By Jim Moody, CAE
CSA President
The May issue of ProSales is a great one. Not only does it contain the ProSales 100, it also features an insightful cover story on ProBuild Holdings.
ProBuild, for those of you who don’t have them in your market (yet), is the largest LBM dealer in the nation. They are an amalgamation of several other dealers such as Hope and HD Supply (which itself had purchased Williams Brothers). Based in Denver, ProBuild is owned by a division of Fidelity Investors.
In my opinion (which I know is shared by many others who are more knowledgeable than me), ProBuild is the large national monster that will be around to compete with independents in the long run. Unlike 84 Lumber, Stock and Builder’s First Source, ProBuild seems to be well managed AND have deep pockets. (Stock has deeper pockets today than it did just a few weeks ago with an investment group taking a majority ownership, but it remains to be seen whether the new owners can manage the company any better than the old ones. At a minimum, Stock is a much smaller entity than it once was.)
One reason that I worry most about the competition ProBuild will bring is that I’ve met the CEO, Paul Hylburt. Paul is the current chair of the National Lumber and Building Material Dealers Association (aka NLBMDA, “the association with too many letters in its acronym”). I’ve had the privilege of seeing how he operates, and I’ve been fortunate to have dinner with him. He’s an impressive fellow. He’s humble, which I think is a key factor in leadership today. He knows the industry (Wicke’s, PrimeSource and Strober are on his resume). He’s surrounded himself with very smart people, though he’s not short in the smarts department himself. And he’s likeable. In fact, he reminds me of many of you.
Paul and ProBuild have been spending much of their time creating a unified corporate culture and system of processes among all their acquisitions. They are close to achieving that goal. (Their technology system is going to be a competitive advantage – more about that next week.) Even while trying to wrangle all those companies into one, they’ve managed to be the top dog in our pound – by almost a billion dollars. What will they be able to do when their focus really becomes selling building materials?
When I talk to dealers about competing with the national groups, I hear a common refrain: They focus on price. Our price may be a little higher, but for our customers, service is as important as price. If we can stay in the same area on price and provide better service, we can handle the national chains’ competition.
ProBuild has the ability to make a market very price-oriented. It’s tough for a small independent (and they are all small compared to ProBuild) to win when the whole conversation with a builder is about price. But what scares me the most is that with strong leadership in place, they may well have the ability to provide service equal to that of the small independent AND do it at a lower price. What happens if ProBuild “gets it right” and they are not satisfied with simply serving production builders?
Time will tell. Many of you have been through this kind of thing before (“Home Depot and Lowe’s will kill the independent dealer”) and it didn’t come to pass. I am certainly not predicting the end of the universe as we know it – I believe that has already happened. Instead, I’m giving you a heads up that if you have a ProBuild yard near you, you should not assume that their level of penetration in your market is going to remain the same. And if you hear that ProBuild is opening a yard near you, you better be ready to play because the game will be on.
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6 comments:
Bring it on!
Sounds like you were brain washed by this guy! He is no wiser than anyone else, and is guessing just like the rest of us. If the independent yards will pay attention to what brought them to the dance, they should have no fear from any competetion.
I would agree that Paul is a very sharp individual, and Pro build is a formidable force in the supply chain. Certain economies and market conditions have kept the LMB business form becoming like the auto industry with a few major players.
• The price of entry into the supply chain is relatively low compared to many other businesses. Hard work and commitment can still go a long way.
• Manufactures need to align with retailers who will promote their products.
• Some manufacturers rely on the independents for a profit while the giants “pay the light bill”; a world of giants kills this model.
• Other manufacturers rely on the independent dealers to reduce the risk of becoming a captive to a single giant.
• The customer base is fragmented, for now. Low prices require an economy of scale to be sustained.
Independents have and will lead the industry in product and service innovation and development. They are motivated by survival to do so. They also have the maneuverability to change and adapt quickly. The real worry?
• What does the next generation of builders and contractors look like?
• Who survived and who can qualify to renew the builder’s license?
• What changes are in line for the traditional supply chain?
I am sure there are more things to worry about, but I’d rather not dwell on these. Rather, the question should be; what unique opportunities will appear as the giants align?
I've been competing with Pro Build in my Southeast Ga. market for over a year now. I've seen their pricing ,their "installed sales"and their service. They got a few of my customers, I've got a few of theirs. Of the customers that took from me, I have most back, plus what I took from them. Price will not make up for poor service or faliure to provide knowlegable labor for their installed sales,(they sub it out).
PERSONAL SERVICE, COMPETITIVE PRICE, will win in the long run everytime...no exceptions! I do not do installed sales.
I WORK FOR PROBUILD AND I WOULD WORRY IF I WERE THE COMPETITOR THE MANAGEMENT IS TOP NOTCH.
A "Big Box" with the ability to provide personal service is a true threat to those of us in the private sector. However, I believe it's the imposible feat. There is a threshold that is passed when a corporation get's that large. The simple truth is that you can become too large to employ enough quality, concerned help that will provide top-notch customer service for the long-haul. You have to remain hungry. Hungry means "lean". That's not to say thaey can't provide better service than Depot or Lowe's, & that's a threat, but operating a monolith which provides personal service day in & out, year after year, would be next to impossible.
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