Spring is in the air and, as our ProSales 100 issue suggests, so is change. Below are three different developments to watch.
The first one is consolidation. This year’s ProSales 100 list saw a few prominent companies disappear: Allied Building Products was acquired by Beacon Roofing Supply, and Meek’s Lumber and Consolidated Lumber were absorbed by American Construction Source last year. And if David Flitman, newly appointed president and CEO of BMC Stock Holdings, is right, acquisitions will not stop anytime soon.
Before joining the lumber and building materials industry, Flitman held leadership roles in the chemical and food-services industries. On an M&A panel at the ProSales 100 conference, in March, he stated that the top three companies in the chemical industry own more than 40% of the market and the top three leaders in the food services industry own one-third of the market. In comparison, he stated that the top 10 dealers in the LBM industry represent only 25% of the market. “So, we’re extremely fragmented,” he said. “There’s a lot of opportunity for consolidation.”
Another significant force of change is enterprise software. Already pro dealers are able to capture, track, and analyze valuable customer data to make smart business decisions. For example, Central Valley makes sure that it consistently keeps top-selling items in stock. To do this, Michele Valdez, category business manager, encouraged her replenishment managers to use analytics to more closely evaluate sell-through data and space-to-sales information to make any necessary inventory adjustments. This enabled the company to increase sales nearly 20%. For these efforts, Valdez was named as one of this year’s ProSales magazine’s Four Under 40 winners.
Information technology has already enabled LBM businesses to be efficient, effective, and profitable. And, as it evolves, so will those companies that evolve with it. Already, there are some expectations that this evolution will happen rapidly. On the same M&A panel with Flitman, LT Gibson, president and CEO of U.S. LBM, stated that because of technology, “this industry is going to change more in the next 10 years than it has in the last 100.”
A third force driving substantial industry change is customers’ changing needs. When Central Valley’s pro builders asked for help with their aggressive project schedules and labor shortages, the company made the bold move of opening a prefab facility, in May 2018. It’s already profitable, so when a recession comes, those profits can help the dealer weather the storm. Plus, it will have benefited from the efficiency gains that the company is working on this year. Clearly, Central Valley picked a good time to launch a prefab facility. This is a good example of how staying nimble to address customers’ changing needs can enable dealers to thrive.
To learn about more industry trends and how dealers are responding to them, read our 2019 ProSales 100 report.
