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

HomeEditorialsMy 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

TISE 2024 exceeds expectations

Las Vegas—The International Surface Event (TISE), Informa Markets' premier exhibition comprised of three world-class trade events, Surfaces, StonExpo and TileExpo, created a bustling sold-out...

Programs and activations announced for Coverings 2024

Atlanta—Coverings, the preeminent international tile and stone exhibition and conference in North America, has released a comprehensive roster of both popular and new onsite...

Louisville Tile promotes Kristine Gaines to CFO

Louisville, Tenn.—Louisville Tile has promoted Kristine Gaines to the position of chief financial officer. Gaines offers a wealth of financial expertise and a proven...

Tarkett launches expanded carpet QuickShip program

Solon, Ohio—Tarkett is making more of its commercial product catalogue available for fast delivery through its updated QuickShip program. Dealers, architects and designers now...

Retailers React: What are you doing to help ease the installation crisis?

Every two weeks, FCNews seeks out flooring retailers across the country to offer their advice on hot topics of the day. This week, we...

Shaw Industries named 2024 Training APEX Award winner

Dalton—Shaw Industries has been named a 2024 Training APEX Award winner by Training magazine. As the only flooring manufacturer awarded, Shaw aims to create...
Some text some message..
X