town USA, it’s a winning strategy. Show the customer that your yard is their yard.
Don’t get me wrong, you still have to be competitive, but you don’t have to be the cheapest. When the builders see that you value your relationship with them just as much as you value their money, they will spend more of their money with you!