Remodeling magazine, a sister publication to ProSales, spoke recently with Keith Coleman, co-owner of Hamilton Building Supply Co., Hamilton Twp., N.J. Hamilton gets the bulk of its business from remodelers, and during this question-and-answer session, Coleman has plenty of thoughts about the relationship between LBM dealers and remodelers.
Coleman: Our remodeling business is about 40% off since 2006; that was a great year! Our new construction business is about 45% off. Our area is very built up, so we've always worked primarily with remodelers.
We're working with our budgets to get to break even. We've cut just about every line item you can cut, and we now have 53 employees, down from 80 in 2006. Last week we posted a note in the break room saying, "When the coffee's gone, it's gone." We're no longer buying coffee for everyone. It was $600 a month. Still, there are so many line items you can't touch or make a noticeable change with: health care, real-estate and property taxes, utilities, vehicle maintenance, insurances.
Remodeling: What are you seeing in your remodeler customers?
Coleman: Remodelers are essentially trying to survive. Even though we enjoy an area of the country that's about as recession-proof as you can get, thanks in part to Princeton University and the community it supports, when Princeton announces a 30% decrease in its endowment, that's a serious amount of money and has a ripple effect [throughout the local economy].
Many remodelers and builders are in pure survival mode. They operate on relatively tight margins, and when the volume isn't there, it's particularly difficult.
And, like us on the supplier end, many remodelers have not made deep enough cuts. The last thing any of us want to do is to lose relationships with the people we've worked with for years and years, so we all do whatever we can do to hold onto employees. And that in some cases means taking on jobs at cost or even below costs.
Remodeling: What trends are you seeing in remodelers' purchases?
Coleman: We definitely see remodelers buying more maintenance and restorative types of products, as opposed to new construction products. They're taking on jobs they wouldn't normally have entertained a few years ago, and in some cases they're having to compete even for very small jobs.
Nobody, for the most part, is building an addition these days. We're seeing some garages being built, some work on very high-end homes in the range of $3, $4, $5 million. But the addition has almost gone away. People are making do with the square footage they have.
A saving grace is that home maintenance will be ongoing, especially when it involves poor-quality products that deteriorate.
Fighting Chinese Imports
Remodeling: What product trends concern you?
Coleman: We've seen an influx of lower-cost, lower-quality materials, mostly from China. We have to fight constantly to keep it out of our facility. For example, with commodity-type items like paint brushes, we're finding that the good-quality items are being swapped with cheaper items and sent in with the same SKU. This pretty much cuts across all product categories.
So we have to be very vigilant. We spot-check deliveries, and if something doesn't seem to be the same quality, we call the vendor and say this isn't the same quality we've had before. It can be hard to tell. Some products look great on day one, but five or six years later the finish wears off. It really comes down to: does it hold up over time. And often, the answer is no.
As an independent dealer, we have to maintain our quality. That's what we depend on. We don't shout this message form the rooftops, but it's implicit. Our customers and clients know that we're going to have a level of quality they can count on and we'll stand behind. We've developed that reputation over the years.
Also, a lot of major manufacturers try to play both sides of the fence, and we have to explain why our products may be better than the big boxes'. Power tool companies will put out a 7.0-volt drill for Home Depot, and we'll be selling an 8.4-volt drill. The manufacturer differentiates the products so that we can justify a higher price, supposedly, but what it means for us is that we have to educate our customers. They want to know why something is $25 more than it is at the big box.
Remodeling: As cheap products become more pervasive, are your remodeling customers becoming more discriminating buyers on behalf of their clients?
Coleman: It depends. People who intend to stay in their homes for a long period tend to be much more quality-conscious than those who say, "You know what? Five years and I'm out."
In reality, it's a trying period for all manufacturers, and if one is weak, remodelers are taking a risk by installing their products. For instance, if you specify a national brand window that is No. 15 or 20 on the best-selling list, you might not have a warranty you can rely on three or four years from now.
Changing Products, Changing Installation
Remodeling: What other product concerns do you have with respect to remodelers?
Coleman: A big problem with remodelers is that with newer-generation products, you really do need to read the instructions. We're dealing with different materials now. Often it's not wood, and it's certainly not your grandfather's wood. Even with composite materials, you need to be very diligent with proper installation techniques.
I hear it all the time: "Oh yeah, I've been doing this for years." The problem is that these are totally different materials that react differently to other materials, paints, fasteners, etc. You've got to be on your game or you'll likely install it improperly.
In fact, what often seem to be very straightforward installs, like windows and doors, are changing dramatically, to the point that the window and door industry is coming together to say this is the right way to do it. This prescribed methodology is filtering into the code too. It might take longer than remodelers are used to and involve additional products (like sill pans) that they haven't accounted for in their bid packages.
The fact is that most products fail today not because there's an inherent flaw in the product but because of the installation. And that's always a tough conversation to have with a remodeler. They don't care to hear that. At the very least, they should rely upon us to warn them of certain installation issues or recommendations. We try to do that to the best of our ability.
Remodelers as Business People
Remodeling: Where else do you see remodelers getting into trouble?
Coleman: They need to be very strong businesspeople. Unfortunately, we're in quite a litigious society these days. They need very strong contracts and written change orders; they need to be very formal, if you will, in their transactions with customers. What happens if they're doing a job and the customer suddenly loses his or her job?
