NRLDA President, Arizono Deoler O'Xlolley, Deqls SomePeorlsof Wisdom on Nqtionql Speoking Tour

James C. O'Ma11ey (right), Phoenix, Ariz., president of the National Retail Lumber Dealers Assn., sees long-range planning as the key to future profits.

"If the retail lumber dealer will be ingenious enough to have some long-range plan to get the most out of his business and work together to get the most out of all the retail lumber business, he will help himself and his fellow retail lumbermen," he declared.

O'Malley wound up a five-stop national speaking tour Feb. 25, before the Western Retail Lumbermen's Assn. in Seattle, Wash. Spokesman for the 30.0d0-member N.RLD4, h" is a strong advocate of long-range plan- ning "in order to do a beiter job of merch"andisi"ing and marketing our products.,,

O'Malley is vice-president of the O'X4alley Lumber Co.. now. obserwing its 50th year in Arizona, and -ar,ages op- erations of the firm's 19 yards and retail stores throirghout the state. In addition to his duties for his firm anl the NBL_PA, he has been designated by the Federal Housing and Home Finance Agency as one of six key businessmei in the nation to serve ot-r IiHFA's Executive'Reserve lJnit.

On his tour of NRLDA's regional organizations, O'Mal- ley. also spotlighted the moiement oI branch yards to surburban areas. He called attention to the radicai changes in tra_ffic problems, merchandise, customers ar.rd locations that dealers face in making such moves:

"If you go out there, you must realize that you will have more customers. You might have from S to 7 times as.--many peoe-le to wait on, but your average ticket will probably be only half or a thi;d of what-it was at the old locations." he said.

NR.LDA's_ president called for improved management techniques also in earlier speeches before the Northiastern Retail Lumbermen's Assn., the Illinois Lumber & Material I)ealers Assn. and the Virginia Building Material Assn.

_ Preceding his appearance before the Western Retail Lumbermen's Assn., O'I\{alley was the honored guest at a testimonial dinner, Feb. 24, in Phoenix, Ariz. The spokesman of 30,000 retail lumber dealers in the United St"t.. was feted by Salt River Valley Hoo-Hoo Club 72, phoenix.

Long-range planning is a "must" for retail lumber dealers in today'9 fast changing markets, J. C. O'l\{alley, presi- dent of the National Retail Lumber Dealers Associition, told members of the Western Retail Lumbermen's Associatjon at their recent annual convention held in Seattle. Washington.

"It is imperative that we look ahead and'plan to adjust our operations to the new patterns of merchandising that have been developing all around us," N{r. O'Malley said. "During the last 15 years we have gone through many changes. There has been a strong movement to suburban living. There have been radical changes in our traffic problem. There have been changes in the type of customeis we have. There are now more women buyers and more do-ityourself business. A lot of us have to make some changbs in our operation. Some of us have an old yard down in the heart of town on the tracks with very little store traffic. Maybe the town has moved away from that section of the city and a yard is needed out in the suburbs.

"Our problems are many and varied. Today the success- ful dealer has to be an opportunist and must be able to grasp these problems-weigh one against the other and then make his decision to do the best iob he can.

"Let's say you are going to move your yard out to the suburbs, or say you are going to put in a branch yard in the suburbs. Are you going to put it in where there is a shopping center, or near a shopping center?

"If you go out there, you must realize that you will have more customers. You might have from 5 to 7 times as many people to wait on, but your average ticket will probably be only half or a third of what it was at the old location. What does that mean ? It means that, to get the proper return on your investment or retu-rn on your.sales, you will have to increase your gross profit on sales tiy probably 5/o or 6/o. Are you able to obtain that increase?

"You will find that some owners and managers of businesses can handle contractors and do a good job, while others can handle the general public and really merchandise. You will have to have a little introspection and see if you are the type of businessman who can do that job of merchandising or whether you must hire someone to get the iob done for vou.

"if you should'go out to a suburban location, you would probably have to put in some new lines. That is a big decision. Maybe at the old location down by the tracks, all you handled was lumber, wallboard, millwork, and a few sack goods, and that was it. If you just move that type of operation out to the suburbs, you will probably fall flat on your face, because the type of customers you will draw will be interested in other kinds of materials-maybe paint, different kinds of hardware, power tools, hand tools.

"In going into a suburban yard, if you set up different departments, you have to know what they are doing and you must knqw what they are making, and that must be figured at least once a month. With the exception of lumber, we break dowrl all our business into at least ten categories. Then, every month we figure our estimated profit on each category and we know what our turnover \vas.

