Distribution Evolution - June 2007

By Frank O'Neill

The floorcovering industry has changed dramatically in the past two decades, but one of the more subtle changes—the disappearance of grand industry events, events that bring together people from every sector of our industry—might have gone unnoticed except for one extraordinary evening in April. That’s when the industry got together in New York City and threw a party, a magnificent party that brings back fond memories of the grand events we used to have in the 1980s.

The party was the 2007 FCIF Gala. The place was Cipriani’s, a monumental restaurant right across from Grand Central Station. More than 350 industry execs and their wives gathered there to honor the latest inductees into the WFCA’s Hall of Fame, along with six others who received Lifetime Achievement awards. At the same time, the organizers were able to raise more money than ever for the Floor Covering Industry Foundation.

What better way to raise money for a great cause? If you’re not yet aware of the FCIF, you should be, because it’s your industry’s charity, here to help you and your colleagues if you should ever have a catastrophic illness. It was started in 1980 by the late Walter Guinan, Al Wahnon, Danny Schoen, Emmett Dineen and Howard Reed. Over the course of the years, it’s raised $3 million to help more than 150 people from our industry.

This year, for the first time, three exceptional people were inducted into the Hall of Fame: Julian Saul, the former president of Shaw Industries; Phil Gutierrez, the chairman of Abbey Carpet; and Allen Lorberbaum, the late chairman of Aladdin Mills.

The FCIF also honored six people with Lifetime Achievement Awards. They are Larry Nagle, the former executive v.p. of Burlington Industries and president of Color Tile; Al Wahnon, the publisher of Floor Covering News; Howard Brodsky and Alan Greenberg, co-chairmen of CCA Global; Bud Seretean, the former chairman of Coronet Industries, which is now part of Beaulieu; and Peter Spiirer, former chairman of Horizon Industries.

Larry Nagle and the committee that put together this year’s bash at Cipriani’s also deserve a special award for creating an extraordinary event, one I’ll remember for a long time.

If you’d like to send a donation to the FCIF, make your check out to Floor Covering Industry Foundation and send it to 2211 E. Howell Ave., Anaheim, CA 92806.

STARNET, THE PRECOCIOUS TEENAGER

I’ve always been partial to StarNet, the contract dealer co-op, maybe because the group started the same year we started Floor Focus, and maybe because its members are entrepreneurs like us, but most definitely because there are so many classy people among its members.

StarNet turned 15 this year, and I have to say it’s grown into quite a robust teenager, especially considering the way things began, when we didn’t think it would make it beyond its first four years. Today, StarNet has 163 members with about 250 locations nationwide, collective sales in the range of $2.5 billion, and big plans for the next 15 years.

I clearly remember StarNet’s first days in 1992, when it was started by three industry execs who called it the International Management Group. Within a year, IMG had 67 members with sales close to $1 billion. Little did any of us dream that four years later, when Shaw, DuPont and Interface began their own distribution networks by buying independent contract dealers, including many StarNet dealers, that membership would slip below 40 and many industry watchers wondered if StarNet was going to make it through the year. At the time, StarNet was also abandoned by its president, who was among my friends until I reported that he had jumped ship and become a consultant to one of the group’s competitors. Such is the small price you pay for telling the truth.

Obviously, StarNet not only made it beyond that rocky beginning, but it’s succeeded beyond anyone’s wildest dreams. I’ve told the story of those tumultuous days after the Distribution Revolution began late in 1995 too many times to go over it again, so fast forward to 2007. StarNet not only has a new president—Jeanne Matson took over for outgoing president Lori Dowling last month—but also some interesting plans for the future.

One of the biggest challenges of a group like StarNet, which is made up of 163 individual companies with sales ranging from around $10 million to well over $100 million, has been to find ways to leverage that collective firepower. In other words, how do you get 163 guys and gals with their own personal agendas to work together to create something bigger and much more powerful than each of their companies individually?

