FCNews exclusive interview: NAFCD executive board members hash out key issues

HomeInside FCNewsFCNews exclusive interview: NAFCD executive board members hash out key issues
NAFCD 2020 executive board, from left: Shane Richmond, Fishman Flooring Solutions; Kyle Gorny, Blakely Products; Dunn Rasbury, A&M Supply; and Steve McKenna, McKenna Distribution. NAFCD 2020 executive board, from left: Shane Richmond, Fishman Flooring Solutions; Kyle Gorny, Blakely Products; Dunn Rasbury, A&M Supply; and Steve McKenna, McKenna Distribution.

New Orleans—Scores of flooring industry distribution representatives gathered here recently to participate in the 2019 North American Association of Floor Covering Distributors annual conference (NAFCD). Topics of discussion ranged from continued industry consolidation, emerging demographics, economic challenges and a changing retail landscape.

During the conference, FCNews managing editor Reginald Tucker sat down with Steve McKenna, president, McKenna Distribution (NAFCD immediate-past president); Dunn Rasbury, director of flooring, A&M Supply (incoming NAFCD president); Shane Richmond, vice president of Mid-Atlantic Sales for Fishman Flooring Solutions (NAFCD president-elect); and Kyle Gorny, outside sales, Blakely Products (NAFCD vice president), to hear their thoughts on key issues impacting distribution.

Following are excerpts of that conversation:

Q: The 2019 NAFCD conference broke a few records. What stands out most in your mind?  

Steve McKenna: Probably the attendance of the show as well as the fact we have never sold out the show before—until 2019. In fact, I think we had to turn down 24 booth requests. To turn away that many potential vendors tells you the show is drawing attention and gaining momentum. Also, we had 44 first-time total exhibitors when you count NAFCD along with NBMDA, which includes 30 first-time exhibitors on the flooring side.

Shane Richmond: That demonstrates the value the trade show brings to our vendor partners certainly. They know they’re getting a solid return on their investment to come here to spend with the distribution community.

Q: Steve, this is your last convention as president. What were some of the highlights during your tenure?

McKenna: I would love to take credit for some things personally; however, I feel as president in a large way we are just helping to facilitate trying to work with Smith Bucklin [NAFCD management], which does an extremely professional job. The strength of the board and the executive committee make it a very easy role to fill. It’s more of a team/industry-wide effort.

Q: Dunn, as you look forward to transitioning to the role of NAFCD president for 2020, what are some of the initiatives on your agenda?

Dunn Rasbury: We have a lot of smart, energetic people in this industry and in particular on this board. It’s just a matter of tapping into those talents and creating value for the industry as a whole. That’s what we’re here for—to make flooring distribution better. If we accomplish anything that does that, I think we’ve done our job. So whether we just augment or help the things that are already out there, i.e., create new projects, it’s about making our business better from top to bottom.

Q: What are some of the challenges you’re facing in your respective markets?

Kyle Gorny: Labor is definitely an issue in Michigan as well as all over the place, I’m sure. In our market, the union halls are trying to develop certified training for installers.

Rasbury: I think it goes beyond the mechanics in the industry. It’s tough to find truck drivers, salespeople, inside salespeople, back office people, etc. With a labor market this tight, it’s really hard to put the right people in the right place all the time. If we can help companies facilitate that with training or programs we do, that’s the key. It’s essential to what we do as managers as well as members on the NAFCD board.

Richmond: For us, trying to find a way to continue to grow our business on top of the people problems is a challenge. Specifically, trying to grow our business in the more mature markets where housing and commercial are not growing the way they’ve been growing in the past. How do we, as a distributor, to continue to find ways to add value. If the market is not growing, then we need to find a way to grow market share. But we’re fortunate in that we trade a good bit in the South, where we’ve seen positive numbers. But we also trade in Baltimore, Washington, D.C., Cleveland and Erie, etc. It’s also about helping our customers find new ways to do business and strengthen them.

Q: What are some of the key end-use sectors in your area, and how are they performing?

Richmond: For us, it’s across the board. Because we trade in the Southeast, our residential and new construction continues to move the needle in those markets. Until very recently, multi-family has been a huge driver. As we look to move into next year, we’re looking at a potential slowdown, we’re seeing the markets become a little more balanced rather than commercial or residential going crazy.

Gorny: Detroit is rebuilding and has been for the past few years. A lot of multi-family housing projects and new construction is going on there, so we have been trying to take advantage of that situation.

McKenna: Western Canada is in a slump right now. There’s not a lot of new construction, or multi-family activity, happening right now. But there is a little bit of commercial activity. It’s only now just starting to trickle back up. but it’s starting from a very low point.

Q: To what do you attribute that slump in your market?

