From file "046_pss" entitled "PS04OTLK.qxd" page 01
From file "046_pss" entitled "PS04OTLK.qxd" page 01

Since becoming chairman of the National Lumber and Building Material Dealers Association, I have been blessed with the opportunity to travel to nearly every corner of our great nation to visit with lumber dealers and their regional associations. It has been a fascinating and energizing opportunity to see our industry from many different perspectives. As a result of my travels, I can report to you that the lumber dealers of this country are successful, growing, and, most importantly, evolving!

Evolution is perhaps the most appropriate word to describe the state of our industry today. I believe that the four key factors driving this change are demographics, competition, information, and globalization.

1. Demographics. Demographics of all types are driving change in our industry directly and indirectly. National builders and national retailers are systematically following the building permit growth patterns of the country, establishing and increasing their presence everywhere there is housing growth. Generational transitions in ownership of independent retailers are creating opportunities for mergers and acquisitions. Aging populations create needs for new types of housing such as assisted-living communities. Work force labor shortages create demands for components and installed services. States with urban and rural markets can have significant sprawl and growth management issues in one region while just two or three hours away populations are declining and economic activity is stagnant.

2. Competition. Our industry has always been competitive, but I believe we are entering an unprecedented era of competition greater than anything we have previously encountered. National retailers such as The Home Depot, Lowe's, and Wal-Mart continue to push into smaller markets and compete in every way for building material sales. National pro dealer chains are acquiring market-leading independents, while at the same time market-leading independents continue to expand and acquire. Specialty retailers and one-step distributors are present and growing in almost every product category. Even manufacturers are moving down the supply chain and in many cases are bringing certain parts of their product lines directly to market competition with the very lumber dealers they sell to.

3. Information. The customer has never been better informed, had better access to information, and had more choices available. For example, at any moment I can simply click over to the Internet and quickly plan a flight, reserve a hotel, and rent a car with access to all the same information as a travel agent, much the same way your customers can find out product specs, pricing, and availability—and shop around—whenever they choose. The customer knows exactly what he or she wants and can expect in the marketplace. The result is that customer expectations have never been higher.

4. Globalization. Like many other industries and many of our own vendors, globalization is about to kick in and have a major impact on our retail industry. Hancock Lumber in little Casco, Maine, for example, is now buying our customer appreciation baseball caps with the company's logo on them from China. Last year we paid $12 per hat (they were really nice hats!). This year we are buying the same hat from China for $3 apiece. Hancock Lumber has assigned “global sourcing” as a top priority initiative to one of our executives. Evolution is the state of the universe.

Evolution is the state of the marketplace. Lumber dealers who grow their businesses in the future will both understand and embrace the impact of demographics, competition, information, and globalization in ways that make their companies better and stronger. Enjoy the journey! —Kevin Hancock is president of Hancock Lumber in Casco, Maine, and is chairman of NLBMDA.