Bulletin 487, May 1965 Marketing of Lumber By Retail Lumber Yards In the Northeast - Phase III UNIVERSITY OF NEW HAMPSHIRE AGRICULTURAL EXPERIMENT STATION Bulletin 487, May 1965 Marketing of Lumber By Retail Lumber Yards In the Northeast — Phase III UNIVERSITY OF NEW HAMPSHIRE AGRICULTURAL EXPERIMENT STATION NORTHEAST REGIONAL PUBLICATION Published for the State Agricultural Ex- periment Stations of Maine, Massachusetts, New Hampshire, Pennsylvania, Vermont, and West Virginia and for the INortheastern For- est Experiment Station, Forest Service, the United States Department of Agriculture. The research was conducted cooperatively l>y these agencies and was supported in part h) regional funds provided under Title 1. section 9b3 of the Bankhead-Jones Act, as amended August 14, 1946, authorizing cooperative re- search by state agricultural experiment sta- tions and the Hatch Act. as amended August 11, 1955. This research was conducted under the Northeastern Regional Project NEM-24. Marketing of Lumber in the Northeast. Bulletin 487, May 1965 Marketing of Lumber By Retail Lumber Yards In the Northeast - Phase III This bulletin was prepared by a sub-committee of the Northeastern NEM-24 Technical Committee. The preliminary work of planning for data analy- sis and bulletin organization was done by Samuel Brock, Henry H. Webster, and Oliver P. Wallace, Sr., chairman of the Phase III sub-committee. Data analysis was done by Eugene B. Penick, Jr. and the chairman. Preparation of all graphs and charts and initial writing of the bulletin was done by Eugene B. Penick, Jr. Review and re-writing were done by Oliver P. Wallace, Sr. with assistance from Robert S. Bond. UNIVERSITY OF NEW HAMPSHIRE AGRICULTURAL EXPERIMENT STATION NORTHEASTERN FOREST PRODUCTS MARKETING TECHNICAL COMMITTEE A. H. V anLandingham, Administrative Advisor West Virginia Agricultural Experiment Station Roy A. Whitmore, Jr., Chairman Vermont Agricultural Experiment Station Samuel Brock Maine Agricultural Experiment Station Robert S. Bond Thomas S. Foster Massachusetts Agricultural Experiment Station ISorm^an D. Jackson Donald E. Nelson West Virginia Agricultural Experiment Station Oliver P. Wallace, Sr. New Hampshire Agricultural Experiment Station Newell A. Norton Pennsylvania Agricultural Experiment Station Perry R. Hagenstein Henry H. Webster Northeast Forest Experiment Station U. S. Forest Service, USDA Glenn R. Smith Cooperative State Experiment Station Service United States Department of Agriculture Mr. Brock, is now with Bureau of Land Management, U. S. Department of the Interior, Washington, D. C. Mr. Webster is now Associate Professor, Department of Forestry, University of Wisconsin, Madison. Table of Contents Page Suinniary 5 Introduction 6 Research Procedure 7 Firm Organization 8 Commodities Handled by Retail Yards 13 Lumber Procurement 14 Customer Services 18 Lumber Sales to Consumers 19 Product Transformations 23 Reasons for Species Choice 27 Types of Consumers 30 Methods of Payment for Lumber by Consumer Groups 31 Delivery to Consumers 32 Conclusions 34 SUMMARY This study of northeastern retail lumber yards was undertaken to deserihe the aetivities of these yards and to determine the extent of their influence on lumber marketing. Northeastern region retail lumber yards are primarily corporations. The latter account for nearly 80 cents of each dollar spent at all retail yards, and over 90 percent operate only one yard. Fifty-two percent of all yards have an annual gross dollar sales volume under $300,000. The other, larger yards, sell nearly three times the volume ( in dollars ) of those with sales under $300,000. The number of employees per $100,000 of gross sales declines steadily from seven for the smallest yards to two for yards with gross sales over one million dollars. Yards offer a variety of products and services. While wood products dominate sales, lumber dollar sales volume is only 39 percent of total gross sales dollars. Larger yards offer a greater variety of products and tend to include many non-wood related items. Retailers show a substantial preference for western lumber, 70 per- cent of purchased volumes. Quality, lengths, volume available, and spe- cies characteristics are cited as major reasons. They do shop around for the best price and buy 32 percent directly from sawmill producers. Can- adian imports, 14 percent, are second