HCN Scoreboard Series: Distribution Nation
The HCN Distributor Scoreboard has seen more than its share of consolidation over the years. Recent headlines show the trend continuing, with Emery-Waterhouse purchased by Ace Hardware (in February), Roberts & Dybdahl bought by Cedar Creek (in May), and Dynamic Paint Products acquired by Merit Distribution (in August).
“Consolidation seems to be a constant in our channel,” said Steve Synnott, president and CEO of Denver-based PRO Group, a network of distributors. “Recent years have delivered more consolidation at the supplier/ manufacturer level than what we have seen in wholesalers and retailers, but all segments have witnessed consolidations, mergers and acquisitions. I anticipate more of the same in future years.”
One of the major changes shaking up the HCN Top 100 Distributor Scoreboard in 2013 is increased demand for products for the home. Housing starts in 2013 numbered 923,000, 18% above the previous year. And that lift in demand — the best in six years — had its impact on revenues.
Of those distributors participating in the Top 100 Distributor Survey, 83% reported year-over-year sales gains — and a full 50% reported double-digit percent gains.
Five companies reported a flat or negative sales change from the previous year.
As a combined group, the 30 respondents reported a collective 9.3% gain in wholesale sales.
Leading the way in the double-digit growth category is Islandia, New York-based Sherwood Lumber, with reported wholesale sales up 35%. The key events that bolstered the company’s performance were efforts to position the company for future growth in new and existing markets, it said. Expanding product lines to include more value-added specialty items was also seen as a key focus.
Not surprisingly, a focus on products and product value was described by other top sales gainers. At Portland, Oregon-based Forest City Trading Group, new products, along with a revived effort on industrial and nonresidential business, lifted sales. Green Bay, Wisconsin-based Amerhart added traders in Oregon to improve its lumber buying abilities. And at York, Pennsylvania-based WOLF, the focus was described as product differentiation, higher quality and competitive pricing.
According to Synnott, leading distributors are responding to the pain points of merchandising. “Maintaining a fresh assortment with new item introductions in many categories of goods is a challenge for independent retailers,” he said.
Taking care of customers is a common refrain among the survey respondents. A part of that is price competition. But Synnott believes there is always more to price than meets the eye.
“Price is certainly a key factor in the marketplace, and most retailers have at least six distributor sources to shop,” he said. “We do hear occasionally of phenomenal values offered to retailers in very combative markets, but more often hear that customer service, prepaid freight, delivery window and marketing functions are more meaningful differentiators than price.
According to Paul Van Noy of Spartanburg, South Carolina-based Lancaster, one of the areas where distributors bring value to customers is by leading them to ancillary products. The name of the modern distribution game: “Help provide them with value-added service that helps them expand their business.”
For Lancaster, a specialist in paint and paint sundries, window coverings are proving to be just such a category for many paint stores that seek to step up their services to the fully loaded design center level. Lancaster recently signed a deal with Exciting Windows to bring marketing, training and product for just such a transition from paint store to decorating center.
“Things are changing — there’s no question about that,” said Van Noy. “And they’ll be more changes before we hang up our hats.”
Where does a wholesale distributor go from here? The answer begins with the customer, said PRO Group’s Synnott.
“Prove to the customer that you can help them become better merchants with higher gross margin performance by delivering merchandising, marketing and advertising services in addition to quality products at a fair price,” he said.
A HEALTHY DISTRIBUTOR SCOREBOARD
Companies that participated in the HCN Distributor Scoreboard Survey showed overwhelming sales improvement in 2013 (or the most recently completed fiscal year), compared with 2012. Combined sales of the 30 companies at right showed a year-over-increase of nearly 10%.
For the Top 100 Distributor Scoreboard, including sales estimates of the leading distributors, visit the “Research” tab at Homechannelnews.com.