As an independent timber or builders merchant you may be the master of your own destiny. And there may be many areas where you can score points against the multi-branch national groups and DIY sheds. You may be quicker on your feet and able to offer customers a bespoke service and expert advice, for example.
But one area where you may feel like an also-ran is in buying power – or rather your lack of it. Unless, that is, you’re a member of a buying society, the services of which can put you right back on a level playing field.
One such organisation is the National Merchant Buying Society Ltd (NMBS), which began life in 1963 as the North Midlands Buying Society when a group of builders and plumbers merchants in Nottingham and Leicester agreed to pool their buying resource.
The scale of the operation has changed considerably over the past 40 years, but the principle has remained the same. NMBS continuously negotiates terms, rebates and special offers on its members’ behalf but enables them to order direct from a list of its approved suppliers. Goods are delivered direct to the member, but the invoice is sent to the NMBS which then sends a copy to the member, along with a statement, at the end of the month. The member pays the NMBS, which then pays the supplier and, because the NMBS is settling one large account, it effectively gets a bulk discount. This shows itself in various guises – enhanced invoice terms, enhanced settlement terms or enhanced rebate terms –but collectively the member is better off to the tune of 5%.
As an industrial provident society, only NMBS’s running costs are retained and all other monies are fed back into the membership via the cost savings brought about by trading on favourable terms. Each member is required to buy 10 shares in the society, giving it equal status within the NMBS.
As if to prove a point that the best ideas are often the simplest, the NMBS has thrived. It merged with another buying group, Great Central Merchants, last year and this year’s turnover will be around £344m.
As managing director Chris Hayward explains: ‘We tend to grow our turnover year on year by 10-20%. Our turnover this year will be about £344m, next year it’s targeted for £400m-plus and we hope to be up to £500m-plus within the next two to three years.’
There is little doubt that that figure is achievable: NMBS now has 670 members from about 1,400 branches throughout the UK. ‘The total purchasing power of our members is between £2-3bn, so obviously they’re not putting all their purchasing through NMBS,’ says Mr Hayward. ‘We would dearly love to have it all – it’s just a question of harnessing that power.’
Computerisation is key since the NMBS processes 120,000 invoices a month. It receives 50% of its transactions via EDI (electronic data interchange) which equates to about 75% of value. ‘We don’t send on electronically to our members at the moment,’ says Mr Hayward, ‘but we are investing in having the capability. The next step is to try to encourage members to adopt electronic trading. We’ve got various initiatives on the go to achieve that, one of which is our e-GO e-commerce programme, and we’re talking to all the software companies within the merchant industry so they make their software EDI-capable.’
Overseas operation
NMBS doesn’t currently operate overseas but doesn’t rule it out. ‘It’s a watching brief,’ says Mr Hayward. ‘We’ve considered importing timber before, but we’ve put it on the “too difficult” shelf at the moment. Our role is to facilitate rather than to do: processing invoices is one thing, ordering a boatload of timber and breaking it out and distributing it is another. I wouldn’t say it’s beyond us, but it’s something we would do later rather than sooner.
‘The next stage of our natural development may be to buy container loads of products and distribute to our members but at the moment we don’t have a distribution facility, and would have to partner someone to achieve that. We actively look for alliances and partnering all the time.’
Mr Hayward estimates that timber merchants represent about a fifth of the membership which falls into three commodity groups – building and timber, plumbing and heating, and hardware/tools and electrical.
Those with timber interests include some big guns, such as JELD-WEN, James Latham, Premier Forest Products, Montague L Meyer, Howarth, Carvers, Jacksons, Severn Timber Products, Richard Burbidge, St Gobain and Swiftwood Imports.
‘Timber is seen as a growth area and a profitable one to get into if it’s done right,’ says Mr Hayward. ‘There’s been a certain mystique in the past that timber is too difficult. People are often scared to quote on timber products. It’s a lack of understanding, but it’s my belief that once people are trained it’s not as hard as everyone makes out – and merchants can do very well with it.
‘A lot of builders and jobbers prefer to have timber cut to length for them, particularly board, but there’s been a move towards pre-packed timber and that’s often a good way for the smaller merchant to get involved with timber in the first instance. Those that have taken it on have done very well and packs are very profitable.’
Another area of ongoing debate is system build. Broadly welcomed by the construction industry and large sectors of the timber industry, many smaller merchants view the emergence of factory finished building products with extreme distrust, fearing they will be sidelined.
‘There’s little our members can do to stop that [system build] happening,’ says Mr Hayward candidly, ‘but a lot of our members’ main business comes from repairs and maintenance so there is still a lot of support work that these system builds can’t take into account. The home improvement market is £9bn, so there’s still a lot of business to go at.
‘The main message is that merchants must embrace new products,’ he continues, citing decking and solid wood and laminate flooring as examples. Smart merchants are also broadening their customer base. One NMBS member he recalls faced up to the competition presented by a DIY shed opening up on its doorstep by opening a retail counter. His business boomed.
