California housing starts rise in May
Housing production in California, fueled largely by multi-family building projects, posted the highest monthly permit total for the year in May, according to statistics compiled by the Construction Industry Research Board (CIRB).
Permits were pulled for 4,630 total housing units in May, up 42% from the same month a year ago and up 28% from April. Permits for single-family homes totaled 1,908, down 7% from May 2010 and down 6% from the previous month, while multi-family permits totaled 2,722, up 124% from a year ago and up 71% from April.
Mike Winn, president and CEO of the California Building Industry Association, noted that CIRB is now forecasting that a total of 51,400 permits will be issued in 2011, up from 2010’s total of 44,762 permits, but still down from 2008’s total of 64,962.
“While it seems we had a great month in May, these gains are largely attributed to the multi-family sector,” Winn said. “The construction industry as a whole is still struggling, and we must continue to encourage our lawmakers to ‘do no harm’ as the industry continues to recover.”
A hundred years, and growing
TW Perry isn’t just a lumberyard with a 100-year history. It’s a company — ranked 33rd on the HCN Top 200 Pro Dealer Scoreboard — with a story.
The drama includes an extreme makeover in the late 1990s, when it recast itself from a home center to a pro dealer firmly focused on the remodeler and contractor. It’s a turnaround story starring motivated salesmen, and it’s an ongoing example of how a decentralized, entrepreneurial business can thrive — even in a tough market.
To tell the story, Home Channel News sat down with the following key players:
• Michael Cassidy, president and CEO
• Ed Quinn, chairman
• Mike Moore, VP materials management
• Rich Cortese, retired president
Cassidy: In a market that’s not growing, we grew 10% last year, and we’re on track to grow 10% this year. We do it by leaning forward — anticipating the market — by being sophisticated, highly technical, decentralized, entrepreneurial and by sharing what we know. In fact, we have a theory of running this company upside down. The customer is at the top of our chart. The person interacting with the customer is next. Then that person’s manager, then the senior manager. And at the very bottom of this work chart is the CEO. Our people can make decisions without having to ask Mike or me.
Moore: We have to be that way given the geography of our territories. The Baltimore market is completely different from Leesburg and Springfield. The analogy we use is we’re all the same family, but we have different children with different personalities. And the local management at each individual branch has to know the customer that they service. And the customer is completely different across all six branches.
Quinn: A hundred years ago, [TW Perry] was a feed and fuel company. Livestock feed and fuel for farmhouses. So when the suburbs were born in the 1920s and ’30s, that’s when the whole fabric of the company changed, and that was the real revolution for the company.
Cassidy: Ed took the company over about 12 years ago. Ed is a turnaround guy hired by the Perry family. They were in their third generation heading into their fourth. And as many generational transfers go, well, they don’t go well. The saying goes: “Value is created by the first generation, occasionally preserved by the second, typically destroyed by the third.” That was the stereotypical case here.
Quinn: The real change that forced Mr. Perry to hire outside consultants — namely me — was the big-box threat. The first Home Depot opened right here in about 1987. And it was an instant success. Our Gaithersburg building used to be a home center, by the way. It was 33,000 sq. ft. It won all kinds of awards. And it never made a nickel. In fact when I got here, they were losing about a million a year [across the company]. The day Home Depot opened, TW Perry sales dropped 25%, and they never recovered.
Nobody knew what to do about it. They made the classic mistake of trying to out-advertise them. Home Depot dominated the Washington Post, and TW Perry was fighting back with advertising in the county newspapers. It was a nice try, but it just wasn’t going to work.
Cortese: At that time there was a lot of work to do. Ed had started the ball rolling. I came on board in February 1997 and yeah, it was a critical period. We were getting hammered. The business focus was scattered. So we refocused the business and determined who our customer was.
Quinn: Sooner or later you have got to focus. What are you going to be when you grow up? Out here [in Gaithersburg], we were selling Christmas trees, train sets, a lot of seasonal merchandise, grills, patio furniture. So, we repositioned the company to focus on remodelers, and that took about two years. I got here in 1995, and in 1997 I hired Rich Cortese, who came in to organize the sales force.
Cortese: I would walk around and talk to people and try to get a feel for things. Why are you doing it this way? And the answer was always, “Because this is the way we’ve always done it.” So the biggest thing was to convince everybody that we are a business, and we need to do things the best way — not because we had always done them that way.
Quinn: Hiring Rich was a watershed event, no question. He knew how to manage people. And he was just a gangbuster, really and thoroughly.
Cortese: One of the biggest things we did is we established next-day delivery guaranteed. If you order by 5 p.m., you’ll get it the next day. I got a lot of push back from everybody on this. I heard, “We can’t do it.” Sometimes our cut-off was at noon, or 1 p.m., when the shipping department would say, “Hey, we got too many today. Let’s cut it off.” And that was pretty much standard. But I said, “We’re going to do next-day delivery because we’re the only ones who can do it.” And all through the boom period, we did next-day delivery without fail — and sometimes we did 300 deliveries per day. Now I laugh, because starting in 2008, everybody can do next-day delivery because there aren’t that many deliveries. Back then, none of our competitors could match us. That was a big turnaround for us.