in volume while Eastern species comprise only 11 percent of total lumber purchases. The volume of dimension lumlier purchased is nearly twice the volume of ])oards with 75 percent of the former in western species. Retail yards sell primarily to three consumer groups : building con- tractors, home owners, and industrial plants. Nearly 50 percent of all sales are to building contractors, 30 percent to home owners, 12 percent to industries, and the remaining volumes to all other consumers. The larger yards sell more volume to contractors while smaller yards sell more volume to home owners. Sales to building contractors are most im- portant in Massachusetts, Vermont, and New Hampshire. Sales to home owners dominate in West Virginia and Maine. Massachusetts has the greatest proportion of sales to industries. Retail lumber yards sell a quality product, primarily dimension lumber from western species to building contractors. But home owners are apparently strongly oriented to "do-it-yourself" projects as nearly one-third of retail yard lumber sales are to these people. Although wood products represent the major proportion of annual gross dollar sales volume, larger yards sell a substantial dollar volume of non-wood items. MARKETING OF LUMBER BY RETAIL LUMBER YARDS IN THE NORTHEAST - PHASE III INTRODUCTION Most limihor to be used in construction is purchased from retail lumber yards. A New Hampsbire stutly^ sbowed tliat 56 percent of con- struction consumer purchases were directly from retail lumber yards. A Maine study- showed that in northeastern metropolitan areas 90 percent of the buibling contractors purchased the lumber they used from retail lumber yards. Another study of lumber marketing by sawmills in the Northeast'^ showed that sawmill owners sell a large proportion of their lumber to retail and wholesale lumber yards. The New Hampshire study showed that 83 percent of wholesale yards' eastern lumber is sold to retail yards. Thus retail lumber yards are a key link in the himber markets between the producer and the consumers. The selection of species and grades of lumber to be carried in stock by retail yards dictates to a large extent the market for lumber from marketing intermediaries and ]und)er manufacturers. This demand for wood and wood j)roducts can ])enefit those producers with the ability and foresight to detect trends and then to set their productive facilities to work meeting the requirements that retailers find through their sales to consumers. The firm producing the grade and quantit) desired at the opportune time will benefit economically. A major element affecting the marketability of eastern species is the knowledge of marketing opportunities by eastern lumber manufacturers. Phase 11, "Marketing Lumber in the Northeast." stated: ''Many lumber suppliers have only fragmentary knowledge of the alternatives open to them in marketing their sawmill products." One indication of th«> alt<>r- natives open to any producer can be found in the detailed study of the operations of retail lumber yards. The Northeastern Regional Lund)er Afarketing Project. NEM-24. is a major cooperative effort to provide a better understanding of th<" lum- ber marketing chain. Phase I of this project described luml)er marketing in the northeast by lumber producers. Phase II described hunber mar- keting in this region as indicated by the purchases of lumber by second- ary manufacturers or other industrial users. Information presented in this rei»()rt was collected as Phase 111 of the Northeastern Regional Mar- keting Project. NEM-24. Planning and data collection were carried out by the Agricultural Experiment Stations of Maine. Massachusetts. New Hampshire. Pennsylvania, Vermont, and West Virginia, with the cooper- 1 Wallace and Ainiddii. 