Marching to recovery 3/5

Published:  21 March, 2011

This report was first published in Builders' Merchants News December 2010/January 2011 issue.

Simon Blaxill, managing director of East Anglian independent merchants, Kent Blaxill, says his company tracks five economic indicators: house prices and transactions, interest rates, un-employment and consumer confidence.

“2010 has been fairly level or even positive on the basket of five, but the public sector cut-backs are causing some widespread concern that has affected confidence in general.

“Our customers with money have generally faired well in 2010 and this should continue in 2011. Some builders who have found it difficult to source land have recently reported they are finding some plots becoming available.

“However, there is inevitably concern among contractors who have undertaken social housing and public
sector works as to what is around the corner.

“They have been seeking smaller contracts to fill their work load but this is probably not sustainable in the long-term and there is therefore risk of increased bad debts in the sector if the cash runs out.

“We are finding that some customers have good order books, but they remain very much the exception rather than the norm. There is a need for the merchant to seek out new sales opportunities where genuine value can be added and positive opportunities can be gained in a market that is likely to remain very difficult for the whole of 2011.

“We have taken on two specialist salesmen during 2011 to do just this. For example, the specialist coatings salesman has opened doors for the supply of not only glass but also of paint for a lighthouse where the customer genuinely did not know where to turn.”

Sheffield-based Pagets Builders’ Merchants’ chief executive, Lorcan Anglin says the general consensus
is that the market will remain very difficult in 2011, with the cuts in public spending turning into real job losses.

“It has also been projected that the differentiation in the concentration of where these cuts will apply could lead to dramatic regional effects – some areas performing well and coming out of recession strongly while others are still mired in low growth and poor prospects. To make the most of these opportunities one must help oneself to ‘make it happen’.

“One view is that merchants are generally customer-facing but in a very passive way. We need to provide our customers with more reasons to use us.

“All of the other good stuff, such as customer service and good stock levels are still necessary, but we need to continue to increase the added value that we provide.

“Added value is defined nominally as the difference between the purchase price and the selling price. Historically, merchants have concentrated on the purchase price as a means of maintaining added value through consolidation or buying groups. The time has now come to concentrate on justifying an
increased selling price and increase the added value in that direction.

“The threats to merchants from web- based suppliers are very much based upon the purchase price model and how much further can this go.

“Merchants live in the real world rather than a virtual one and concentrating on those areas of operation in the real world will help to maximise merchants’ benefits.

“One option on the selling – or demand – side is the franchise model from Green Energy Centre. This model augments the ‘demand side’ offering to drive sales of existing and new products through extra services.

“It is also based upon tangible real world actions and builds on merchants’ strengths. Tesco – the
ultimate customer-facing organisation, keeps trying to leverage more from its customer base. Recently it has trialled a pawnbroking service. Sainsbury’s and M&S do the same, so why shouldn’t merchants be capable of doing this too?”

In early December, the Energy Bill  presented by Chris Huhne, Minister at the Department of Energy and Climate Change, stated that: ‘A competitive market for Green Deal delivery which enables new market entrants, like high street retailers, builders’ merchants or local authorities, to be advisers, providers and accredited installers’.

“A Green Energy Centre franchise is one route,” says Mr Anglin, but there may be others and merchants have an opportunity to make it happen, he emphasises.

“The Green Deal will be eligible to every area of the country and any merchant can get involved, so no there is North/South divide to be concerned about,” he states.

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