Another year, another solid ding on pro dealer and distributor cash registers nationwide. Despite a sluggish national economy, the residential construction sector surged in 2002, nicking up a total of 1.36 million new single-family starts, according to the NAHB. The strong output, which exceeded analysts' predictions thanks to a spike at the end of the year, was fueled by- low interest rotes and some cooperation from Mother Nature--and the trickle-down effect was apparent in the pro dealer sector. Indeed, for the LBM suppliers landing a spot on the 2003 PROSALES 100, which is derived from the PROSALES Annual Survey of Leading Construction Suppliers and Distributors, average gross sales in 2002 rang ii1 at S214.86 million with a mean annual growth rate of 6.63 percent (See "About the Survey." page 30).
Overall, industry, consolidation took a backseat in 2002, and the primary growth avenue the respondents was organic in nature. Of the 20 companies in the PROSALES 100 that reported acquisitions, only seven has gains beyond single-unit growth. Big moves like Redmond, Wash.-based Lanoga's 17-unit bite out of Wickes and Eighty Four, Pa.-based 84 Lumber's purchase and reopening of 18 defunct Payless Cashways operations largely were a function of setting in the national chain ranks, rather than targeted purchases of multi-unit, regional independents.
Vertical integration has become a dominant trend in the pro supply business, and this year's survey respondents were not an exception to the rule. Looking to quench the value-added thirst among custom and production builders alike, a full 68 of the 2003 PROSALES 100 classify themselves as lumberyards with manufacturing capabilities (see Figure 1). From roof truss and wall panel plants to door hanging shops to pre-built stair facilities, manufacturing has become a prime profit opportunity not only for lumberyards but for the nine specialty distributors and four wholesalers making the cut in this year's PROSALES 100 as well. Even the 19 non-shop lumberyards are feeling the pull of production, offering outsourcing services for trusses, panels, and components to their labors-trapped contractors.
While production and expanded services are placing many dealers on new turf and fertilizing business opportunities, this year's survey results and follow-up interviews also revealed that the long-term, tried-and-true values of the traditional pro yard remain grounded with roots in customer service and relationships, regardless of company profile. For example, when PROSALES calculated corporate growth and sales per employee for the respondents, the spectrum of companies grabbing top spots ranged from large to small and vertically integrated to straight sellers. On the other hand, the respondents interviewed herein revealed little diversity when asked about the best approach to customer service--to get out there in the market and pitch to the right people. When asked specifically who the most important points of contact are, a full 76 percent of the PROSALES 100 reported that the purchasing staffs of their builder accounts have the most influence on buying decisions (see Figure 2). Another 64 percent also are following up with clients' presidents, owners, and CEOs, while builder estimators and division presidents are a far second at 25 percent and 24 percent, respectively.
Moreover, if you're going to keep pace with the leaders on the PROSALES 100, yOU need to be out on the street actively servicing your builders because a full 90 percent of the respondents are hitting the jobsites on a regular basis (see Figure 3). And when they aren't out helping to solve building dilemmas and making service calls, these dealers and distributors are bringing the contractors in-house. When surveyed about which communications/ marketing tools they utilize to reach current and potential customers, 73 percent indicated that they use customer appreciation functions, while 70 percent utilize manufacturer-sponsored product demonstrations. Less personal approaches like consumer advertising and e-mail were used by only 46 percent and 31 percent of the PROSALES 100, respectively.
Regardless of whether it was a handshake or a mouse click that closed the deals, dealers kept the orders rolling in during 2002, and congratulations are due to everyone in the industry who collectively helped to move pro distribution into new and exciting channels--from e-commerce to installed sales to manufactured components. Overall, the companies on the PROSALES 100 and the "The Next 25" ranking (see page 42) represent the cream of the crop, and they are raising the bar across the LBM industry. Read on to see how your firm measures up and fits in.