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Lawrence,
I’d have to disagree with you on this. While it certainly isn’t fair to charge you MORE than retail customers, I don’t understand why you should feel that you should pay LESS. I’m a homeowner, a DIYer, and a painting contractor. My primary paint supplier charges me less than an individual homeowner only because of my annual volume with him. My discount is not as large as my buddy who keeps four guys pumping 5 gallon pails through the airless all day. His discount is not as large as the homebuilder crews doing 5 houses every day, etc.
Why should I (or you) make a mark-up on materials? I don’t have to carry an inventory and its associated overhead. If a product is defective, I don’t have to deal with the distributor, manufacturer, or wait for a credit to my account. Half the time I’ve been paid for materials by the client before I’ve even been billed by the supplier. I sell my ability and my time and charge accordingly. I mark-up my materials only to the extent that I lump all the small incidentals into the job as a percentage of the overall bid.
As a homeowner, I feel that my money is as good as anybody’s and I will pay more for those things which require advice or service which you may not need, but a 2×4 in your truck is no different than one in mine, is it?
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Lawrence
As an intermediate/andvanced DYI'er (at least I'd like to think so!) I have no problem with your position. I expect to pay more than a contractor and as long as I'm not getting ripped off, it's ok. I just wish I could buy at some of the "wholesale only" places even at a higher price.
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Are you letting your suppliers know that you'll base your buying decisions on price? Like giving them a complete material list (for the whole house) and telling them it's a competitive situation. Why would they give money away with being asked?
A DIY friend was doing a total remodel of his house. Moved to a new house during that time (his wife refused to sleep in a bedroom without intact walls and ceiling to keep out the wind and rain). Got one of those "Welcome to the nieghborhood, here's a 10% off coupon" from Home Depot. So he detailed all his remaining materials. Went in, spent $11,000. Saved $1,100.
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You do bring up a point I hadn't considered; maybe there's no discount left in lumber from your supplier. I buy my paint from a ma & pa store that has breadth and depth of inventory, and knows what they're selling. Right next door to them is a national chain building center who sells paint thinner at a retail price that is lower than the wholesale cost of my supplier. He sends his employees over there from time-to-time to buy it just so he can re-sell it at the same price as a service to his customers. He doesn't (and couldn't) discount it to me or anyone else. Maybe your supplier has chosen to do the same thing with lumber pricing and hopes to make it up on hardware or custom windows or somewhere that he could offer a discount to larger customers.
It seems to me that the entire building industry is in a kind of flux; there is often little distinction between retailer/discounter/wholesaler. Only those guys that sell oriental rugs seem to have a greater confusion associated with them and their prices :)
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Lawrence,I'm a full time contractor.And I get a discount from all the lumber yards I deal with.I have to be competitive and so do they if they want my business.I don't only base my choice on price,where we're working has a lot to do with it also.But why should I pay the same price that the guy who comes in and asks 20 questions and might come back a year from now pays.I also get better material then he gets because I know what I'm looking at and the guys in the yards know me and what I'll accept.I also take care of them and the drivers,most home owners don't.Vince
*I completely agree with you Lawrence. What I try and do is markup materials to the price the homeowner would pay; that hopefully defrays some of my time picking materials up, picking out good stuff, etc, stuff that I guess should but never seems to be covered in your price for the work. I am a fulltimer, by the way, cabinetmaker and renovations. Not big time , but a good customer. Like you say, in every other industry there is wholesale and retail, except it seems now at the yards. Even my wholsale sheet goods supplier recently priced slotwall at the same price it was on the shelves at one of the local yards; i had to bitch and moan to get them down a couple of bucks a sheet. My only advantage over the homewoner when dealing with the yards is the yard boss knows me, serves me when he sees me, and if I need something fast, it goes on the next available truck. But the discount thing is really making me mad.
*Very good topic here.I once was askedd to bid a roofing job for a builder who claimed he built something like 6-8 houses a year. I told him if I do the job I supply all the materials,labor ,everything.He told me he was gonna supply the materials cause he could get them cheaper than I could. ( he uses my supplier by the way). My question was how does he think he can get the same materials for less,from the same supplier, buying only 8 roofs a year?
