My take: Distributors don’t have it easy, that’s for sure

Home Editorials My take: Distributors don’t have it easy, that’s for sure

October 29/November 5, 2018: Volume 34, Issue 10

By Steven Feldman

 

I have always admired floor covering wholesale distributors, and not because I count many of them as good friends. For the most part, they are regular guys; they like to eat, have a few beers and go to sporting events. They don’t take themselves too seriously. They work hard. They are accessible. And yet, their role in the supply chain is probably the most difficult of any channel partner.

For starters, some work on razor-thin margins, and those who don’t are doing only slightly better. Second, they are constantly getting hammered from both ends of the spectrum as middlemen. They have to meet the demands of two sets of customers—their suppliers and their retailer accounts. They require a keen and varied focus because both have different sets of needs to satisfy.

On top of tight margins, it seems distributors are always facing price pressures. In the current job market, the cost of labor has increased. Especially considering many truckers have left the industry over the past five years. As well, when the cost of fuel doubles in a relatively short period of time, who do you think feels it the most? Those who own the trucks, of course. Warehousing costs have increased. And then you have the issue of ELDs, where drivers are now monitored—actually their engines are—and cannot go beyond the limits of the law. If it is mandated that a driver can only drive 11 hours a day, he can no longer drive 14. That means deliveries can take longer. We won’t even get into the subject of the litany of price increases distributors receive from their suppliers, not all of which can be passed on in their entirety. What about rising healthcare costs? Old news.

I recently came across an article that outlined six challenges most often cited by wholesale distributors across an array of industries. They include:

  1. Increasing competition from manufacturers.Increasingly efficient logistics systems allow manufacturers to sell more goods directly to end users, thereby bypassing distributors. Plus, consolidation in many manufacturing sectors has produced large manufacturers with national distribution systems. In our industry, think Shaw and Mohawk.
  2. Retailers demanding faster delivery.As big-box retailers such as Walmart and Target expand their product offerings, they are tightening delivery deadlines and imposing stiffer penalties on distributors for late shipments. Wholesalers may also be fined for providing inaccurate product information. Many companies have invested in technology upgrades and additional employee training to meet the new standards.
  3. Dependence on fuel prices.Wholesaling is the business of transporting products, and fuel prices play an important role in a company’s overall profitability. The cost of diesel fuel can represent a significant portion of total wholesale operating costs. Many distributors pass this cost on to customers in the form of fuel surcharges, but some smaller companies might not have this leverage.
  4. Vulnerability to changing prices.Rapid changes in costs leave distributors vulnerable to changes in inventory values. Although distributors try to limit their cost exposure by pricing products according to a percentage mark-up on costs, competition may make it impossible to mark up expensive inventory when prices are falling.
  5. Worker safety concerns.There are significant hazards associated with the storage, handling and transportation of many products. Companies must therefore implement tight safety standards to avoid system failures and maintain preparedness for potential issues that may arise.
  6. Supplier and retailer consolidation.Wholesalers are losing buying power due to increasing consolidation among manufacturers. Regional distributors have become easy acquisition targets as they struggle to compete with national players. The top chains are increasing their market share and continuing to take advantage of manufacturer discounts for large purchases, giving them additional leverage with distributors that are unable to offer similar terms.

At the end of the day, it is quite the challenge that so many of our floor covering distributors have figured out how to overcome all of this. Kudos to them.

Must Read

COVID-19 to hasten housing activity in smaller markets

The COVID-19 pandemic is likely to hasten a housing trend already taking place across the nation—residential construction activity that is expanding at a more...

Ecore to distribute COVID-19-approved disinfectant

Lancaster, Pa.—Ecore, a manufacturer of ergonomic and acoustic performance surfaces for commercial and athletic markets, has partnered with Rochester Midland Corporation, a 130-year-old, family-owned,...

Beauflor USA expands sheet vinyl offering with Omega+

White, Ga.—Beauflor USA is launching its Omega+ collection, a highly durable vinyl roll product featuring 22 diverse visuals and the integration of the company’s...

FCNews partners with mask maker to support front-line workers  

By Reginald Tucker Floor Covering News has joined the call to help keep healthcare workers safe by donating personal protective equipment to several local hospitals...

WATCH: The WFCA hosts second retail survival webinar

https://www.youtube.com/watch?v=f7EgX4y-fsw&feature=youtu.be Last week, the WFCA hosted its second retail survival webinar where attendees got to hear from some of the industries leading flooring retailers on how...

Shaw Contract unveils new LVT line, Rugs program

In an effort to best serve the needs of the design community, Shaw Contract is introducing an LVT collection that can be used for...
X