Article Number : 4902 |
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| Date | 9/29/2009 8:59:45 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=4902 |
| Abstract | By K.J. Quinn Distributors are on red alert as the industry scrambles to keep itself afloat following steep declines in wood sales and a housing market in a state of flux. Throw in a global economic crisis and you have a “perfect storm” threatening... |
| Article | By K.J. Quinn Distributors are on red alert as the industry scrambles to keep itself afloat following steep declines in wood sales and a housing market in a state of flux. Throw in a global economic crisis and you have a “perfect storm” threatening the viability of an industry that up until a year ago was among the fastest growing flooring categories. “A lot of dealers are working hand to mouth,” said Chet Derr Jr., president, Derr Flooring, Willow Grove, Pa., noting small dealerships have been particularly hard hit as several have gone bankrupt while others are barely keeping their heads above water. The tale of the tape is alarming as the financial meltdown, which began in the summer of 2007, finally pushed the world into a recession. The credit crunch has led to tighter lending standards, which has made it more difficult for consumers to borrow money, which has negatively impacted home improvement and construction spending. “There is no demand whatsoever in the builder business at this point,” said Buddy Faircloth, executive vice president, Armstrong, at Cain & Bultman. While the housing market’s downward spiral significantly impacted wood sales from fourth quarter 2008 through August, so did low consumer turnout at retail. This was a major factor for distributors whose customer base is primarily made up of specialty flooring dealers serving the residential replacement segment. As you might expect, distributors contacted by FCNews report that wood sales are down single to double digits, depending largely on region. “The wood business has changed dramatically in the Southeast in the past 12 months due to the loss of the majority of the builder business,” said Melinda McChesney, president, Johnson Wholesale Floors, an Atlanta-based flooring distributor. “The loss of the builder business coupled with the pressures on pricing in the market has become the two major issues.” Distributors say they are dealing with the market downturn with the same roll-up-your-sleeves attitude they’ve used in the past. In the case of wood, it means concentrating on delivering products the market wants at the price points it demands. “We think the key to our future is to strengthen existing relationships, enhance our brands, improve ourselves through training and hard work,” said Keith Slobodien, president, Apollo Distributing, Fairfield, N.J. “And whenever possible to support our dealer base, not compete with them.” At the same time, distributors say they are doing what they can to help retailers become more profitable with their wood business than they would from buying product through another channel. For distributors such as J.J. Haines, Glen Burnie, Md., this means providing retailer customers with a strong lineup of business support services to helpthem increase sales and profitability. “We work very closely with our suppliers to make sure we have the right products at the right price point,” said Fred Reitz Jr., vice president of operations. “We help our customers in a number of ways, including credit to support them during tough times and the broadest product portfolio for them to choose from than any other distributor.” One way Haines helps dealers grow their businesses is through educational programming, such as providing sales and technical training for retail salespeople. A distributor like Haines can also help retailers merchandise more effectively by offering insight on everything they need, from designing their stores to improving customer-service techniques. “We need to help our customers to carefully sort through the myriad of product choices and merchandising to fit their store and business,” Reitz said. “Customers don’t have the luxury of wasting space on unproductive displays, experimenting with unproven manufacturers, the risk of claims, and stock outs or poor delivery.” From advanced finishes and alternative installation systems to leaps in engineered construction and increased availability of exotic species and hand-scraped looks, the depth of the latest batch of hardwood flooring provides an endless supply of items for consumers and end users to choose from. More importantly, the availability gives wholesalers and their retail/contract partners additional margin opportunities and numerous ways to differentiate their offerings in an increasingly competitive product segment. “We have to give customers better value for the dollar than they are willing to spend,” Cain and Bultman’s Faircloth said. As wholesalers build up their wood portfolios, they are constantly evaluating inventories to reflect the demands of the territories they serve. “The first and most important [factor] is ready availability of inventory in all five of our locations,” Johnson Wholesale’s McChesney said. “A retailer is so concerned to not lose a sale by a delay of delivery of material that he or she is looking for a supplier that will give immediate delivery.” It’s hard to predict what will happen next, but if the economy improves and the housing market follows suit, then better times are just around the corner for the wood industry. To prepare for a turnaround, distributors say they continue to advise customers of new products and technologies, and ensure they are well positioned to handle their needs from a logistics and supplier standpoint. “The worst thing we can do is cut inventories back, because you have to be prepared to service an order when the dealer wants it,” Derr Flooring’s Derr said. |