They've just got to protect themselves to best of their ability. And the best way to do that is by being very formalized, though it's not in many remodelers' nature. They want trust. But the more professional they can be, the more enhanced is their ability to stay in business.
Remodeling: How can remodelers avoid making mistakes in their orders?
Coleman: We take on lot of that responsibility for our clients. For example, with windows and doors, we'll go over the plans, make sure tempering needs are addressed, the right materials are ordered, etc.
We have a very liberal return policy for stock and commodity items, if they over-order for any reason. But with special orders and non-stock materials, I view our role as asking lots of questions, giving them a complete proposal, and getting them to review it until they can say, "Yes, you've heard what I said." I do this even with guys I've dealt with for 25 years.
Keep the questions simple and straightforward. Even with something as simple as an exterior door, we have about 25 questions. If any one of the specifications is miscommunicated, there will be a problem, and chances are that it will be expensive to fix.
Remodelers should be very specific with their clients as well. It's important to get both the salesperson and the client into the mode of slowing down. There are so many choices. Make sure it's accurate. It slows the process down, no question. And this means it costs more. But it really does pay in the end.
When Dealers Close, Do Opportunities Open>
Remodeling: Many major LBM dealers have closed. Does this provide any opportunities that remodelers should pounce on?
Coleman: The economic climate does mean that remodelers' local independent dealers should be ready, wiling and able to do just about anything that they're asked to do.
Ask for free delivery, for example. We've never had a delivery charge or a fuel surcharge. If a remodeler wants me to run into town with $50 worth of material, I'm going to do it. I might try to team that delivery up with something else, but I'm going to do it. If this delivery is $50, the next one might be $1,000.
Remodelers need to value their time, and having the supplier deliver the material is one way to do this. Running to the store to buy something, and taking a coworker, is not using your time productively if you can be doing billable work. Be as efficient as you can be.
Remodeling:: What if your supplier shuts down, or you lose your source for a particular item?
Coleman: Look elsewhere for someone who's ready to pick up the slack. The market should respond to that. I recommend that remodelers sit down with the sales manager, tell them what level of service you're used to getting, ask for a tour of the facility, and figure out how the supplier can help you make money. That's what it's all about.
By buying from as few sources as possible, the remodeler saves time and aggravation, and helps build the vendor's sales volume. Suppliers that don't jump on an opportunity like this are foolish. Chances are if one professional is really loyal to a product or product line, many more would purchase the product as well.
I always bring in a product (if I'm able to) when a contractor comes to me and says I use such and such on a regular basis--whether they're nails for his nail gun or a composite moulding that he particularly likes.
Remodeling: What other missed opportunities should remodelers take advantage of?
Coleman: Ask about onsite workshops and training, and attend! We have a huge show every other year, and we also recently had Mike Sloggatt from Gary Katz & Co. here for a free daylong demonstration. He's one of the premier craftsmen in the industry, and he put on a series of fantastic millwork demonstrations. We had a tremendous turnout, and asked for RSVPs, but still a lot of remodelers who said they would come didn't.
Advanced ordering. Remodelers could be more cost-effective if they planned ahead and gave the supplier an opportunity to pool orders and buy on a more direct basis. For example, with items from Baldwin Hardware, if you give me four or five weeks notice, or even less, I can pool your order with others and get a discount, or possibly cut down on freight costs. Or hit a certain level of volume that allows me to buy better.
Again, I don't think remodelers should hesitate to ask if their supplier could drop off $75 worth of materials. Chances are I'll probably have a truck going by there anyway. Don't assume they won't send out a truck for a small order.
Remodeling: Any other advice to help remodelers have more mutually profitable relationships with LBMs?
Coleman: I think some of them need to get up on e-mail! It's amazing how many don't use it. They need to be able to communicate more effectively back and forth in order to eliminate miscommunication, to reference items, to see pictures, to review statements, etc. And with Blackberries and iPhones, it's tremendously helpful.
The remodelers that I've brought kicking and screaming to e-mail now can't live without it. It's that old adage: e-mail is change and there's resistance to change.
Remodeling: What's the lumberyard of the future going to be like, and how will remodelers need to respond?
Coleman: The lumberyard of the future is probably going to have less lumber in it, and more composite materials. But it will still need to have material on the ground, especially for remodelers. They run into things day in and day out that they don't expect. That's one of the interesting things about the business. We need to respond very quickly and give them the materials they need. They often don't have the luxury that new homebuilders have of knowing exactly what they'll need.
We'll probably do more special orders and made-to-order models, with tighter inventories and manufacturers trying to turn their products around faster. With this increasingly expansive number of choices that people have, you can no longer guess what they'll want. It can be much more cost-effective and efficient to build the order, assuming that you give a reasonable lead time - usually two to four weeks for even the most complex window and door units.
But what these fast turnarounds mean, though, is once that order is placed and certain buttons are pushed, it goes right into production. You can't change your mind. So you've got to make sure you've got it right. Changing your mind can be very expensive. Scary bad sometimes. Some manufacturers have a 50% surcharge just for a cancellation.
Learn more about Hamilton Building Supply at http://www.hamiltonsupply.com.