Regaining retail: yes, the bib boxes took some—OK, maybe a lot—of your cash business, but there's still plenty to grab if you target your efforts

Prosales, Feb, 2005 by Rich Binsacca

There was a time when a job sign reading "Coming Soon: The Home Depot" inspired a fair amount of uncertainty and tension among lumber dealers that relied on retail sales to hedge their contractor business. For some, the result was closure or consolidation, acquisition by a national dealer chain, or acquiescence of their cash revenue. However, even though the big boxes are still coming (The Home Depot and Lowe's added about 150 new locations apiece in 2004) a big chunk of retail business still is left in the tin--certainly enough for more pro dealers to plunge a thumb, if not play their whole hand, into capturing recapturing) retail sales. boxes currently command percent slice of the $400 by in annual retail sales of build materials and merchandise, as reported by the Census Bureau, which still leaves a huge market up for grabs for pro dealers, especially higher-level, quality-oriented DIYers with specific product and project-related needs.

"The boxes took away price-sensitive buyers, but the serious, project-oriented consumers still rely on us," says Doug Ford, general manager of the Ballston Spa, N.Y., flagship location of Curtis Lumber, the 2004 PROSALES Dealer of the Year, which recently added seven locations through acquisition to boost its 11-location, $120 million operation. "That's a better [type of consumer] business for us, anyway."

Regardless of how they view and attack their respective markets, those willing to fight for cash customers understand the key differences between themselves and the shiny new boxes down the street. "We had to realize what our strengths were" says Roger Kotter, president of Stone Lumber Co., a single-location dealer in Nampa, Idaho, just west of Boise. "We knew service and experience were going to set us apart."

Stone Lumber and other dealers that appreciate retail business focus their efforts on sharing product and project knowledge, leveraging contractor conduits to consumers, and strategizing crossover inventory and value-added services. "There's still a fair number of people who appreciate the services we offer, and prefer to support the local economy," says John Hannan, president and CEO of Spahn & Rose Lumber Co., a $95 million operation based in Dubuque, Iowa, that manages 25 locations, as well as distribution and truss facilities. "Higber-level DIYers appreciate the value they're getting, even if they pay a bit more for materials."

Knowledge Is King

Ask any dealer why a certain, if smaller, segment of homeowners still frequent their stores, and the consensus answer is a knowledge able staff. "Our [retail] customers need the knowledge base we offer versus the Wal-Mart mentality," says Kotter. "Our staff offers ideas and helps them solve problems."

That's because, unlike most of the hourly and part-time help employed by big-box retailers, most pro dealers have sales associates who bring several years of building and pro sales experience to the table. "People come in looking for help," says Kotter, himself a 33-year industry veteran. Whether a homeowner's plans range from a replacement window to a room addition, Kotter knows his staff can handle it. "We've all built that stuff."

Banking on a knowledgeable staff, however, requires a dedicated effort to keep them on the payroll. "The biggest thing [to our success in retail] is retaining good employees," says Curtis Lumber's Ford, a process made even tougher because he has to keep the store open on weekends and evenings to capture cash sales. "Builders and consumers rely on those relationships."

In addition to project know-how, consumers also look for insight into new products they've read about or found online. "We do a huge business in specialty products because we know about a wide range of products," such as composite decking and high-performance windows and doors, says Jim Pruitt, general manager of Palmer Lumber Co., a single-location, $7 million operation in Chehalis, Wash.

Palmer Lumber's access to products (and product knowledge) is supplemented by its affiliation with Ace Hardware's LBM program, which was revived nearly two years ago after a corporate split with Builder Marts of America (now part of Guardian Industries). "The access to such a huge inventory of products [through Ace's distribution network] is a big plus, especially on special orders," says Pruitt. "It allows us to be competitive."

Quid Pro Quo

Another important retail magnet for companies like Curtis Lumber and Palmer Lumber is expanded showroom space, which allows dealers to leverage a conduit to consumers through its pro customers by enabling pros to bring new-home and remodeling clients into the store to gander at the latest kitchen, bath, window, flooring, and millwork products. Additionally, a fancy new showroom also attracts walk-in traffic. "We expanded to attract both [pros and consumers]," says Ford. "We want builders to send clients in to talk with their salesperson and make allowance purchases."

Walk-in retail customers, meanwhile, are not only looking for product ideas, but also are interested in getting a referral to a reputable builder, remodeler, or replacement contractor. "We funnel them to our [pro] customers just like our contractors funnel consumers to us," says Ford, adding that it breeds loyalty among credit and cash customers.