The risks of switching to a pro focus

il /IANY retailers, faced with IYldeclining consumer sales, have added outside sales forces to pursue builder, contractor, remodeler and commercial business. Integral to their success, though, is being prepared for the risks.

Selling to professionals is the complete opposite of selling retail. In retail, the customer comes to you, usually pays list price, pays on the spot, and takes the merchandise away with them. Pro-oriented dealers, though, must go to their customers, discount the price, deliver the merchandise, and wait to be paid. And this new customer base often operates out of the back of a truck and has among the industry's poorest credit ratings.

As sales volume to pros increases, there is a reciprocating drop in gross profit and increasing risk from having so great an amount of sales to a small number of customers. In addition, the more outside salespeople focus on creating gross profit, there is a reciprocating drop in sales production, since high-ticket sales such as upscale hardware and kitchen/bath projects require more time and effort.

Nevertheless, dealers who sell to pros can develop long-term, loyal relationships that result in regular, more personal attention, it's been among the most successful niches for dealers that compete against big box retailers. A pro focus helps even the playing field by negating some of the big boxes' greatest strengths, including retail square footage, location, advertising and promotions. r Investing in equipment, such as pagers, mobile phones and company vehicles. o Investing in new inventory. o Investing in technologies required to manage the outside sales operations. big-ticket sales. Operationally, pro sales offer a greater return on fixed investments, since they typically are less expensive as a perc-entage of overall sales.

Yet, the competition often responds by grabbing an even greater share of your existing retail business. "One of the problems is we assume we're going to keep the retail business while we're out working on the pro business," notes Doug Murdoch, market development manager for TruServ. "What usually happens is the retail business begins slipping away."

Because selling to pros requires

Mixed dealers who try to serve both retail and professional customers sometimes serve neither well. According to a recent National Lumber & Building Material Dealers Association survey, on average dealers that serve both retail and pro customers are significantly less profitable than dealers that concentrate on just one segment. According to TruServ, the decision to sell to the pro segment requires several risks and investments. including: o Usually, sacrificing margin for volume. o Hiring or appointing an outside sales staff. r Instituting accounts receivable and credit procedures. o Catering to an often demanding business segment.

Still, TruServ, Ace Hardware and Do-it Best recommend pro sales for retailers willing to do the work; all three buying groups offer comprehensive programs to help their members sell to the pro segment.

ARKET Resource Associates. Inc.. has released its 1998 Softwood Plywood and Oriented Strand Board Report revealing engineered panel buyers' ranking of top suppliers.

The industry-wide survey asked 1,050 retail (37Vo), wholesale distributor (487o), office wholesaler (87o), secondary manufacturer (2Vo), and industrial buyers (57o) to rate their suppliers of softwood plywood and./or OSB against specific performance criteria.

The study evaluated 2l companies, including 13 that supplied softwood plywood, nine that sold OSB, and six that handled both.

The first place finishers included:

Softwood Plywood

Shlpment affives undamagsd - Hood Industries

General appearance of unlt . Hood lndustries

Unit contents clearly markod - Willamette Industries, La.

Contact easy to rcach by phore - Weyerhaeuser Co.

Knowledgable sales perconnel - Hood Industries

Honet negotlations - Hood Industries

Easy to order from - Potlatch Corp.

Shipment anives as speclfied - Weyerhaeuser Co.

On-time shipment - Hood Industries

Handles claims well - Hood lndustries

Ptoducer considers ms lmportant - Potlatch Corp.

Overall ratlng - lnternational Paper