The changing role of builders merchants in the construction supply chain

Abstract

Builders merchants are an integral part of the construction industry, yet rarely are they consulted when discussions take place on the future of the construction industry. Throughout history, builders merchants have played a dominant role in the construction industry, initially as an intermediary between the artisan and the buyer, and more recently as a source of working capital for contracting firms. The merchanting industry currently is undergoing considerable change. The depressed construction market and the failure of the housing repair and maintenance sector to recover in the first half of the 1990's as activity in the private non-housing repair and maintenance sector has increased, has raised competition between merchants. The major building merchants are becoming larger by acquisition and merger, the smaller merchants are seeking niche areas, and the medium-size firms are under serious threat from acquisition by the larger merchanting firms. The trend towards consolidation in the sector, driven by the need to reduce costs, has meant that the large merchanting firms now control around 60% of the building materials market sales. Factoring is a growing trend, particularly with smaller companies sourcing goods from the cheapest source. The larger merchants have to respond by sourcing goods from the lowest cost base, irrespective of whether they buy from overseas markets. This paper analyses the UK builders merchants sector and evaluates the important role played in the supply chain.