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Industry’s wake-up call from conference

The message from the second day of the BMF Conference was that the world has changed, the industry has changed and merchanting is changing to cope.
That was from the point of view of a supplier, a major independent builders merchant, a medium sized mixed merchant and a national merchant.

Andy Williamson, managing director of IKO plc, David Kilburn, executive chairman of merchant MKM, Simon Blaxill, managing director of merchant Kent Blaxill and Dr Peter Hindle, MBE, general delegate of Saint Gobain and former managing director of Jewson all took to the stage to explain why.

Williamson said: “Suppliers have had a tough time of it, and are being squeezed. Raw material prices keep going up, and there is pressure from merchants and their customers to keep prices low.”

He said that IKO has worked to improve service to customers throughout the recession, working closely with merchants. “Clear communication across the business was key, he said. “It’s the simple things that make the biggest difference.”

He reported that IKO has worked on getting more engagement with the staff, plus attracting new staff through its apprentice and graduate schemes. They employed more people, rather than cut staff: “You need people out there in tough times.”

At MKM, the UK’s largest independent merchant business, executive chairman David Kilburn agreed.

He said: “When the recession came in 2008, there was huge pressure to reduce the workforce; lots merchants lost up to 30% of their staff but we didn’t. We reasoned that these people had worked hard to build MKM up, why should we let them go when things get hard?

“Now, we’re really glad decided to invest instead.”

MKM is unusual in the industry in that all the branch directors have a stake – a real, sizeable financial stake – in the business. “I firmly believe that if you give people a stake in the business, they will be more inclined to go the extra mile. And our people have really gone that extra mile.”

The traditional route to becoming a builders merchant manager, Kilburn said, is to start at the yard and work your way up. “Typical salary is somewhere around £35k, plus a car chosen by someone else, maybe a bonus. Our aim was to elevate our directors to a higher level not via that basic salary but through giving them a reason to earn through a profit share in the business”

As a result, Kilburn says, MKM never has to advertise to get new branch directors. “People come to us.

“I believe this is one of key reasons why we are fit for the future and why we have weathered the recession so well.”

Simon Blaxill, managing director of East Anglian independent builders merchant Kent Blaxill was next to speak.

“Even before the recession, we knew that change was coming. The recession accelerated this,” he said. “There’s no doubt there’s no going back to where we came from.

“The theme is fit for the future, and we still have some challenges that we need to address.” Blaxill. said. “Kent Blaxill has reviewed its business over the past couple of years and made changes to reflect that.”

The business has four core parts: decorative, glass, building materials and plumbing and heating. They also have a stand-alone hard landscaping importer, Global Stone.

The company has a long history in its region, starting in decorative and glass markets. the building materials and plumbing and heating came later.

“Whenever I have to register the company for anything I always put us down as a mixed merchant, mainly because there’s never a box to tick for ‘very mixed merchant’,” he said.

“The bigger companies are getting bigger, and they have resource and economies of scale. They have the buying power, and the retailers in particular have an online impact. Tradesmen are buying online now, and traditional merchant business is being lost.

With Kent Blaxill’s strategic review, it was important to do away with any preconceptions, Blaxill said.

The company identified four key ingredients for success: Empowerment. Setting standards. Shared values and Measurement. The company has also been experimenting with central distribution, which delivered benefits to the customer as well as the business.

“The key criteria for success: empowerment, shared values and measurement, are criteria that can be applied to any business,” he said.

Peter Hindle MBE warned of possible threats to the builders merchant sector. “Buying online is now easier and cheaper, particularly for light goods not needed immediately.” It’s a problem that affects all merchant businesses, big and small, he said. ” Customers come to our showrooms, look at the products, get advice from the staff there and then go away and order online cheaper.”

There’s also the “Amazon effect” which will start to be felt more sharply. “Suppliers can bypass merchants by going direct to the end consumers, either directly or via these fast developing online marketplaces.” He gave the example of a tool manufacturer in Germany, which has seen direct to market sales grow to 25% in 2011 from 12% in 2000.

Other challenges to merchanting he said are things like the question of whether the current standard footprint of a branch is right for the new market we find ourselves in. Energy costs too are still rising, nearly double what they were seven years ago. “We will all face price increases because of this. Logistics is also going to get more important and more expensive. Look at the rising costs of fuel – it’s probably not sustainable to offer free delivery on everything. Merchants will need to face up to it. Between 2002 and 2012 fuel prices have risen 92% .”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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