Distribution has seen its share of changes in the last 40 years, with the pace of change rapidly accelerating in recent years.
The industry is seeing major acquisitions developing across all categories being driven by Home Depot and Lowe’s. This has moved from manufacturing consolidation to include the same phenomenon with both dealers and distributors as well. Home Depot buying Redi Carpet and Lowe’s buying Artisan Design Group as they move more aggressively into the builder channel. Floor and Décor buying Spartan Surfaces to tackle the commercial segment. And now, private equity entering the arena combining regional distributors into larger footprint wholesalers to create a national distributor network vs. regional approach.
FCNews asked five distribution executives for their five pivotal events:
Jeff Striegel, Elias Wilf
Shift to hard surfaces
In the 1990s, carpet manufacturers were consolidating at a rapid pace as they shrunk from dozens of companies to basically just three major companies: Shaw, Mohawk and Beaulieu. At the time, the major carpet manufacturers focused almost exclusively on carpet, and hard surface was almost entirely handled through distribution. As the decade ended, the shift into hard surface was entering a major phase as the carpet mills began to aggressively move into acquisitions to engage the hard surface segment. The product mix transformation reshaped nearly every distributor’s business model.
The rise of big box retailers in the home center arena.
For distribution, this was a game changer for how products were moving into the marketplace, and the spark that fueled a major shift for manufacturers from position of dual distribution in major markets, shifting to single distribution. The fuse was further lit in the late ’90s when Armstrong went from over 20 national distributors to just 12 RDCs. This evolution not only created single distribution for most lines but also set the stage for distributors to expand into new territories and become much larger.
Industry consolidation and vertical integration
As the carpet manufacturers wrapped up industry consolidation, they moved aggressively into hard surface, with many acquisitions taking place. Each of these changes significantly impacted distribution networks. Whereas hard surface distribution at the time was primarily controlled by the sheet vinyl manufacturers—Armstrong, Mannington, Tarkett, Congoleum—the stage was set for hard surface to begin the same transformation as carpet in going mill direct vs. distribution.
Luxury vinyl tile
Without a doubt, it was the single largest industry disruption throughout the entire industry … but even more so for distribution. It drove massive growth of imports from Asia and drastically changed the landscape for all USA hard surface manufacturing. It created many brand-new suppliers and radically impacted all the direct USA manufacturers as many companies like Shaw and Mohawk simply became distributors as well, as they no longer manufactured these products, but imported them from Asia. It was great for distributors, as they essentially were able to do the same thing alongside them. Distribution embraced the LVT category.
Private equity
Private equity driving distributor consolidation has increased in recent years, and while it’s still in the early phases, there is no doubt this will ultimately have some higher level of impact on distribution. The larger are getting larger. I suspect we will eventually see a national distributor emerge before it’s all said and done, which at this point we haven’t seen occur. The flip side of this to date is private equity has not shown a successful track record here yet.
Lucky Burke, Reader’s Wholesale
Deregulation of the trucking industry
Deregulation completely reshaped the flooring industry and the go-to market strategy of every manufacturer and distributor.
Consolidation
This was especially the case for distributors. We have seen the number of distributors for some manufacturers drop from 40 to 50 in the ’80s to fewer than 10 today. Carpet manufacturing has consolidated from 250 to 300 mills to just a handful today.
Globalization
Flooring manufacturing in Southeast Asia and other areas worldwide. The global expansion completely changed the competitive environment.
Changes in format sizes
From 12-foot and 6-foot vinyl that came in rolls and needed labor to cut, wrap and deliver to vinyl that comes in boxes. From 12-foot roll racks that needed huge square footage in stores to pallets that can be stored easily. Products are now introduced as much for ease of handling at retail as they are for any other reason.
Automation
We’ve gone from inventory index cards to completely automated computer systems. From finding space to put pallets to assigned spaces generated as you unload trucks. From ordering by “feel” to system-generated purchase orders. From stocking three weeks supply from domestic manufacturers to 100 to 120 days’ supply from overseas. Add New Year’s shutdowns and the capital requirements are much greater now. Being in a capital-intensive, low-margin business requires much more financial and business acumen.
Hoy Lanning, UCX
Consolidation
When I started in this business, there were 300 carpet mills in the U.S. and hundreds of flooring distributors; many were separated by the vinyl flooring major brand they carried. (For example: Armstrong, Congoleum, Mannington, Tarkett.) Today, carpet mills in the U.S. have been reduced to less than 20. When I started, there were 48 Armstrong distributors and today there are less than 10. There continue to be fewer distributors and they cover larger geographies. This reduction continues with most products and there has been an increase in private label products and few distributors, if any, only carry one vinyl line.
