What does ENAP stand for? Either you know it or you don’t. The answer: “Everyone Needs A Profit.” And to Stephen Sallah, president of the New Windsor, N.Y.-based co-op, it’s anything but trivial. “As a co-op, you can’t lose money,” said Sallah, who joined ENAP as CFO in 2008 and rose to the CEO title in September. “Somehow at the end of the day, you have to be able to return something in the black back to the dealers.” ENAP has done that, he said. And it’s also opened a Louisiana office and added 11 members last year, bringing the count to 220 dealers.
Has the industry bottomed?
I agree with those who say the economy is getting better. The low point was 2009, but you do run into dealers where 2011 was their worst year. I think there is a lot of optimism and hope right now, and there wasn’t in 2010 or 2011. I’m encouraged by that. But it’s not huge. I’m better two months than down one month, but there are still pockets of concern out there.
What are the factors that determine success?
Competition is part of it. Some guys had three competitors in a market, and now they just have themselves. So their business is up quite a bit. Others have seen encroachment by the competition, yards in their backyard, and some of the big boxes have continued building in some areas.
What about this year so far?
January and February were great, [but it’s] hard to back out how much is from the weather. But on average there is much more optimism. At our show in March, everybody said the same thing. The vendors and members are much more positive.
What will be the biggest change for lumberyards in the next five years?
We’re focused on trying to read that ourselves right now. Fortunately I have 220 dealers out there with their eyes and ears helping me navigate into the future. You know that homes are going to be smaller. Kitchens are going to be modest. Many of us can remember the story of a $70,000 bathroom remodel. Those days are pretty much over. I think they need to think about how to turn the volume they were turning even when starts come back, because of the smaller footprints of these starts.
But right now dealers are most concerned with material shortages. These shortages aren’t happening right now, but dealers know that all it’s going to take is a slight increase in demand. And if it does, mills and manufacturers have restructured so much that dealers believe getting product might be even worse than 2004 and 2005.
What is it that they have to get right in 2012?
Emphasize the right products, because starts aren’t going to come back quickly.
If you were heavily dependent on products that were start-driven such as gypsum, then you’re going to be in trouble. But if you assume that people are going to stay in their homes longer and are going to spend to improve those homes, and if you can move to decks, kitchens and bathrooms and start to cater to that market, you can do it. I’ve had guys tell me if it wasn’t for the kitchen or the roofing business, they’d be in trouble.
How are businesses changing?
The systems are very good now. The point-of-sale systems will give you a lot of analysis where the turn is and where the margins are, but there are just no starts out there.
But some things haven’t changed. It seems that most important is the commitment from ownership and management. If you’re an active owner that gets to the yard early every day and gets involved with key customers, that’s a huge advantage. There’s a lot of bright people in this business. Guys that have good skills are at a huge advantage.
What is going to challenge the independent dealer in the months and years ahead?
The economy — it’s still just too unpredictable. How much inventory should they take on? The competition is always a threat from big boxes, the pro-oriented chains and the specialty houses. Guys that are just roofing or just gypsum, one-steppers, they’re always putting pressure on our guys. And long term, it’s skills. A lot of youth have left the industry. That’s going to affect the success of the dealer at all levels. It tends to be older than it should be.
With that said, I am more optimistic right now than in the past three years. We will deal with these issues.
You’re a believe in the independent lumberyard. Why?
A lot of the old businesses are gone — the local clothing store, the local bookstore, the local pet store. About the only guy still there is the local lumberyard. And he’s not just there, but he’s doing well. I asked 50 dealers, ‘How come you’re still there?’ And the answer is: ‘Because we know how to service the customer.’
Underline the right results,
Underline the right results, since starts aren’t going to come back rapidly. If you were a lot reliant on creations that were start-determined such as gypsum, then you’re going to be in snag. But if you suppose that people are obtain to stay in their homes longer and are going to expend to advance those homes. I am currently enrolled into my high school diploma program at Winford High School and regarding this topic hopefully my input will help you for sure.
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Inside the mind of contractors
The fact that contractors and remodelers have been losing bids over pricing should come as no surprise. They’re under tremendous pressure for price concessions from homeowners, and if they want to stay in the game, contractors have to lower their prices somehow. But how they choose to cut costs through purchasing, and what goes into their decision-making process, is the subject of a newly released study by L.E.K. Consulting, a global management consulting firm.
The survey of more than 500 residential contractors, all of them business owners with at least three employees and five years of experience, revealed some interesting observations about the way pros use social media, how they judge “sustainable” versus “energy-efficient” products, and their unwillingness to “trade down” to cheaper brands when purchasing building materials. And lumberyards will be pleased to learn that their customers are, for the most part, loyal. Although many shopped at big boxes for more competitive prices during the recession, that trend is starting to reverse itself, according to the survey. Contractor loyalty to the two-step channel, as measured by those willing to pay a price premium to shop there, increased from 3.4% in 2010 to 3.8% in 2011.
“The two-steppers right now have the most loyal customers,” said Rob Rourke, VP growth strategy and M&A for the company’s Chicago office. “The big boxes would have to discount their merchandise more deeply to lure away [these] customers.” In the survey, contractors rated big boxes the lowest on the loyalty scale for the second consecutive year. They cited delivery speed, stock on hand for immediate purchase and contractor services as underperforming areas.
Yet the survey participants said they comparison shop across channels to get the best price for the products they trust, instead of buying less expensive brands or lower-grade products in response to competitive pressures. More than 50% of contractors indicated that they have used the Internet for price comparisons, and another 40% expect to conduct more purchasing online during the next three years.
The survey also asked contractors — a sample that took in framers, window and door installers, kitchen and bath remodelers, roofers, and general contractors who do room additions — how they use social media in their jobs. The answer was a little surprising: YouTube.
