Article Number: 4282
Armstrong remains bullish on independent distribution
By Steven Feldman
LANCASTER, PA.—This year celebrates the industry’s longest running manufacturer-distributor relationship with Armstrong and J.J. Haines reaching the century mark. Much has changed throughout the last 100 years, but one thing remains constant: the value of independent distribution to Armstrong, particularly in this economy.
“Our belief is that across the spectrum of 20,000 retailers, going through independent distribution is the most cost-effective way to reach our customers,” said Frank Ready, executive vice president of Armstrong and CEO of North American Floor Products. “It’s a model we’ve had for years and works very well.”
While Ready believes Armstrong has the best distributors in North America, he admits the road is not always paved with roses, particularly as to how their respective balance sheets should be strengthened.
“Some distributors over the last several years have tried to grow their businesses, not organically with existing products but rather by taking on more products and brands,” he said. “The way we see it, this causes problems. First, it dilutes focus. Secondly, the approach of proliferating product lines results in higher costs, such as long supply chains of the product being imported, increased investment in inventory and the eventual obsolescence of products. Also, some distributors, in an effort to satisfy their core-suppliers, have added a dedicated sales force, which is a duplication of cost: two sales forces calling on the same retailer.”
Conversely, distributors on occasion have taken issue with some of Armstrong’s actions as it seeks to best serve its retail customers. Those would include setting up owned distribution in certain areas of the U.S. or having a direct relationship with select accounts, such as the National Floorcovering Alliance (NFA).
“In NFA’s case, you have the cream of the retail crop in their respective markets who want to buy multiple product categories directly from the manufacturer,” Ready said. “So we were able to work with each of their members to tailor a portfolio of products that are right for their markets. The result is a more effective business relationship where we are more responsive to their needs and, thus, a better supplier.”
In this unique relationship, Armstrong handles the sales relationship, billing and logistics, and assumes the credit risk. The local distributor handles special orders and are reimbursed based on an agreed-upon fee schedule.
“When we have gotten directly involved in the sales or logistics process, more often than not it’s been to gain focus on our portfolio of product and get it sold and presented the way we want it sold and presented. In some cases a distributor may not be as educated as we would like because it has so many more products with which to contend.”
Sometimes Armstrong takes ownership of its distribution in a particular geographic region. Take the Pacific Northwest, for instance. Armstrong and its former distributor had a rather sudden and less-than-amicable split in late 2007, Ready said.
“We needed to develop an alternative. And we didn’t see an alternative where there was an existing distributor that could provide us with the requisite focus, commitment to inventory and customer service. So the answer was to do it ourselves.” Armstrong hired its own sales force and contracted logistics to a third party. The results have been favorable. “Last year we were up double digits vs. ’07 in a very challenging market.”
Another isolated instance occurred last year on the wood side of the business in the Northeast, when Hoboken Floors shut its doors. “We did not have an alternative with the depth of knowledge and experience in hardwood that we required,” Ready said. “So when Hoboken’s salespeople became available, it became an interesting option to hire those people and expand the logistics of Patriot, which had been set up in New England for 15 years.” He said sales are up slightly in a very tough market.
“It wasn’t a conscious effort on our part to get into distribution,” he said. “It was a reaction to unique events where the alternatives didn’t give us the quality of local representation, in-store service, etc. We honestly believe an integrated relationship between a distributor and core supplier is the best alternative, where we are both focused on the same goal. The challenge is that as distributors seek growth by diversifying their product offering, that dilutes all the elements that make that relationship work.”
The issue is a double-edged sword. Any manufacturer wants its distributors to be strong, and any strong business seeks to continually grow. As Ready attests, “By and large, Armstrong has the best distributors in every market we serve. They have the strongest balance sheets to weather storms like we are in now, the best reps and best logistics capabilities. And in this environment, you have no idea how much we appreciate having the best distributors.”
It works both ways. Ready noted that by having one of the most trusted and recognized brands in the industry, Armstrong should be more important to them than ever.
Aside from the powerful brand, Armstrong resilient distributors greatly benefited more than 10 years ago when the manufacturer moved to single distribution. What this did was allow its wholesalers to compete against distributors of competing products, rather than the same. “The remaining distributors became much stronger and much more cost effective because they had more volume going through their box,” Ready said. “They could get much more efficient by selling more product. Of course, you have fewer reps visiting each retailer, which is why it is so important for our distributors to maintain their focus.”
At the end of the day, no relationship is without its peaks and valleys. But it is inarguable that Armstrong’s relationship with distribution is mutually beneficial.
