118

EVOLUTION OF THE

Greg BrooksThe Building Supply Channel Inc

HOME IMPROVEMENT CHANNEL

The Building Supply Channel, Inc.5 April 2011

218LEVITTOWN, 1950

• 30 homes per day• 30 homes per day

• 1,000 square feet

• 2.4x income vs. 3.5x

• Built to be remodeled

1950s & 60s: The cash-and-carry era

318

Wickes & the Bay City Cash Way

A complete “building materials supermarket”

Small builder-remodelers, DIYers

No delivery, no credit, no service

17% vs. 33% gross margins

Demographic drivers

Frugal, resourceful GI generation

Emerging specialization

418

1950s: The R&R boom

Siding-window specialists

1960s: Crews to subcontractors

Roofing-siding distributors

Drywall-ceilings distributors

1970s: Builders embrace prefabp

Millwork, truss manufacturers

1970 & 80s: Home centers, home center warehouses

518

Changing demographics

Up-and-coming Baby Boomers

Professional retailers up the ante

W. R. Grace, Evans Group, Ole’s, Handy Dan, etc.

Lumberyards miss the memo

Memories of 1973-5, 1981-2

Still “customer neutral”

1990s: The ultimate specialists

618

“Those boys are clean-cut, upbeat, and knowledgeable. To say we can beat them on service, I just don’t know.” —

Bob McClure, McClure Lumber, ProSales, March 1994

HOME CENTER CONCENTRATION, 1997 vs. 2007U.S. CENSUS BUREAU

718

1997 2007

12.7%75.2%

0.3%

92.7%

4.4%7.1%0.6%

0.7%

5.5%0.8%

Top 4 5 - 8 9 - 20 21 - 50 All others

5.5%

Lumberyards return to their roots

818

The longest boom in U.S. history

Home builder consolidation

From supermarkets to “shell construction specialists”construction specialists

Manufacturing

Labor managementg

Impact on remodelers

Equipment and inventory Equipment and inventory

LUMBERYARD CONCENTRATION, 1997 vs. 2007U.S. CENSUS BUREAU

918

1997 2007

4.9%

9.7%71.7%

4 3%

18.3%65.3%

6.8%

6.9% 5.7%

4.3%

6.4%

Top 4 5 - 8 9 - 20 21 - 50 All others

WHERE REMODELERS SAY THEY BUYPROSALES, 2007

1018

LBM dealerLumber

Wood & F C siding

SpecialistVinyl siding

Roofing

SubInsulation

Garage doors

Big boxTools

FastenersWood & F-C siding

Decking

Molding

Roofing

Drywall

Paint & stain

Garage doors

HVAC

Plumbing

Fasteners

Shelving systems

Doors

Windows

Stairs

Flooring & tile

Cabinets & tops

Fireplaces

Electrical

Builders’ hardware

Sealants & adhesives

p

Appliances

TOP 25 HOME IMPROVEMENT MARKETS ($ BILLIONS)HARVARD JOINT CENTER FOR HOUSING STUDIES (2009 $)

1118

$8.0 billion+

$6.0 - $7.9

$4.0 - $5.9

$2 0 - $3 9$2.0 - $3.9

< $2.0

SUPPLY MODELS VARY BY MARKET

1218

Design-build markets

Scherer Bros., National Lumber vs. T W P G hl L bT. W. Perry vs. Ganahl Lumber

R&R markets

Desert Lumber, Mill Creek Lumber

The turnkey model

Mill Creek Lumber vs. Robert Bowden

U.S. REMODELING EXPENDITURES ($ BILLIONS)HARVARD JOINT CENTER FOR HOUSING STUDIES

1318

49

52

54250

300

350Rental units

Owner-occupied229

280

326286

2744 4044

48 57

49 54

150

200

250

149 161180

210229

108 121 136 162 172231

27423241 40

50

100

01995 1997 1999 2001 2003 2005 2007 2009

HOUSING STARTS PER 1,000 POPULATION, 1947-2010CENSUS BUREAU

1418 10

12 1947-70:7.2123

1971-90:7.1482

1991-2006:

6

8 5.6686

2

4

0

1950s 1960s 1970s 1980s 1990s 2000s

AFTER THE GREAT RECESSION

1518

Lesson learned: diversity

Residential vs. commercial, new vs. d lremodel

Potential new models

Centralized commodities, standalone specialties

Remodeler consolidation

1618

EVOLUTION OF THE

Greg BrooksThe Building Supply Channel Inc

HOME IMPROVEMENT CHANNEL

The Building Supply Channel, Inc.5 April 2011