On April 15, Mike’s Lumber, a fledgling pro dealer stationed on two acres in tiny Logan, Ohio (population 7,157), celebrated its first anniversary. Getting through that first year was a challenge, says owner Mike Flowers.
A brutal winter didn’t help. But bigger challenges for the dealer include establishing ties with contractors (who accounted for half of the $533,000 in sales that Mike’s Lumber generated from its grand opening through Dec. 31, 2013); and clarifying its niche in a saturated market: Two Carter Lumber locations, as well as branches of 84 Lumber, Lowe’s, Menard’s, and other independent pro dealers are sprinkled throughout nearby towns.
During the tough times, the 53-year-old Flowers could rely on his credibility with suppliers, having worked 32 years for local pro dealer King Lumber until that company’s owner, B.J. King, retired and closed his yard. Flowers now leases that location, which includesa 3,000-square-foot building that had served as King Lumber’s remote warehouse.
The small size of this building and yard—which stock around $60,000 in inventory—is only one of Mike’s limitations. Another is manpower: Flowers, his sister Dalia, and yard worker and delivery man Gary Beall are the company’s only employees. “It’s all hands on deck all of the time,” Flowers says.
Like other independent dealers, Mike’s Lumber tries to prove that you don’t have to be big to succeed. But when giant pro dealers and distributors dominate business across the country, what’s the role of a dealer that is content to operate one yard or serve a single market?
As the sole yard in Logan, Mike’s Lumber stresses convenience. Flowers provides customers with his cellphone number in case they need something delivered in a pinch at night or on weekends. He also believes in attracting more pros with higher-quality lumber. For instance, all of Mike’s Lumber’s 2x4s and 2x6s are Conifer Timber’s “Select” grade. Its dimensional lumber is strictly No. 1 yellow pine; and pressure-treated lumber is No. 1 grade, too.
When ProSales spoke with Flowers in early April, he was enjoying a strong spring selling season and was about to hire an outside salesperson. He was also planning to join the buying group Progressive Affiliated Lumbermen.
ProSales interviewed a dozen other independent dealers about what is and isn’t working for their companies. Most have been around for decades and have weathered competitive storms. Those same dealers are keeping their distance from production builders that “dictate price and shop every job,” says Bart Graves, the general manager of Quarles Lumber, in Fort Worth, Texas, which has been in business for 113 years.
Competing profitably, these dealers say, requires consistent excellence, self-awareness, and—perhaps most importantly—following some basics guidelines.
Provide Essential Services
Success for small dealers starts with the fundamentals, says Steve Harms, who manages Triple A Lumber’s four-acre stand-alone yard in Amarillo, Texas. The dealer generates between $7 million and $10 million annually
in a market where it competes with Stock Lumber, 84 Lumber, Sutherlands, and two other independents. “There are opportunities to succeed every day,” Harms says. “But your loads have to be right and deliveries need to be on time. You can’t afford to be going back to jobsites twice.”
Another Texas dealer, Lengefeld Lumber, which takes up 2 ½ city blocks in Temple, last year achieved the highest sales in its 62-year history. Owner Bruce Walker attributes this growth to “quality materials, decent prices, an excellent delivery record, and good customer relationships.” George Hopper agrees. “There’s still loyalty out there, and a lot of customers prefer to buy from someone local,” says the owner of W.F. Paulett, a two-acre yard in Scottsdale, Ariz. The lumberyard celebrates its 100th anniversary this year.
Dealers readily acknowledge that their yards must give pros reasons to keep coming back that go beyond low prices. Triple A’s bait, Harms says, is the quality of its inventory—especially framing lumber. “I tell contractors that you’re not going to have to answer questions [from framers] about our lumber,” he says.
Other dealers say that their willingness to provide services that meet a particular customer’s needs helps to build pros’ allegiances. “Our growth comes from doing things that our customers need, but can’t do on their own,” says Jeff Parini, who co-owns Hills Flat Lumber, which operates two locations in central California. The dealer gets half of its sales from pros. The services that Hills Flat Lumber provides include installing granite countertops and power poles for construction sites. This year it got into small-engine repair.
Olympia, Wash.–based Bayview Building Materials offers free field measurements of specialty items, as well as free takeoffs. “Our calling card is service you can count on,” says vice president Matt Peterson. Dash Lumber & Supply, in New Orleans, offers free delivery within that metro’s boundary and emphasizes this service with the slogan “Service: Delivered. Quality: Delivered. Expertise: Delivered.” It maintains a boom truck for drywall deliveries.
