There’s a seismic shift rumbling through the retail building material industry fueled by technology and changes in both the culture and government regulations. This shift, in turn, will change how we do business over the course of the next five to 10 years.
For their companies to remain viable, industry executives must recognize and embrace these changes. But many executives are too slow to accept the advancements because they refuse to change the horse they’ve been riding.
Huge technological developments in online purchasing are causing retail brick and mortar stores to struggle. A recent CNBC story says that we can expect “a tsunami of retail store closures” and should prepare for “far fewer shops and smaller stores.” I’ve been preaching “smaller is better” for the last three years and believe that, with more stores closing, retail property values will also plummet.
Due to technology, the retail business in our industry is evolving to “needs based” purchasing. Consumers looking for an item to complete a project will only go to stores to buy it if they need it immediately or can’t buy it online. They won’t go to a big-box store seeking that tool or widget when they can buy exactly what they need with three mouse clicks and free shipping.
The business play for many large retailers may be to take a page from UPS and FedEx—have truck, will travel. Is there room for private dealers delivering small items regionally?
Cultural changes are also affecting the industry as we experience a decline in do-it-yourselfers. Today, many youngsters have no idea how or the inclination to fix anything, so as the older generation dies out, or is too old to work, retailers should expect a noticeable decline in do-it-yourselfers.
The biggest impact to the retail building material business comes from excessive government regulation and new building codes. Permitting, insurance regulations, and licensing are killing the “do-it-yourself business” in the state of Florida. And the government, through OSHA and the trial lawyers, is eventually going to win the battle of the box store.
Forklifts being used in shopping areas and merchandise stacked to the rafters will likely be deemed workplace hazards, which will open the door for the trial lawyers. Retailers may be forced to follow a safety template and store design dictated by government bureaucrats.
The retailers of tomorrow will have to morph into smaller, leaner operations focused less on selling “loss leaders” and more on margin expansion through value-added services and installation.
Winning retailers will have expertise in their staff and the ability to handle consumer issues. This fast-approaching seismic shift could rival that of the early 1980s when big-box retailers outdated the traditional lumberyard. The process of adapting to the new landscape of the retail building material industry will likely be uncomfortable for many executives, but the future belongs to those who act now to make the structural and operational changes that are necessary to succeed.
Don Magruder is the CEO of Ro-Mac Lumber & Supply, former chairman of the Florida Building Material Association, and two-term past president of the Southeast Mississippi Home Builders Association. Contact him at don.magruder@romaclumber
.com or 352.267.5679.