LIFE & LUMBER

Posted on January 26, 2021 by Mark Barnard, President & CEO

 After COVID-19

Last January, when the words “COVID-19” first started making their way into daily conversation in the United States, very few people could have predicted the toll it would take on nearly every aspect of life. Almost every industry has had to live by a new motto: adapt or fall behind.

The LBM industry is no different. We have had to embrace new methods of buying, selling, delivering, and hiring, as well as working with technology, new sales techniques, and new challenges. As we enter this “new normal,” it is essential to take stock of what has changed and how COVID affected how the building materials industry does business.

 

COVID’s Effect on the Lumber and Building Materials Industry

Both positive and negative changes have impacted the LBM industry during the pandemic. In an industry that is, by its own admission,  resistant to change, COVID has both rapidly induced progress and highlighted specific preexisting weak points in the industry’s standard operating procedures.

  • Marketing and Sales:

Like many other customer-facing industries, building materials companies have stopped being able to acquire, market, and sell their products in traditional ways. As in-person activities that used to be commonplace—like visiting contractors and lumberyards—have been restricted, the LBM industry has had to find alternatives to these techniques.

Similarly, networking events like golf events, dinners, and trade shows have experienced restrictions during the pandemic. These changes have forced suppliers to find new and creative ways to leverage technology to their advantage in an effort to promote their products. Considering that the building materials industry has not traditionally been very technologically savvy, the trend toward heavy use of technology throughout the supply chain came as a shock to the system.

During the most severe portions of the lockdowns, in-person sales calls were largely restricted, which caused many suppliers to reassess the time and resources devoted to inside sales. Inside salespeople were better positioned to contact potential buyers, so many companies started to prioritize inside sales more than ever before. In an industry that prides itself on its front-facing sales, customer service centers and inside sales suddenly became equally as important as their outside counterparts.

Combining the new need for technology with the emphasis on inside sales, many companies have had to learn how to leverage technology on their sales teams to make socially-distanced sales throughout the year. Mark Mitchell, one of the leading sales growth consultants in the building materials industry, emphasizes the importance of virtual sales on his website. He says that suppliers need to improve their websites, use a wide variety of virtual sales techniques, publish videos, and open as many lines of communication as possible between them and their customers (like chat boxes on websites).

These new marketing and sales techniques have become a standard part of successful dealers’ toolboxes due to the ever-changing regulations surrounding in-person meetings.

  • Materials Shortages:

One of the most consistent challenges facing the industry during COVID has been the shortage of materials. According to LBM Journal, 62% of building materials suppliers could not find all the materials that their customers needed for their projects. 79% reported difficulty finding pressure-treated wood, and 60% were having trouble finding decking. These are some of the most common materials on the market, so having trouble finding them threw a wrench in every LBM company’s process for months on end.

Much of the materials shortages could be traced back to the lower import activity during 2020. The World Economic Forum notes that export activity unilaterally fell in 2020, which meant that the US could not receive the same quantities of building materials as in past years.

Besides the lower imports, production of materials decreased as many different industries ground to a halt. The reduced production contributed significantly to the materials shortage throughout the year.

Building materials suppliers had to wrestle with the problematic shortage of materials while also facing an increase in demand for their products in the US.

  • Increased Demand:

Many industries faced plummeting demand as people were unable to leave their houses. However, as more people stayed inside or worked from home, they began to pursue DIY building projects, causing a spike in demand for building materials. Additionally, droves of people are moving from the cities into more suburban or rural areas, which has caused a boom in new housing developments and renovation projects on older homes.

While increased demand by itself would be a significant cause for celebration, the increased demand coupled with materials shortages spelled disaster for many suppliers. Some companies were unable to deal with the stress that the pandemic placed throughout the supply chain.

As new markets opened and demand increased, other suppliers were able to make more sales than ever. For those who were able to keep up with the demand despite the shortages, profits and sales unexpectedly hit record highs.

