6309 Monarch Park Place, Suite 203
Niwot, CO 80503, USA
Phone (303) 443-5060
Toll free (888) 742-5060
1. Remodel /Repair
Construction markets continued to struggle in 2010, particularly when it came to residential construction. According to the U.S. Census Bureau, housing starts were up in 2010 over the prior year, but nowhere near where they were just a few years before. In addition, the value of construction was down significantly.
As a result of the flailing construction market, building materials distributors turned much of their attention to the remodel and repair market in order to "just survive," says Chris Lynch, COO of Reid & Wright, a building materials distributor based in Broomfield, CO. "Refocusing on products and channels that serve the repair and remodel market kept our sales declines at around 50 percent rather than 75 percent or greater [since 2006]."
Homeowners who can't sell their homes in the current marketplace have turned their attention toward upgrading their existing homes by adding new amenities, such as decks or lofts, Lynch says.
"Distributors need to widen the products they are offerings to make themselves more appealing to remodelers because a remodeler is much more likely to want a specialized product available when they walk in the store, as opposed to a builder who comes in with a plan that you fill over the next several months," says Craig Webb, editor of ProSales magazine.
2. Product Expansion
"In order to succeed in today's operating environment, [building materials distributors] can't be a one-trick pony," Webb says. Contractors and builders will rely more heavily on distributors to provide a broader range of products and to provide them faster.
For example, Kimal Lumber, a Florida lumberyard, rebranded itself earlier this year as Kimal Lumber & Hardware and added 2,200 SKUs targeted for professional builders and remodelers, Webb says.
The importance of distributors to contractors and builders has not gone down. "The more products you need, the more sources you have to find," Webb says. As such, they're looking for partners to work with to meet their needs.
3. Volatility in Lumber, Commodity Prices
Lumber prices in 2010 were up over 2009, but prices remained low when compared to 2007 levels. Softwood lumber increased 6.3 percent, while hardwood lumber posted gains of 7.2 percent.
"If you're a building materials distributor and you get 30 to 40 percent of your revenues from lumber sales, when those prices are down, it can be painful," Webb says. "And it can be especially painful if the prices are down, but the cost of gas is up." But, that volatility may increase some builders' and contractors' reliance on distributors to manage the paperwork around commodity pricing and purchasing.
Acquisitions/Expansion & Divestments
Average decline for companies on list: -1.1%
Excluding ABC Supply's 53.8% growth from Bradco Acquisition: -10.25%
Related economic indicators for this sector: