Most Lumber Sold in the California Markef Flows Thru the Wholesaler-Refailer Channel

HY DO WHOLESALERS distribute most of the lumber in California, and through retailers, too?

Is it because lumber retailers like the the dependable service ofiered bythe wholesalers? Or the fact that the wholesaler's bankroll finances purchases for an average of 28 days?

EDIToR's Norr.: Analysis ol a distribution systen is maile possible only when oll the lacts are auai,lable. In Calilornia, the lumber uhole' saler is an extremely imPortant supply source lor the retailer.

To obtain this intorrnationneuer belore deaeloped', The California Lumber Merchant joined with ti,e National-Ameri. can Wholesale Lumber Association in a comprehenshte suraey ol uholesabrs throughout the West (inblud,ing Canad,a) who do business toith retoiJers in California. The results are coaered in this story.

There are many reasons, of course. But the fact remains that California retailers like to do business with lumber wholesalers. This should disprove the idea held by many that a majority of the footage is being sold directly to the user, by-passing the retailer.

Survey Team

These conclusions and more wene arrived at in a survey of wholesalers who do business in California conducted jointly by The Califontia Lumber Merchant and the Notional-American Wholesale Lumber Association. The survey has brought to light many things about the California-oriented wholesaler-a vital link in this nation's vast lumber distri,bution system. It has recorded some of his current gripes, too. This newly completed survey covered 1963.

Nation-wide, National-American members do a dollar volum,e in excess of $1.3 billion annually. The survey in California points out that dollar volume sold in that state alone by all wholesalers is slightly in excess of $600 million. Of this large volume,75/o or $454,833,740 was sold through retail lumber dealers. The percentage of lumber going dir,ectly to industrial firrns and contractors was but a small item.

Whdre does the California-aimed wholesaler direct his personal calls? To the lumber retailer, by two to one. The California Lumber N{erchant-NAWLA survey estimates that 149,615 personal calls a year are made on retailers, but only 70,668 to industrial accounts. The personal calls on builders and contractors are much less. amounting to only 7,776.

The wholesaler is on the telephone a lot, making more than 155,704 totals calls to customers per month over 1.8 million annually. Each firm will average more than 500 calls each month, the survey reveals. The wholesaler is in constant contact with his source of supply-the lumber mills. The survey shows that 48,266 calls monthly go out to the mills, or an average of nearly 160 calls monthly in California.

I(eeping in contact with customers and mills-serving the important task of being the so-called middleman-is a pretty expensive business. In 1963, they reported spending the whopping sum of 82,862,358 for telephone and teletype.

This nation annually uses more than 37 billion feet of lumber of all varieties. The nation's most populated state, and growing rapidly, uses a good part of the over-all total. The survey indicates that total lumber footage sold in Califorinia proba'bly far exceeds the 2.5 billion foot figure computed from statistics reported by producer associations.

souRcES

And where do wholesalers serving Californa obtain their lum,ber? Nearby mills within the state oI California account for a little more than 54/o of the supply distributed. Oregon, next door, supplies just about 40o7b, wth the rest coming from Washington, British Columbia, Arizona, e:c.

Forty-two percent of the lumber distributed in California is shipped by rail and an almost equal percentage by truck. The rest comes by water.

While they distribute billions of feet of lumber, the same cannot be said for plywood. Seventy percent of the wholesalers replied they did not sell any plywood. The rest move about I.662 billion feet annually.

National-American Wholesale Lum,ber Association membership requires a wholesaler must not only sell lum,her for the suppliers, but must also assume the risk by taking title to the product. This means the manufacturers is assured of his money, and the wholesaler serves as a banker for the retailer. This requires huge capital on the part of wholesalers. The survey shows that California wholesalers carried a minimum of $48,667,000 in accounts receiva. ble on any one day in 1963 and that the average age in days of his accounts receiva'ble was 28 days.

Lumber wholesalers selling in California employ approximately 2,048 personso of whom 831 are salesmen. In a year's time, 10025 sales meetings are conducted, some for custoher personnel.