Pros are increasingly turning to the Internet to find instructions or videos on how to install new products or handle difficulties that arise. If a manufacturer’s website offers little help, there’s usually a video posted on YouTube of somebody who performed the same job or encountered the same problem.
Take the example of installing a vent fan in the bathroom. “Contactors are turning to YouTube to learn how to install the fan from the [ceiling] underside without going into the attic and rolling around in the insulation,” Rourke said.
But many of these “how-to” videos are posted by altruistic remodelers who are just sharing their expertise.
“The branded building product companies have been late to the dance in using social media to interact with their customers,” Rourke said. But then he noted a number of exceptions: CertainTeed, US Gypsum, Tapco, Emerson Electric and Owens Corning roofing.
Bruce Graf, president of Graf Development in Dallas, doesn’t see himself as a Facebook kind of guy. But he’ll watch installation videos on YouTube if he purchases a unique tool or product. A recent example is a trough or “infinity” drain in a shower.
And then there’s Pinterest.com, the popular new website for posting creative ideas, designs, recipes, fashion and everything in between. A designer he worked with on a project established an account so they could trade ideas back and forth with the homeowner. After that, Graf opened his own account and began posting some photos of his competed jobs. They proved to be popular; at press time Graf Development had 55 followers, and a number of Pinterest members have reposted his photos on their accounts. “I’m really stuck on it now,” Graf admitted.
Although Graf didn’t participate in the L.E.K. survey, his view on channel shopping are in line with the results. He buys his plumbing supplies at Ferguson and his lumber at an 80-year-old independent lumberyard in the Dallas area. “I want to see them survive,” he explained. Home Depot is for “basic stuff.” Graf eschews Internet purchasing and cringes when his clients order supplies online because they’re cheaper.
“The product shows up and it’s not the right product and it slows everything down,” Graf observed. He also noted that when the homeowner’s budget gets tight, “they’ll eliminate the green features.”
The L.E.K. survey found a big divide between “sustainable” (eco-friendly) and “energy saving” in the green products sector. More than half the contractors surveyed said they were willing to pay more than a 10% premium for these product attributes. But when the researchers dug a little deeper, they found that residential contractors were much more interested in the energy-saving products, while commercial contractors’ purchasing decisions were equally influenced by both.
L.E.K. consultant Rourke surmised that residential contractors are influenced by their clients’ appetite for anything that reduced their energy bill. But unlike commercial customers, homeowners are generally impatient to realize their energy savings. “They don’t get into the market unless the payback is three years,” Rourke said.
Commercial projects, on the other hand, are focused on the bottom line: cash flow. And if they’re aiming for LEED certification, the sustainable products will gain them more points.
Todd Jackson, CEO of Jackson Design & Remodeling in San Diego, guides his residential customers toward energy-saving improvements that may not seem dramatic at first. Reflective-coated plywood in the attic, motion-activated light switches in powder rooms and pantries, and insulation in interior common walls all come standard in the firm’s custom homes and remodeling projects. In most cases, so do tankless water heaters.
But when a client asks one of Jackson’s six project designers about solar panels, the firm sits down and does the ROI for the homeowner.
“We get asked many, many times about putting solar in, but in many cases, it doesn’t calculate out,” Jackson said.
When it comes to sustainability issues, consciousness usually prevails. Two of the firm’s clients have requested elaborate rainwater collection systems, and the estimates fell in the $14,000 to $20,000 price range. One homeowner went ahead with his plans; the other didn’t.
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National Hardware Show preview
As home building begins to rebound after a five-year slide, the National Hardware Show is celebrating with an expanded Building Products category that calls out exhibitors with special signage to make them easy to pick out on the show floor. Among those scheduled to represent this enhanced category are GRK Fasteners, Louisville Ladder, CoverGrip Corporation and Dumond Chemicals, and pro dealers planning to attend include Gahahl Lumber and BMC.
"Timing is everything, and we are confident that this is the right time to welcome traditional hardline building products back to the Show," said Sonya Ruff Jarvis, VP attendee programs for Reed Exhibitions. "We will offer building products that complement the core hardware category, such as tarp, twine, rope, blades, tools, fasteners, power tools, metal framing and more." Dumond Chemicals, in its 22nd year at the National Hardware Show, will unveil new environmentally friendly paint removal products, Catch-N-Cover microfiltration membranes and graffiti removal products. "Being under the Building Products umbrella, it's going to be good to have a dedicated space to introduce new products to the dealers and heighten their awareness of these new products, which can ultimately lead them into new customer segments," said Dumond president and CEO John Petroci.
Also for the first time this year, the Farm & Ranch category will have a dedicated area of 20,000 sq. ft. on the show floor and will feature such exhibitors as Hengjin Electron Co., MaxPower Precision Parts, Solo Inc. and The Cordage Source. Megan Menzer, owner of Newton's True Value in Cherryvale, Kan., is happy to see the expansion of Farm & Ranch at the Hardware Show, which reflects what's been happening in her own two stores.
"Farm and ranch is big in our area, and we recently started a dedicated section in our stores," said Menzer, who opened her second location in October 2012 and carries such products as cow tags, electric fences, minor medical supplies, herbicides and pesticides. "Instead of having special Farm & Ranch stores, you're now finding the category is present in more diversified locations, including many hardware stores. Fifty years ago, that's what the hardware store was — a farm and ranch supply store — and I think that's coming back."
In other developments, Made-in-the-USA products will have their own area on the show floor and include displays from more than 50 companies; the Pet Pavilion has been expanded and features special signage; and the Energy Efficient Products section, being sponsored by Polaroid and Intelligent Green Products, has been beefed up and will include exhibitors Heat Controller, Niagara Conservation Corp. and Polaroid Lighting.
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