Article Number : 3780 |
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| Date | 10/27/2008 8:38:09 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=3780 |
| Abstract | By Sarah Zimmerman Just as every other segment of the industry meets with the hardships of the current economy, so too does distribution feel the bludgeoning impact of the housing slump, credit crunch, raw material and fuel cost increases, and customer spending squelch... |
| Article | By Sarah Zimmerman Just as every other segment of the industry meets with the hardships of the current economy, so too does distribution feel the bludgeoning impact of the housing slump, credit crunch, raw material and fuel cost increases, and customer spending squelch. “Distribution at this time looks a lot like the stock market— it is a roller coaster that is mostly down, and it’s tough out there,” said Al Maghes, vice president of sales and marketing for Erickson’s Flooring & Supply in Ferndale, Mich., and current NAFCD president. “It’s the perfect storm—conditions that on their own would not have as much impact but together wreck havoc throughout many industries, including flooring.” Similar squeals have been heard across the channel, with reports that all business is off— and by as much as 40%. “Essentially, we have real economic factors causing people to pull back on projects or purchasing decisions out of fear and concern, and, in turn, those fears and concerns exacerbate the economic factors,” explained Scott Rozmus, president of Florstar Sales in Romeoville, Ill. Jeff Hamar, president and CEO of Galleher in Santa Fe Springs, Calif., agreed, saying capacities that were increased and investments made several years ago are hard to unwind now, mentioning the ongoing shift to alternative channels is only exasperating the situation. In the same vein, Bruce Zwicker, president and CEO of J.J. Haines in Glen Burnie, Md., warned no one is immune to the current downturn. “I call this the second shelf,” he said. “Demand was already under water and sitting on a shelf, but not the bottom. Now, we are sliding down to a lower shelf, which we hope is the bottom.” And, Joel Lefkowitz, president of Allstate in Fairfield, N.J., put it in simple terms: “There are fewer people to do business and more people fighting for the same order. So, you have to be very careful who you partner with. There is not enough margin for a distributor to be able to do what is necessary in the market to grow business properly.” However, thinking outside the box and differentiating are definite ways to remain standing, he noted. “Try to bring in products that are unique to the market and make sure that you are more customer focused; concentrate on service.” Differentiation remains key “You differentiate by being as consistent as you can,” Zwicker said. “If your product offering is already strong, you maintain your inventory and provide reliable delivery. You extend credit and work with customers. You maintain a high-performing sales force, customer service and drivers.” David Powell, marketing director of Erickson’s, pointed to three key factors every business must look at to be successful in any economic climate: quality, cost and service, which he said results in lower claim rates, more referrals, higher margins, higher sales closures and a lower total cost of doing business for customers. Singing the same tune, Rozmus noted differentiating comes down to people, products and service. “It is simple to articulate, perhaps, but less simple to establish and maintain. Distributors need to add value and also remind both vendors and customers of thevalue they add.” This is no time to retreat from the battlefield, Hamar said. “You have to continue focusing on product development and introductions, maintaining service levels and staying close with customers to stand out.” Future words of wisdom Though no one is calling for the return of “good times” in the near future—estimating a possible upswing toward the end of 2009 or quarter one, 2010—distribution leaders remain determined to weather the storm, focused on cutting costs, innovation, sustainability, technology and industry relations. Watch your costs and expenses, and enter the green scene, Lefkowitz advises. “Green is becoming very big because developers can attain tax credits. Therefore, to maintain business and even grow, you need to find and offer green products.” Powell said though consumer purchases are expected to be substantially down for the rest of the year and into 2009, innovation will be important, “as many companies will not want to invest resources in this economic climate.” He said the best way to increase productivity is to spend time and money on employee training and education and improve efficiencies. “Your customers buy from you because of your value equation...Give them a holistic approach to doing business with you as a total solutions provider, not just a product and price supplier.” Maghes and incoming NAFCD president Jack Lindenschmidt suggest seeking out industry connections. “To promote distribution, unite with other distributors to support this cause, and continually create value for your supply-chain partners.” And, courage is Rozmus’ best advice looking ahead. “Manufacturers, distributors and retailers need to have courage moving forward to continue innovating, educating and selling.” He also mentioned keeping up on technology as a great way to cut costs and increase profitability. Hamar added, employees are going to have to do more with less and rely on each other. “We all have to understand that survival in a structure similar to what we operate today is a major consideration for many of our manufactures, distributors and retailers, and these times will test the strength of our partnerships like never before.” Zwicker suggested just keep paddling. “When in the rapids, keep the canoe facing downstream and paddle like mad,” he said, noting in this environment it is about cash and prudent cost cutting; fighting for share is a given. |