"We have an idea what our expenses in that department were, so we can tell how much is being made in each department. Accurate records must be kept, because you will hnd that while you know it is easy to sell sack goods to certain people at a close price, you get quite a turnover in it but don't make much money. On the other hand, you may have some large markups in a department store where is no turnover and not much money is being made there, either. Pricing is one of the most important things to consider when moving to a new location.

"In building a new yard, what is the first thing you do? You talk about yard layout, but one of the most important problems is to go to the traffic engineer of the city or county and see what the projected flotv of traffic is, and what their future plans are for different highways, and what arterials are going to be paved and changed that will affect your business, Go to the city and county zoning board and see what the plans are for development of the various areas. After you have decided on lJre location and what you are going to do, what lines you intend to handle, and what type of control you plan to keep over them, and then do a proper job of merchandising.

"It is difficult for many of us who have been in the retail lumber game for a long time to amend our ways, but we must do it. We must have long-range planning in order to do a better job of merchandising and marketing our products. I would like for each of you to ask yourself-'What is my long range plan ?' It is time for introspection."

Washington-A long-range, well-rounded merchandising program for all segments of marketing and the lumber in-

(Courtesy of the Soutlt'ern Calitornia Retuil Lumber Association)

The function of the retail lumber yard is to secure and supply the lumber and building material requirements pf the aiea which it services. The basic process is to secure the products of the industry at a cost low enough to ruppiy a market willing to pay a price,high enough to return the cost plus a profit.

It is the dealer's ability to deliver a product to a customer at a price equal to, or lower than do the armchair brokers, the truckers, the direct mill shippers, etc., which determines whether or not he gets the business.

Three segments of general public influence are directly interested in the proiess of brderly distribution of the products of the inhustry. Stockholders are interested because they are entitled to a return on the investment of their capital. Federal, State and Local Governments are interested from the standpoint of taxes Labor is interested in regular employment at good wages and under good working conditions.

When one of these three segments demands too great a share of the sales dollar, one or both of the other segments must take a loss or all may get nothing. Retail lumber dealers' profits have been hovering around. au average of l.l3/i on sales after taxes each year since 1950. ahis average profit, of course, is the poorest of the best, or the best oi it-te poorest ; but in most cases it is so small that there is little or no incentive for plant expansion.

If our free enterprise system is to survive, there must be relief from the staggering tax load-relief not only for the corporations but, more importantly, relief for- the consumers. You cannot have profitable sales unless there are more consumer purchasing dollars available.

Another major factor is the cost of labor. Since 1935 when our industry commenced negotiating with- the unions. Lumber Flindler rates have been increased from 52lc to $2.17% per hour. Ordermen rates have increased lrom 62fc in-1935 to $2.371per,hour now. The Stickerman's rate has increased lrom 82lc in 1935 to the current rate of $2.571 per hour.

The Carrier's rate has increased from 65c in 1935 to $2.33% per hour now, and the Truck Driver's rate on dustry is needed to meet the competition of "substitute" mateiials, declared James C. O'Malliy, retail lumberman of Phoenix, Arizona, -and president of the National Retail Lumber Dealers Association, in his address at the sixth annual meeting of the American Institute of Timber Construction, Janu-ary 2l-23, in Chandler, Nrizona, Mr. O'Malley said that the lumber industry has paid "too much attention to manufacturit g . . and forgotten all about the marketing and merchandising of their product.

"W'e in the retail business," he pointed out, "have been helped by the backlog of houses needed, the FHA,- the Koiean situation, and other things-that kind of artificial stimuli. Many of us have not properly merchandised our oroducts. haie not marketed lumber as well as we could irrl ", noi advertised it as much as we can. Consequently, you will find all through the country many retailers who ire using substitutes Jor lumber in places where they shouldn't."

Mr. O'Malley explained that retailers often advertise lumber "substifutes" because manufacturers "have made it easier for them to advertise their products. Retailers", he declared, "like any other business men, take the easy way out. The successful retailer today is the one who has gotten out of many parts of the lumber business and in with merchandisers and other lines.

"It is up to us," he concluded, "and to all the others connected with the lumber industry, to have a long-range plan of selling, marketing and merchandising our products to

The following is the Percentage Distribution of Fed-

State and Local Tax Dollars from 1934 to 1956:*

* From "Facts & Figures on Government Finance" published by The Tax Foundation.

