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Regional Channel Revenue for Lumber and Building Materials

Principia recently published Lumber and Building Materials Distribution 2015, its third comprehensive analysis of the $147 billion industry. Through examination of revenue by region and number of dealer outlets, regional differences in the average revenue per outlet were identified.   Channel revenue is split between two major dealer categories, lumberyards and specialty 1-steppers. The national average revenue per location is $6.8 million which is the outcome of dividing $69 billion by the approximately 10,000 locations in these categories.

The historical development of the lumber and building materials distribution industry shows that branch locations were typically built in the major population centers in the post war era and there was a preponderance of locations in the Midwest and Northeast.  However, as the housing expansion took place in the 1970s to the South and West, the industry did not keep pace in terms of shifting the distribution base. In fact, during the housing downturn, much of the industry focused on closing underperforming locations without consideration of how to position when the recovery took hold.

Best Opportunities for LBM Dealers are in West and South

As shown in the figure the highest average revenue per location is in the West and Southwest.  Virtually everyone’s forecast projects the West and Southwest to continue to be the growth engine for new housing starts.  A key takeaway for LBM dealers looking to expand regionally should be to carefully examine their strategy and consider not only what is easiest to accomplish but which opportunities represent the greatest potential for revenue and margin growth.