Pulling in different directions

Home Channel News, Jan 10, 2000 by Scott Larson

"On the surface you'd think there would be a problem," he says, echoing Kuester's concerns about a "custom mindset" that requires job-site visits, special and custom orders and general "hand holding." But the reality, at least in his market, Luecke claims, is that both types of builders carry their own unique sets of expenses. Riemeier, he notes, does takeoffs and drafting and gets permit approval for one of its production accounts. Similarly, he notes, labor is so tight in the Queen City region that working with any kind of builder is predicated on providing framing carpenters.

The key to profitability, he declares, is knowing the costs associated with such services and making sure the customer understands them as well.

"Whether he's custom or production, the builder rends to beat you up on costs, Luecke says. "You have an internal control -- your pricing -- and as long as you understand that, whose fault is it but your own for selling too low to make a profit?"

Still, to guard against such pitfalls, many dealers argue that any company interested in serving both custom and production accounts is better off operating two separate, highly focused divisions -- or as Kuester puts it, "building an invisible fence down the middle of the yard." Each division -- one designed to serve production accounts, the other geared for custom builders -- would have its own customer base and run as its own profit center with its own operational assets including trucks, sales staff and training needs.

Wickes, which in many ways has helped spearhead the trend toward specialization, has taken that approach a step further. Since restructuring to focus on builders in 1998, the dealer has identified two market types -- major markets where production builders are active and conventional markets where they aren't -- and developed distinct strategies for each.

In conventional markets, Wickes operates showrooms in which it devotes one-third of the space to high-end and custom-order products such as specialty doors, windows and columns that custom builder demand. In major markets, the dealer still serves custom builders but features no showrooms and offers "a different level of service," according to Dave Krawczyk, Wickes' president and the architect of its builder-oriented approach.

"We still sell and deliver to custom builders," Krawczyk says of the major market strategy. "But we do it in a way that fits into the framework of the production builder."

Recently, Wolohan Lumber, the Saginaw, Mich.-based dealer, adopted a somewhat similar approach by separating its operations into one division that consists of contractor-focused Woloban stores and a second that targets retail project sales and sales to builders. The latter division is called CML, the operating name of Central Michigan Lumber, which Wolohan acquired last year.

Luecke, however, hasn't gone so far. Aside from paying strict attention to costs and having one member of his sales ream focus on production-type accounts -- as much because that's the type of work he enjoys as anything else, Luecke notes -- Riemeier Lumber shows no outward signs of specialization.