LBM Industry Update panel with Do it Best managers, from left: Todd Hixson, Jean Fahy, Joe Corah, and Josh Ratcliff.
LBM Industry Update panel with Do it Best managers, from left: Todd Hixson, Jean Fahy, Joe Corah, and Josh Ratcliff.

The construction supply industry is plagued by unusual headwinds. At least, that was the general consensus among Do it Best executives on Friday, during the panel “LBM Industry Update” at the co-op’s annual Spring Market (May 17-20) in Indianapolis.

Chief among those challenges has been the weather, which contributed to last year’s lumber supply shortage and subsequent overproduction, causing significant fluctuations in lumber prices. Unfortunately, weather challenges have extended into 2019. This year’s long winter and the heavy rainfall in the Midwest and across the United States have negatively affected product sales, Todd Hixson, division manager at Do it Best, stated. “Normally, by now, we have a lot more slabs in for basements. Some of those basements are probably inground pools right at the moment. We’re waiting for them to dry out. We usually have a lot more framed up [by now]…but things just haven’t started that way.”

Additionally, Hixson added that the average size of new homes has been “dropping considerably over the past six months to a year. That takes less lumber. It takes less panel products. So, if the mills are producing the same amount of products, then it’s got to go somewhere. The thing is, it’s not going offshore that much.”

China, which is embroiled in a trade war with the United States, was a “huge importer of spruce and fir” from Canada and the U.S. However, it has recently shifted suppliers. Now, Hixson stated, “their number-one supplier is Russia.

“The other thing that may be a little bit of an issue is…on Monday [China] put a 20% tariff on all southern yellow pine exported to China. That was an item that was actually going really well,” Hixson stated, adding that one major producer told him that morning that it has already noticed a slowdown in export orders.

A few years ago, he said the industry didn’t have enough rail cars to meet the high demand for lumber. As a result, shipments would show up two months late. Now, he said, rail cars are “sitting all over… . Hardly anyone wants anything at the moment.”

Sharing recent industry data, he stated, “Our housing starts just came out yesterday. The good news is that they’re up. The bad news was single family homes are down. Multifamily homes are up, but for many of us…that’s not our niche. All the prognosticators who do housing starts have recently lowered their start numbers again. So, they’re just a little bit above last year. That doesn’t necessarily bode well for us for the rest of the year,” Hixson stated.

Compounding the problems is that even if housing starts pick up, the industry’s labor shortage will inhibit contractors’ ability to make up for lost business in the first half of the year, Hixson added.

Customer Segmentation

So how should dealers respond? By focusing on the things within their control. In a presentation later that day, Rich Lynch, vice president of marketing at Do it Best, offered some marketing suggestions. One key area he encouraged members to focus on includes some enhancements to the Best Rewards program, such as customer segmentation capabilities, which he stated will give dealers “an even better understanding of your customers” and help construction supply professionals make “smarter marketing decisions.”

Rich Lynch, Do it Best
Rich Lynch, Do it Best

More specifically, he stated that members can segment the data by various metrics, including average ticket, days between visits, number of departments shopped, and distance to the store. He added that a deeper dive into the data reveals nine distinct customer segments, or personas, that pro dealers should focus on: Big Spender, One Big Thing Shopper, Regular Shopper, Handyman, Loyal DIYer, Out of Towner, Fixer, Occasional Shopper, and Lapsing Shopper. “If you look at the top three, they are 29% of the customers, but they are 64% of the sales. These are the very people you want to be focusing your marketing on,” Lynch said.

“But there’s a catch. If your cashiers aren’t asking for Best Rewards information from every customer, every time, you’re not collecting the right data to make sound, profitable marketing decisions... . For our Best Rewards to be fully unleashed, it’s got to be asked for at every transaction.”

Some of the more progressive members, he stated, are already linking more than 70% of customer transactions to Best Rewards accounts. “Many of you are nowhere near that level. If your scan rate is not high enough, you’re not going to be able to take advantage of segmentation to [drive] smarter thinking and smarter marketing decisions.”

Another way to help bolster sales is to offer a customer financing option. Lynch revealed that Do it Best is launching a consumer financing program with Synchrony that enables dealers to “offer customers financing on everything you sell, from big ticket items to smaller ones, with flexible payment options.”