Commercial construction has been a part of Roanoke, Va.–based Marco Supply's history from the company's beginning in 1970. Schools, hospitals, movie theaters, and retail centers fueled the specialty tool and fastener supplier's growth into a 16-unit distributor selling tools, fasteners, and related construction equipment across the Mid-Atlantic and Southern states. Unlike residential building, however, the commercial construction economy has dipped since the late-'90s, and Marco took its share of knocks in the process.
In Atlanta alone, where Marco operates one location, office building has declined more than 40 percent in the past two years, according to president Marshall Jones, who also is vice president of the Specialty Tool and Fasteners Distributors Association (STAFDA).“Office construction was a big part of our business in the late-'90s and early 2000 and 2001, and for that to be cut [virtually] in half is analogous to housing starts in the residential market going down 40 percent,” Jones says. “It took some retooling and some time for the market to recover. But even as our customers come out of that fog, there don't seem to be any new challenges that did not exist before then. It's still ‘I've got to have it now.'”
Indeed, specialty distributors across the construction spectrum say block-and-tackle supply basics continue to be the most important components defining their markets as they sell to a diverse customer base that includes specialty contractors, general contractors, residential and commercial builders, subcontractors, and remodelers. But with the customer melting pot comes equally diverse challenges of keeping in-stock and educated on a range of varying job-specific needs and buyers.
Full-Range Sales At Marco Supply, that diverse customer mix helped to smooth out the market dips in regional commercial construction over the past five years. “One-quarter of our business is the commercial contractor, including concrete contractors, while another quarter of our business comes from the mechanical, plumbing, electrical, and HVAC contractors,” Jones says. “The drywall and acoustical contractors make up another quarter on the commercial side, and the final quarter is a hodgepodge of everyone else who is left, including residential framers, glass and glazing, residential and commercial roofers, steel fabricators, and OEM (original equipment manufacturers). So overall [we're serving] just a wide variety of customers.”
This type of supply is the norm for most large specialty dealers. Consider Beloit, Wis.–based ABC Supply as another example. With locations spanning 44 states, the company sells roofing, siding, windows, and other exterior products to an extremely diverse customer base of GCs, subcontractors, builders, and remodelers. “Obviously, with our roots in the roofing side of the business, over a third of our customer base are roofing or roofing and siding contractors,” says company president and COO David Luck. “Our mix of new construction to remodeling business varies depending on the geographic market. In areas that are booming with new construction, like the South and West, we have a stronger mix of new-construction work, but given the extremely large housing stock, our overall mix of business runs in the 60 to 70 percent range for remodeling/retrofit.”
Large customer variety, however, increases inventory demands as specialty distributors typically carry full, in-stock product lines from multiple manufacturers within their chosen areas of expertise. “One of the areas that is challenging is the different products used by different builders in the same market,” explains Rik Gagnon, senior vice president of sales for Costa Mesa, Calif.–based White Cap Construction Supply. (White Cap was acquired by The Home Depot in May.) A 71-unit specialty supplier of tools and hardware, White Cap carries $100 million worth of inventory at any given time to meet or exceed customer expectations on daily supply requirements. “We have a lot of overlapping products that accomplish the same thing, but we still support each builder or subcontractor by inventorying competing products,” Gagnon says.
Specialty distributors also move more than just principal products, offering complementary lines that are likewise inventoried and ready-to-go for contractors and subs without the hassle of special order or lead-time waits. “For us, it's about being in stock,” explains Luck. “Less product lines mean a broader, more professional assortment in stock. Then you take the complementary products with it. [For example,] with a steep-slope residential roof, you want all of your metal trim and vents and specialty underlayments, ice and water shield, nails, and power tools—that's what you need to be truly professional.”
Sometimes larger inventories among specialty distributors are a function of product focus and market specialty. Roofing, in particular, benefits from near-zero spoilage in stock, enabling suppliers to keep bulk quantities on hand to meet market demand as building seasons and weather affect purchasing. “Seasonal demand combined with regional storms will create excessive demand on manufacturers who need the distribution pipeline to help maintain level production schedules,” says Bob Vatterot, president of Dealers Service and Supply, a two-unit roofing distributor in metropolitan St. Louis. “In fact, most manufacturers offer special winter buying programs to deal with this issue.”
Fortunately, complete in-stock availability also transcends overhead as a marketing and customer service asset that communicates dependability as a go-to supply source. “You go to a warehouse store, they have a couple of colors and a couple of styles; you go to one of our yards and it's two acres full,” says Luck. “You want a pink shingle? We probably have got some in town somewhere.”
Additionally, Gagnon says the image conveyed by full-line, in-stock inventory is an invaluable word-of-mouth rep that White Cap relies on across its varied markets and customer bases. “Customers say, ‘You guys have everything—your stores are like candy stores for contractors,'” he says.“[But] with the focus on the specialty products that we supply, there is also a lot of product knowledge that goes along with this diverse inventory, which requires an investment in the training and quality of employees who work at White Cap.”