26,000 lbs, and under equipment has been increased from 6Oc in 1935 to $2.30 per'hour until June 30, 1958. Besides this, the industry is-now making fringe payments on all hourly employes which they didnot malie in 1935. They .r. ' -Ot. ^attd Two Weeks Paid Vacations; Six Paid Holidays; Health and Welfare Insurance costing the employer $10.00 per month per employee; and a ?ension Plan for which the employer contributes an additional $17.30 monthly for each hourly employee. Then again, there are the coffee breaks and other fringe payments, which are an additional cost to the dealer that all add up to sizeable amounts beyond the hourly rates shown above.

We don't know what the unions will demand this year but a number of settlements outside of our indrrstry have been made lately with the Teamsters and -Engi- neers that would indicate they will likely be asking for a multiple-year contract with substantial increases to be given each year during the life of the agreement' t-

Labor must. however, be made to understand that if wages are increased without compensating decreases-in othir costs, the lumbermen on whom they depend for employment of their members will be in even a less favorable position to meet outside competitron' the best advantage." Mr. O'Malley's talk follows:

Gentlemen, first I would like to say that it is a real pleasure to be here with you today.

I was born and brought up in the retail lumber business, and during the War spent over two years in the Pacific Northwesi on duty as in Army Air Corps officer attached to the Central Proturing Agency, watching the lumber and plywood allocations foi the Air Corps and the Air Corps contractofs.

I started going up to the lumber country in 1941 and have been there at least once a year since, with the exception of one year. I believe most of the fabricators who are here today are from that area or receive most of their raw material from there. I think there is some of the greatest country in the whole United States in that regign, and in the summer of 1956 I took my wife and four children there to spend a month at the delightful seaeoast resort of Gearhart, Oregon.

During the early rnonths ol 1944, when I was a second lieutenant in the Army Air Corps, I was invited to attend the annual meeting of the West Coast Lumbermen's Association in the lVlultnomah hotel. As the meeting was going on, I was particularly impressed by a report given.by i member, probably of your organization if it was in existence at thal time, because it had to do with the making of trusses, fabricating trusses-something which I thought the lumber industry really needed. However, I was very disappointed at the tenor of the rest of the meeting.

A. I was sitting there listening to speakers and analy- ztng therr programs, as a retail lumberman I realized how little the retailers were doing for the industry, and knorving Paul Stevens of the National-American Wholesale Lumbei Assn. and some of the other wholesalers there, I had a good idea of what the wholesalers were doing. I couldn't gef out of my mind one very significant thought-that rie, the manufacturers, the wholesalers, and the-retailers-are not doing much for the lumber industry. In fact, I wanted to jump to my feet that day and say, "Why don't we do something for the lumber industry? ! !- For the Promotion of lumber and lumber producls ?"

_ My home base during the war was at Wright Field, and f was attached to the aircraft scheduling unlit. Even'as a p-rivate, -as soon as they found that I was a lumberman, they lrad me handling lumber and plywood. After I became an officer was when they sent me but West, and of course, all the larger organizations knew me and I knew them. and it really worked out very well, and we saved the Government a great deal of money. In fact, I handled over 50 million dollars in lumber and plywood allocations for boxing and crating and had only a pirt-time secretary to help mel I know that some ofificers who didn't have any e*peiierrce and who didn't knor,v anyone in the business,-.o,rld easily have built up a staff of 40 or 50 people to handle the same thing. In fact, I have always thouqhf that some of the other branches of the service did about"that.

Getting back to Wright Field, although I was iust in the procurement and allocation end, I did obser.re quite a few things that went on. In fact, toward the end of the war I was put on a packaging committee, a committee on which we were v.itally interested_ in the shipping problems of all krnds ot arrcratt parts and spares, and I got an inkling of what they were doing with lumber and piywood in paitic_ ular. Of course, thoseof you who knory flywood remember the toxic glue line that we had to ship t6 ihe South pacific area to prevent delamination, and t6ere was all kinds of treatment of lumber with chemicals. There was a plastic surface plywood and thin-gs that I got just a smattering of.

But I was convinced ofbne thingi-*1-t.n I got out of-the service and things got back to n--ormal, thai our lumber business would be entirely different than before. We'd be in for a lot of treatment of lumber, the treating process would be different glued-up members, our plastic Taminates would get into the_picture, along with plasiic overlays, ply_ wood, and so on. You and I know thai this didn,t frappe", because the lumber _industry and the manufacturing'ind, in particular, went back to that old production piobt"- and. had no long-range planning or .e"f marketing plan for therr product, or a merchandising plan, or whaiever you want to call it.

