Posted on

Distribution: Mid-level players maintain muscle in their markets

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Screen Shot 2015-10-30 at 4.46.02 PMIn economics, “disintermediation” is a term that means the removal of intermediaries in a supply chain; in other words, cutting out the middleman.

The word was originally applied to the banking industry in 1967, but flooring distributors are well aware of the practice of a manufacturer bypassing them to sell direct.

The top 20 distributors are generally immune to getting squeezed, but smaller companies certainly feel the pinch when it happens. “It is tough to be a midsized flooring distributor,” said Jeff Hamar, president of Galleher, a top 10 distributor based in Santa Fe Springs, Calif. “You can be big or you can be small but being in the middle is tough.”

While midsized distributors may not be as nimble as its niche counterparts and face challenges that perhaps the bigger entities don’t, there are many success stories among these mid-level players.

To compete against the larger full-line distributors, a midsized distributor has to rely on competitive pricing and products, as well as a strong service component. Those that offer a full line of products can benefit the dealer in terms of consolidating shipments as well as being a trusted partner.

Gilford Flooring, a Cincinnati-based distributor, has assembled a strong supplier lineup—including IVC, Inhaus, EarthWerks, Somerset, Anderson, Horizon and American Biltrite—by staying close to customers and being committed to its success.

With two months left in 2015, Gilford is on pace for a record year, according to Dennis Cook, president. “We budgeted for 7.8% growth this year and we expect to achieve that number. We’ve got some great products, we have some outstanding salespeople, we have a customer service team that I would put up against anyone’s in the business, and we have a well-oiled logistics team. When you have all those things you become very relevant to your customers.”

Like all successful companies, Gilford has learned how to adapt over the years. It started in 1991 as a commercial-only distributor and entered the residential space in 1999. Today Gilford is 80% residential and 20% commercial.

It also has a knack for picking winners. When a resilient supplier dropped Gilford about 10 years agScreen Shot 2015-10-30 at 4.46.07 PMo, Cook traveled to Dalton in search of a replacement. He found one in an upstart business, IVC. “Dennis saw something in this little Belgian company and that was before we were even incorporated,” said Paul Murfin, CEO of IVC US. “A company like Gilford is committed to you, committed to your success.”

Also a midsized supplier, Trinity Hardwood Distributors, a Dallas-based distributor that focuses almost exclusively on wood flooring, has been in business since 1977. Jon Roy Reid, president and founder, believes in building relationships with suppliers based on trust and mutual respect. It has fostered long-standing relationships with Mullican and Mirage, among others. “It’s about relationships,” Reid said. “When I started in 1977, people knew each other. Building relationships was important then, but it may be even more important today.”

Jaeckle Distributors of Madison, Wis., may be a midsized wholesaler in terms of revenue but it can even the playing field through technology. “I think we benefit from having a relatively young ownership and management team,” said Torrey Jaeckle, vice president. “My brother Jeff and I came up through the business during the technology boom; that and the rise of the Internet over the past 20 years means that change is not only embraced, it is a part of our DNA. We are always looking for ways to improve, especially through the use of technology.”

Jaeckle embraced fcB2B technology, employs high-level data analytics and measures everything with a mind toward making sure the company provides the levels of service and value its customers desire. “We utilize a warehouse management system and our warehouse is both bar-coded and paperless,” Jaeckle said. “Every salesperson is outfitted with an iPad and has access to any document they might need via the cloud. These aren’t things we do because it’s now the ante to play the game; we want to do these things and we want to be the first ones there. We are driven to change and improve, and get excited about new initiatives that allow us to become more efficient and provide better service.”

Being efficient and providing superior service are part and parcel of what makes a midsized distributor relevant in an era of industry consolidation. “One thing about our company is that we are willing to invest big dollars into looking forward,” Jaeckle noted.

Cook said every truck that is purchased (including driver and overhead) costs Gilford about $150,000 per year to manage, which is not a small sum for a midsized distributor. “I have a saying: ‘If you don’t grow, you go.’ But you want to grow at a level that affords you the ability to serve the customer.”