Product changes
Back in the day, most retailers only sold carpet and vinyl. Eventually, other products expanded such as ceramic and wood. In the ’90s, laminate was introduced to the U.S. Although there had been many luxury vinyl tile products previously, LVT grew tremendously with imports; the expansion of WPC and later SPC also had a huge increase in SKUs. Manufacturing technology improved and with it new products and better looks were added.
The Great Recession
During this time, the flooring business reduced by approximately 40% in sales. This forced many people to leave the business, sell, reduce their size or pick other strategies. During this time some companies, including CMH (Lanning’s former company) were one of them; we decided to expand. We acquired three companies from 2008 to 2012. This strategy helped us survive and strive.
COVID-19
With this catastrophe came many new things. We learned how to work from home, where it was possible. We had to learn to do business differently. We kept our distance from people and wore masks.
The modern age of technology
When I first started in this business, the company I worked for didn’t even have a computer. We operated a $25 million distribution business with the Cardex system. Everything was done on paper and through telephones and typewriters. Accounting was done with ledgers. With the addition of fax machines, computers and the internet, we all learned how to do more business, more efficiently, and faster than ever before.
Keith Slobodien, Apollo
Industry consolidation
The consolidation of manufacturers, distributors and retailers has fundamentally changed the competitive landscape of the flooring industry. As organizations have grown larger, independent distributors have had to find new ways to differentiate themselves through service, expertise and stronger customer relationships. This shift has reinforced the importance of adaptability, partnership, local connections and delivering value beyond price alone.
The rise of luxury vinyl flooring
The emergence of LVT and LVP transformed the industry unlike any product category in recent memory. Consumer demand shifted rapidly as these products delivered a combination of design, durability and value that resonated across multiple market segments. Distributors had to quickly adapt product assortments, inventory strategies and product knowledge to support this evolution.
Globalization of manufacturing and supply chains
The flooring industry has become increasingly global over the past 40 years, creating both opportunities and challenges. Expanded sourcing options have increased product availability and innovation, while supply chain complexity has required distributors to become more strategic in inventory planning and supplier relationships. Global events now have a direct impact on local business operations.
Technology and digital transformation
Technology has reshaped not only how distributors manage their businesses but also how they connect with customers and promote their products. The rise of websites, social media, digital marketing and data-driven decision making has created new ways to educate customers and build brand awareness. Distributors that continue to evolve with these changes are better positioned to remain relevant and create meaningful value in an increasingly competitive marketplace.
Evolving customer expectations
Over the last 40 years, customer expectations have changed significantly. Today’s customers expect not only quality products and reliable service, but also education, marketing support, digital resources and timely communication. Distributors have had to evolve alongside those expectations, continually finding new ways to deliver value while maintaining the relationships that remain the foundation of the business.
John Sher, Adleta
The housing crash and the Great Recession
It was a defining moment. The crash really forced you to partner with people you thought could stay in business. The credit we extended to companies burned us in a few cases but also solidified some partnerships; it made us more important to customers. As bad as the last couple of years has been, it is nothing like what it was like back then.
The rise of the big box retailers
We had to train our retailers so they could compete with the big boxes. The whole thing of the big box—and having to replace that business—made us much stronger in our sales forces as well as the way we went out and worked with our retailers.
Armstrong bankruptcy
The first bankruptcy (for asbestos) made us have to look at other [suppliers] and be more diversified. We came out of it stronger and kept our contractors and flooring retailers on board and gave them products they could sell.
Explosion of hard surface flooring
The influx of hard surfaces flooring, mostly vinyl in the beginning, gave distributors an enormous lift. It also brought Shaw and Mohawk into the category as competitors. We had an edge as the retailers looked to us as experts in vinyl.
World supply chain
Wholesalers who were used to getting product from Lancaster, Pa., and Temple, Texas, now had to go to Asia. The new styles were coming from overseas, and globalization ushered in a supply chain revolution.
COVID-19
This totally wrecked the supply chain for two to three years and loaded distributors up with a crazy amount of inventory that they are now just working through. It caused great stress among flooring distributors, which is why some sold and got out of the business. For those who survived, they thrived in the ensuing years after COVID-19.