From an outsider looking in, we know that what'they have done in the manufacturing end of it is to pay too mucir attention to manufacturing, getting a balancid operation, a balanced production operaiion, e-fficiency of production, and all that, and they have forgotten all a6out the marketi ing and merchandising of their-product.

I see that- your subject today is ,,Sales Today and Tomorrow." We, in the retaiJ business, have been'helped by the backlog of houses needed, the FHA, the Korean situation. and other things-that kind of artificial stimuli. Many of us have n_ot properly merchandised our products, have not marketed lumber as well as we could hive, not advertised it as much as we can. llowever, one of the fundamental r,r'eaknesses is that the product must be handled correct- ly-from the time it is manufactured into lumber to the time it is used. If not started out correctly and merchandised right, you are falling down just as yorl begin. Just like a house-it must have a solid foundation or it*will-fall apart. Consequently, Iou will find all through the country many retailers who are using substitutes Jor lumber in places where they shouldn't, and that is why you and I are here today-because we must have a weil-iounded plan

Phoenix Honors O'Molley

Many area lumbermen were on the committees for the testimonial dinner at Hotel Westward Ho, February 24, when Salt River Valley Hoo-Hoo Club 72 honored James C. O'Malley,502+0, one of its members, on his recent election as president of the National Retail Lumbdr Dealers Assn. The meeting was called to order at 6.29 p.m. by Charlie Mapn, toastmaster. The president of Club 72, Ralph Heisser, and VicePresidents Aram Mardian and Roy Harper made the presentation of the gift to the Phoenix dealer and head of the lineyard company. Pete van Voorhis introduced the speaker of the evening.

Other lumbermen on the committees were: General -Aram Mardian, John Trent, Ralph Heisser, Pete van Voorhis, Gus Michaels; Dinner-Allen Thum, lrank Haney, Cecil Armstrong; Publicity-Pete van Voorhis; Finance-Frank Haney, Aram Mardian; Tickets and Seating-Wayne Parrish, Dean Drake, F_itl Hethcoat; Ticket Sales-Ace Mason, Ralph Heisser, Howard Beals, Charlie Mann, Latry Griffiih, Nat Thompson. The club officers served on the receiving line.

There were more than 400 altogether at the testimonial to salute the noted Arizona lumber dealer on his new high office, including E. G. "Dave" Davis, the 1955-56 Snark of the lJniverse.

among manufacturers, wholesalers, fabricators, and retailers of promoting lumber products in the right way. ft seems to me that the retailers have alwiys talien the easy way out. Lots of times they advertise subititute types of composition boards for lumber or aluminum allov.- or s.tbel alloys for lumber,_ and things like that. Why do-they do it? Because that is the easiest way out. But also thev do it because, for example, Johns-Manrrille, Celotex, Maso-nite, and Reynolds Metals have made it easier for them to adv_ertise their products. Many times the retailers of the United States who advertise more than g40 million dollars worth of .building materials within a year and easily would like to advertise more than that, maybe $50 million dollars r,r'orth a year, do not do so for two reasons:

1. The thing that they like to advertise is wood and wood products, and advertising promotion hasn,t been good,.so consequently they go to the forms that f,ve mentioned and advertise the substitute products.

2. Retailers, like any other business men, take the easy way out. The successful retailer today is the one who has gotten out of many parts of the lumber business and in with merchandisers of other lines.

This is an indictment against the whole lumber industry in general. It reminds me of an experience which we hav'e had within the past six months.

I wanted to see if some of our yards in the suburban areas of some of these fast-growing cities in Arizona could get into the swimminf pool Susiness in a small qay and not build pools, but sell equipment, chemicals, diving boards, ladders, and filter syltCms. I looked into that, gentlemen, arid found that this is the fastestgrowing industry in the whole United States, and they have no marketing procedures whatsoever.

It is a horrible deal. I feel sorry for the pool manufacturers, because just like Topsy, thLe business ,.1ust grew,,, and. srnc_e they have no merchandising plan, they are at wit's end and don't know what to do. Weri they glid to see us ! Th-ey_wanted us to get into the business-ye's-but we don't. feel that we can until they straighten out their methods.

The same way in the air conditioning .business. Of all places in the United States, this is the most advanced in air conditioning, because this is practically the hottest place

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