State Of The LBM Industry Interview With John Maiuri

The lumber and building materials (LBM) industry is undergoing a significant transformation which is being driven by technology. While traditional challenges like labor shortages and inventory management persist, modern tech's role in the future of LBM businesses cannot be overlooked.

We recently talked with John Maiuri, president of ECI’s Building Supply Division, to explore critical trends in the LBM space, the types of technology that are making the biggest impacts on the industry, and what businesses should consider for succession.

ECI: What LBM trends are you seeing that everyone should pay attention to?

John Maiuri (JM): The speed of change concerning technology and digitalization in the marketplace is an ongoing accelerating trend. It should not come as a surprise to people that there is a transition to online engagement in virtually every aspect of our daily lives.

Through our market research, we have seen big box stores in all geographies, especially in the U.S., show continued growth in ecommerce. Home Depot and Lowe's, for example, report that many of their in-store sales are driven by online research or online commitments to orders for later pick-up in-store.

Right now, many LBM dealers are facing challenges with labor shortages, which can be partially solved with the adoption of ecommerce technology. Having telemetry to your customers and into the market, you can get a good understanding of trends and what customers may be shopping for.

That can help an LBM dealer understand the demand that might be put on inventory levels and the need for availability. Additionally, having a one-to-many engagement strategy with ecommerce, you can exceed the capacity of individual sales representatives and accounts receivable staff inside the store, by using a tailor-made B2B account management portal.

ECI: How can technology be used to empower an LBM dealer’s sales team?

JM: It’s about finding a balance. In the LBM industry, and especially within the independent channel, both consumers and the builder trades come to independent LBM operations for industry expertise and ties to the community. This experience and expectation are typically met with knowledgeable personal staff engagement.

Software is a tool, and should be viewed as an augmentation of, not a full replacement for the in-store experience. Consider Artificial Intelligence (AI). There is a worry that AI is taking over the world and replacing people and jobs. That’s more hyperbole than reality.

While there is evidence of increased business velocity and scaling enablement due to AI strategies on an individual level, there is very little evidence of wholesale replacement of people. In the early days in this business, people used to spend a great deal of money on Yellow Page advertising. Now, I don’t know when the last time you picked up a phone book was, but I haven’t seen one in quite some time.

We rely on the Internet and a business web presence, and especially so in high-growth markets. Investing in forward technologies like ecommerce for B2C and B2B, is a very relevant technology tool next step and beneficial opportunity for anyone in LBM.

ECI: How does software help with labor shortages?

JM: Labor shortages in this industry have been a recurring issue for years and it seems as though COVID has made shortages worse. I have a great deal of compassion for our customers and all members of the LBM community.

I grew up in a rural community where you were taught self-sufficiency and exposed to the trades in high school in economics, wood and metal shop classes. At that time, typing and keyboarding were considered tech-based education. In today's day and age, many of these programs have diminished in schools which has caused many people to be less oriented to this sort of vocation. You see and hear of challenges in the builder trades about people who are qualified to swing a hammer but are unable to read rulers. It’s not that different for people in the building material supply and hardware stores.

The amount of people who can intuitively fix a toilet, repair a sink, or paint a room is diminishing. Technology, like video and online content, solves that by speeding up understanding of what it takes to do these jobs. I've got three adult children; my youngest is nearly 40, and they tackle home projects using YouTube as a resource, watching recorded videos of people doing projects. Technology serves a purpose. I'm not suggesting it's the end-all, be-all, but I'm not sure how anyone gets by without it in today’s world. It's become integrated into our everyday lives.

ECI: We’re seeing the median spend for a household go up year-over-year. People that were able to lock in a low interest rate are fixing up what they already have and not looking to move anywhere. What can building suppliers do to capitalize on this growing DIY movement?

JM: I would encourage people to never underestimate, even if they are focused on trade businesses, the nature of involvement at the DIY level.

While DIY customers may not be doing the home improvement themselves, in many cases, they are selecting the products, and choosing the quality of merchandise behind the scenes. Think of them as specifiers and project managers relying on tradespeople to do the work for them.

