ProSales Fuel Survey Chart [Download PDF]
For Jay Breard, responding to the sharp rise in fuel prices may require a paint brush. Over the years, Breard's Rufus Deering Lumber Co. in Portland, Maine, has become so committed to the idea of free delivery that it even paints those words onto the sides of its trucks. But as a result, when diesel prices shot up more than 50% since last summer, Deering largely had to eat the extra expense. But Breard is going to stick with the free-delivery policy–at least for now.
Of the 514 dealers responding to a recent ProSales survey on fuel costs, about one-third still offer free delivery. But the situations vary dramatically. In California and Nevada, more than 95% of the dealers said they have delivery charges, while in New England, only about 35% said the same.
Fuel surcharges are slightly less popular–41% of all dealers said they have them versus 63% that charge for delivery–but they are rising quickly in use; about 40% of those surcharges have been launched since Sept. 1, 2007. In addition, roughly three-fifths of all dealers say they have considered creating or changing delivery and fuel charges over the past nine months.
"It's an unfortunate but necessary byproduct of the times we live in," says Stephen Rendine, general manager of Douglas Lumber, Smithfield, R.I.
One place where the costs-vs.-marketing debate is going on is in Charm, Ohio, where Keim Lumber provides free delivery within a 150-mile radius of its rural location. Owner Bill Keim says the increased cost of gas is hurting his business, but so far he hasn't changed the policy.
"If we were in a big city with a lot of people close by, it wouldn't be near as important. We could draw from a 30-mile or so radius," Keim says. "We have to add 100 miles because we're in the middle of nowhere. We have to go to the people."
And what are the consequences of that policy? "Bad," Keim says. "You have to figure [the fuel costs] in somewhere, and it's bad. That's about as simple as you can get."
The fuel issue also may lead some dealers to reconsider core assumptions that go into the pricing of their goods.
"I've always considered delivery as part of our service to our customers, something that the big boxes don't do," one dealer writes. "I've stayed away from delivery charges by increasing my margins. But I may have to change my thinking."
As would be expected when independent dealers are involved, the survey revealed no consistency regarding whether the price of a product should include delivery. Keim Lumber is so committed to free deliveries that if a customer comes in and picks up an order, he gets a 5% cash-and-carry discount. Others assume that the prices they charge are based on the buyer picking up the goods at the store; delivery comes extra. Some impose delivery and fuel charges on every order that's put on a truck. Others apply one or both of the charges based on distance traveled and the order size.
Some dealers suggest that they aren't creating charges but are merely passing along the delivery and fuel charges that distributors impose on them. And among dealers, those vendor costs are extremely unpopular.
"If I can read a [profit and loss statement] and figure out how much to increase my margin, then the smart folks at my vendors can, too," one surveyed dealer says. "If they are unable to, then they are too stupid for me to do business with."
"Sales need to be at the leading edge, educating the customer about consolidating orders and planning ahead to reduce the impact of fuel surcharges and delivery fees." another dealer adds. "These will not be going away in the future. In fact, these will become standard ... before the end of 2008."