1958. Marketing of Eastern White Pine lumber from Maine and New Hampshire. N. H. Apric Exp. Sta. Bull. No. 452. - Brock. S. M. l')6:}. Marketinp Maine Iiiinlicr to the Northeastern Buildin}: Con- struction hxiustry. Maine Apric. Exp. Sta. Bull. 615. •' (".hristensen et. al. 1962. Marketing of lumber produced bv sawmills in the North- east Phase I. West Va. Univ. Agric. Exp. Sta. Bull. No. 478. ation of tlio Northeastern Forest Ex]>eriinent Station, U.S.D.A. The data were eomj)i]ed at the New Hampshire Agrieuhiiral Experiment Station. This report continues the previous two studies of the NEM-24 series by describing another segment of the market structure for lumber. It is intended to descril>e (1) the flow of lumber to retail lum])er yards, (2) the lumber purchased by and services sought and offered to building contractors, home owners, and other domestic consumers, and (3) the factors influencing purchases of eastern and non-eastern lumber by do- mestic consumers. RESEARCH PROCEDURE Direct interviews with owners and operators of retail kuuber yards were recorded on prepared questionnaires. Samples of yards were taken from BOASI^ lists. However, all states participating in this study report- ed that the lists were not completely satisfactory as some building con- tractors were included and known retail dealers were found listed as lumber producers or not included at all. The exact size of the population in some states was, therefore, uncertain. A total of 542 firms were used for analysis from the total of 1,362 listed by BOASI for the participating states. Over 600 firms were actually contacted. Table 1. Number of Firms by States — BOASI List and Number Sampled. BOASI No. Sampled Maine 91 47 New Hampshire 52 52 Vermont 20 36 Massachusetts 334 156 Pennsylvania 761 172 West Virginia 104 79 1362 542 Several large multi-yard firms have retail outlets in more than one state so that state volumes of lumber are not representative of their actual transactions. Thus, while strong differences between states are stressed in this report, the effect of these multi-yard firms on a particular state is not shown by the state figures. Description of the retail lumber yard businesses in the northeast is derived from the yards studied and follows the format of the question- naire. The latter was developed by a sub-committee, strengthened and approved by the whole technical committee in a working session. 1 Bureau of Old Age and Survivors Insurance. Standard Industrial Classification No. 5211. FIRM ORGANIZATION Ownership Patterns Retail lumljcr yards in the Northeast fall under three major types of ownership: corporations, single ])roj)rietorships. or j>artnerships I Fig- ure 1 I . These comprise 99 percent of all ownerships in the region, with corporations owning 67 percent, single proprietorships owning 21 per- cent, and partnerships controlling the remaining 11 percent. Ahout one percent of the firms are under unspecified types of ownership. FIGURE 1. OWNERSHIP PATTERN OF REGIONAL RETAIL YARDS AS A PERCFNT OF TOTAL YARDS. In general, the corporation yards are larg(% efficient enterprises, selling in quantity and serving relatively large consumer areas. Although many of these yards purchase from local marke^t inlermediaries or wholesalers, some are retail hranches of v(>rticallv integraled corpora- tions which nuinufacture liimher and wood prodiu-ts. In such cases, tlu< retail yard may serve as outlet for company produced goods. The corporation has gained a strong position in the r(>tail yard in- dustry in the northeast, i'heir success lies in tlu- sevcrc(^nt indicate that they spend one j)erc<*nt or less while six percent of the yards spend nothing on advertising. Only 14 percent of all firms spend over two percent of their gross sales in hringing their products hefore the puhlic. There appears to be no significant difTerences in ad- vertising expenditures hy the various yard size classes. Advertising ex- j)erts feel that two percent of gross sales is a sound advertising hudget and less than one percent is almost certain to he inadequate, regardless of dealer size or location.^ ' Woyerh;nis«T (lomijany. How to Plan Advertising for Profit: A management guide for retail lumber dealers. Loose leaf, p. 16. 12 Expenditures (percent) Over 10 None 0 10 20 30 Percent of total yards FIGURE 6. ADVERTISING EXPENDITURES AS A PERCENT OF GROSS DOLLAR SALES. The proportion of consumer, contractor and industrial sales is also a factor influencing advertising expenditures. What appeals to home owners does not generally appeal to industrial huyers so that advertising methods may differ according to the market outlet. COMMODITIES HANDLED BY RETAIL YARDS Lumber sales comprise approximately 39 percent of the gross dollar sales by retail lumber yards in the region (Figure 7). An additional 45 percent of sales are made up of other wood products — millwork, ply- wood, wooden clapboard and shingles, reconstituted wood products, and flooring. The