Tech to the fore as 'bellwether' sector mulls post COVID sales future.
As the great and the good of the US lumber industry prepare their virtual lanyards for this year’s NHLA and ProDealer conventions, the sector’s many thousands of producers, distributors and brokers alike will be pausing for breath to reflect on one of the most volatile years in recent memory. And with good reason. The lumber and forest products sector remains of vital importance to the US economy, often being seen as a bellwether of the nation’s wider economic health given its intrinsic links to the US housebuilding and contribution to the nation’s overall manufacturing output.
"Lumber producers and their broker counterparts need to be mindful of what the sales data is telling them."
A year like no other.
2020 had all begun so encouragingly. In January, builders broke ground on the most new homes since 2006, leading to a significant spike in lumber product demand. Fast forward just two short months and sawmills across the nation were routinely shuttered as Coronavirus lockdown restrictions took hold. As the pandemic began to spread, many mills reduced production in anticipation of reduced demand but soon found themselves playing catch up to cater to surprisingly robust consumer demand for home improvement products and bullish housebuilders prepared to undertake new starts once more. Naturally, ramping up production, while protecting workers with social distancing, was easier said than done and product supply suffered. Then came wildfires across the West, leading to further reduced inventory across the board. Indeed, just this month, Weyerhaeuser, the nation’s largest lumber producer, which manages nearly 3 million acres of forest in Oregon, reported that fires have directly affected its operations. The net effect of all this has been soaring lumber prices, which have risen by as much as 104% so far this year, and could well be higher once the full impact of the wildfire season is fully taken into account.
New sales territory, new sales challenges.
So where has all of this volatility and uncertainty left the industry’s market players?
“It’s fair to say we’re in completely unprecedented territory.” Says Alex Witcpalek, lumber market specialist and Director of Sales for North America at sales enablement software developer, sales-i.
“The lumber sector is unique in that it is susceptible to more external factors than any other area of the US economy. This regularly leads to fluctuating market dynamics but nothing quite like we’ve seen this year. The sector has always been price sensitive but given the unprecedented wider market dynamics in play right now, more than ever, lumber producers and their broker counterparts need to be mindful of what the sales data is telling them to protect customer relationships and entice new clients in what remains a very competitive industry.
"The inability to physically check lumber inventory has placed a major premium on sellers being able to rapidly and incisively understand and interpret buying patterns."
The challenges for lumber brokers are typically a world away from their producer counterparts. Being able to work in a highly dynamic, fast-paced sector where change is the norm goes with the territory of being a successful broker but given where we are today, brokers need the most insightful technology tools at their disposal to help them take advantage of sales opportunities. Sales enablement software is such a compelling solution for brokers as it helps them really understand what makes their customers tick and ultimately, get their products in front of the right buyers at the right time. So when they’ve been able to source a particularly well priced inventory of Cherrywood for example, they are able to make insightful, data-driven decisions based on previous client interactions about which of their customer base are likely to both need and want the products, in what volume and at what time.
Supporting the producers.
Lumber producers are also increasingly seeing the benefits of broadening their technology horizons. Typically, the least data-driven and tech savvy players in the market, the vast majority hold large amounts of customer sales data but often struggle to capture it effectively, let alone use it to draw meaningful, actionable insights.
We are seeing the most forward-thinking companies in this space increasingly open to change this mindset as they actively look to ringfence existing business from hungry competitors, something that is increasingly important given how much many of these producers rely on the repeat business of a handful of longstanding customers.
Fundamentally, what our producer customers tell us they value most about being better informed about their customer behaviours is it enables them to make better decisions about their sales strategies and move from reactive customer relationship management to more proactive sales.
For those distributors and wholesalers who sell timber products into lumber yards, cabinet shops and the millwork sector, Covid-19 has brought about a whole new layer of extra challenges. Restrictions on people movement have meant many operators have had to rapidly switch to remote selling, something that will have been a culture shock for many. What’s more, the inability to physically check lumber inventory has placed a major premium on sellers being able to rapidly and incisively understand and interpret buying patterns. Finally, with housing starts beginning to slow as we enter the winter months, wholesalers now have to work harder than ever to replicate the double-digit growth they might typically enjoy when the housebuilding market was in fuller swing. Sales enablement software is helping operators address each of these challenges in turn by giving them a better understanding of changing customer dynamics and behaviours and the insight to seize on quick win sales opportunities as they arise, something that very often puts them at a significant advantage to their more technology averse competitors.
An uncertain future...
Of course, with a coronavirus vaccine still elusive and debate as to the extent of the overall economic impact of the crisis ongoing, there will remain a great deal of uncertainty in the lumber market. What we can say with absolute certainty however is that there are multiple benefits for operators across the market who can harvest, collate and analyse their data better. As Fall slowly moves into Winter we’re certain to see further volatility in the sector and those players that are equipped to respond to changing market dynamics will be best placed to survive and thrive as the post Covid-19 economy takes shape.