In 1922 Walgreens soda jerk Ivar “Pop” Coulson revolutionized the drugstore industry with the introduction of a novel creation called the malted milk shake. To this day, Walgreens credits the beginning of its national market growth to Coulson's addition of a heaping scoop—and then another heaping scoop—of Walgreen's own vanilla ice cream to the traditional glass of chocolate syrup with soda and dry malt. In 1921, the company had 20 locations in the Chicago metro area. By the end of the decade, its unit count had reached 525 and included locations on the East Coast from Florida to New York City. Seventy-five years later, the Walgreens empire has grown titanic in scope, serving some 4 million customers a day from approximately 4,800 locations (a new Walgreens store opens every 19 hours).
What does all of this have to do with construction supply? Consider this: Walgreens is the only Fortune 500 company other than Wal-Mart to have increased both sales and earnings every year for the past 30 years. According to “Drug Wars,” an article on Walgreens' track record by Matthew Boyle in the June 13 issue of Fortune magazine, the company stands as a perfect example of how steady execution, streamlining supply channels, and focusing on primary customers lead to sustained growth. “Drugstores are a commoditized, low-margin business, after all,” writes Boyle, “where success isn't a matter of grand visions so much as figuring out all the small ways of gaining an edge.”
Substitute “pro dealers” for “drugstores” in that quote and you've got a pretty accurate description of the competitive atmosphere in the LBM industry. Looking to players like Walgreens in businesses with similar market challenges can bring new ideas to the strategy table and reaffirm the sharpness of your own market edge. For Walgreens, keeping ahead of competitors like CVS, Rite Aid, and Longs Drug Stores has been partially a function of a 13-year, $60 million supply chain overhaul that has reduced owned inventory days from 68 to 41, a $2 billion savings in goods the company no longer has to stock, Boyle writes. Additionally, Walgreens has targeted its primary customers by opening the bulk of its new locations in the senior citizen–heavy (and thus prescription-heavy) Sunbelt markets.
“Focusing on customers, saving customers time, and streamlining supply are all good ways to stay competitive,” agrees Joe Lawrence, president of San Diego–based Dixieline Lumber, which has remained successful in Southern California while rubbing shoulders with companies like La Mesa Lumber and Hardware, The Home Depot, and Escondido Lumber Co. Like Walgreens, Dixieline is staying competitive by focusing on core customers. For example, Lawrence says that the company's custom home division is growing sales by providing package deals of lumber, trusses, windows, and millwork to single-family builders doing five to 20 houses a year.
Dixieline also has been revamping some of its own internal supply chain issues to save transportation and inventory costs while also getting product closer to the end user. The company's Colton distribution facility celebrated its grand opening on June 28, and will serve builders throughout the growing Inland Empire in California. “We're doing arguably 50 to 60 million feet a year in the Inland Empire market, and we were able to use some public reload rail, but the lion's share of that lumber was shipping out of San Diego two hours away,” Lawrence says. “So we decided it was time to have a yard up there—we have enough of a foothold to justify it.”
When it comes to the sweet science of ingenuity, Dixieline was one of the first companies to collect waste wood and sawdust to sell as product to landscapers and pet bedding manufacturers instead of paying for waste disposal and tipping fees. It's just another small way to gain an edge, and saves the pro dealer upwards of $40,000 a year. That's no jerking around.
Chris Wood is senior editor for PROSALES. 415.552.4154 E-mail: email@example.com