*This is a tough one....Who knows where you're getting the best deal or getting ripped off. I deal with one lumber yard here in Dallas, and try not to take my business elsewhere unless they don't have what I need.I know that places like HD can sell some things cheaper, but I don't get the quality of material that I need there.People in smaller communities have it harder than those of us in the "Big Cities" so to speak. Dallas is a very big place, and there is a lot of competion for the dollar. We have places here that just sell "wholesale" as long as you are in business. Some of those places won't sell to me because I am not a retailer. However, I find that a lot of those places will sell to me because I have a federal tax ID number. The town that I come from originally, Longview, Texas, is so small that I'm not sure if they have a good lumber yard there.It kind of comes down to over-head. You have to figure at least 20% over cost regardless of cost to get by. If the homeowner can get it for less, let him buy the material and do the work.I once gave a homeowner a price for installing crown moulding in his family room. About 200'. He said he could get the material cheaper and I said OK.He brought me 30 pieces at 6' each. He said thats the longest he could get in his Volvo. I didn't figure all that joinery. Lost my ass. I was young.Ed. Williams
*Wow. I sent back the 8' pieces the lumberyard sent a week or so ago -- clear stock. Very annoyed, I had told the salesman exactly what we needed. I called him back, said I'm trimming a house, not a closet.OK, I'm lazy. But if they're the same price either way. The contractor price. :) (Which ain't all that different.)
*Contractor's prices are always a dicey and emotional issue. I used to work for a Truss manufacturer that was owned by a lumberyard, so I got a lot of exposure to this issue. I personally feel that a legitimate general contractor SHOULD get a discount over a homeowner. This is primarily due to the fact that they have a better idea what they want, and you don't have to explain everything to them. (several times) Also, you don't have to run a credit check every time a house is built. But sometimes it's hard to draw the line. What exactly is a contractor? How about a homeowner acting as their own general contractor ? How about a guy who just owns a pickup truck and a couple of saws, but has no office ? How about the friend of the contractor who buys things on a contractor's account ?With margins shrinking, I think you'll see less and less difference between what a contractor pays and a homeowner. There just isn't that much markup on things anymore.
*I think Ron has hit it on the head. I asked Wally at the yard I deal very little with. After he danced around the issue a little, he just said. We have been stuck with contractors bills, for very large numbers, single cases upto $100,000.00. We just can't go on giving away the yard to these guys that go bankrupt every 5 years. Since their system is computerized and they aren't literate yet, just giving me a 10% discount turns into a monumental task. Basically for a small yard to absorb the cost of 10 contractor clients/year going bankrupt is enough to put a 5,000,000/year lumber yard out of business. He also said that the poor quality of cedar has basically put them out of the cedar business. It seems you American lot gets the good stuff, again I am envious. As in any business, you have to choose your clients carefully. It seems more and more they are choosing Visa and MC over contractor sales. As a rule I don't work for contractors, (Here in Canada Anyways, Too Risky). Turkstra Lumber Co. In Stoney Creek used to sell 85% to contractors, Now 20%. More and more it seems Canada is not the place to be a contractor. Is it the same in the US? I think I'll go back to paying cash for matls rather than by acct.(At least until I start buying by the lift)
*Many good thoughts here. I always thought it was supposed to work like this; if I do regular business with a yard that gives me a 10% discount, then mark my materials up that 10%, it is fair to everyone.The customer gets the material for "the goin' rate".I get 10% to help cover the cost of overhead like liability insurance I have to carry in case those same materials fail sometime in the future and I have to replace them.The yard benefits because I acted as a sales agent for their products. And when respected contractors buy from a business, especially in a small town, it is good advertising for the yard.I don't resent the fact that suppliers will discount to individuals. I wouldn't have to spend as much time on the phone if they didn't, but they have the right to run their business however they see fit. I sometimes alter my prices to get a job I really want. What they are doing amounts to the same thing. I can't blame them for that. - jb
*Lawrence, the free market is at work here in theis issue.I used to get upset when I would find out that individuals can get the same or better deal. But it is really showing us how compettitive the retail market has become. It is no longe smith's lumberyard competing against jones' lumber. They are fighting for sales against the huge retail outlets, and they are cutting proces to the bare bones.You are now forced to focus your profit making in the service arena. You will not be able to make a healty markup on materials. It's a simple fact of life.Accept it, and move on. Your purchasing decisions now should be made on other factors. Price is now a small one. Develop personal relationships with your suppliers,and reap the benifits of your relationship: better delivery schedules, higher quality materials, better response to problems, better service in general, etc.Change your selling tactics to reflect these changes.For instance: Selling a deck is one area. Customer: I can save 10% if I supply the materials.You: Oh?! Well you better figure on shipping out 25% more lumber if you want the same quality deck. The big box has a much lower rate of quality materials, that I usually cull at least 20%! Unless, you don't mind having curled boards on your deck!And, incidently, you will ultimately be responsible for the lumber, and the integrity of the completed job, after I am done.Paying more, not happy, but oh well!blue
*Andrew D: it seems the margin between WHOLESALE and RETAIL has become so tiny that it is non-existant. Hence, you call a "wholesaler" a retailer.Clint: You're onto something here. However, I think this is a bad business practice for the vendor. When the "boom/bust" cycle is bust, what then? I sure would remember what my former vendor did to me.I, for one, do front costs to my retail customers--homeowners--but it comes at an increased margin. Perhaps you'd care to comment on this practice, since I am no longer--hurray!--one of the big boys.Lawrence: Seems the standard practice of volume discounts is falling by the wayside. I wholeheartedly agree that this should continue. Volume is king. Whereas a boycott can be a viable option to combat this change in vendor practices, it is hard to organize because lots of fellers don't want to get "political". When confronted with this kinda' thing, I march into their place and tell 'em in a LOUD voice I won't be a customer anymore until they straighten up. I'll bet Andrew D has something to say here.
*Yep.Just wanted to establish my free-markey bonafides so I wouldn't get painted as a bleeding-heart liberal.I think it is great practice to tell management WHY you are taking your business elsewhere. I do that too -- I told one HD for example why I was going to take my purchases to another one after a disastrous experience due to their failure to train their employees. And did it too. I think the feedback helps support a healthy economy -- management isn't just feeling around in the dark, wondering where its customers are going. I especially emphasized that they were not retaining employees -- new faces every week means havoc, one big reason i prefer the lumberyard.We are trending towards a low-margin economy. Facilities such as the Internet reduce transactional costs -- I can check prices across the country if I want to. Rather than volume, I would say EFFICIENCY is king. And I don't think this means the death of small retailers -- there are plenty of subtle trends that a big ship like Wal-Mart will simply miss. I sure appreciate the great quality of the moldings from my fancy supplier, even if I buy my 2x4's from HD.
*Blue, nice to see that signiture. I'd like to thank you for adding to the vocabulary of my entire crew. "I can Booger that can now be heard resounding across the various yards we work in!", it is entertaining! You are as usual right on the money, literally. One of the things we sell on is that we pay more for materials and infact our yard brings in lumber that is a full 3 grades superior to the local yards,(which is true and we do pay more for the privilage). Our posts don't crack...yada yada yada. My record is 80% this year, and I am having fun with it. It would be nice to increase my profit margin though, and mabee be able to sell on price for basic work.
*LawrenceI'm a full time builder & renovator. An old established lumber yard in Kingston, On. went belly up a year or so ago, before H.D. even arrived on the scene, apparently because they had always dealt almost exclusively with contractors. The place was set up in a way that supposedly intimidated DIY types and the contractor business just couldn't keep them alive. Not long before this I had had a conversation with the manager of the local Cashway (a chain of smaller version H.D. type stores that have been around for at least 20 yrs). This guy is an old friend who used to deliver materials to me from this same store (a real sucess story there)back in the days when they had decent material. He told me that they made most of there money "off the floor, from DIYers". Now with H.D. sticking it's nose in everywhere, all the smaller yards are trying to compete on price, even though they usually have noticeably better quality material.My 'local' yard is also affiliated with a small chain, and they now offer "my discount" to any one off the street who spends $50.00 or more on material, cash & carry. Now I get 30 or more days on account, an additional 1% if I pay by the 15th, and free delivery, although they aren't so quick on the delivery any more, and won't do it at all if the load isn't worth at least $500. I get around all that when needs be by having good rapor with the shipper and drivers and yard guys, they'll sneak stuff for me out on another delivery in the area. . . but I've known some of these guys for 15 years, and have made a point to always treat them like we are equals. Management cut my discount back to 5% a couple of years ago,(after 13 years of faithful business) but I complained loudly, and it was re-instated. . . shortly after when they shortshipped on a $1500. load, I was told it would cost me $50. to have them deliver the couple of sticks they were short. . . my "buddies" looked after me, but probably risked their necks!!!Suppliers to other trades, notably electrical and HVAC,i really look after their contractors with big discounts, but I guess it's because they still don't have any significant competition from the H.D. or DIYers.Loyalty just doesn't account for much in this business any more. And the perception that more $$$ can be made from the never ending flow of DIYers than from a few semi-solvent contractors is killing it for us.-pm
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I used to be in the electrical product business as a Mfg. Rep. On the big projects, the discounts to the distributors and passed on to the contractors was very steep. Piece part business was up to the distributor, some sold at MSRP, some at cost+10%.
