Lines of supply: traditionally characterized by small companies making low-volume purchases, the remodeling market definitely can be a challenge to supply—but it also can be a lucrative revenue stream for pro dealers that treat remodelers like VIPs rather than fill-in business

Prosales, Sept, 2004 by John Caulfield

Rainbow has purchasing relationships "all over the place" with dealers and suppliers: a Kohler distributor, a drywall specialist "who also does the taping," and so forth. But the dealer keeps returning to Hancock Lumber for most commodities because, Cooper explains, he has a direct line to people he knows, and Hancock provides engineering assistance oil the jobsite. This relationship has been "a good mix," adds Cooper, because "I was growing and they were growing."

Loyal Customers

While he draws upon several supply options, Cooper definitely is not a fan of the big boxes. "They are really just big hardware stores," he says. The survey's respondents echoed Cooper's sentiments, not giving big boxes very high ratings on overall service, with 69 percent and 61 percent of" the respondents ranking both The Home Depot and Lowe's, respectively, a 5 or less on a 1-to-10 scale, with 1 being extremely poor and 10 being extremely good. In contrast, 69 percent of the respondents ranked their local building materials dealer as an 8 or greater on the service scale. Even more revealing is the finding that remodelers don't think warehouse pricing is much more competitive, either.

However, while many pro dealers scoff at The Home Depot's claim that 30 percent of its stores' sales come from pros, big box penetration with remodelers--especially in certain product categories--cannot be so easily dismissed. Between one-quarter and one-half of the remodelers polled in this survey said they prefer big boxes to other venues for tools and fasteners, locksets, caulks and adhesives, lighting, insulation, and shelving and storage (see Figure 1).

And in metro markets where big boxes are now pervasive, remodeler acceptance of these stores as primary suppliers is more common. "Home Depot is my second home," Ralph Freeman of Atlanta-based J&J Contracting told Cox News Service in June while shopping at The Home Depot's store in Morrow, Ga. "If I'm at a dead-end in a job, I'll ask one of the guys here and they steer me in the right direction. On a scale ell to 10, I give them an 11."

While Freeman may be gung-ho on all aspects of purchasing from warehouse home centers, a more typical remodeler's buying pattern tends to show a diversity of sources, as seen at Arthur Bradley Design/Build, whose cost of materials consumes about one-third of its $7 million annual revenue. In addition to employees' quick product pick-ups at the Home Depot next door, the company purchases lumber from two local pro dealers, Dixieline Lumber and Ransom Bros. Lumber & Supply, mostly because their yards are close to its headquarters. Its roofing wholesaler buys the products it installs. The remodeler sends drywall subs to The Home Depot or Dixieline for Sheetrock. In addition, "We like to be near a supplier with a showroom that we can send our clients to," says Schuber, a preference that gives The Home Depot and Dixieline (which has two millwork showrooms in town) a leg up, as well as plumbing distributor Ferguson Enterprises, whose local warehouse displays bath fixtures in "booths" and "suites, says Schuber.