The Dealer's Cost of Doing'Business

by Paul HOLLENBECK

(The f ollouiug article is front a spe eclt deliuered. h l[r. Hollenback to thc nt,ost rccent conaention of th.eOhlahomo Lumberm.en's Association, Oklah.oma City, last Fatl. Because of its length and imfortance to all retail building mater,ials dealers, lhe sfeech w,ill be printed over three consecutiac is,swcs of Tnu Celrl'onNrA Lurrrun Moncrre,Nr, of zuhiclr, t/ris rs I'art 1. trIr. Llollenbeck is the head of the Lumber Serztice Comfony, Rurbanb, California.)

This talk could just as .rvell ha.ve been entitled "ltaising Your Net," the theme of your convention; "Holv to Price Merchandise" or "Your Cost of Doing Business." You can't talk about any one of tliese phases of doing business .rvithout taking into consideration the others. When I heard that the theme of your convention this year was to be "Raising Your Net," I was extremely pleased because net profit is :r problem throughout our industry.

The solution to this problem is not an easy one. It rvill not be solved until we take an honest, realistic look at it; until rve talk about it; until lve determine u'hat moves we can make in order to correct the situation. It is right that ne should look to oul associations for the answer to this problem. They represent the leadership and :lre the logical media through rvhich u'e should attack this problem. The problem is far too laige for any individual to solve. \\,re need an industry trenti. We are on our way to a solution because 'ivs have started to rvork on it.

Your cost of doing business used to be the ke1' to profits because you had :r reasonablv stable ma.rket. Tod:ly yorrr stable market is gone and so are your profits. A very large percentage rif <.,nr lurnbermen are rvaiting f<lr that stable market to return in the belief that it is the <-rnlv tvay to make money in this business.

I rvish that I could teil you that that stable market is on its way back, or that I could tell you how to bring it back. Instead, I'm going to tell you the truth as I feel it to be.

I don't believe you zrre ever going to have the stable market conditions you used tc-r have in the sense that we think of stable markets prior to 19.+0. If this is true, then rve must find another way to make satisfactory profits rvithin our industry. It is ah,vay-s difficult to discard old ideas, and to accept new ones. Our sah'ation lies in the acceptance of a new concept of how to do business. Before we can accept a new idea of how to do something and to discard our old rvays, it is absolutely necessary that rve understzrnd thoroughly our problem and'"vhy it happens.

One of the outstanding features :rbout the luntber business prior to 1940 r,vas its dependability as far as profits u'ere concerned. Its profits rvere not generally large, but they rvere dependable \\re had problems in those days, but they u'eren't as difficuit as the ones we:rrs facillg n()\\..

The U. S. Justice l)epartment did a very effective job of stopping this and all other small ltusinesses fronr using the old accepted idea c'i business ethics and dealer cooperation. \\'e did not feei the elTects of this until after World \\'ar II. The rvar founci us rvith the highest profit experience \\re have had in c,ur history, onlv becarrse materials 'tlere in shtirt supply. \Ye nriLcle money, ltot necessarily because \\'e 'rvere gorid businessmen, but because all u-e had to do rvas find the materials. Thc-v sol<l themselr-es.

Many of our dealers like to givc OI'-\ credit for these profitable years, and .n'ish that n'e coultl have sontething like OPA again. This r.ill not <lo thc job. Ir u'as the short supply that created those profitablc leurs. Irr fact, I l;elieve that OPA had a lot to do rvith our present ur-r-<kring.

Wheir they set up the original price formulas at the beginning <,rf \\rorld \\r:rr II. ther-left out thc lrroker in thc lumber business, s'ho l'as in realitv our distribution svstem. This caused yards to go direct tci the supplicr an<l the srrpplier direct to the lumbtrman, then eventuall-r' clirect to thc consunler, thus cutting 11s out of many of orrr larger sales. This trend continued. i',n<l eventually u,e found u-holesirlers. brokers, and manuf:iciurers all competing :rt the constlmer Ievel.

