Swimming with the big fish

Industry concentration has been a UK timber trade theme for 15 years and more. The appetite of the big builders merchants multiples for more branches and ever wider geographic coverage has been insatiable. Looking through the TTJ archive, there’s now a long roll call of small to medium sized independents which have been hoovered up as a result. Some have succumbed to the offers of the mega merchants because the owners are retiring, some due to tough market conditions, others simply because they’ve been made an offer they can’t refuse.

The latest news takes this concentration process a stage further, with the multiples starting to consume one another. Saint-Gobain’s acquisition of Build Center from Wolseley potentially adds 150 branches to its Jewson network, already the biggest single timber and wood products seller in the UK. It wasn’t exactly a surprise. Wolseley was arguably the hardest hit multiple in the crunch, largely thanks to its exposure to the depressed US construction market, and had already cut its branch network and workforce. In a signal of intent, it had also converted its Sustainable Building Center in Leamington Spa – a feast of innovative timber products and winner of a TTJ Environmental Achievement Award – into a Plumb Center training academy focused on renewable plumbing technology.

No doubt some will interpret the big fish now being swallowed by even bigger fish as another toll on the bell for small to medium sized timber businesses. What we are seeing, goes the refrain, is what we’ve already seen in food and clothing retail, with the independents inevitably swamped by the giants thanks to their economies of scale and the prices they can offer as a result. And the fact that Travis Perkins was also after Build Center, they say, reinforces their point, showing that another multiple’s desire for expansion is undimmed.

However, as we are seeing in some areas of retail, this process really isn’t inevitable and, while it may not be easy in an intensely competitive economic environment, by providing individual service, quality and innovative products, or by serving a market niche, independents can survive and prosper.

I saw an example of this on a recent visit to merchant/distributor Robert Duncan in Gateshead (the subject of a full article in a later TTJ). The business had been in a downward spiral, but following its acquisition by fellow independent MH Southern just two years ago, it’s undergone a remarkable revival.

It hasn’t been easy, said Keith Ornby, who moved from Southerns to be Duncan’s managing director. But, in the face of the building slump, it has managed to retain its workforce, win back custom and double turnover. It’s taken investment, some stock rationalisation and serious sprucing up, but the basics of the turnaround boil down to boosting staff morale and providing precisely what customers want and backing it with service. And the latter runs from just-in-time delivery, to better customer communication and marketing support, a new website, complete with online ordering, and trade open days, where customers are invited to the call and collect centre to see latest offers and are given a coffee and sandwich into the bargain.

Amid all the economic gloom and doom Duncan’s is a heartening story. And the thing is, it’s not an isolated one. Each year more and more companies are being voted for in the TTJ Awards Small Timber Business of the Year category and this year we’ve had another 12% rise to a record 134. The big boys may be looking to get ever bigger, but there are still plenty of SMEs holding their own, and their customers clearly appreciate the fact.