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April 2023 #15285 Page #136
The Last Word LBMs and the Component Business
T
he contemporary consolidations within the Lumber and Building Materials (LBM) business were prompted by consolidations within the home Joe Kannapell, P.E. improvement retail industry. Home Depot started the movement in 1979, and its dramatic growth forced Lowes to follow it, converting its stores into mostly retail outlets. This led to the formation of Builders FirstSource (BFS), fueled its rapid growth, and then prompted other LBMs to begin consolidations. Later came the consolidation of the consolidators, with BFS buying ProBuild and then BMC. Has a better business resulted? Looking at the experience of Lowes can provide some answers. Beginning in the 1920s in small Southern towns, Lowes conducted most of its business with contractors. As it expanded to 238 stores by 1984, Lowes developed a large cadre of knowledgeable contractor salesmen with strong ties to their customers. These salesmen typically provided a range of services, including material take-offs and coordination of deliveries, including trusses, which they purchased from others. Lowes had become a one-stop shop for contractors, and it had no intention of losing that business, which accounted for half of their sales at the time. In fact, they seemed to doubt Home Depot’s future when they declared in their 1984 Annual Report, “the big format companies will run out of big cities before we run out of small and medium towns.” At the same time, however, Lowes began setting up separate Lowes Contractor Yards to keep this important clientele. It also built a large truss plant to supply its stores in Florida. However, when ten-year-old Home Depot eclipsed the sales of sixty-year-old Lowes in the late 1980s, the die was cast at Lowes, and the quest to gain consumer sales dominated its business, alienating both pro-builder customers and their Lowes contacts. BFS went after these underserved pro-builders in the 1990s, with a similar “one-stop-shop” approach that Home Depot’s Founder, Bernie Marcus, had conceived in the 1970s and deployed in the 1980s. Bernie hired experienced tradesmen to staff his stores, just as BFS brought on experienced Lowes-trained contractor salesmen. Bernie created stores that had everything needed for home improvement, just as BFS created supply yards that had everything needed to build a house, but Home Depot added two very important services: project coordination and national builder focus.
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