Article Number: 1053
NFA, Armstrong Strengthen Business Relationship
By Steven Feldman
Chicago—Members of the National Floorcovering Alliance (NFA) earlier this month voted to enter into a landmark relationship with Armstrong World Industries that includes some direct-sell elements. For the nation’s largest hard surface supplier, the deal represents an opportunity to more than double the volume it does with a group which collectively does more than $1 billion in annual business. At the same time, NFA members can realize better margins and greater profits.

NFA, which is comprised of 33 of the nation’s top retailers, will place orders with and be invoiced directly by Armstrong. Distributors will still be involved in the fulfillment process—functions that include warehousing, delivery and merchandising, much in the same manner they service Armstrong’s Home Depot and Lowe’s accounts. “We suspect our distributors’ business will continue to grow because of the program,” said Paul Murfin, vice president of sales. “Inventory will turn faster, and this helps keep trucks full. Things that make distributors more efficient.”

He said the arrangement includes a comprehensive collection of all Armstrong products. “Certain builder items are excluded. We have a significant investment in the builder industry, and we were more interested in growing our retail business.”

Sam Roberts, NFA’s president and orchestrator of the deal, believes this is an important step for the group. “Every retailer is looking to strengthen his relationships with a major mill. You need to achieve a competitive advantage in your marketplace. So we were looking for ways to bring value to Armstrong and us.”

Why Armstrong? “We feel Armstrong has the best brand name in the hard surface business,” he said. “It also has the most comprehensive collection of hard surface products of any one manufacturer. It was an obvious candidate.”

He believes the landscape of the industry is changing, and this deal is a landmark moment—a precursor of things to come, noting how U.S. mills will find it hard to compete on a level basis with those who are importing from China, where as much as 25% of the cost is cut out. “We’re in a unique position, given the composition of our membership, to thrive in this new environment. We’re not changing reality, but rather recognizing and adjusting to it.”

Although, with that said, NFA is not going to jump in to similar deals with every supplier. “There’s no question we will be actively pursued,” Roberts said. “But we must act with wisdom and caution. If we are going to tie ourselves to another major mill, we want to make sure it does not come at Armstrong’s expense. It will be a measured process.”

Murfin acknowledged the program is motivation to improve Armstrong’s position at retail as well as get closer with its retail customers. “To be honest, these guys already buy directly from many [overseas] manufacturers. We can provide products the same way. But this is also about having more of a personal interaction with the retailer where we can develop programs that are mutually beneficial. When you deal with wholesale distribution, many times you abdicate that role to the distributors.”

The Raby Co. is a prime example of a company Armstrong is targeting with this deal. The six-store retailer, the largest in New Mexico with a 90/10 retail/commercial mix, did minimal business with Armstrong, according to Phillip Raby, president, but now anticipates doing as much as 20% of his hard surface business through the mill. “This is a great deal if you’re a volume buyer. It’s also a great avenue to increase margins and profits. We normally work on 40% to 45% margins, but can do as much as 50% with Armstrong. It brings another player to the market aside from Shaw and Mohawk in that whole direct model. It will make us more competitive in the marketplace.”

Sam Prizant, owner of Pittsburgh-based, 41-year-old retailer Prizant’s Carpet, is another who anticipates doing more business with Armstrong. “This should make Armstrong one of our better hard surface suppliers,” Prizant, who recently returned to the business after a 12-year hiatus, added, “In merchandising our stores, with this program we would probably favor Armstrong.” And that’s important given the retailer does approximately $20 million annually from its 10 stores, of which 95% is straight retail.

Murfin was quick to point out this should not be construed as the proverbial shot heard ‘round the world. “This in no way represents a philosophical change in how we go to market. We’re just sticking our toe in the water. This is only 33 retailers out of 20,000-plus. We want to see it work before considering other options. We remain totally dedicated and committed to our distribution strategy.”

In illustration, he noted that aside from NFA, Armstrong has a direct relationship with only three retailers: Home Depot, Lowe’s and Sherwin Williams.

At the same time, this was something Armstrong had to do. Murfin believes if it didn’t, someone else would have capitalized on the opportunity. “Look at every company that exhibits at Surfaces; only a handful have distribution. They all would work this deal. In fact, I would imagine there’s a host of proposals on Sam Roberts’ desk right now from every hard surface manufacturer at this convention.”
Sam Roberts

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