remaining sales volume is of other products, primarily hardware, paint, and non-wood exterior siding. Although lumber is no longer the major commodity sold in the retail lumber yard, wood pro- ducts in various forms do comprise in excess of 75 percent of the gross dollar sales volume throughout the northeastern region. All wood products, as enumerated above, are handled by most yards with little variation noted between size classes. No significant differences were found between states. Non-Wood Products Of the non-wood commodities, paint is stocked by about 90 percent of the retail yard operators. There is some variation by states for those selling paint. It ranges from 97 percent in West Virginia to 74 percent in Massachusetts. The low figure in Massachusetts may be attributed to the fact that it is a more urban state and there is greater competition 13 FIGURE 7. SALES OF COMMODITIES HANDLED BY RETAIL YARDS. from outlets specializing in paint products. No correlation may be noted between yard size classes for paint sales, although a range exists from 81 to 95 percent. Hardware is universally sold by all size yards in all states. Non-wood exterior siding is sold by 72 percent of the yards, with a range from 89 percent in New Hampshire to 49 percent in Massachusetts. Characteristics of markets and degree of competition in selling this product probably account for these variations. Larger yards handle this item more frequently than do the smaller ones. LUMBER PROCUREMENT Retailers showed substantial preference for western lumber regard- less of the market from which it was purchased (Figure 8). Even pur- chases from instate sources wore predominately of western species. Only 19.5 percent of all lumJ)er purchases are from producers; thus the main sources of lumber for retail yards are firms acting as market inter- mediaries. Some of these firms are vertically integrated, having pro- ducer, wholesaler, and retail units. Retailers purcliase 35 percent of their needs instate but only 19 percent of this volum<> is from local producers, except for Maine, where sixty percent of retailer purchases are eastern species and from producers. Instate Sources Analyzing instate - outstate lumber purchases presents difficul- ties because Massachusetts and Pennsylvania are the main locations for most market intermediaries dealing in lumber. In New Hampshire, Ver- 14 o > I < I— o u UJ a. Z to Q < >- < I— LU a: < Z o o >- < I U Z3 0£ tu ca Z3 U o 15 iiiont. and West Virginia. 75 to 93 percent of instate softwootl purchases are from local producers but this represents only 26 percent of the total lundier purchases by retailers in these states (Figure 9). |{ i I i 1 1 |"j Out-of-state sources I I In-stote sources FIGURE 9. PERCENT OF TOTAL LUMBER PURCHASED FROM IN-STATE AND OUT-OF-STATE MARKET INTERMEDIARIES AND LUMBER PRODUCERS. Outstale Sources Eighty percent of all purchases from outstate sources are from mar- kets intermediaries. These represent 53.5 percent of all retail lumber yard purchases. Further, 77 percent of this lund)er is western species. 12.5 percent Canadian, 4.5 percent southern and 6.0 percent eastern. Retail yard size class does not seem to affect purchasing practices. Lengths, species characteristics, volume available, and quality are more important factors influencing purchase decisions. In general, tlu^ larger yards ])urchase and market the bulk of retail lundter sold in the northeast. These yards noruuilly serv«> a relatively large area in retail trade and are strongly competitive prieewise. In se- curing their lumber and wood products they buy from the source which ofTs may he aeeounte \xilliiii tlie yard. 18 Lumber and wood products are the main sales product for retail yards Retail yards in all states except Maine and New Hampshire follow the regional pattern. Brochures on wood use are offered by less than 30 percent of their yards. New Hampshire has the greatest deviation of any state from the regional picture. In that state nearly 70 percent of the firms offer price-stamped lumber as a service and all other services are available at over 75 percent of the firms. In general, as the size of a firm increases, quantity of services offer- ed tends to increase. As an example: for firms providing wood specifica- tions, 21 percent of the 1-50 thousand dollar class offer this service while 62 percent of the one million