LANCASTER, PA.—This year celebrates the industry’s longest running manufacturer-distributor relationship with Armstrong and J.J. Haines reaching the century mark. Much has changed throughout the last 100 years, but one thing remains constant: the value of independent distribution to Armstrong, particularly in this economy.
“Our belief is that across the spectrum of 20,000 retailers, going through independent distribution is the most cost-effective way to reach our customers,” said Frank Ready, executive vice president of Armstrong and CEO of North American Floor Products. “It’s a model we’ve had for years and works very well.”
While Ready believes Armstrong has the best distributors in North America, he admits the road is not always paved with roses, particularly as to how their respective balance sheets should be strengthened.
“Some distributors over the last several years have tried to grow their businesses, not organically with existing products but rather by taking on more products and brands,” he said. “The way we see it, this causes problems. First, it dilutes focus. Secondly, the approach of proliferating product lines results in higher costs, such as long supply chains of the product being imported, increased investment in inventory and the eventual obsolescence of products. Also, some distributors, in an effort to satisfy their core-suppliers, have added a dedicated sales force, which is a duplication of cost: two sales forces calling on the same retailer.”
Conversely, distributors on occasion have taken issue with some of Armstrong’s actions as it seeks to best serve its retail customers. Those would include setting up owned distribution in certain areas of the U.S. or having a direct relationship with select accounts, such as the National Floorcovering Alliance (NFA).
“In NFA’s case, you have the cream of the retail crop in their respective markets who want to buy multiple product categories directly from the manufacturer,” Ready said. “So we were able to work with each of their members to tailor a portfolio of products that are right for their markets. The result is a more effective business relationship where we are more responsive to their needs and, thus, a better supplier.”
In this unique relationship, Armstrong handles the sales relationship, billing and logistics, and assumes the credit risk. The local distributor handles special orders and are reimbursed based on an agreed-upon fee schedule.
“When we have gotten directly involved in the sales or logistics process, more often than not it’s been to gain focus on our portfolio of product and get it sold and presented the way we want it sold and presented. In some cases a distributor may not be as educated as we would like because it has so many more products with which to contend.”
Sometimes Armstrong takes ownership of its distribution in a particular geographic region. Take the Pacific Northwest, for instance. Armstrong and its former distributor had a rather sudden and less-than-amicable split in late 2007, Ready said.
“We needed to develop an alternative. And we didn’t see an alternative where there was an existing distributor that could provide us with the requisite focus, commitment to inventory and customer service. So the answer was to do it ourselves.” Armstrong hired its own sales force and contracted logistics to a third party. The results have been favorable. “Last year we were up double digits vs. ’07 in a very challenging market.”
Another isolated instance occurred last year on the wood side of the business in the Northeast, when Hoboken Floors shut its doors. “We did not have an alternative with the depth of knowledge and experience in hardwood that we required,” Ready said. “So when Hoboken’s salespeople became available, it became an interesting option to hire those people and expand the logistics of Patriot, which had been set up in New England for 15 years.” He said sales are up slightly in a very tough market.
“It wasn’t a conscious effort on our part to get into distribution,” he said. “It was a reaction to unique events where the alternatives didn’t give us the quality of local representation, in-store service, etc. We honestly believe an integrated relationship between a distributor and core supplier is the best alternative, where we are both focused on the same goal. The challenge is that as distributors seek growth by diversifying their product offering, that dilutes all the elements that make that relationship work.”
The issue is a double-edged sword. Any manufacturer wants its distributors to be strong, and any strong business seeks to continually grow. As Ready attests, “By and large, Armstrong has the best distributors in every market we serve. They have the strongest balance sheets to weather storms like we are in now, the best reps and best logistics capabilities. And in this environment, you have no idea how much we appreciate having the best distributors.”
It works both ways. Ready noted that by having one of the most trusted and recognized brands in the industry, Armstrong should be more important to them than ever.
Aside from the powerful brand, Armstrong resilient distributors greatly benefited more than 10 years ago when the manufacturer moved to single distribution. What this did was allow its wholesalers to compete against distributors of competing products, rather than the same. “The remaining distributors became much stronger and much more cost effective because they had more volume going through their box,” Ready said. “They could get much more efficient by selling more product. Of course, you have fewer reps visiting each retailer, which is why it is so important for our distributors to maintain their focus.”
At the end of the day, no relationship is without its peaks and valleys. But it is inarguable that Armstrong’s relationship with distribution is mutually beneficial.
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