Talking points
What does ENAP stand for? Either you know it or you don’t. The answer: “Everyone Needs A Profit.” And to Stephen Sallah, president of the New Windsor, N.Y.-based co-op, it’s anything but trivial. “As a co-op, you can’t lose money,” said Sallah, who joined ENAP as CFO in 2008 and rose to the CEO title in September. “Somehow at the end of the day, you have to be able to return something in the black back to the dealers.” ENAP has done that, he said. And it’s also opened a Louisiana office and added 11 members last year, bringing the count to 220 dealers.
Has the industry bottomed?
I agree with those who say the economy is getting better. The low point was 2009, but you do run into dealers where 2011 was their worst year. I think there is a lot of optimism and hope right now, and there wasn’t in 2010 or 2011. I’m encouraged by that. But it’s not huge. I’m better two months than down one month, but there are still pockets of concern out there.
What are the factors that determine success?
Competition is part of it. Some guys had three competitors in a market, and now they just have themselves. So their business is up quite a bit. Others have seen encroachment by the competition, yards in their backyard, and some of the big boxes have continued building in some areas.
What about this year so far?
January and February were great, [but it’s] hard to back out how much is from the weather. But on average there is much more optimism. At our show in March, everybody said the same thing. The vendors and members are much more positive.
What will be the biggest change for lumberyards in the next five years?
We’re focused on trying to read that ourselves right now. Fortunately I have 220 dealers out there with their eyes and ears helping me navigate into the future. You know that homes are going to be smaller. Kitchens are going to be modest. Many of us can remember the story of a $70,000 bathroom remodel. Those days are pretty much over. I think they need to think about how to turn the volume they were turning even when starts come back, because of the smaller footprints of these starts.
But right now dealers are most concerned with material shortages. These shortages aren’t happening right now, but dealers know that all it’s going to take is a slight increase in demand. And if it does, mills and manufacturers have restructured so much that dealers believe getting product might be even worse than 2004 and 2005.
What is it that they have to get right in 2012?
Emphasize the right products, because starts aren’t going to come back quickly.
If you were heavily dependent on products that were start-driven such as gypsum, then you’re going to be in trouble. But if you assume that people are going to stay in their homes longer and are going to spend to improve those homes, and if you can move to decks, kitchens and bathrooms and start to cater to that market, you can do it. I’ve had guys tell me if it wasn’t for the kitchen or the roofing business, they’d be in trouble.
How are businesses changing?
The systems are very good now. The point-of-sale systems will give you a lot of analysis where the turn is and where the margins are, but there are just no starts out there.
But some things haven’t changed. It seems that most important is the commitment from ownership and management. If you’re an active owner that gets to the yard early every day and gets involved with key customers, that’s a huge advantage. There’s a lot of bright people in this business. Guys that have good skills are at a huge advantage.
What is going to challenge the independent dealer in the months and years ahead?
The economy — it’s still just too unpredictable. How much inventory should they take on? The competition is always a threat from big boxes, the pro-oriented chains and the specialty houses. Guys that are just roofing or just gypsum, one-steppers, they’re always putting pressure on our guys. And long term, it’s skills. A lot of youth have left the industry. That’s going to affect the success of the dealer at all levels. It tends to be older than it should be.
With that said, I am more optimistic right now than in the past three years. We will deal with these issues.
You’re a believe in the independent lumberyard. Why?
A lot of the old businesses are gone — the local clothing store, the local bookstore, the local pet store. About the only guy still there is the local lumberyard. And he’s not just there, but he’s doing well. I asked 50 dealers, ‘How come you’re still there?’ And the answer is: ‘Because we know how to service the customer.’