dollars and over size class firms offer it. The largest size class firms are also leaders in offering wood tech specifi- cations, do-it-yourself plans, and price-stamped lumber. LUMBER SALES TO CONSUMERS The principal market for eastern softwood lund)er is clearly north- ern New England ( Table 2 ) . Western lumber sells in greater volumes in the southern part of the region but dominates lumlier sales in all states except Maine and Vermont. Southern lumber gains steadily in percent of volume as the southern end of the region is approached. Canadian lumber varies in volumes sold by states but shows no clear regional pattern. Table 2. Percent of Lumber Volume Marketed in Each State by Regional Species Groups. States Regional Region Species Group Maine N. H. Vt. Mass. Penn. W. Vo. Total percent Eastern 70.0 43.8 43.1 7.6 2.3 2.8 15.5 Western 16.5 53.4 38.2 80.4 68.5 71.5 66.3 Southern 0.7 0.2 0.2 1.5 8.2 21.0 5.5 Canadian 12.8 3.6 18.5 10.5 21.0 4.7 12.7 19 Boards Boards from eastern species for sale by retail yards are generally of poorer quality than those from other regions ( Talde 3). Over one-lialf of all eastern hoards stocked are No. 3 common and poorer. In adiHtion. about 1 1 percent are ungraded or on a mill run basis. Only one-quarter of all sales arc No. 1 and No. 2 connnon grades and only seven percent is of high quality, i.e. clear. Table 3. Lumber Sales to Consumers. Percent of Various Grades of Boards and Dimension Lumber Marketed by Retailers. Board Grades Dimension Regional 1 &2 3 Common Species Group Clear Common & Poorer Ungraded Graded Ungraded Eastern 6.7 25.2 56.2 11.9 46.2 53.8 Western 15.4 36.3 46.6 1.6 99.3 0.7 Southern 13.0 82.9 4.0 0.1 100.0 0 Canadian 1.5 72.5 20.7 5.2 95.7 4.3 Number three common and poorer boards constitute the major proportion of western board sales ])y grades l>ut are less than half of total board sales. Thus over half of western boards in stock are of better grades of hnnber. Over 15 percent is of clear grades. Little western lum- ber is sold ungraded. The availability of western lumber in the upper grades, in volumes needed and also pre-graded, enhances its competitive position relative to eastern lumber. Boards from the southern region and from Canada are of high quality. Over 80 percent of southern boards is in No. 1 and No. 2 com- mon grades and an additional 13 percent is in the select grades. About 72 percent of Canadian boards is in No. 1 and No. 2 common grades. Species of Boards White pine is the most important single species produced in the northeast. Hegion-wide, however, eastern white pine l)oards are stocked by only half of the yards. In contrast, western white pine boards are stocked by two-thirds of all regional retailers. Maine. New Hampshire, and Vermont vards stock the most eastern white })ine (Figure 12). West Virginia and Pemis) Ivania reported the greatest ptMcent of yards carrying southern pine boards, 75 percent of all yards in West Virginia and about 45 percent of Pennsylvania''s yards. Price advantages and availability of this species to local retail yards account for intra- regional dillerences. Other eastern species are of relatively little importance compared to white pine. On the average, 17 percent of all r<^gional firms reported carrying hendock. 19 |>ercent carry eastern spruce and only about 5 percent carry eastern fir. The northern New England states are in all cases the leaders in stocking these eastern species. 20 Western white pine 100 80 60 40 20 STATE West Virginia Pennsylvania Massachusetts Vermont New Hampshire Maine 0 0 Percent of total yards Eastern white pine 20 40 60 80 100 FIGURE 12. PERCENT OF REGIONAL RETAILERS PURCHASING EASTERN AND WESTERN WHITE PINE BOARDS BY STATES. Western species of boards dominate northeastern markets (Figure 13) . Western white pine is the leader in this species group, followed by ponderosa pine and redwood. Fifty percent of the yards, principally in the southern portion of the region, stock ponderosa pine. Redwood is stocked by 45 percent of the regional yards. The stocking of this species by yards of the various states indicates that its use is universal through the region. Over one-half of the yards in Massachusetts and West Vir- ginia, and over one-third of the yards in Pennsylvania and Vermont, report stocking redwood. Western spruce is also an important species SPECIES Canadian white pine Eastern fir Eastern hemlock Eastern spruce Western hemlock Sugor pine Southern pine Canadian spruce Western spruce Redwood Eastern white pine Ponderosa pine Western white pine Percent of total yards FIGURE 13. PERCENT OF REGIONAL RETAIL YARDS STOCKING VARIOUS SPECIES OF BOARDS. 