The days of manufacturer owned commercial dealers may be coming to a close.
The days of manufacturer owned commercial dealers may be coming to a close.
By FRANK O'NEILL, Publisher
The
commercial market’s distribution revolution has just about come full circle.
For the past nine months, Shaw Industries has been quietly closing down its most
unprofitable Spectra dealerships, while Invista began dismantling its owned
network, The Invironmentalists, shortly after Koch Industries bought Invista in
April. But last month, Interface Flooring was the first of the three players
with owned distribution networks to say it will bow out completely. That company
plans to either sell or close down the rest of the Re:Source Americas
dealerships it owned at press time in the next few months.
The idea of owning dealerships all started back in December 1995 when Shaw
Industries bought the Atlanta dealership Bell-Mann. That move was reflexive,
precipitated by reports that DuPont was about to take over the big contract
dealer group Monroe Schneider, which was in hock to DuPont to the tune of about
$8 million. A landslide of reactions followed when DuPont did indeed buy Monroe
Schneider and its debt. Shaw acquired more independent dealers and the founders
of StarNet, the independent dealer group, bolted to Interface and took a slew of
StarNet dealers with them. In a few months, Shaw, DuPont and Interface each had
nationwide dealer networks and were promising to create a more professional
dealer structure than the floorcovering industry had ever seen.
Good intentions aside, the idea of manufacturers owning their own dealerships
was flawed from the start. Both designers and end users felt that their ability
to choose product was severely compromised by the new far-from-independent
structures. There were plenty of other political and practical problems with the
concept, which would take a book to explore, but the single biggest flaw was
that until the commercial distribution revolution took place, all the nation’s
contract dealers were owned by entrepreneurs, and history has shown that
corporations virtually never succeed when they move into businesses that are
entrepreneurial in nature. Shaw, DuPont and Interface quickly discovered that it
was very difficult—let’s say close to impossible—to make money owning
these networks of small businesses.
So nine years after the commercial distribution revolution started, it’s
rapidly coming to a close. Interface’s decision to shut down its owned network
was a smart one. Now the company’s two carpet divisions—Interface Flooring
and Bentley Prince Street—can get back to their knitting—er,
tufting—without all the political and economic baggage that the dealerships
brought with them.
I fully expect that all manufacturer owned dealerships will soon be history, and
we’ll return to a nationwide network of independently owned contract
dealerships, just as we had nine years ago. However, there’s one significant
difference between today’s contract dealer network and the one that existed
nine years ago. Today, there are far more highly professional, economically
stable dealers than there were back then.
CLEANING UP
We’ve
hardly heard the last of the evolutionary move back to independent ownership of
contract dealerships. There are going to be a lot more changes in the coming
months, and one of them will almost certainly be in the flooring maintenance
business, which Shaw, Interface and Invista have been heavily involved in.
We’ve already seen a number of independent contract dealers increase their
involvement in that business recently—most notably, the Port Chester, New York
firm R.D. Weiss, which bought the New York and Boston businesses of The
Invironmentalists three months ago and Austin’s Intertech Flooring, which
bought The Invironmentalists’ Austin and San Antonio locations last month.
Other contract dealers have bought into the franchise system started by the
Columbus, Ohio retailer Rite Rug, and still others are looking carefully at the
possibilities.
As far as I know, there are only two companies with a nationwide presence that
specialize only in flooring maintenance, and that’s Houston’s Corporate
Care, which owns 15 locations around the country, and the New Jersey firm
Interior Preservation, Inc., which is better known as IPI.
For all you dealers out there who are thinking about getting into the
maintenance business, it could be a great way to expand (and increase your
profits) with a group of people you already do business with. But make sure you
go into it with your eyes open. It involves a lot more than hanging out your
shingle, buying a vacuum cleaner and waiting for the customers to come.
Phil Tavani, the co-owner of the Wyckoff, New Jersey specialist IPI, can attest
to that. Tavani, who started his flooring industry career as a manufacturer’s
rep with Lees, went on to a long career with Bentley Mills before he bought an
interest in IPI six years ago. Today, he owns IPI jointly with Kevin Roche. The
company maintains carpet, hardwood, ceramic and stone floors for many firms in
the New York and North Jersey Metro Markets and for national chains like
Tiffany’s and Abercrombie and Fitch. It also handles a lot of problem jobs
referred by commercial floorcovering manufacturers.
IPI has nearly 40 technicians servicing customers throughout the greater New
York area. When they clean a carpet, they follow a four step cleaning process:
vacuuming with powerful commercial vacuums; pile lifting with a turbo vacuum
that pulls against the grain and grooms the carpet; low moisture or extraction
cleaning, depending on the condition of the carpet; and spot cleaning, to remove
the really tough stains that don’t come out with most processes.
Every new IPI employee goes through a minimum of six months on-the-job training
with a senior technician before he’s sent out on his own, and only the most
highly experienced employees are sent out on the really challenging jobs, like
extraction cleaning of carpets that have serious problems.
There are many more fine details to IPI’s business, but you should get the
idea now—there’s a lot more to the maintenance business than hiring a few
guys to learn how to vacuum a rug. Some companies, like R.D. Weiss, thrive in
the business. Others prefer to turn over their maintenance jobs to specialists
like IPI or Corporate Care.
DISTRIBUTORS SEE THE SUN
I
didn’t get to go to the NAFCD meeting this year, but our associate editor, Jim
Roberts, tells me the climate among members was bright, and it wasn’t coming
from the hot Phoenix sun, either. Even though there’s considerable concern
about the continuing erosion of their market positions by the big manufacturers
selling direct, the nation’s flooring distributors found some reasons for
optimism.
Much of it seems to stem from the dramatic increases we’re seeing in imports
these days. Not only are distributors hooking up with importers of hardwood and
vinyl from Asia, but also with ceramic manufacturers from Europe, Asia and Latin
America. Now there are even signs that Shaw and Mohawk may turn to distributors
to carry some of the products they import.
Santo Torcivia, our contributing editor and president of the consulting firm
Market Insights/Torcivia, feels that distributors who want to expand into
imports should not be concentrating on adding more product lines, but rather on
expanding vertically into new territory. He says the more territory they
control, the more valuable they’ll be to importers and other suppliers who
don’t sell direct.
Bravo, the group created by Armstrong’s distributors two years ago, is a good
example of a successful transition to imports. Bravo was able to attract a
number of the largest European ceramic manufacturers because of the national
scope of its network.
A FULL HOUSE?
Could
the housing boom we’ve seen over the past several years finally be coming to
an end?
Pulte Homes, the nation’s largest builder, recently said that the red hot Las
Vegas housing market, which has been growing faster than any other market in the
nation, has begun to cool off.
Another sign of a slowdown comes from the L.A. Times, which says home sales in
southern California dropped sharply last month.
I’ll keep a close watch on this trend. Let’s see if it’s catching.
If you have any comments about the issues covered this month, you can contact me
directly at foneill898@aol.com.
Copyright 2004 Floor Focus Inc