Distributors turn to private label brands

Home Inside FCNews Distributors turn to private label brands

October 26/November 2; Volume 30/Number 10

By Ken Ryan

Flooring distributors continue to rely on name brand manufacturers for strength in marketing efforts and the ability to sell reliable names to consumers. However, private label—or house brands—is a growing part of the business for many as a way to provide differentiated offerings and to boost margins.

“Like other distributors we have created brands that allow us to make adjustments in the offering based on regional trends,” said Donna Lagano, vice president of marketing at BR Funsten in Manteca, Calif., which carries six private label brands.

There is sound reasoning for a private label approach. In many product categories there are high quality options available from relatively unknown manufacturers and brands. When the brand name is unknown there isn’t much ability for the distributor to leverage the label in the marketing of the product. In those cases, it may make sense to private label the offering.

“Private label in distribution has a connotation that this is a way for a distributor to get a low priced product to market,” said Maybank Hagood, CEO of William M. Bird, Charleston, S.C. “But what we found is it is more of an opportunity to find a high value product consumers in our market really want.”

The past 10 years have seen a large increase in imported product, especially from Asia. Many of these products are well suited for private labeling because they allow the distributor to tailor the offerings to specific markets, picking and choosing patterns, constructions and designs that fill voids in their current lineups or complement other flooring options. The ability to customize the program to suit specific market needs is a strong attribute of private labeling.

Bob Eady, senior vice president of sales and marketing for T&L Distributing in Houston, explained private label offerings allow distributors to provide their dealers with looks that are customized to their specific regions as opposed to a product that is styled nationally in scope but may not resonate in local markets.

Jeff Hamar, president of Galleher in Santa Fe Springs, Calif., calls private labeling “customization at an affordable price.” One-third of Galleher’s business is private label.

Margins are also an important component. Executives said there is a definite inverse correlation between margins and the number of distributors carrying a brand in a market. Every distributor would prefer to have single distribution on every line it carries; the reality is that many manufacturers, especially domestic companies, have a market strategy that is not in accord with single distribution. “Private labeling ensures the distributor will have single distribution on the products in that brand,” said Torrey Jaeckle, vice president of Jaeckle Distributors in Madison, Wis. “While that may mean higher margins, it also adds activity and costs to the distributor since much of the marketing and sampling for the line has to be developed, managed and maintained in-house.”

In the end there are pros and cons to both manufacturer and private label brands, and most distributors will develop a good mix of products using both in an effort to achieve business objectives.

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