21 as over onr-half of the retail dealers in New Hampshire, Vermont and Massaehusetts report stocking it. Canadian spruce hoards are stocked by about two-thirds of the yards in all states except New Hampshire. Dimension Lunil)er The volume of dimension lund)er sold in the region is nearlv twice the volume of l)oards. Despite this fact eastern sawmills tend to produce more jjoards than dimension. Although eastern species will make satis- factory dimension, sawmill owners have seemed to be unaware of this market. Western species comprise 74 percent of the dimension lumber sales in the region; further. 60 percent of the total lumber sales are west- ern dimension. Imports of Canadian lumber are two-thirds dimension stocks. Less than one-half of the dimension lund)er from eastern sources is sold graded. A previous study ^ showed that ahont 40 percent of the soft- wood lumber sold by sawmills was graded before selling. Thus, pur- chases directly from sawmill firms are likely to be ungraded. Eastern dimension lumber purchased through wholesalers and all dimensions from other regions is graded before sale. All retail yards in all states sold graded Canadian dimension with the exception of Maine. In that state about 50 percent Canadian dimen- sion was sold ungraded. This may be due to the particular source of Canadian lumber and to the competitive price of Maine produced east- ern spruce. Species of Dimension Lumber Western species of dimension lumber dominate most markets in the Northeastern region (Figure 14). Douglas fir is the most important spe- cies and is carried in stock bv two-thirds of all regional retail vards. Western heudock. spruce and firs are stocked by half of these yards. In general, each state follows the regional pattern: however, west- ern species are stocked by a smaller percentage of the yards in the more northerly states. Only about one-third of Maine r<'tailers stock Douglas fir as most of their yards stock eastern species for dimension. Canadian spruce dimension is stocked by one-third of all yards. However, over 50 percent of Maine, Vermont and Massachusetts yards stock it. while less than 20 percent of tlu' yards in the otluM- states carry it in stock. Eastern dimension species are of relativelv little importance region- wide, altiiough they receive considerable use in some areas. parti«ularly Maine. Eastern hemlock and spruce, are stocked by about one-fifth of all yards but they are stocked by over three-fourths of Maine retail yards. riie advantages of western species are manv com])ared to eastern species. Western dimension is well manufactured. availai»le in long lengths and large sizes, and in volume. It is also carefully graded and grade marked. 1 M;irkftin<: of IhiiiIkt prfKluced hv >a\\ni!ll> in the Northeust. Phase 1. Bull. 478, 1962. W e.-l \ a. A};ri<-. Exp. Sta. 22 SPECIES Canadian pine Eastern fir Sugar pine Ponderoso pine Western white pine Eastern white pine Redwood Eastern spruce Eastern hemlock Canadian spruce Other western firs Western spruce Western hemlock Douglas fir Percent of total yards FIGURE 14. PERCENT OF REGIONAL RETAILERS STOCKING VARIOUS SPECIES OF DIMENSION LUMBER. Length of Dimension Lumber The majority of softwood dimension lumber, bought from retail yards is less than 16 feet in length (Figure 15 ) . This is true for all states, although lumber of these lengths comprises a greater percentage of total purchases from eastern and southern sources than from western or Cana- dian, Longer lengths are generally from western and Canadian species. Less than 1 6 feet in length SOURCE 1 6 feet and greater in length 100 80 60 40 20 0 0 20 40 60 80 100 Percent of total yards FIGURE 15. LENGTH OF DIMENSION LUMBER PURCHASED BY SPECIES SOURCE. PRODUCT TRANSFORMATIONS Most retail yards in the northeastern region perform one or more product transformations on a portion of the lumber handled by them. These transformations entail storage, either under cover or in the open, 23 seasoning, grading, grade marking, and fini^ihing and/or surfacing. The first of these is not truly a transformation because it is an activity