As market turns, a 'big' threat emerges

Does the independent lumberyard compete with the big-box national retailer? The answer might surprise you.

It surprised Jim Robisch, senior partner at The Farnsworth Group. His recent presentation during the LMC convention was titled "The Future Threat of Big Box Home Centers in the Pro Market," and it spelled out the case that Lowe's, Home Depot and Menards are not to be underestimated as LBM competition.

"Big boxes are becoming more relevant," Robisch told HCN. "Not as the initial provider for the framing package, but for just about everything else. All of a sudden, they're on the list of places where builders say they buy."

Based on Farnsworth research of pro purchasing habits, Robisch said he is seeing diminished market demand for some of the traditional strengths of the independent channel. Until very recently, lumberyard dealers would hang their hat on customer service and quality products. But those are declining as important selection criteria for today's builders and remodelers.

Meanwhile, the criteria of low price, convenient location and product availability are generally growing, and that recent shift plays into the hands of the big box, Robisch said.

What happened? Several things all at once. The housing downturn forced many dealers to cut heavily, lowering inventory levels and staff, he said. A dearth of starts forced many builders to take on remodeling jobs. The nature of their work led them to the big box, while in some markets, independents closed. The influence of the big-box home center gained traction with the pro market as this was happening.

Combined with all the above is a new landscape where dealer loyalty isn't nearly what it used to be. "Competitive cross shopping is probably two times what it was before 2008," Robisch said.

For the independent pro dealer, it adds up to a growing competitive threat. But there is a response to big-box encroachment. The Farnsworth presentation offered strategies that minimize the competitive impact of the big box. Successful dealers focus on existing customers, increasing their average ticket, while pursuing profitable new customers.

Farnsworth research also recommended:

  • Consider restructuring the sales team for the tech-savvy future generation of builders, for whom site visits are low value, but strong inside sales support are high value.
  • In the product assortment arena, maintain in-stock positions at all times with signature products.
  • Experiment with nontraditional merchandise, such as apparel.

Also understand that where big boxes are weak, that's where the independent is strong. "Independent lumber and building supply dealers continue to maintain a differentiating advantage perception in areas of service, quality and business partnership that can still be leveraged if enhanced and refocused to today's contractor needs," Robisch said.

Ken Clark

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