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Defy Shrinkflation

Publisher Letter

With prices rising in everything from gasoline to mortgage interest, inflation is impacting virtually everything we buy and sell. It’s bad enough when it’s limited to commodity building material prices, whose spike-then-plummet pattern wreaks havoc on our businesses. When costs rise across the board, like they are now, it affects everyone and adds one more complicating factor to our world. According to the Wall Street Journal, “Strong consumer demand and pandemic-related supply constraints continued to push up prices,” with the U.S. inflation rate hitting a 40-year high of 7.5% in February.

This latest round of inflation introduced an unfortunate new term, shrinkflation, where we’re paying the same but getting less. It’s most prevalent in packaged goods, where, for example, a package of cookies that was 17.2 ounces is now 14.6 ounces but costs the same. Likewise, you may have noticed that rolls of toilet paper are shrinking, and don’t be surprised if your “half-gallon” of milk only contains 59 ounces.

LBM Resources

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Today’s valuations couldn’t be better, averaging 7X EBITDA for strategic buyers. But is a downturn coming that could drive down that multiple of earnings?...

What can we do about this latest challenge? Complaining and panicking don’t do a lot of good, and blaming politicians has similar impact. Instead, we in the LBM industry will do what we always do: we’ll control what we can control and focus on limiting the impact to our customers and our businesses.

We may not be able to control rising product prices, but we can control what our customers experience when working with us. When your customers are experiencing either inflation or shrinkflation, make sure they know you’re right there with them, and you’ve got their back. “You’re absolutely right that materials cost more than before—and we don’t like it any more than you do. With prices rising, we’re more committed than ever to having the products you need when you need them, and to making sure our deliveries to your jobsite are on-time and in-full.”

One thing we can do to help control our costs is to make better use of the technologies we’re already paying for. Or, if our current tech tools are holding us back, then invest in upgrades. At LBM Journal, we’re in the final phases of implementing two new software systems to streamline our operations, and to help us deliver the information you demand, better, faster and more efficiently. It’s about doing more with less—and making sure our teams have the tools they need to make that happen.

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If you’re looking to connect and learn proven-in-the-real-world tactics and strategies from other LBM leaders, I strongly encourage you to join the industry’s biggest audience of dealers and distributors at LBM Strategies 2022, October 12-14 in Denver. Thanks to sponsorship support from our industry’s leading suppliers, registration is exactly the same as last year. Plus, you’ll save $300 if you register by April 30.

Here’s to working together to control what we can control, and powering through whatever challenges arise.

— Rick Schumacher
Executive Editor & Publisher

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