Recession decisions help Johnson Hardwood to survive, prosper

Home Inside FCNews Recession decisions help Johnson Hardwood to survive, prosper

January 19/26, 2015; Volume 28/Number 15

By K.J. Quinn

It has been said some of the greatest regrets for industry leaders are risks they didn’t take. Such is not the case with Johnson Hardwood, a company which faced a crossroads during the recession, and made difficult decisions which enabled it to prosper while positioning the supplier for future growth.

“Going back six to seven years ago, we heavily relied on distributor sales, and a small portion of our business was selling to dealers direct,” recalled Bill Schollmeyer, CEO. “When the economy changed and things slowed down, we realized we had to redesign ourselves a little bit.”

Johnson, a producer of premium hardwood flooring, distributes its products to the U.S. and Canada. Prior to the onset of the recession in the fall of 2009, Johnson sold almost exclusively through distributors and saw no reason to change. But when Hoboken, its top Texas distributor, closed its offices, Johnson made the decision to sell direct to the Texas and Louisiana areas.

The move turned out to be the precursor for a shift in its distribution philosophy, as the company later expanded direct-to-dealer efforts in its home state of California, as well as western Pennsylvania, Ohio, Indiana and parts of Kentucky.

“Johnson always had the ability to stay flexible and be decisive because of our size and lean corporate structure,” Schollmeyer told FCNews at the time. “I plan to capitalize on these core strengths to develop the best method of distribution for each market in which we compete.”

In 2010, Schollmeyer was promoted from vice president of sales to his current role, responsible for overseeing the company’s U.S. operations.

While Johnson was undergoing its distribution changes, the recession began to take hold, significantly impacting the flooring distribution business as a whole. Some wholesalers struggled to keep their heads above water as the builder and residential remodel markets plummeted, while others went out of business.

“When the economy changed, distributors were pulling back inventory,” Schollmeyer recalled. “Sample and display costs affected our business tremendously. We probably were too heavily reliant on distributors, so we made the switch.”

Johnson moved forward with its plan to sell direct to dealers in most geographical regions as the company sought to gain more control of its distribution and create a more balanced sales mix. “That was a tough thing to do,” Schollmeyer said. “We kept certain distributors who were good and replaced others who didn’t fit our needs as well as a direct sales force.”

Johnson did not totally abandon selling products through wholesale distribution. Tri-State, Derr, Mastercraft, Interstate and New England Floor Supply are among the distributors still carrying the Johnson line. This channel represents approximately 50% of Johnson’s sales.

“Johnson has been a very good partner with Derr,” said Rick Holden, Derr’s COO. “The products are well made and have visuals that consumers desire and offer good value. The company has continued to add new items to meet color and design trends.”

Investment in the future

Johnson sought to stay aggressive to grow the business during a time when sales and profits were down and most companies were cutting back. The company invested in the logistical services and manpower necessary to support its customer base.

“The hardest part was executing in terms of production, inventory and merchandising,” Schollmeyer said. “We added marketing staff and we hired a sales force consisting of 16 field sales reps.” Johnson recently opened an East Coast warehouse and maintains company-operated distribution centers in California, Texas and Pennsylvania.

As if surviving the rough economic climate wasn’t difficult enough, Johnson faced additional challenges in delivering distinctive, high quality products while providing strong sales support—a balancing act not every direct-to-dealer supplier is able to pull off successfully.

“We made investments in more inventory, and in our marketing and merchandising operations,” Schollmeyer noted. “We assumed more credit liability on the dealer side. It was a tough but necessary decision which worked out well, for the most part, as we have very good customers.”

Indeed, Schollmeyer cites Johnson’s long-standing relationships with its retail partners as being integral to its success. “Dealer penetration means more display placements and promotions built upon what we already have. We’re not looking for additional distributors other than private label sourcing, which we do in several areas right now.”

The working relationship dealers maintain with Johnson is one built on communication and trust. “I have been doing business with Johnson for around six to seven years and have had the same sales representative the entire time,” noted Sean O’Rourke, vice president of sales for hard surfaces, Avalon Flooring, Cherry Hill, N.J. “It enables Avalon to get better service and, in turn, Johnson products are well established on the showroom floor with salespeople.”

One relationship that quickly evolved the past few years is Johnson’s partnership with Carpet One, the retail selling group operated by CCA Global Partners. During this time, the number of Carpet One stores serviced by Johnson expanded from a regional to national basis.

“We started slowly and it developed into what they call a ‘core vendor’ relationship, where we are now involved with Carpet One dealers everywhere in the country,” Schollmeyer explained. “The business has grown tremendously in both sales as well as the relationships with some of the best dealers out there.” In certain markets, Carpet One dealers have access to private label merchandise from Johnson, in addition to the 100-plus SKUs available to the company’s dealer network.

Product development

With its attention focused primarily on servicing floor covering dealers, Johnson works to supply them with on-trend, unique products by sourcing durable hardwood species from around the world. “Johnson has really changed from being an exotic hardwood supplier to an all-around hardwood supplier/importer,” O’Rourke noted.

According to Schollmeyer, the company set out to be a market leader that adheres to product quality and service. “Our strategic objectives are to continuously stay ahead of the curve with unique product designs. Innovation, design and styling are the key things, plus deeper penetration in the markets we’re already in, whether it is dealer direct or through distributors.”

In 2010, Johnson undertook a study to determine what consumers and designers were looking for. It found consumers wanted to make bold statements with continuous pieces of hardwood that enabled spaces to look longer, wider and provide a less distracting flooring pattern. Johnson’s product development team utilized its creativity to create flooring products that met this need, one of which included the Tuscan Series, an engineered hand-scraped product.

“The ¾-inch solid Renaissance hand-scraped product and the Tuscan engineered, random-width, hand-scraped offering are our best sellers,” Derr’s Holden said. “They [offer] excellent visuals for our market and at acquisition costs that allow everyone to make a reasonable margin.”

Among Johnson’s top sellers are its signature ForeverTuff line and higher fashion, hand-textured products. “The ForeverTuff product lines have been excellent, as they are truly commercial quality with the styling and taste to go residential as well,” said Harvey Johnson, owner of Mastercraft Flooring Distributors in Miami.

Whether exotic or domestic, Johnson travels the globe in search of unique grain patterns, durable woods and responsibly harvested trees. Each flooring plank is precision milled, hand crafted and hand stained to produce an exceptional product.

At Surfaces Johnson plans to roll out two new wood lines —Ale House and Noble Castle —which it anticipates will have a positive impact on business.


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