When a customer has a complaint, Hubert Lang III is used to direct talk and quick action. That's why Lang, president of Lang Building Supply in Brunswick, Ga., was surprised by the way he heard a customer was unhappy with deck handrailing he had purchased. Lang didn't get news of a problem until five months after the sale, when his credit card processor pulled from the LBM's account the $26,000 paid for the deck package. "The credit card company reached in and snatched back the money," said Lang, the fourth generation of his family to serve as Lang Building Supply's president. It took another four months of haggling among the credit card company, the customer, and the deck handrail's manufacturer–eventually leading to extensive work on the handrail by the manufacturer–before the customer was happy and Lang got the $26,000 restored.
Lang was one of nearly 350 LBM executives nationwide this summer who related their experiences as part of a ProSales online survey on dealers' credit card experiences. While nobody else reported a problem as big as Lang's $26,000 headache, roughly a quarter of the dealers said they've seen a sharp increase in credit card usage at their operations since January 2006. Another 40% said card use is up at least slightly. Those increases helped prompt nearly 24% of respondents to tighten their policies on taking credit cards, often by refusing to accept them on account payments or ending the practice of giving rebates for prompt payment when plastic is used to pay the bill.
"This is a huge issue that we don't know how to handle," said Scott Sommers, manager of Hartville (Ohio) Building Center. "I would like to come up with a way to give what we are paying to the credit card companies back to our customers."
ProSales conducted the survey between July 25 and Aug. 6; 340 people started the survey and 325 completed it. Of that group, 270 people identified themselves as working at lumberyards, 88% for an independent.
Sixty-three percent of the people at yards participating said building professionals account for 75% or more of their company's sales. Just over 35% of the LBM respondents worked at yards with annual sales volume of $1 million to $10 million, 27% were at yards with sales of $10 million to $25 million, 22% worked at yards with sales of $25 million to $100 million, and 13% came from yards with sales of more than $100 million.
The numbers and comments collected in the survey indicate that credit card charges are a painful issue nationwide. As we reported in May ("Taking Credit," page 28) credit card spending among small-business owners jumped 107% between 2001 and 2005, and many card issuers have aggressively pursued builders and remodelers as sources of increased business. That, in turn, has caused a sharp jump in the transaction fees that dealers pay card processors–and a similarly sharp rise in ire by dealers galled at the notion that their transaction fees are helping pay for their customers' vacations.
"It seems more people are playing the credit card reward games and want their lumber purchases to earn them points," wrote Hamid Taha, a vice president at Alpine Lumber Co. in Denver. "We see the fees as a hardship that prevents us from accepting them on monthly charge accounts."
Lang also has, to his regret, seen his share of points-happy customers. On the other hand, Lang Building Supply does business with state and local governments that used to take months to pay on their invoices, but now give their workers credit cards to buy supplies. Compared with waiting for the government to cut a check, he prefers paying the transaction fee and getting the money right away.
Indeed, several dealers appeared resigned to the trend. "Credit and debit cards are a fact of life in our store," said Dan Wilson, manager of Parkes Lumber Co. in Lawrenceburg, Tenn. "If we didn't take them, I don't think we could remain in business for very long."
"What with the housing slump causing the erosion of margins due to every LBM fighting for the few jobs out there, it may be that we have to revamp our credit card policy instead of losing the percentage we pay to the credit card companies," added Paul Dalton, a manager at Keith Brown Building Materials, Modesto, Calif.
Victor Duplesis, general manager of retail operations at NFL Building Center, Summerdale, Ala., had a more succinct question: "How do we get them to pay us first?"