Gripes

While distributing a major portion of all lumber sold, wholesalers too, are beset with profit problems and have some complaints directed at lumber manufacturers, retailers and themselves. The survey invited comments. They are varied and critical.

From a northern California wholesaler came this comment:

"Same problems that beset the rest of the industry. Hard to make a decent profit. Too many willing to sell their services cheap. Wholesalers bid it up at the mill to get the lurnber and then bid it down at the sales level. This would be a good business if only every level would at least

Hishlishts of a Joint Survey on California lumber wholesalers by fire California Lumber Merchant and the Nati,onal-American IVhoIesale Lumber Association for 1963

*lncluiles imports, multiple wholesoler wholesalers, hard,unods, soltwoods sll transactions (sules by uholesalers to other other lum,ber aolumes hand'led. try dor a decent living markup. There is no easy cure."

From another:

"Wholesaling. to retailers is becoming much more competitive, as the normal' channels of distribution are violated. Sales from wholesalers to contraglelg? job-site delivery have increased in past years."

From the San Francisco Bay area:

"Too many mills selling retailers on same basis as whofesalers-too many mills sell' ing wholesalers (so-called) who do noth' ing but sell building contractors. Too many wholesalers in our ranks a.utting commis' sions-splitting with retailers, etc. Too much direct selling to contractors, by-passing yards and not enough real wholesal' lng.

Lomplains another:

"We are too close to the mills; too many retailers who discount buy direct from the mills. I wish the mills would cooperate more with the wholesalers and allow at least a 5/o comrnission so we can have at least a small edge over the retailer who is buying directly from the mills."

Here's criticism from Los Angeles of a retailer's lack of service:

"We will be entering a limited and selective type of contractor business, as we csn perform a distribution function as well as any retailer who is gradually becoming a general building material dealer rather than a lumber outlet. We can find no morketing ingenuity being performed by the retailer today. Due to lack of markup on dealer sales versus industrial and contractor sales, we have concluded that dealer relations are solely being maintained through price concessions. We cannot afford this any longer."

These frank outbursts of criticism of their own industry, as volunteered by wholesalers surveyed, certainly are not sym' tomatic of the entire lumber wholesaling industry serving California. But they do point up problems that exist. No matter what the problems, the survey brings out the fact that wholesalers distri'bute most of the lumber bought in California. And most of that is finally sold by the retail dealer to the general public.

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R0CUE VAttEY I0URt{EY-(all photo identif ications are from left to righD l-Knute Weidman with Pete Speek and Art Milhaupt, both of Fremont Forest Products. 2-Elmer Lewis and Cal Sugar's Jerry Griffin. 3-Low net winner Brian Bonningon. rl-Medco sales manager Ed Nave and Horace Wolfe. 5-Wickes Lumber buyer Jim Gill and Bob Lockwood of DeVoe Lumbel Medford. 6-John Polach, Les Doddington and Berkeley wholesaler Paul Gaboury. 7-Ted Barnes of the newly-formed 4-Star Lumber Sales, Roseburg, John Longfellow of World Wide Woods, Hedlund's King Palmer and Bill Kirkpatrick of the Denver & Rio Grande. 8-Emmerson's Sam Witzel and Paul Gaboury. 9-Bill iohnson with Lee Stewart of Eugene. 10Bob Kilgore, Bill Bright and Summerbell's Bill Doyle (seated). 1l-Friendly fellow at center is unidentified, but that's Hal Hartzell of Jefferson Wholesale fleft) and Red Norton who owns a string of yards in the

Medford area. l2-Les Pierce of Gem Studs, George Darling of Pine Mountain Lumber and Elmer Lewis. '13-Jerry Fernandez of Dant Forest Products. 14Jim Fife, Big Sur Lumber, Monterey. 15-Dollar Company's Stoy Elliott, Dick Shultz of Hirt & Wood and, Hank Dreckman of Dant Forest Products. 16-John1 Polach and Sacramento wholesaler Bill Sayre. Tle golf and gin rummy tournament was one of the big-t gest productions of its kind. .: