Focus on Leadership: Jeff Hamar talks about his journey to becoming head of one of the industry’s major floorcovering distributors - April 2021
Interview by Kemp Harr
Jeff Hamar’s grandfather entered the flooring business in the late 1950s-first as a hardwood producer then evolving into distribution in 1980. Following in his footsteps, Hamar focused his career on the floorcovering business after graduating from Carthage College, where he studied history and business. Today, Hamar is at the helm of the distribution firm that his grandfather acquired, California-based Galleher, which has grown to be one of the top five flooring distributors in the U.S. Here, Jeff provides insight on the dynamic changes within the distribution channel, private label brands, sourcing, inflationary economic headwinds and living a purposeful life.
Q: How did you end up in the floorcovering distribution business in California after growing up in Michigan?
A: In the late 1950s, my grandfather purchased Horner Flooring, a wood flooring manufacturing company in Michigan. They had two customers in California-Galleher in Southern California and Golden State Flooring in Northern California.
In 1980, the owners of Galleher were looking to sell, and my father and uncle, who were running Horner, purchased the company. Coincidentally, it was the year I graduated from college, and I moved to California that fall to start my career.
When I started, sales of wood flooring were less than $1 million per year. Ironically, 32 years later, Galleher benefited enormously when Golden State Flooring closed.
Q: One of your strategies is to offer a blend of house brands with manufacturer brands. Tell us more about your branding strategy.
A: Nearly 20 years ago, I became concerned about intensifying margin pressures and the need to control the destiny of Galleher as the industry evolved and two-step distribution was forced to compete in an increasingly competitive environment.
Given our West Coast location, the size and wealth of the local market, the concentration of the population, the innovative design trends unique to our market and the movement toward globalization, it made sense to pursue introducing some proprietary brands. We also felt that by featuring a broad range of products and brands, it allowed for a much better retail strategy and the ability to occupy more space in a retail showroom with products that simplified the sourcing challenges of dealers. It was tough at first because of the control the U.S. manufacturers had over the industry and the lack of consumer interest. Over time, it became the cornerstone of our strategy and a path to much greater opportunity and financial success. We continue to stock and promote many manufacturer brands because of the supply chain efficiencies, product diversity and market awareness they offer.
Q: How do you choose whom to source products from?
A: In the early 2000s, I met someone who represented a factory in Indonesia, and I saw opportunity with the product they produced. That led to a trip to Indonesia, where I established a relationship and bought my first container.
Shortly after that, I attended one of the first flooring exhibitions in Shanghai. I remember arriving in China knowing no one and hiring a translator to accompany me for three days as I stopped by and met with many exhibitors at the show.
As we grew our line of products, we focused on factory capability, quality, proven ability to keep commitments, financial strength and trust. I very quickly hired an employee who lived in China, and that was a good move, as it allowed us to really implement some best practices very early in the process. Over the years, we have worked with over 20 suppliers from Asia. In terms of North American-based suppliers, we are fortunate to only work with tier-one manufacturers that bring a plethora of strengths to the relationship.
Q: I remember you teaching a class on the advantages of sourcing from China. From where do you source most of your imported products today and why?
A: It has really evolved over the years. Today, Vietnam is our leading country of origin for our Reward and Monarch lines of wood flooring. We also source significant quantities from Cambodia, Malaysia, Taiwan and still a little from China. In total, we are bringing in product from about a dozen countries around the world.
We began to pull back from China almost a decade ago when the first anti-dumping efforts began and later as the trade disputes became more disruptive. We made early investments in Vietnam and Cambodia and, today, benefit because we kept our word and were loyal to our suppliers.
Q: Why have you stayed out of the ceramic tile and stone markets?
A: We gave that segment a real effort for almost ten years and got out of it during the Great Recession. We only focused on ceramic and porcelain tile but found the category difficult in many ways. Looking back, it was a mistake to get in, and we learned valuable lessons about focus and choosing channels and segments only when a sustainable competitive advantage is realistically achievable.
Q: At one point, you sold your company to a Japanese firm and then bought it back after they struggled. Tell our readers what happened and how you were able regain control of the company.
A: Between 1986 and 2006, we grew from $5 million to almost $120 million in revenue and went from one location to eight locations.
By the mid-2000s, I was increasingly uncomfortable with market dynamics, including profit margin compression, more manufacturers direct selling, the emergence of a robust big box and national specialty flooring retail component, and the inevitable industry consolidation, which would create enormous pressures on all distributors.
We felt we had a path to be the consolidator and by leveraging our inherent strengths, Galleher could emerge a winning organization. However, the financial risk to do this personally was beyond my comfort level, so seeking a partner made sense. We sold Galleher in January 2007 to Itochu, which was a $25 billion multinational Tokyo-based trading company with over 600 subsidiary companies. The plan was to use Galleher as the platform and grow aggressively in the United States. I continued as president, anxious for this next chapter, but the housing industry literally began to collapse in the spring of that year. Three years later, the Japanese decided to give up, and my brother and I bought the company back. I had always maintained an excellent working relationship with my Japanese colleagues in both the United States and Tokyo. When they decided to exit the business the trust that we had established allowed for a quick and successful negotiation that satisfied the needs of both parties.
While things were still very tough in 2010, we adopted an entirely new business plan, taking into consideration all that had changed in the prior four years. Within a few months the company was profitable again, and over the next six years, we grew at a nearly 25% CAGR (compound annual growth rate), growing sales from about $50 million to $200 million by 2017.
Q: One of your unique growth ideas are the big city showrooms, which don’t sell anything. Tell us about that strategy.
A: Galleher has operated a stand-alone showroom in the design district in San Francisco for many years. This facility has always been a resource of great importance to the design and high-end flooring community in Northern California. The opportunity for customers to look at a huge selection of large panel samples with very high consumer/designer support capabilities in a safe and nonthreatening environment is very appealing.
The idea is not unique, as high-end product showrooms exist for lighting, fabrics, plumbing fixtures, tile and stone, and other product categories. We took this idea to another level by doing extensive market research to create an effective environment to showcase wood flooring. Homeowners, designers, developers and specifiers really appreciate what we offer and are thrilled to use our facility to select their products, which they then source from our customers. We now feature three of these types of showrooms with plans to open more this year.
Q: As one of the top five flooring distributors, you compete in a market where some producers sell direct and others sell through distribution. Where will this end up?
A: I ran Galleher for 35 years from 1986 through 2020. The three biggest changes were in the areas of technology, product and channel dynamics. I think everyone understands how technology and product have changed. When I started, we literally kept track of inventory on paper file cards, and there were no computers in our offices. Our early prefinished wood floorings products came in a couple of SKUs that had three color options. There was no laminate flooring, no LVT flooring, no urethane finishes, and the product quality was marginal, at best.
Interestingly, the changes in market dynamics dwarf the advancement in technology and product over the last four decades. Today Home Depot, Lowe’s, Floor & Decor and Lumber Liquidators control 50% or more of the residential replacement business. Shaw and Mohawk have become enormous, fully integrated organizations. Private label or proprietary brands of wood, laminate and LVT now represent most of the flooring sold.
The digital marketplace is enormous, and the role of social media, influencers and e-marketing is transforming the industry. I believe that over the next decade there will be significant upheaval of the current structure with a new set of winners and strategies of getting product to the consumer. The impact of disruptive strategies and players will transform the flooring business more significantly than all the changes of the past 40 years. I think it will be tough for many distributors and manufacturers to adapt to this new world. It is always more difficult to transition an existing business to a new model than create the next iteration of the business from scratch.
Q: What challenges must distributors overcome to remain viable?
A: Going forward, it is going to be critical that distributors find ways to recruit and retain higher quality employees. The business is becoming too complicated for traditional practices to be effective in areas such as global supply chain/demand planning, digital marketing, sales deployment strategies, pricing systems and operational execution. Managing a complex product portfolio will be essential for successful distributors to ensure relevance in their trading region.
I sense that we are nearing an era when inflation becomes a reality and there are few corporate leaders around who really understand that type of environment. Finally, scale will matter, and the strength of your balance sheet will likely determine your options.
Q: Do you think hardwood flooring will start to regain share? Why?
A: I think wood flooring sales will grow going forward, and that the era of declines is behind us-at least for a while. I am less confident that wood flooring marketshare will increase. Over the next few years, constructing affordable housing will be a primary goal of local governments.
Alternative products make sense in lower-price point homes. The features and benefits of rigid LVT and laminate flooring are compelling to many homeowners, which is a reality that wood fanatics must acknowledge. I also think the most wood-friendly commercial segments (hospitality, hotels, retail and corporate) will be soft for the next couple of years. Longer term, I am worried that tax changes and rising interest rates will impact the higher end of the market, resulting in less second and third homes and fewer renovation projects that have driven much wood flooring activity in recent years. However, looking out on the horizon, I am always an optimist, and I do believe that all will be good for those that anticipate the future and take the risks needed to succeed in a free market environment. Wood flooring will always be the product of choice or desire for most people.
Q: What long-range impact will the pandemic have on the flooring business, if any?
A: I think it will likely have permanent changes in areas such as sales force utilization; consumer online shopping and product researching; focus on the home, which will increase demand for home improvement products; emergence of a decentralized workforce, which will allow forward-thinking distributors to seek employees outside their local geography; retail shopping; and the dramatic changes enabled by technology, like Zoom, AI and productivity enhancers.
Q: Who are your mentors, and what did they teach you?
A: I was appointed general manager of Denver Hardwood (a sister company of Galleher at that time) when I was 26 years old and became president of Galleher at 28. I really did not have a mentor. I was a history major in college and loved to read. Over the years, I built a library of over 1,000 books that have guided my journey. I was fortunate to get involved in the North American Association of Floor Covering Distributors many years ago and listened with great interest to people like Rolston Johnson, Alex Hill, Don Rado, Wade Cassidy and many others, who took time to help me and teach me. My parents taught me valuable lessons on how to treat people and to live life with integrity and purpose. I have had a keen sense of intuition and awareness and have observed many people to learn the skills that contribute to success.
Q: What do you do for fun?
A: I am blessed with a wonderful wife and two terrific children. My oldest son is a junior at Notre Dame and doing exceptionally well. And my younger son is a sophomore in high school and is on an excellent path. I have a passion for nonprofits and currently serve as the chair of the board of trustees of a leading college in the Midwest, and I also chair the board of directors of a large regional hospital organization/health care system in Southern California. I am also on a couple of other boards and help at our church and a local school. As a family, we love to travel, exercise regularly and spend time with friends.
Q: What did the Boys Scouts teach you that has helped you in your business success?
A: For nine years, I was a Cub Scout den leader. It was great to be an inspiration to boys and share with them, which reinforced in me life lessons on success, purpose, creativity and service. I always had the biggest den in our pack and was proud that all 30 kids moved from Cub Scouts to Boy Scouts. It was a privilege to sit on the board of review for a number of these young men when, years later, they earned their Eagle Scout. Many, in their own way, shared with me the positive impact I had on their lives.
Copyright 2021 Floor Focus
Related Topics:Shaw Industries Group, Inc., Mohawk Industries, Lumber Liquidators