McKenna: It’s the entire economic outlook. In Western Canada, it’s a very resource-driven economy. Oil prices, for example, has fallen; we’ve also had some government changes that have not been very favorable. The Canadian government doesn’t necessarily invest in infrastructure spending or provide the same type of stimulus activities that you see in the U.S. We see a very different side of the coin. We also trade in the Midwestern U.S. where we see, in some cases, situations where we can’t get inventory fast enough vs. in Canada, where we should perhaps ship this inventory down to the U.S.

Q: From a product category perspective, we’ve seen a lot of introductions in waterproof, rigid core, SPC and, now, wood-rigid hybrids (wood veneers on top of rigid cores). What do you think? Too much too fast?

McKenna: The traditional hard surface categories are always going to be there. I don’t think you’ll see any one of those categories die completely. I don’t think ceramic tile and hardwood flooring are ever going to be completely out of the equation. I don’t think either that vinyl floors are going to go away completely; I’m quite sure they will still be there in 50 years in some capacity. However, what we’re seeing is a much faster pace of product life cycle. So, what used to be a 10-year cycle before something really became mainstream is now perhaps a one-year cycle. What’s going to be interesting to see in the next few years is does that mean in two years we’re not selling SPC at all? (That’s entirely possible. When something grows that quickly it could also die that quickly.)  We might be at this show in 10 years talking about the time when the industry was all SPC but now it’s something completely different.

The other interesting thing is we’re trading down dollars. At convention I had a conversation with a wood manufacturer who now has an SPC line; their concern is they used to sell to a customer one container of wood, which would generate X margin dollars. Now, in order to equal that margin, they have to sell the same customer 10 containers of SPC. Which means that customer has to print 10 times the amount of invoices, ship 10 times the amount of product and have potentially 10 times the amount of risk with each transaction because now you’re exponentially increasing your number of transactions and not increasing your number of dollars. So there is some risk there.

It’s one thing to jump into these exciting markets because the rate of growth can potentially be really quick, but there’s also potentially a downside to that.

Rasbury: I also think the growth of that market also fostered a couple of things we see on the trade show floor here. People are trying to figure what that next thing is, but I don’t think they have a plan for what that next thing is. A lot of this wood on an SPC core is just that—let’s slap something on this core and see how it works. We’re not seeing real traction there. We’re also seeing a lot of herringbone and designs that’s a very small part of the market, but people are looking for that next segment, and it’s almost like they’re force- feeding new products even though there’s not a market for it just yet.

Richmond: To that point, we also run the risk that—because of the dominance of SPC and the newer technologies people are pushing out—something else that gets introduced that’s new and exciting might get lost in the growth of SPC. Everyone is seeing so much in that product line and there’s so much opportunity there that there may be another technology that hits right now that doesn’t get traction because there’s no room for it in the market.

Q: In his keynote speech to attendees, Alan Beaulieu (ITR president) provided a generally optimistic outlook for the flooring industry over the next few years. In your view, what’s the biggest threat to traditional distribution? Conversely, what’s the strongest advantage of traditional distribution?

McKenna: The easy answer to the threat is the disruption of online and the big boxes. But I believe those mediums have been around long enough now that we’ve proven there’s still very much a need for distribution. While certain demographics might be comfortable buying a floor online, there’s still some who are not comfortable with that transaction. I think there’s always going to be a need for a retail store—although the percentage may fluctuate over time.

I think the advantage of distribution is, regardless of how somebody buys something, they still need to have the inventory on hand and be able to ship it to the customer at some point. There’s still a demand for what we do; it’s just that it might be a moving target in terms of how much demand there is for it at a certain time. It’s really up to us to manage our businesses accordingly.

Rasbury: The main question, in my mind, is can companies that are in traditional distribution keep up with the rate of change as being demanded by the market right now? Whether that’s fulfillment, technology, customer-facing issues…we all work for companies that have been around for a while and might not be as nimble as we would like to be, particularly in certain technology areas and other things that are moving so rapidly. And when you have that innovation curve that’s so steep right now, a lot of times it’s just hard for companies with a management system to react as fast we need to. We do run the risk of being left behind in certain situations or lose a customer base or vendor base just because our rate of change is too slow.

Richmond: I think the biggest threat to traditional distribution business are traditional distributors. If we’re not investing in our business or changing fast enough, we run the risk of being left behind because we’re no longer relevant. On the technology side, there are things consumers get used to: everybody wants to check inventory online, find out when it will be at your house, etc. I call it the Amazon effect; Even though they don’t trade in our business, the consumers and the people we sell so still expect that. We get held to these standards that maybe we’re not able to keep up with.

Gorny: I still believe traditional distributors provide a great asset given our knowledge. Customers today still need that knowledge.

***

(For more coverage of the 2019 NAFCD convention, please see the Nov. 25/Dec. 2 edition of FCNews.)

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