Graves, of the three-acre Quarles Lumber, says that his company’s preferred patrons are custom builders who need a yard like Quarles to act “almost as a supervisor” helping them to manage their projects.
“We try to grow customer by customer and help them grow their business,” says Steve Mitchell, president of G.R. Mitchell, a 13-acre yard in Refton, Pa. G.R. Mitchell expects to increase its revenue this year by 35% over 2013 to $13 million. Mitchell points to one customer that his company has been working with to streamline its invoicing process by sharing job codes for commercial projects. If Mitchell decides to ramp up inventory for a customer, he can do so without having to justify the decision to some far-off corporate office.
Parks Building Supply, in Fayetteville, N.C., is on track to generate $24 million in sales this year, which would be a big jump from the $6 million it did in 2008. Owner Toliver Parks says that his company’s vitality stems from “innovation and execution” of programs it has initiated in recent years. These include:
• The Carolina Certified program, which currently endorses eight local builders on its website. Parks Building Supply wants to trademark this program.
• Every other year, the dealer offers its best customers a trip incentive, at a time when other dealers have eliminated these kinds of sales promotions.
• In 2009, Parks Building Supply hired an installation manager who had previously worked for Stock Building Supply. Parks’ installed sales program has since expanded to include windows and doors, vinyl siding, decks and porches, and hardware. Two-fifths of the dealer’s annual revenue comes from products that are sold installed.
Other independents distinguish themselves from the pack via product specialization. Kitchen cabinets and paint have become big draws for Peoples Supply, in Hyattsville, Md., the latter thanks to the “strong relationship” between its supplier Pratt & Lambert and buying group Do-it Best, according to Peoples’ co-owner Tony Brunk. Some dealers cited their buying groups as seminal to their ability to compete.
Hills Flat Lumber—whose operations include a 30,500-square-foot retail store in Grass Valley, Calif.—has been even more adventurous with products. In 2008, it started selling appliances, including Bertazzoni ranges that retail for between $2,800 and $12,000. Hills Flat is now one of the biggest dealers of Bertazzoni in California. Parini notes, too, that his company has also sold kayaks, ammunition, and Carhartt work clothing. These and other products reap the benefits of the dealer’s advertising, which hits 58,000 households at least once a week with newsprint ads and circulars.
Showcase What You Sell
Over its 26 years in business, Builders Lumber & Hardware, in Shelbyville, Ind., has outlasted three other lumberyard competitors. But after Carter Lumber closed its local yard on Nov. 1, Brian Baker, Builders’ president, noticed that his yard’s pro sales didn’t increase much, leading him to conclude that Builders had reached its high point in market penetration.
Where Builders’ business is picking up is on the consumer side, which accounts for about 25% of its $3.5 million in annual revenue. Through the first three months of 2014, Builders’ consumer sales were up 35%. Baker observes that homeowners are more involved in choosing products for new construction and remodeling projects, putting pressure on the 13,000-square-foot retail store to show more product.
While some pro dealers still choose not to include a retail component in their operations, the showroom appears to be making a comeback. Pacific Lumber, for example, last year consolidated its entire operation around a new design center for cabinets and millwork in Lake Oswego, Ore.
On April 4, Parks Building Supply moved onto a new yard that, at 11 acres, is nearly four times larger that its old location. The new yard includes a 12,000-square-foot store/design gallery that features a full array of carpeting.
Instead of a retail store on its lumberyard, Quarles Lumber operates a separate 4,000-square-foot Andersen window center on an acre nearby. G.R. Mitchell runs a window and kitchen cabinet showroom in York, Pa., 45 minutes from its headquarters. That showroom has had good results selling Marvin windows and doors. By carrying better-quality millwork, G.R. Mitchell tied more easily into selling Apex siding, which it recently took on.
Lean Forward, Cautiously
Opening new locations hasn’t been a priority for most independent dealers. But as markets heal, dealers once again are considering the best ways to capture more business. “Our biggest challenge is figuring out how fast to ramp up,” says Michael Diecidue, Dash Lumber’s president.
Some independents in healthy markets will go with the flow for hiring and expanding. These include Lengefeld Lumber, which serves an area that Walker says could double in size in 20 to 25 years. Bayview Building Materials’ Peterson says that Olympia is expanding southward.
Dealers know, too, that success hinges on knowledgeable, seasoned employees who build trust with pros. But the recession drove many out of the industry. “If we were to open a second yard,” Graves asks, “where would we find that next great salesman?”
Overall, Graves and his fellow dealers say that a quality
sales team combined with top-notch products can give small independents the
strength they need to stay small—even in markets dominated by LBM giants.