en- gagt im- portant as considerations affecting purchases. Physical factors affecting the purchase of hinihcr from a specific state generally conform to those mentioned above in the order given: however. th<'re are sonu* variations from tliis pattern. ^ ards purchasing easl<'rn hnnher are most influenced hy (piality of manufaiture. Aext in importance are weathering ability and special uses. There are no signifi- cant differences hetween sales vohime classes as to factors influencing purchase of eastern lumher. Most retailers reported tliat w<^stoard feet in the six states studied. Seventy-two percent of all industrial 1 Clark, Row. 1964. Changing Role of Retail Dealers in Lumber Marketing. South Forest Experiment Station, New Orleans, La. 2(1 pp. illustrations. - Brock, S. M. 196:i. Marketing Maine Lumber to the Northeastern Building Con- struction Industry. Bull. 61.'). Maine Agric. Exp. Station, Orono. •' Wallace and Aniidou. Ibid. 30 sales by retailers are reported by Massachusetts and Pennsylvania firms. This is partially a reflection of the industrial developiiK-nt in these two states, but also is due to the concentration of large retail lumber firms with multi-units in several states. Ninety-five percent of sales to all "other" markets are in Maine and Pennsylvania. Sales by yard size classes show no pattern except that 68.5 percent of all lumber sold under this classification is by the largest yards. Size Class ithousands of dollars) BUILDING CONTRACTORS I I Over 1000 601-1000 401-600 301-400 201-300 101-200 51-100 1-50 Average ^^^HH HOME HI^^H OWNERS 1 ' 1 1 1 1 100 80 60 40 20 20 40 60 80 100 Percent of total yards FIGURE 23. SALES OF LUMBER TO BUILDING CONTRACTORS AND HOME OWNERS BY YARD SIZE CLASSES. METHODS OF PAYMENT FOR LUMBER BY CONSUMER GROUPS The use of credit by retail lumber yard customers varies by type of customer. Only one-third of all hnnber sales are on credit. Building con- tractors use credit twice as much as other customers, over 50 percent of their volume of lumber purchases. 31 Table 4. Method of Payment to Retailers for Lumber by Type of Consumer, Volume In Percent. Type of Buyer Method of Payment Cosh Credit Advance Percent Building Contractor 48.8 50.7 0.5 Industry 64.2 26.2 9.5 Home Owner 74.3 24.1 1.6 Average 62.4 33.7 3.9 Honieownoi> and industry purchasers buy primarily "for cash" with homeowners purchasing three-quarters of their wood needs without the use of credit. Industry makes 10 percent of its j)urchases by advance pay- ments and is the only significant user of this tyjje of payment. Thus, in the region, retail yards sell more lumber on a cash basis (62 percent) than on a credit basis (34 percent). Only four percent of sales are made by advance payments. Maine and Vermont yards sell more on credit than other states studied in the region. DELIVERY TO CONSUMERS Lumber and Ijuilding material are bulky merchandise which most retail lumber yards deliver to their customers, particularly for volume orders. About 80 })ercent of contractor purchases are delivered by the re- tailer at no additional charge (Table 5). Only about 3 percent are de- livered at extra cost to the contractor. Throughout the region about 17 percent of all contractor purchases are pr(>sumably transj)orted at their own expense. Only Pennsylvania differed significantly from the regional averages. There, retailers are responsible for delivery of slightly less than two-thirds of contractor purchases. The remaining one-third is transported by the buyer. Table 5. Method of Delivery to Consumer by Type of Consumer in Percent of Volumes. Type of Buyer Delivery • Delivered: Delivered: Not no charge extra charge delivered percent Building Contractor 80.2 2.9 16.9 Industry 72.0 11.6 16.4 Homeov^ner 64.9 11.4 23.7 Average 72.4 8.6 19.0 32 Retailors deliver two-thirds of homeowner purchases at no extra charge. Ahout 10 percent of their purchases are d<'livered at extra charge and the remaining one-fourth is not delivered. Homeowners mak<' many small })urciiases which they can transport themselves or for which they do not want to wait for delivery. For the region. 