My conversation with a lumberyard CEO was proceeding smoothly when I noticed a picture hanging on the wall behind his office desk. It showed a warehouse full of insulation, so I asked how his sales of that product were going today.
“That picture was taken years ago,” the dealer replied. “We used to be the biggest insulation supplier in this market, but then a specialty firm came in and started taking away our business. Eventually, we dropped it.”
Lots of lumberyards in big and even medium-sized markets will tell you the same tale of products abandoned, be they insulation, power tools, or roofing. Also, these dealers will describe ventures they have shied away from entering: installed sales, component manufacturing, and multifamily and commercial projects all are examples.
Naturally, lumberyards want to focus on what can make them money. But such a focus could leave many dealers reliant on a limited pool of services and products that, one day, won’t provide enough sustenance to survive.
You could say small and custom builders enable the problem. They often buy in small quantities, need material takeoffs, do their building at the jobsite, and rely on you to be a de facto project manager. Because they already have customers for their projects, they are less sensitive to material prices. Perhaps, above all, these builders patronize you because they can buy on credit.
Now contrast that with what big and industry-leading builders do. They purchase goods direct from manufacturers. Some design with software that creates de facto takeoff lists. They manage their own projects and are getting deep into off-site construction. Because they build spec homes, material price sensitivity makes them savvy and tough negotiators. And they have more credit options.
Meanwhile, one-time specialty firms like ABC Supply, Beacon, and the SRS family of companies might have started as roofers, but now you can buy decking, windows, and lots of other items that used to be available from you alone. And of course, The Home Depot and Lowe’s are amping up their services for pro customers, even including deliveries.
There’s plenty of evidence to suggest that in big and medium-sized markets, we’ll see more apartments, tract homes, and commercial work. The specialty dealers already work in those markets, independent lumberyards not as much. Custom homes won’t go away, but given how many small builders are nearing retirement age, your favorite customers might. So, what should you do?
Try to sell more to the customers you have. For years, smart operations have tracked how much of a house they have sold to a builder. This makes sense if what the builder isn’t buying is something you sell, such as windows. But if you don’t sell the product, consider de facto subcontracting to offer builders a more complete package of goods.
Also, keep track of trends. Off-site construction, mass timber, and specialty installers all are driven by deeper desires to put up homes faster, more efficiently, with fewer people, and with better construction quality. See if there’s an opportunity for you. For instance, even if you don’t sell the mass timber panels or modular units that go into a commercial project, you can rent space in your yard to serve as a staging area for those big items.