The lumber business is a rough one. We should really call them commodity brokers due to the rapid price fluctuations.
Lawrence;
What is the T&C on these overpriced materials? Are they guaranteeing a fixed price over a 30, 60, or 90 day time frame, especially for any of the volatile commodity items, such as drywall, plywood, OSB, FG batt insulation or framing wood? Are you talking a few sheets of plywood at a time or an entire bunk?
I've got a true story that tells you the rapid price fluctuations of commodity items. I went to a local H-D for some 1/2' CDX plywood. The overhead sign listed a price. A standup sign on the bunks had a slightly lower price. The actual price at the checkout was even lower. I returned the next day for another sheet. The overhead sign was replaced and the actual price was different than the previous day.
go figure!
JE
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Rich, Recently one of my favorite retail chains has been purchased by a western lumber co.
Their advantage was bringing in the best (clear), grades and charging a premium, to one main yard in Missisauga. (Lansing). By speaking out in a loud voice I just about obtained a beating from the 350 lb, 6'10, shipper, (who tried to bully me into taking western red cedar that had been picked over for the last 6 or 7 years, it had been there so long it was black, some had 3" crown and all were cores).I must look like an easy mark. After words with 3 shippers I went back inside and the sales manager came out with me. 2 hours to get proper lumber. They kept bringing it out and I kept sending it back. All this because they refused me entrance to the yard,(new policy). The whole thing was rediculous,(ask Stubby he was there).
Andrew, you are right, there are some great specialty shops that are there for the finding, (Barrie Trim and Moulding and Wakeman Flooring are two of my favs, Wakeman doesn't even have a sign out front).
Patrick, I think all lumber co's could benefit from creative terms. Turkstra lumber used to give full time contractors 10% off for 30 days. If the bill wasn 't paid within that time they would add the discount back on (with tax), and add interest. Worked well for me.
John, Terms are net 30, free delivery. When I am not building a shop or any other major projects I normally pay the balance within a week...in effort to build trust and loyalty. Besides they supplied the lumber pretty quick.
*Trust and loyalty! If only Wall Street put a dollar value on these! We'll all make it, folks, the human species will survive. Doing business doesn't have to be unpleasant. I recently bought a minivan and was astonished at how ... fair ... they were. No nonsense. I would recommend the dealership in a second, even if someone were interested in a different brand. This is good business.
*Andrew D: Are we at the tangential crossroad in the thread so soon? We get calls and unsolicited mailings from lenders very often. Most are only as pleasant as they need to be, some are downright rude. Last week a guy calls--he's like the 140th of the month--says his stuff, hangs up, but not before saying he'll be calling back for a followup.Comes the day he said he'd call and, what do you know, he's on the line saying, basically, he doesn't have anything we want. So, he keeps his word to followup even when he can't offer anything of value to us. I told him how I marveled that he would even keep his word about the followup. Honesty and commitment are still fashionable..
*david,Why should you mark up material? Well lets see...1. What is your time worth going to the supplier,loading the truck, and transporting it to the job. 2. Did you spend any time estimating the job or helping the customer select a product? Where are you billing that?3. Painting may be a different trade, but in my business there is time involved in culling a stack of 2x's or discarding the top sheet of plywood, time well spent to be sure, but time is money. Your argument really makes no sense. If everyone bought and sold for the same price we wouldn't have an economy. The accountant, the secretary, office supplies,pagers, etc. etc. these things need to be paid for on a daily basis and the money needs to come from somewhere.Sure, bill for your time and expertise, but part of that expertise is knowing what to buy and who to buy from. My regular suppliers offer me a discount and in most cases I give a percentage of that back to the customer. They pay less then retail, I make a mark-up, and everyone is happy. A win win situation.Richard Max
*Rich, I may be a little off base with my assumption about boom time pricing. Perhaps the competition among vendors may be squeezing the smaller guys to the point of margins so thin that they don't think they can afford to offer discounts. Having been in the product pricing game in a former life, I know that pricing for an individual customer can be profitably structured to fit his volume and buying pattern, tempered by how much attention that customer needs. The analysis requires some effort, but the business that makes the investment is more likely to maintain/improve profits and satisfy more customers.I don't think any contractor should subsidize the client by purchasing materials with his own money. I'm in favor of the job being bid to include contractor procured materials, with a payment schedule that reflects actual costs incurred plus time worked. At any point in the project, the contractor should be able to walk away with a pro rata profit. I also think that contractors should be honest and do really good work.
