Every Lumberman Should Set His Own Price

Chief Trouble in Retail Lumberins ls Pricing System

By Paul R. Hollenbeck

Twenty-one years of retail lumber.experience has driven home to me the conviction that no man can tell the other fellow what his price should be in retail lumbering, that it is a decision he has to make for himself.

In 1949, when I conceived and formed Lumber Service Company, after many years with Patten Blinn and Hayward Lumber Company, I determined to put into operation some of the ideas and convictions I had, which in each case I knew represented answers to the problem of the retail lumber industry. Day-by-day experience over 4 years forced me to-recognize that lumbermen were not properly equipped as far as price information is concerned. Time and again f had recognized the difticulty the retail lumberman was faced with in estimating a large job on the basis of a fair return to the vard. and a fair orice to the consumer. With many others I had personally experienied the difficulty of retail lumbermen in always giving correct and full answers requested over the counter from the consuming trade.

Far-too many retail lurnbermen were in the position of not beginning to make satisfactory profits, and many began to suspect zolry. Foi mori than three years I had been conducting intensive research on my own, and when I started Lumber Service eompany I had the conviition i hnew t\9 reasons why, and when I took in as associate a long-time personal friend, C. Marshall Topping, he, likewise, felt we should make this information and service available to retail lumbermen at a cost they could well afford. Topping had been in the business almost 20 years and had an excellent background of experience. We are now operating with our stafi at 419 N. Victory Boulevard, Burbank.

The more research l conducted the more I was convinced that the chief trouble in the retail lumber yard is the pricing system.

The U. S. Department of Justice and consent decrees are factors not to be ignored in the lumber industry, and collusion could not be entertained. I recognized that the only possibility of a business of my type succeeding would be to create a service that would be for the benefit of the individual, one that would be good enough for the retail lumberman.to consider, face facts, and buy without benefit of cooperation from his competitor. As I conceived the service, whether oi not a competitor of another retail yard did a satisfactory job or not, the serztice would. remain in effect.

I was determined from the beginning to not have anything to do with collusion or industry cooperation. I determihed in advance that Lumber Service Company and its associates should remain completely independent and have no strings tied to it whatsoever, or be obligated to any retail lumberman. I can truthfully state we are still in this-position ani always will be.

_ We have never attempted to fix prices in any areas or any yard, or between two or more yards. We have faced the'fact constantly that that was not the way to run a business and that the anszser for the retail lumber business was for each man to learn how to run his ouw business.

Singularly enough, it was the very simplicity of the service which created sales obstacles at the outset. We insisted that the principle behind the sertice is not the preparation of a price book for any subscriber. Rather, it is a reporting and analyzing service that ian be made into a price book by the individual subscriber. This has been mv basic co,ncept, namely, that no one can tqll the other man what his prici should be, that it is a decision he along has to make.

It should be clear we have no magic formula for solving the pricing problem in the retail lumber yard. Our service is not, andlannot be, i system that can be-installed and 4dopted and put into'successful opera- tion in three or four hours. Being creatures of habit many ietail lumbermen for years have felt that the only thing that can do them any good is a price service that reflects not only his own prices but those of his competitors, or a price list on which each of-hii competitors could work.

I confess that we had more than our share of woe with the orieinal group of subscribers. For the first 20 to 30 days the initial buyers of our serztice wondered at times why they had bought the service. They were being placed in the position of handling their prices on an entire- ly different basis than ever before. They-had purchased a book, a service, and this they liked to believe was the complete and instantaneous answer to their price problem. The book was not designed to do this, and cannot do this. This I had to point out time and again to the origin- al purchasers of the service.

We knezu what the service could do for the subscriber once he began to use it. I had eliminated the guesswork. It was a certainty with me once I could get the retail lumberman to use the book. The first hurdle was the toughest. It is a source of intense gratification to me today that my convictions have been sustained by eviry one of our subscribers. After two or three weeks thev began to like the service. Their liking then improved. They became emfhatic in endorsing it. Several went so far as to declare the service to be "wonderful" and "revolutionary" as far'as the retail lumber industry is concerned.

faith in the service had increased in leapi and strides. They-realized, with me, that in order to have their business on a sound basis thev had to get certain prices for certain types of merchandise from cirtain customers, while on the other hand they could aftord to go dbwn in price for certain kinds of btrsiness under certain kinds of conditions. This is basic. It was sound, and all the more so because they were making their own decisions. They were doing their own pricing, knowing that in order to stay in business they had to sell at a profit.

I'm told now that we fashioned better than we anticipated. Our system is meeting the most rigid scrutiny on the part of our customers in a most satisfactory manner.

Our system is to secure the selling price of a specific wholesaler. This is shown in the first of five columns in code. Then four columns of mark-up follow, indicating first J$/e gross profit, second 27/o gross profit, third 22/o gtoss profit, fourth l77o gross profit. Inasmuch as it is common practice in the industry to allow a ZVo cash discount these columns actually indicate 33,25,m and 15 per cent gross profit on selling.

Opposite each of these figures is a blank space so that the subscriber can insert his own special price if he chooses.

It has been estimated that it would cost the average retail lumber yard in Southern California today between $6,000 and $10,000 a year to go into extensive price planning and analysis, for there are hundreds, yes countless thousands, of items to be analyzed and priced.

In addition to our complete service Lumber Service Company today sends along to its subscribers additional information which is highly valuable, and which we believe is not supplied by anybody else furnishing this type of service. In the General Information Section of the book we prepare for customers a section on California Lien Law, and then go one step farther by explaining the law in understandable layman's language. Of even more importance today is another service we have added, a war regulation section which explains in layman's language price control, limitation orders, priorities, wage and hour, veteran housing and regulation X and W. These are all maintained on an up-to-date basis digested with amendments to date included. And as soon as the Office of Price Stabilization comes out with price requirements for the industry we intend to analyze all such prices and publish them for the retail lumber yards on an exact basis.

We found that in less than 30 days of the time they made the chase these original customers were usi ot trme the puring the book, constantly. Their lations as they come out.

To make sure war regulations are simplified for our customers we are now holding meetings with them and instructing them on the regu(Adat)