Distributors' Perspective: Success from evolving with the market

By Jessica Chevalier

Distribution plays an important role in the flooring industry, and many of today’s most successful flooring distributors have been in the business for decades. Traditionally, many of these businesses have found success in identifying their core competencies and staying true to those strengths. However, today’s competitive market—replete with big box discounters and manufacturers that are increasingly eager to sell direct—demands that distributors, if they hope to thrive, predict the future of the flooring market and keep one step ahead of everyone else in the supply chain with regard to both product and service. 

DIFFERENTIATING THE DISTRIBUTION BUSINESS
The flooring distributor’s primary business is servicing independent retailers, and so it stands to reason that, as big boxes have challenged independent retailers, so have they challenged those supplying them with products. 

For Fishman Flooring Solutions—a Baltimore based company that has been in business since 1919 and serves customers with 28 locations between Trenton, New Jersey and Atlanta, Georgia and as far west as Toledo, Ohio—that means finding new opportunities in places that may previously have been outside its scope. Explains CEO Bob Wagner, “As a distributor, it doesn’t make sense to go head to head against manufacturers, so we try to access areas where there isn’t competition.” One of those areas, in Fishman’s estimation, is the mainstreet commercial market. 

The company believes that in its service area many mainstreet commercial projects, characterized by Fishman as jobs under 2,000 square feet, bypass A&D entirely. “It is a sale controlled from flooring contractor to user,” explains Wagner. “And those projects are often last minute projects in need of a lot of local inventory.” To get the corner on that market, Fishman decided to create its own private labeled line of carpet tile. The carpet tile line is focused: plain and conservative design wise, short on SKUs, but long on value and service. Historically, Fishman has focused on flooring accessories but also sells LVT and commercial resilient, so the foray into soft surface is quite a departure for the business.

To support the carpet tile line, Fishman’s, which has 158 full time employees, created architectural folders and made color selections that tie into Johnsonite’s hard surface products. All the products featured in these architectural folders are stocked, which guarantees that customers can get them as needed, even on tight timelines. 

Says Wagner, “There was no way to know if we hit the right price points, the right colors and patterns. We had no way to gauge if there was any pent up demand, but we were confident that the value equation was a good one.” And it seems that the bet has paid off. Though the line is quite new and the verdict is still out on its overall success, Wagner reports that Fishman began getting orders for its new carpet tile products on the second day that samples were in the field. 

Galleher Corporation is a well-established distributor based in Santa Fe Springs, California that has been in business since the 1930s. The company has 270 employees and operates out of 19 locations, most of which are in California, with others in Nevada and Arizona.

In the late ’90s, Galleher, which had long been a wood company, decided to take on new product lines. Today, it carries hardwood, LVT, sheet vinyl, carpet and some laminate. It also sells a fair number of accessories, most of which are wood related. The decision to move into other products was driven by the fact that Galleher was bullish on growth but couldn’t expand its distribution footprint without stepping on its suppliers’ toes. As such, the logical move seemed to be to offer more products to the clients with whom it had already established relationships.

Galleher also manufacturers its own line of prefinished hardwood. Though hardwood manufacturing isn’t new to the company—this is the third iteration of its manufacturing operations—Jeff Hamar, president of Galleher, reports that this is the greatest capability the company has had with regard to texturing and staining. It uses both UV oils and urethanes as well as multi-staining processes. Since the company targets the upper end of the wood market with these products, creating differentiated and well-designed visuals is key.

However, it isn’t just about what products a distributor carries, it’s also about how quickly they can get them to the customer. “Today, there is a heavier burden on inventory availability,” explains Hamar. “Having inventory rapidly available is a huge need. We’re dependent on local stock more now than ever before. A distributor has to have broad offerings; it’s hard to be a niche guy anymore. You have to offer many solutions.”

To that end, the company has also ventured into carpet sales with solution-dyed polyester, which Hamar says he never anticipated doing, and the soft surface flooring is selling quite well for the company.

Ultimately, says Hamar, “As a collective group, the independent channel will have a hard time sustaining itself moving forward. If you are only focused on that [group] as a distributor, it will be hard to maintain your business, so we have to find ways to grow in areas where the traditional retailer hasn’t.”

Like Galleher, the bulk of Erickson’s Flooring & Supply Company’s business is in hardwood. The Ferndale, Michigan based company has been around since 1943 and focuses on hard surface flooring, servicing the upper Midwest, which consists of Michigan, Indiana, Illinois, southern Wisconsin and northern Ohio. Erickson’s has around 40 employees.

Part of the company’s strategy is to stay ahead of the competition with regard to product. For instance, Erickson’s is now carrying hybrid luxury vinyl, a relatively new product category whose core features recycled wood. Says marketing and IT director David Powell, “We try to stay ahead of trends with regard to color, texture and format, but most importantly, we try to source quality products from quality suppliers. In distribution, if you don’t have good suppliers who can sell you quality products in a timely fashion, you’re basically out of business.”