One of the ways StarNet has done that is by establishing a national accounts program that’s able to leverage the powerful fact that their group has some 250 nationwide sites that can service a big client’s needs anyplace in the country quickly and efficiently. According to the latest Floor Focus Contract Dealer Survey, StarNet dealers have been getting more and more national accounts in recent years, business that used to be sold direct by manufacturers.

StarNet has also been able to leverage its increasing power by promoting its maintenance and reclamation systems. Today, about 100 members have expanded into maintenance, not only making themselves a much more valuable resources to their clients, but also tapping into a great new profit center.

Joining forces with CARE, the carpet industry’s joint reclamation effort, has been another way StarNet has moved beyond its basic services to provide its clients with a great service—removing old carpet that will be recycled and either turned into new fiber or other products—but it’s also serving the national community by promoting a cleaner environment. Right now, about 35% of members do some reclamation, but all members are expected to jump on that bandwagon in the next few years.

The latest and most exciting move by StarNet is exploring ways to leverage the increasingly global marketplace. In April, Jeanne Matson and four members of the StarNet board of directors—Bob Sabosik, Randy Rubenstein, Harold Chapman and Jim Vanhauer—spent five days in China and two more in Korea visiting with ceramic, wood and carpet manufacturers and learning how they do business. The long range goal: importing products directly from companies around the world.

While StarNet looks beyond its traditional boundaries, the group continues to grow even more powerful. According to chairman Bob Sabosik, eight to ten new members will be chosen to join StarNet every year for the next five years. The group’s 20th birthday is definitely going to be a memorable one.

THE MOST POWERFUL RETAIL GROUP IN AMERICA

The National Flooring Alliance was started as an informal gathering of a handful of the biggest retailers from different parts of the country, a forum for sharing ideas. Today, the NFA has just 35 members, but all of them are the biggest retailers in their Metro Markets. Their collective sales: $1.3 billion.

A week after StarNet held its annual meeting in Phoenix, NFA members gathered there for their annual meeting. One of the more interesting undertakings at the meeting was a poll of members on the economic weather in each respective Metro Market. With the exception of the Northwest, where sales are stable, if not up, the forecast was fairly stormy, particularly for the builder sector. Sales in some markets that were particularly strong during the building gold rush of the past five years, markets like Las Vegas and Miami, were down as much as 40% in the first quarter of 2007 compared to Q1 2006. Most, though, were down 20%, and virtually all the downturn has been in builder business.

All the members agreed that opportunity in today’s market lies with residential replacement business.

SOME GREEN FACTS

The keynote speaker at the StarNet annual meeting was Rick Fedrizzi, the president of the U.S. Green Building Council, the people who are responsible for LEED certification of sustainable, healthy buildings. Fedrizzi is hardly an hysterical doomsayer, and the USGBC is not some fringe group—it has 8,200 members like GE, McDonald’s and the Marriott hotel chain—but by the time he finished talking, I felt true concern about the short and long term future of our planet. Here are some of things he said:

• For the first time in human history, half the world’s population will experience water scarcity in their lifetime.

• Six of the hottest years in history were recorded in the past ten years.

• China is creating unbelievable degradation of the environment, as many millions of people move from the country to cities and 20 billion square feet of space is constructed there every year.

• Buildings contribute more to CO2 emissions than transportation or industry.

This last fact really hit home, because the flooring industry has been doing its part to create healthy, sustainable buildings in recent years. But Fedrizzi went on to give all smart business people good reasons for building green. Here are just a few of his comments about the power of LEED certification:

• Retail stores experience big increases in sales per square foot.

• Offices experience up to 16% productivity increases.

• Kids in LEED certified schools do 20% better on test scores.

Fedrizzi said that the initial cost of a green school doesn’t have to cost more than traditional structures—Harvard built a LEED Gold building in 2006 at no extra cost—but they also save about $95,000 a year in energy costs.

If you have any comments about this month’s column, you can email me at foneill898@aol.com.

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