72 percent of all lumher sold hy retail vards is delivered free of direct transportation charges to the customer. Only 9 percent is delivered at extra cost. The remaining 19 percent is transported hy the huyer. Retail yards now furnish the builder and homeowner with a greater variety of goods and services 33 CONCLUSIONS Retail lumber yards of the Northeast are no longer just "lumher yards." They sell any produets that may he useful to homeowners and building eontraetors. Lumber sales are less than 40 percent of these re- tailers' gross annual dollar sales volume. However, wood product sales exceed 80 percent of total dollar sales volumes. The lumber available to customers is mostly of western species, es- pecially in dimension stocks, 66 percent of all purchases. However, all yards do stock eastern softwoods. Large western firms are able to pro- duce lundicr that will meet construction codes and loan institutions re- quirements. About 50 percent of western shipments to retailers are kiln dried, while only 14 percent of eastern lumber is. Eastern lumber is not available in large quantities, kiln dried. Lund)er yard retailers procure 68 percent of their lumber from market intermediaries, the remainder directly from producers. Most yards buy some lumber directly from sawmill firms, however. Vertical integration at both ends of the size scale of firms is evident. Thus, own- ers expect to absorb the costs and the profits of the middlemen. The volume of dimension lumber sold in the region is ncarlv twice the volume of boards. Plywood and other type sheathing have replaced boards to a substantial amount in construction uses. Despite this, eastern sawmill owners are producing twice the volume of boards over dimen- sion. Even imports from Canadian sources are two-thirds dimension stocks. Most dimension lumi)er is purchased in 16-foot lengths or less; only 16 percent is over 16 feet. All of this latter stock conies from Can- adian and western sources. Eastern species are mostly cut into shorter lengths and this may contribute to its lack of manufacture as dimension. Western and Canadian stocks are over 50 percent 16 feet or k)nger lengths. Retail yards are purchasing lumber as a finished j)rodiu"t ready for sale. Such operations as lund)er grading, grade marking, surfacing or dressing, and seasoning have been performed by producers or middlemen for the retailer whose unit is a store, not a shop. A few yards do carry out some or all of these operations but they are usually vertically integrated. The most important factor influcMicing purchase of eastern hnnber by retailers is its immediate availability. Howcvim-, th«> most iuqiurtant factor for all lumber species is quality of manufacture. Eastern pro- ducers have not been abb* to meet western firms competition on this factor. In addition, size and IcMigths available are of primary importance; and again, eastern lumlxM- is not available in the larger sizes and long lengtb>. While price is an inq>ortant factor to all retailers. dilVerences in quality between eastern and western luud)er manufacturing gives western lund)er a price advantage (b^spite shipping distan<'es. The vari«>ty of services offered to custonuM's bv \ ard owners are sub- stantial. Increasingly, aids are offered to fit wood to the job the customer has in mind. Very few customers understand grad<' difTerences in lundjcr or species differences. Help from sales people is essential. Written as well as verbal aids are evitb'nce of aggrosivc^ retailing. 34 Retail lumber businesses are dependent upon home construction and maintenance. Yards have two major customer groups — home- owners and building contractors. Eighty percent of retailers' lumber sup- plies are sold to these customers. Industrial firms are the third most im- portant customers. Volume of sales to these customers depends upon yard size class. Small yards sell mostly to homeowners while the largest yards sell mainly to construction contractors. Retail lumber yards are becoming supermarkets for homeowners. Some are already locating in or near shopping centers. They offer both delivery and serve-yourself services. Whether one is planting new shrubs or repairing broken stairs, they can supply these needs. Fencing — one of many manufactured woods products sold by retail yards 35 Marketing of Lumber by Retail Lumber Yards in the Northeast — Phase IIL NEM-24 Technical Committee Retail lumber yards sell any product that may be useful to building con- tractors and homeowners. They sell mostly non-eastern species for lumber. Bulletin No. 487, May, 1965, University of New Hampshire Agricultural Experiment Station.