Building Material Supply
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Increase Appointments
Engage Prospects
Build Your Confidence
Industry Overview
The building material supply industry in the US includes about 50,000 companies with combined annual sales of $250 billion. Major companies include Home Depot and Lowe's. Some independently owned stores belong to wholesale cooperatives, such as Ace Hardware and True Value Company, that buy materials in bulk and resell them to members. The industry is concentrated: the top 50 companies account for more than 50 percent of the market.
Competitive Landscape
Demand is driven mainly by residential real estate construction and renovation. The profitability of individual companies depends on merchandising and customer service. Large companies enjoy economies of scale in purchasing and have the ability to offer more products. Small companies can compete effectively by catering to contractors, by offering specialty products and services, and by serving areas unattractive to larger companies because of limited customer concentration.
Products, Operations & Technology
Major products are lumber and other structural building materials and supplies (45 percent of sales) and hardware, tools, and plumbing and electrical supplies (25 percent of sales). Other products include paint; lawn, garden, and farm equipment and supplies; and floor coverings. In addition to selling products, many companies sell installation services (so-called "installed sales") using their own employees or outside contractors.
A typical building supply store has about 20,000 square feet of floor space; big-box home improvement retailers like Home Depot or Lowe's have more than 100,000 square feet. The items sold in largest volume by most companies are lumber and plywood panels - commodity products with relatively low margins. Some companies sell only lumber, but larger stores also carry an assortment of higher-margin goods. Inventory management is a major operating concern for most retailers, including stocking the right products, pricing, re-ordering, and tracking sales. A typical Home Depot store carries 40,000 items.
Big chains buy many products directly from large suppliers, while smaller companies buy from a large number of regional distributors. Lowe's buys products from 7,000 vendors. Chains with many retail outlets often operate their own distribution centers.
Larger building material retailers rely on computer technology such as point-of-sale systems and electronic bar code scanning systems to help manage inventory. The biggest companies offer self-checkout systems. For companies that offer delivery services, fleet efficiency can be enhanced with GPS technology. GPS fleet tracking systems can reduce labor and fuel costs, improve vehicle utilization, and safeguard vehicles and other equipment.