Most of us depend on our cell phones every day. If we have a question or need to make a choice, we can search the internet for referrals, look at references, and determine customer satisfaction in just a minute or two to make an informed decision. Building suppliers can cater to all types of customers within an ecommerce strategy.

ECI: When evaluating industry technology, what features should building supply businesses look for?

JM: For those in the trades, like building contractors, general contractors, and subcontractors, you make your money by using your skills and only have so much time to accomplish it.

So, if you are not taking advantage of the benefits of technology, customers will be coming directly to you to help manage their account, pay their bills, settle disputes, find information, and so on. These very manual processes often happen at inconvenient times. Creating a digital presence that allows your B2B trade relationships the opportunity to engage with your business on their schedule for self-service type activities can create a very strong additional value proposition within your business.

Many tradespeople, builders and subcontractors have to rely upon you to service them on the job, in the early morning, at lunch or end of the day. With a digital presence, you can equip your trade accounts with an engagement channel that provides 24/7 access without the associated headcount to staff your business around the clock.

Convenience is the new loyalty.

Years ago, businesses would have four or five telephone lines which were often all occupied, giving new callers a busy signal, or forcing them to leave a message. The right digital presence has unlimited capacity and can be a powerful tool for an LBM business. Having a scalable website that enables customers to self-serve allows them to easily get the information they need, place orders, make a payment, and more whenever convenient for them.

ECI: What are some of the little things independent businesses can do to compete with Lowe's or Home Depot?

JM: Historically, our customers have relied on their vendor community to support them on a technology and online presence basis. While that is a step in the right direction, it should be looked at as a channel, not a final solution.

These national vendor sites do not allow for the level of personalization that is often necessary to distinguish a business from competitors and be an extension of the vertical specific software relied upon to run the business.

You're in a better position to deliver a consistent customer experience using a direct-to-market digital channel. If using your own specific integrated digital presence, 100% of the customer engagement comes directly to your business, is not dictated by your vendor relationship, nor subject to leakage to a competitor doing business with the same vendor. Modern tech, like having a web presence, is driving fundamental changes in the operating software of brick-and-mortar businesses. Through a vertically specific integrated digital presence, there is an opportunity to deliver an omni-channel experience in the marketplace.

This enables customers to get the same engagement as being at your business with some of the best staff members you have from the convenience of their truck, dining room table or while on vacation. If you can get to that point as a business, you will have the best of both worlds where customers get the expertise of professionals and the convenience of an online shopping channel.

ECI: Let's talk about selling versus succession. We recently put out a trend report for the LBM industry that talked about how 72% of family-owned businesses want to keep that business within their family. What advice do you have for these businesses to ensure they can hand down the business to the next generation?

JM: There are no shortcuts. If you want the younger generation to be interested in the business, you must make it easier for them to earn a living than it was for you and your parents or grandparents. There are certainly easier ways to make a living than running a hardware store or lumber and building material supply operation.

So, make sure what you are passing down is modern, less complicated, easier to attract help, and scale efficiently. To keep the interest of the next generation in your business, invest in their future through technology and embrace change today.

ECI: What would you say to a business owner who feels like “now” is not the right time to adopt tech?

JM: People need to think about the value of embracing digital technology, to ensure they can serve the expectations of their customers and market.

Recently, I read Home Depot’s 2023 Q3 reports, where stores reported a 3% loss in same-store sales versus a 5% gain in online purchasing. Lowe’s report for the same quarter suggests a similar trend. This is testament to what digital can be for any business.

Independent business owners also need to be aware of what's happening around them. It’s only a matter of time before Amazon’s warehouse proliferation eventually solves the heavy material distribution part of our industry, and their one-click platform, presents a level of engagement small mom-and-pop stores may have trouble competing against.

John concluded the interview by expressing appreciation for business owners trying to reserve money for other business purposes. However, he stresses that he does not see a more important investment in a business than beginning the digital journey, ensuring they are not left behind and are better able to capture the opportunities ahead.