Despite challenges, optimism reigns for distributors

Home Inside FCNews Despite challenges, optimism reigns for distributors

December 8/15, 2014; Volume 28/Number 12

By Ken Ryan

Dallas—From the opening inspirational story delivered by Sal Giunta—the first living soldier to earn the Medal of Honor since the Vietnam War—to the closing optimism dispensed by noted economist Alan Beaulieu, the 2014 NAFCD + NBMDA annual convention left many attendees in a feel-good mood, ready to seize business opportunities in their markets.

“I’m very optimistic about the next couple years,” said Enos Farnsworth, president of Denver Hardwood. “We’re coming off unprecedented growth. Look at the crowd; there are 51 new exhibitors here.”

Torrey Jaeckle, vice president of Jaeckle Distributors in Madison, Wis., said the continued positive momentum was his big takeaway from the show. “We had it last year and it is continuing this year. Things are actually good. We forget how good things are sometimes when we get mired down in our business. We have a lot of opportunity.”

George Roth, general manager at Lockwood Flooring in St. Louis, said you come to the NAFCD show “to have the conversations you did not expect to have.” He added that the upbeat mood was stronger than last year. “People are positive; they feel there is so much opportunity. It is about helping each other, not just about winning.”

Heidi Cronin Mandell, president of The Cronin Co., Portland, Ore., called the relationships she has forged here the past two years “priceless.” She added, “I can learn something every day.”

Show officials said there were 355 NAFCD attendees, 51 first-time exhibitors (NAFCD and NBMDA combined) and 176 overall exhibitors. With more than eight hours devoted to exhibits, distributors were able to spend quality time with their customers.

“This is my favorite show to see customers,” said Kirk Sandifer, executive vice president of Cain & Bultman, Jacksonville, Fla. “It’s relaxed, you can get in and out of a booth quickly if you want, or spend as much time as you’d like.”

Bruce Hammer, sales manager at Elof Hansson, Norcross, Ga., said the company decided to exhibit only a week before the show. “We are glad we did. It has been a very productive show for us. We’ve picked up two distributors while we were here.”

Chris Thompson, vice president of sales and marketing at Boa-Franc/Mirage, said he had many quality one-on-one sessions with top-flight distributors over the course of two days. “It’s a very intimate setting here. You can usually spend as much time as you like with customers.”

During the conference distributors voiced their concerns about challenges they still encounter as the industry slowly recovers from the downturn. “It is an economy that is improving but not at rates we are used to post-recession,” Jaeckle said. “We all want to grow our sales better than the GDP. For us, residential was better than commercial in 2014. It looks like next year it might be reversed.”

For some distributors, among them Kevin Murphy, general sales manager of Trinity Hardwood in Austin, Texas, the biggest issue confronting them is labor. “It’s tough getting good people nowadays. That’s our biggest issue.”

Farnsworth added, “Getting drivers is the biggest challenge for us. We cannot hire drivers right now.” Jaeckle said the shortage of drivers heightens competition for the smaller pool of drivers, and that, in turn, leads to increased freight rates.

Margin pressure was another topic of conversation among wholesalers at the show. Cronin Mandell said that in product areas such as LVT, lines could get devalued when so many companies enter the channel, thus depleting margins for everyone. Some distributors have turned to private label programs as a way to improve margins.

Jaeckle said the real key is to not let margin issues occur in the first place. “You have to manage it, and we have the tools for that. Our data analysis tools allow us to drill down and find the problems and mistakes. It is a constant day-in, day-out process. You have to have someone in charge of margins or they will manage you.”

Economist spreads optimism 

Alan Beaulieu, president of ITR Economics and author of “Prosperity in the Age of Decline,” returned to NAFCD for a second straight year as a keynote speaker.

Beaulieu told a packed audience that the U.S. economy is still the strongest in the world, and challenged industry players to go after business now.

“The economy will be your friend for the next five years,” he said. “If you don’t have big, hairy, bodacious goals, you are going to miss out. You are entering a really good period in the U.S., but you may not feel that way. A lot of people don’t feel that way. I travel a lot and other countries have a better feeling about things than Americans, who tend to be introspective and down on themselves.”

Beaulieu said he is confounded by what he believes to be good economic data amid a grumpy populace. “GDP is at record high levels, employment is at record high levels, and yet 75% of our peers think we are in a recession. How is that possible? The media? I think they are all watching ‘Family Guy’ and think it is a documentary. What are we reading or thinking? This country has a lot going for itself and it is going to last a long time. It is fun and should be fun for a long time.”

The economist said his firm has upped its outlook in 2015 to 4% growth, which he termed “not the fastest growth rate, but still growing.”

Beaulieu said banks would lend money to those with stellar balance sheets. His advice: Borrow as much as you can now—even if you are flush with cash— because interest rates will be rising soon.

Installation challenge

The show featured roundtable discussions that touched on a variety of topics ranging from labor to social media. A common challenge continues to be finding and retaining qualified installers, with no easy answers in sight. Jon Namba, a certified flooring installer, said finding someone between ages 18 and 40 who will stay put beyond a year is difficult, almost to the point where he questions whether to provide training or not. “I feel like a temp agency sometimes, having to constantly babysit people. I don’t know what the answer is.”

Namba added that he has tried working with trade and vocational schools in his Salt Lake City market to cultivate new installers. After some initial success, interest eventually waned.

Graham Capobianco, who works in OEM business development and technical sales at Loba-Wakol in Charlotte, N.C., said during the roundtable that flooring leaders cannot by dissuaded by the “‘why train them if they are going to leave?’ mentality. Regardless of whether they stay or leave in a year, training is essential.”

Scott Rozmus, president of FlorStar Sales, Romeoville, Ill., said that flooring installation is not a glamorous job like being a doctor or engineer, and that hurts recruiting. “Mom and dad are not going to brag to the neighbors that their son is a flooring installer. Yes, the pay is good, but it is hard work and many new generations of kids don’t find that appealing.”

The 2015 NAFCD + NBMDA convention is scheduled for Nov. 3-5 at the Hilton Orlando Hotel.

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