Powell reports that, while the business of distribution has remained inherently the same in the 20 years that he’s been in the business, there have been significant changes that have altered day-to-day strategy. Powell explains, “For us, the biggest change is that product lifecycles are a lot shorter. It’s not that something expires, exactly, but the bell curve of sales to profitability is abbreviated. The success of a product line in terms of how well it works for the distributor is a lot shorter, and we basically have to get new products in the pipeline as soon as we launch something. Technology contributes to this trend, as do the fast pace of society, the global economy and the rate of innovation. And on top of all that, today’s consumers are just demanding.”

SERVICE, SERVICE, SERVICE
Ultimately, no matter how many products a distributor offers, a significant part of their value comes down to how good a resource they are for their customers. 

“We have become more focused on the customer,” says Wagner. “Our motto is to be easy to do business with. We don’t take that lightly. The industry is changing. There is a lot of consolidation at all levels. We [as distributors] are the answer people—even if the answer isn’t something that we sell. Customers rely on us for information.”

One of the ways that distributors seek to add value to their operations and provide answers for their customers is through private labeling. If a retailer carries a nationally branded product, consumers can view it in the showroom and then, using their mobile device, shop for the cheapest price online. But it’s also fairly common for online retailers, which don’t carry the costs associated with a brick-and-mortar location, and big boxes, which receive significant bulk discounts, to offer flooring products at a lower rate than independent retailers. In these cases, independent retailers are basically reduced to glorified sample closets, where customers come to see a product, feel its heft in hand and have their pertinent questions answered by knowledgeable staff, only to turn around and buy the product from a discounter. However, private labeled products—sold only to a distributor’s brick-and-mortar retailers—level the playing field, as consumers simply can’t price shop in the same way. If they see a product that they like in a showroom, they have to buy it from that or another independent retailer. Both Hamar and Wagner estimate that around a quarter of their offering is private labeled, and Powell characterizes Erickson’s private labeled offering as “growing and significant.” All three of these distributors source some of their private labeled products directly from overseas. 

In addition, private labeling gives the distributor a leg up in their own business, “Regarding the private label phenomenon,” says Hamar, “it gives the distributor margin opportunity and the ability to select products that are best for their marketplace. California tends to be more of a trendsetting region. If you look at the assortment offered by many of the larger manufacturers, many aren’t right for our market. We care a lot about our suppliers, but it’s about understanding your market and finding balance. Of our top six brands, four are private labels. Through private labeling, we have been able to broaden the focus of the products that we control.”

Ultimately, according to Powell, the most important of the distributor’s jobs is being “a local advocate for customers through the flooring supply chain.” For Powell that means being locally based, having local inventories, local customer service and local technical support. “Last mile services are very much in demand,” he says. “Even if a manufacturer is selling direct, they still need distributor services.”

WITH SUCCESS COME CHALLENGES
In spite of the many speed bumps to the distribution channel today, all three distributors with whom we spoke report that they saw growth in 2014 and expect the same from 2015. Much of that success, no doubt, is because the businesses are proactive rather than reactionary with regard to how they approach the market. 

In fact, when asked about the greatest challenges to Galleher, Hamar responded, “There is nothing keeping me up at night right now, but our greatest challenge is trying to anticipate market dynamics, making sure we have the right resources and strategies in place for what is evolving—and having the right people to execute those strategies.” That sort of forward-looking approach is what keeps Galleher at the forefront of the distribution business. 

Similarly, the challenges Wagner mentions are the kinds that are certainly characterized as good problems. “Our footprint is large, and we are growth oriented,” he says. “It’s getting more difficult for us to push our boundaries and be respectful of our supplier partners’ needs.” In addition, like many businesses in the flooring industry, Wagner considers finding and hiring great people an ongoing challenge.

Powell finds that catching and holding anyone’s attention is increasingly difficult in our high tech world. “Today, you’ve got a crowded marketplace,” he says. “You have so many low cost sellers and white noise competing for the customer’s attention. We work hard at getting our customers’ attention and helping them get their customers’ attention.” In addition, Powell notes that it is increasingly difficult to know where to invest time and money, mentioning social media, data mining and mobile sites as some of the many technology-related issues vying for his time and interest. “Do we all need to be like Amazon.com?” he asks. “I don’t know. Maybe we do.”

Ultimately, says Hamar, “You have to find a way to be relevant with the consumer demographic segments that are doing well and the channels that are profiting. You have to look at your business and see if you are spending time in the places with the most upside opportunity. Are you tapping into property management, custom home builders, senior living, mainstreet commercial? Looking at what is up overall doesn’t tell you much. You have to consider the segments individually.”

Related Topics:RD Weis