Quinn: Rich’s first hire was Doug Kelly, who is now our head of sales for the whole company and part-owner of the company as well.
Cortese: We were in dire need of experienced salespeople. I used to ask all the vendors: “Who do you know?” And they all kept mentioning this fellow Doug Kelly who worked at 84 Lumber. So I called Doug. I said, “Here’s what we’re doing, is there any interest?” Doug said, “No.” He was doing pretty well. But his branch was on a valuable piece of land, and 84 Lumber got an offer for the land, so they shut down the branch. Doug called me back and said, “I have an interest.” He progressed from being top salesman, and sales manager and he has been included in the ownership group.
Cassidy: You have to have the entrepreneurial spirit throughout the organization. You have to have a strong and nimble leadership team. And Ed is the architect behind the transition from the old Perry family business to our current team. Our senior management on average is 46 years old. That’s young in this industry. But they have 16 years at TW Perry and 22 years in the industry. That’s just a remarkably deep group.
Quinn: Today our balance sheet is strong. There are not many lumberyards that have strong balance sheets. We have a great balance sheet because we protected it during the recession. For our hundredth year, our story is our financial strength and stability.
Cassidy: We examine everything. There’s not a category that we don’t want to get better in. We’re always looking for one more idea. Right now, we’re looking at a lot of interpersonal evaluations and assessments of effectiveness of our shipping operations, our selling operations — down to the employee and shift level. So that the person who works the counter knows what their numbers are.
Moore: We’re chain-of-custody certified. From strictly a sales standpoint, it’s been a slow growth in the green building area. But more importantly, we’re educating our customers about positioning themselves to survive and thrive going forward. The codes are changing, and builders have to adapt. It’s about using new materials that are coming out in the right way, and it’s about positioning them to be a leader in their market. The sales and the monetary benefit for us will come eventually.
Cassidy: We want to be the educational resource for our customers. We advise a lot of our customers in how they run their business. And green building is one of those areas. And it’s not wind turbines, and it’s not solar panels, and it’s not collected rainwater. It’s not fuel cells. It’s good basic building technique.
For Wheelwright Lumber Co. president Paul Wheelwright, the key to his store’s success for 121 years has been doing a few things really well and sticking to some core principles.
“We have always been known for great service, and our delivery times are always within two to three hours for local deliveries,” he said. “I always try to buy the best quality of materials. For example, all of our 2x8s, 2x10s and 2x12s are select structural grade instead of #2&btr. Our studs are #2&Btr or premium, instead of stud grade. These things develop loyal customers.”
Wheelwright knows that a satisfied customer can turn into a loyal customer for years, if not generations. He has witnessed it at his Ogden, Utah-based store. “ I believe that people like to do business with local companies. We have been in the area for over a hundred years,” Wheelwright said. “We’ve been good to our customers, and they have been good to us.”
Excellent customer service and quality materials are not the only factors that have sustained this dealer for so many years. Wheelwright also believes in these core principles:
• Carry very little debt.
• Pay off everything during the good times, and that will get you through the bad times.
• Own everything.
• Lease nothing — it is much cheaper when things are slow.
• Keep your best people.
“I think we’ve done these things well,” he said.
Wheelwright’s business has withstood — even thrived at times — during the long downturn, in part by shifting its focus from a largely pro-oriented focus to more of a DIY destination. Its 12,000-sq.-ft. sales floor, part of a large renovation several years ago, is more than double that of the old location. Consequently, Wheelwright said his store has seen an influx of DIY customers that it never experienced at the old store, where 95% of its customer base was pro. “Business has increased considerably, which is a pleasant surprise in this downturn,” he said.
When Wheelwright entered into a wholesaler partnership with Orgill seven years ago, Wheelwright was in the process of building a new, more expansive store. Using Orgill’s Market Driven Retailing (MDR) process, Wheelwright was able to devise a product assortment and pricing structure necessary to be competitive. “I used to have customers coming in and asking if I could match the big-box price that was often much lower than ours,” Wheelwright said. “But I don’t get that anymore, especially on price-sensitive items. In some cases, we’re even a few dollars less. Our retail business has increased two to three times in sales as a result.”
In August 2004, Wheelwright Lumber relocated to its brand-new facility on 6.5 acres, a property that houses a larger store and door shop, a warehouse with 20,000 sq. ft., as well as a rail spur to bring in quality lumber products by the carload.
Wheelwright said the Orgill reps routinely walk his store looking for ideas, such as new merchandising sets. “They don’t merely order the sets and go home, they help put it together with us,” he said. “They are with us every step of the way. It has been a very good partnership.”