  • New Talent:

An early consequence of the struggle to meet demand with the limited supply was a series of layoffs in many companies. Building manufacturers had to let go of employees they could no longer afford and increase the remaining staff’s workload. While taking on the additional work, the employees also had to grapple with the ever-changing business restrictions during COVID and the new techniques being used to accommodate those restrictions without losing sales. Due to this restructuring, many employees experienced significant burnout.

As the industry enters what many consider to be the “new normal,” companies are now trying to hire new talent to reimagine what the building materials industry will look like in 2021 and beyond. However, a significant shortage of qualified individuals entering the industry coupled with competition from other industries over top performers makes for a difficult hiring landscape.

Many companies in the LBM industry are having trouble locating and hiring qualified talent to deal with the new challenges and opportunities brought on by the past year’s uncertainty.  Most companies are now finding that the traditional method of posting job ads is ineffective, turning instead to outside sources, such as recruiting firms, to find their next great hire.

  • Profit:

Fortunately, the LBM industry was deemed essential and was allowed to continue working during the pandemic. Despite the difficulties facing the sector, companies achieved record sales and profits due to the massive demand.

One of the critical factors in whether a company achieved record profits was how well they adapted to the new normal. The most forward-thinking companies have benefitted from this market of high demand and product and manpower shortages by making significant changes to their businesses.

 

The New Normal

It is abundantly clear that last year’s uncertainty brought on significant and irreversible changes to the LBM industry. Building materials supply companies are now facing the challenge of adjusting to these changes and finding new ways to grow and meet increased demand.

  • Leadership:

Most companies within the industry are actively seeking out new thought leadership to reimagine how they do business amidst all the uncertainty. It has become evident that the LBM industry’s hesitancy to change has brought on more difficulties than would have otherwise been necessary, so most businesses have recognized the need to adapt to the new normal quickly and effectively. Thinking “outside the box” is advantageous when it comes to hiring new leaders who can bring new ideas and processes to the table. We see companies hiring former Amazon employees to gain their understanding of efficient presentation, sales, and logistics.

In addition to exposing specific weaknesses within the building materials industry, COVID also opened new areas of demand that have gone largely untapped in the past. As companies look for new thought leaders, they are particularly looking for leadership that can bring fresh ideas about entering these new markets.

  • Success and failure

Even though the more adaptable companies experienced record profits, others were unsuccessful and experienced low yields or total failure. At the online fall market, Boyden Moore, the CEO of Orgill, emphasized the importance of adaptability. The adaptability of individual companies has proven to be a large determiner of whether they have succeeded in the past year, and willingness to embrace technology has had a massive impact on companies.

  • Acquisitions:

When demand and profits started increasing in 2020, many companies took the opportunity to capitalize and sell. US LBM, for example, acquired at least six other LBM companies since August of 2020 alone.

In addition to acquisitions within the industry, however, private equity has also taken notice of the LBM industry and has started pouring money into acquiring successful companies. In November of 2020, Bain Capital Private Equity agreed to acquire US LBM. The private equity dollars flowing into the LBM industry indicate the strong potential the industry has for growth into new markets in the next few years.

 

The Future of the LBM Industry

COVID exposed areas within the industry—like technology and adaptability to new circumstances—that were severely lacking. However, increased demand coupled with the resiliency of the LBM industry led to record profits despite the uncertainty. Many companies are now looking to expand their horizons by continuing the process of adaptation by hiring new leaders and qualified new talent to run their operations. The increased and sustained use of technology in the LBM industry has also better positioned companies to move into new, untapped markets in the coming years.

In short, the pandemic has fortified an already resilient industry by giving it the tools to become even more durable and adaptable. It has also attracted new talent to the industry, which will allow companies to grow in unpredictable ways as new thought leaders influence them.

The future of dealers within the building materials industry seems secure, and many companies are better prepared for the future now than they were at the same time last year.  These are the makings of a great story that your company should be sharing to attract new hires.

 

About the author:  Mark Barnard is the CEO of SnapDragon Associates, LLC the Top Results Orientated Recruiting firm in the LBM Industry.  He can be reached at mark@snapdragonassociates.com or 603-323-0940 

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