TJris nrezrrrs tl-ritt torl:Lv, cspeci:rll.r- in our l:rrgc ntetropolitan areas. our dealers are n()t competing against dealers like thernselves, with scrvicc, credit, :rncl rqrr:rlity, all on a (Cor-rtinuecl on lrage 44)

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While reading some lumber history the other day, I was forcefully reminded of the passage of time. As an illustration, in 1915 a group of Southern Pine manufacturers gathered in New Orleans and organized the Southern Pine Association.

*t<*

I was there. So were five other men who, like myself, published their own lumber magazines. Just 25 years later that Association celebrated its silver anniversarSr at its annual New Orleans convention. Of those six publishers who attended the first meeting, I alone remained alive.

*>8*

Jim Baird, of the Southern Lumberman; Bolling Arthur Johnson, of the Lumber World Review; Walter Wright, of the New Orleans Lumber Trade Journal; William Eddy Barnes, of the St. Louis Lumberman, and J. E. Defebaugh, of the American Lumberman. had crossed the Dark River.

*** once r was making " "o:""; tJ" for""try convention, and I recited some figures showing the age of our American forests. My old friend Harry Seaman interrupted my remarks to ask if my figures about thousands of years ago were based on my own recollections?

Not only had five of these publishers gone, but three of their publications had also disappea,red: the Lumber World Review, of Chicago; the New Orleans Lumber Trade Journal, and the St. Louis Lumberman.

Made me feel old, ,r"td*a ia ,oot And that was 16 years ago, that second meeting. I started THE GULF' COAST LUMBERMAN, April first, 1913; Trre Cer.rroRNll LuMsrn MrncrtRNt, luly L, 1922. Both began as semimonthly publications, and have never changed, and never missed an issue. So I have been a lumber journal publisher f.or 44 years, a lumber journal editor for 48 years, and a lumber journal writer for several yeatrs more than that.

And now that In"* "U*aala o"ing the oldest living lumber journal publisher, the oldest living lumber journal editor, and the oldest living lumber journal writer, I shall drop the subject lest someone think that I worship antiquity.

However, it might be proper to report here that Stanlev Horn and Jack Whaley, co-publishers of The Southern Lumberman since the death of Jim Baird, are the next oldest lumber journal publishers, and Horn probably the next oldest editor. So I am dragging these two old friends of

BY JACKDIONNE

mine into the venerable grouping, just to keep me company. And splendid company th*ey both are.

To prove that my friends have good memories, I frequently receive requests for copies of editorials, and sometimes speeches, that f made long ago. I wrote "Keep That Boy in YoF Alive" about 35 years ago, and we still get and fill requests for copies. And now I have a request for the text of both a speech and an editorial I made long ago entitled "Trees and Men."

I recall attending a newspaper convention more than thirty years ago. I made a scheduled address the first day. The second day a speaker failed to show up, and I was asked ifI wouldn't fill his time on the platform. I got up and talked about "Trees and Men," and got even a better reception than I had the day before. So, here is the exact text of that speech:

"You can learn about ,rlrr,*r.J* trees. when a forest of young trees is planted by foresters, the little trees start growing very close together. And immediately there begins a mighty but quiet competition between those little trees to grow upward toward the sunlight and the moisture in the upper a'ir; those two fagfors that give the tree life irnd strength. And every little tree in that new forest strives and stretches and fights its i.nstinctive way upward and ever upward; a competition that never ends through the entire life of the tree. For by reason of this constant striving upward, the tree grows strong and straight. The treetops merge, making heavy shade below, causing the lower limbs to fall off. The bark covers the scars, and the surface of the trunk becomes smooth, and straight, and as attractive as the tree itself. The grain of the wood is thus made to grow straight without defect, and stronger and more valuable by far than it could ever have been but for this striving. Competition has given to the fiber of this tree strength, straightness, quality.

"Sometimes, as an illustration, the forester will plant a lone tree of this same species a hundred feet or more from the edge of the young forest, leaving it to grow by itself, out where it gets the sunshine and moisture without effort. And do you know what happens to this tree? An amazing thing. Just exactly what happens to a human who grows without effort, without competition, without that striving that makes for strength and quality. That lone tree is invariably stunted in its growth. Becauses there is no need to strive and strain UPWARD, the tru,nk becomes squat, and is much shorter than the forest trees.

"Because there is no shade to destroy them, the lower