These past few months, with the news full of doom and gloom for the housing industry, I've traveled almost more than ever working with dealers across the country in an effort to “shore up” their existing business. One point that has become clear is that these dealers I've visited—all of them—know without a doubt what their core business is. Because of this, they are ready to face whatever the market brings.
Unfortunately, I can't begin to tell you how many stores I've seen over the years where the message to the customer is very mixed: Are you a home center? Are you a lumber dealer? Are you selling to contractors and builders, homeowners, or remodelers? Do you even know who your core customer is?
Some dealers really don't know. I've seen plumbing aisles with just enough material and accessories to maybe—maybe—do a weekend repair at home; ditto for the electrical accessories. Yet these same dealers will proudly proclaim that they are pro-oriented dealers selling to builders and contractors. Are they? What is the actual customer mix? How many cash sales do they run daily? What about charge sales? Do they keep close track of deliveries vs. pickups? Do you?
I recently visited a very large pro yard in the heart of the South. This dealer knows without a shadow of a doubt that its customer is the mid-size home builder. Not remodeling, certainly not homeowners (there isn't even a cash register in the store). Inventory levels are high, well stocked with any and all material that builders may need, from dimensional lumber to engineered products and trusses. Almost 100% of sales are delivered. This yard knows its customer base and therefore exactly how to serve that base. As a result, the company is doing very well.
Right after that visit, I met with another dealer that has two stores in small to mid-size cities with a totally different customer mix and store setup. This company does not have a big box in the immediate area, and therefore its business must cater to the needs of the community. If you need it, these stores have it. The company developed this model based on historical purchasing trends and quantifiable data, not speculation or because its buying group merchandising department says it needs to carry 200 purple widgets because widgets are going to be hot this year.
So how do you get that data to determine who your core customer base is? Where do you turn for real, useful information to build your business and ensure that you're doing the best you can? Your buying group can help, but you probably have all the information you need right at your fingertips—your POS system. Customer analysis, inventory turns, and careful business analysis will show you the direction you need to take in the coming years. Some of the reports that will provide this information are an inventory analysis report, an inventory turns report, a turn and earn report, an inventory usage report, and a GMROI report. Others might include vendor performance reports or days on hand reports.
In my experience, too many well-meaning LBM dealers across the country have attempted to be too many things to too many people. This isn't necessarily a bad thing, but it can confuse your customers and can keep you from providing the best possible service. In today's tight market, proper business focus is what you need, not a one-size-fits-all type of operation.
