A contract hauler drives in on a six-lane roadway, stops at predetermined locations, receives a full load of lumber and building supplies, and then heads out to a nearby jobsite. That driver has just passed through a warehouse that mimics the efficiency and abundant stocks of an Amazon.com facility. The shiny concrete floor that he traversed is kept that way by a ride-on floor sweeper that operates 24 hours a day. His straight-line, in-and-out experience is nothing like when he has to navigate the maze of added-on sheds at legacy lumberyards, waiting to be loaded. At least, that is the intent of Home Depot’s quest to gain a bigger share of the pro builder market, ultimately reaching 90% of U.S. customers with same-day and next-day delivery, like Amazon does. [For all photos, See PDF or View in Full Issue.]
Since 2020, Home Depot (HD) has been erecting 600,000 to 1.2 Million sq. ft. Flatbed Distribution Centers (FDC) like this one in Dallas, Texas, with a reported 17 more either finished or under construction, out of a planned 40 facilities. Their associates proudly proclaim that they’ll soon have these impressive edifices in all cities with an NFL franchise, except, perhaps, Buffalo. Their aim is two-fold: to capture more of the professional builder sector and reignite their growth, since they have saturated most markets with their big box stores (considering that, in 2024, they added 12 new stores to their 2341 existing facilities, which expanded their floor space by barely 0.5%), and to take further advantage of their B-to-B online enhancements.
HD believes that this $1.2 Billion investment will increase their share of the professional builder segment from their current 15% to 17% share and bring it closer to the 50% share they have earned in the consumer do-it-yourself market. But where will they obtain this new business? Will it come from the LBMs or the independent building supply yards?
Their biggest potential source of this new revenue is Builders FirstSource (BFS), which is one-tenth the size of HD but dwarfs its competition like HD. Yet, over the last ten years, BFS has maintained a strategy designed to increase its truss sales, which has raised its share of total revenue from 19% in 2014 to 27% in 2024. And, BFS claims that their increased truss sales contribute much more to profitability than lumber and sheet goods, giving BFS an advantage that HD doesn’t have without truss manufacturing.
It is significant that HD began this new venture in Dallas, which is a stick-framed single-family market, where their inability to source trusses in-house is not a significant disadvantage. Perhaps HD still is reticent to manufacture trusses, after their abortive ownership of Cox Lumber and Williams Brothers nearly two decades ago. However, as they have opened facilities in Atlanta and Charlotte, offering trusses and EWP has become more important. They currently stock 11-7/8” I-joists and LVLs and have discussed stocking deeper EWP and trimmable open web floor trusses. But they also will need a source of roof trusses, and that may be Universal Forest Products, since Universal buys $50 Million of retail products from HD currently. However, a two-step approach is not ideal.
At the opposite end of the revenue spectrum are the privately owned lumber yards without truss plants, which seem to be more likely prospects. HD has invested heavily in software to enable online purchasing, has a decided advantage in stock levels and delivery times, and apparently is able to provide material take-offs. It remains to be seen if they will be able to deliver the personal service and the specialty products that smaller builders require.
The material handling advantages inside these HD FDC’s are compounded by the outside facilities. Three separate rail sidings service HD’s property. Two separate tracks run parallel to the eastern face of the building, separated from the building by 200 ft. of yard storage. The third track runs directly into the building with enough length to accommodate eight rail cars.
Opposite the indoor rail spur is adequate space to hold the contents of a trainload of material, prior to transferring it into cantilever racks that extend nearly to the 30 ft. ceiling height.
This initiative to gain pro sales by Home Depot is reminiscent of the opposite action taken by Lowes, who basically abandoned their pro business 30 years ago and followed HD into the retail business. Ironically, when Lowes embarked on this initiative, a group of associates recognized the need for a specialized pro-oriented business, just as HD has done today. Those associates created Builders FirstSource, which may soon be HD’s competition.