From file "106_pss" entitled "MarketM5.qxd" page 01
From file "106_pss" entitled "MarketM5.qxd" page 01

Like every dealer and distributor, Alan MacDougall has customers who demand just-intime delivery. But instead of scheduling same-day delivery of a truckload to a dealer location in the next county, he ships materials 6,000 miles on a freighter to Japan. “It has to be loaded in job lots before it gets shipped [so materials can be delivered right to the jobsite],” says the international sales manager at BMD (Building Material Distributors), a $230 million two-stepper based in Galt, Calif. “We learned that and other lessons before we got it right.”

Because of a complex (and high-margin) distribution channel for imported goods and lack of warehouse capacity in Japan, says MacDougall, “builders and developers [there] want to buy direct from the West.” However, most U.S. manufacturers are unwilling to ship less than a full container across the Pacific; BMD's broad inventory offers overseas buyers a custom mix of building products from one source. “Manufacturers give [international buyers] our name, and vice-versa,” he says.

The growing popularity of Western-style housing, specifically in Asia, has fueled demand for frame-construction materials. The homes shown here were built in Beijing, to replicate those from California's Napa Valley, with materials supplied and shipped by BMD from the Bay Area. Courtesy Building Material Distributors Now nearly a dozen years in the export business, BMD uses offshore accounts to hedge domestic demand, sell high-margin and special-order products, and serve a growing international need and desire for U.S.-made building materials. Still, international trade represents less than 10 percent of the company's annual revenue.

But BMD and others with an established foothold overseas expect to grow that segment of the business as markets in Asia (especially China), Mexico, Central and South America, and nations of the former Soviet Union steadily improve their ability to trade with the United States and satisfy a global call for Western housing styles and products. “There's demand for building materials worldwide,” says Wayne Gardella, vice president of domestic business development for Export-Import (Ex-Im) Bank of the United States in Washington, D.C., a federally funded financier of U.S.-based exporters. “American industry is beginning to understand that global is the way to go.”

But will pro-oriented (or any retail-level) dealers be along for the ride when manufacturers, wholesale distributors, and third-party exporters and brokers seize offshore opportunities? Probably not directly in most cases. “Dealers don't have much of a future as exporters,” says Joe Honick, president of GMA/ International Ltd., in Tucson, Ariz., a consultancy to U.S. companies operating or selling abroad, specifically in Asia. “It's tough enough to build a market in your own territory, much less overseas.”

It's also unlikely that increased international demand and exports will impact the ability to satisfy domestic needs for building materials, thus causing delays and price hikes along the domestic supply channel. In fact, recent cement and steel shortages have been the result of fewer available imports rather than a siphoning of U.S.-made products. “Other countries, especially China, are sucking up their own products that they might have sent here,” says Honick, in large part because of recent commitments by several nations to increase their own housing production.

That doesn't mean, however, that pro dealers should ignore the export market or think they can't participate. Short of direct-exporting materials themselves, dealers may be asked to supplement a distributor's international shipment, create pre-engineered home packages for overseas or bordering buyers, and benefit from a broader inventory of products at the wholesale level.

“When we pull from our customer base [dealers] to fill out an order, it's helping them turn inventory,” says MacDougall, without intruding on a dealer's relationships with its pro customers at home. The distributor also carries more than 100 product lines exclusively for overseas customers, including plumbing and electrical fixtures and fittings, that it may eventually sell to domestic buyers as products become compatible with U.S. standards.

Opportunity Knocks Several issues are driving an intensified interest in exporting building materials and housing across oceans and over borders, including a record-breaking national trade deficit of more than $617 billion in 2004, as reported by the U.S. Census Bureau in February, and the belief among economic policymakers that increased exports support domestic job growth.

No one is suggesting that building products are a panacea for either issue; they aren't even currently among the top 10 categories in terms of revenue generated from export sales, according to the Commerce Department. However, construction materials are viewed as a relatively untapped opportunity with plenty of potential. “Exports offer builders and suppliers a chance to expand their markets,” says Rita Feinberg, executive director of NAHB International. “That's always a good thing.”