*You know Clint, therer are two sides to that coin. Mabee these retailers should be thinking long and hard about what we...the contractors think of them. I am probably responsible for another 100,000 at least in residual sales. Friends, aquaintances, fellow contractors, anyone who asks where I buy my lumber...or tools...or stain. This just doesn't figure into the equation. I can tell you that anyone who wants to stain one of my structure is pre sold, on the most expensive product availiable,(just happens to work the best). Zero effort required on part of the shopkeeper. They even know how much they will need.
*Lawrence, why shouldn't everybody benefit from a referral sale? When the homeowner makes a purchase based on your referral, he should get a little discount to make him a return customer, and you should get a credit against your account for your next purchase. It's customer recognition/service that ultimately keeps a vendor in business. Them that go out of business, deserve to.
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This message speaks for itself.
Who's in favour...and let's hear from the home owners and DIY's out there. I'm at the end of my leash on this one.
I had one supplier for 7 years that decided to charge me more for materials on account than private home owners. You can guess how many orders they get now. How about a buoycott of all retail lumber yards who don't give their regular contractors a cut of at least 5%
Who other than HD does this...give us your stories, good and bad.
*It really is up to the retailer -- whatever option makes them the most money, assuming a competitive marketplace. Now that consumers buy more and more direct, there is less reason to subsidize contractors with 30-day net and such. If I were a retailer, I might offer my "regulars" a loyalty discount or credit to keep them coming back, like frequent flier miles -- but if they just go for the lowest price, heck, a customer is a customer.A "boycott" is only appropriate the retailer is doing something unfair -- such as running a monopoly or murdering dolphins. Otherwise, free market, the retailer with the most profitable terms will grow. Presumably a true boycott costs the boycotters something extra -- they are choosing where to do business on a factor other than price.
*One of our local building suppliers charges more for certain items than the home center does. But he gives 30 day credit -- up to 60 days if you time the buy right. This is why there're still mom and pop groceries in some towns -- they run a tab. Otherwise, it's like Andrew writes.If I pay cash at said building supplier, I get a 10% discount. Cash flow is everything.
*Given the current volume of building,I assume the local yards and specialty vendors are doing enough business that they are less inclined to offer price breaks and extended credit. On the other hand, how many remodeling/custom contractors are willing to front costs and reduce margin for homeowners?Clint Searl
*Folks, any business that buys quantities should get a price break. I'm not talking 10 to 20,000.It's like that in any business that purchases volume and manufactures a finished product. Take welding shops for an example. The discount is more like 25-30% over what you can buy as a walk in. Tires, windows, et al. In fact I can't even buy windows from most companies...so I buy from the one that I can. Contractors walk in or fax in a complete material list...no take off required, a minimum of time and work...and usually load their own truck. Please mention if you are a part time or full time contractor with your post...we're all curious.
*Lawrence,I'd have to disagree with you on this. While it certainly isn't fair to charge you MORE than retail customers, I don't understand why you should feel that you should pay LESS. I'm a homeowner, a DIYer, and a painting contractor. My primary paint supplier charges me less than an individual homeowner only because of my annual volume with him. My discount is not as large as my buddy who keeps four guys pumping 5 gallon pails through the airless all day. His discount is not as large as the homebuilder crews doing 5 houses every day, etc.Why should I (or you) make a mark-up on materials? I don't have to carry an inventory and its associated overhead. If a product is defective, I don't have to deal with the distributor, manufacturer, or wait for a credit to my account. Half the time I've been paid for materials by the client before I've even been billed by the supplier. I sell my ability and my time and charge accordingly. I mark-up my materials only to the extent that I lump all the small incidentals into the job as a percentage of the overall bid.As a homeowner, I feel that my money is as good as anybody's and I will pay more for those things which require advice or service which you may not need, but a 2x4 in your truck is no different than one in mine, is it?
*David,You are making my point for me."My primary paint supplier charges me less than an individual homeowner only because of my annual volume with him. ", all other trades get discounts.I'm starting to believe it's the carpenters that are doing it to themselves. They do it, because we let them. If I were only buying a few sticks of wood, I would understand entirely. We are purchasing $80-120,000 per year. There is no discount to speak of, and I'm going to have to bring it in by the lift starting next spring to compete. There seems to be no middle ground. Take it or compete with them I guess!