Hank Darlington 2014-03-05 07:40:09
Times are changing It's certainly no secret that I've been active in this great industry for a number of years, and over those years I've seen tremendous changes. These are just a few: Fifty years ago the two dominate fixture manufacturers were American Standard and Crane. Eljer was a player and Kohler was just beginning to hit its stride. There were very few showrooms and those weren't done for the right reason. They weren't profit centers and they had very little retail appeal. Decorative plumbing fixtures and faucets as we know them today hadn't been conceived yet. There were only three decorative faucet lines: Artistic Brass, Broadway Collection and Phylrich. Two of them are gone and one is fighting to make a resurgence. There was no Ferguson Enterprises as we know it today. The industry was made up of a bunch of family-owned, independent wholesalers. There was no Internet! In fact, most wholesalers weren't even computerized. Yep, inventory control, accounts receivable and financial statements were done by hand. There have been so many more important changes - too many to recite in this article. I always have loved change! Change is inevitable. Sometimes it's good, other times not so good. Change will happen and we can either adapt and roll with it and turn it into an advantage - or we can fight it and let it roll over us. In the last year or two we've seen more largescale changes than I can remember taking place in such a short period of time. Listed below are a few of these changes that have transpired in the past 12 months, and what I believe they will mean to you, your company, our great industry and your customers. Ferguson made a bold and gutsy decision to not be an exclusive Kohler distributor by taking on the American Standard product line. American Standard was acquired by Japanese conglomerate LIXIL. LIXIL consummated a deal to purchase Grohe. Winnelson signed an agreement to take on the Kohler line nationally. Will TOTO be next? TOTO and Wolseley Canada made an agreement for Wolseley Canada to represent TOTO products. How long will it be before Ferguson, a Wolseley subsidiary, does the same thing? Kohler (as well as a number of other decorative plumbing and hardware companies) implemented an Internet minimum advertised price policy to protect its brand. Kohler and selective distributors are opening "Kohler Signature Showrooms" in several large cities in the United States. These very retail-oriented stores show and sell only Kohler-made products. These are a few of the really big changes that have occurred. There are, and will be, more. There's going to be a big shakeout and settling-in period over the next two to five years. In my humble opinion there's going to be a huge horserace between the three major Fixture manufacturers (Kohler, American Standard and TOTO). I personally love it. This is what free enterprise is all about! I'm the first to admit I'm not in a great position to speculate on what all this change will mean to the above-listed manufacturers, national companies such as Ferguson (the largest plumbing wholesale distributor in the country) and Winnelson, the independent wholesalers, the big boxes, the Internet, and yes, even all the way down to the independently owned showrooms and kitchen-and-bath dealers. But isn't it fun to speculate? I realize I no longer own a business, I'm not running a business and my crystal ball isn't any better than anyone else's. But please allow me the privilege and fun of venturing some pretty well-educated guesses as to where a lot of this is headed. I have talked with several folks who are directly involved in what has taken place and what will take place. Ferguson moves away from being an exclusive Kohler distributor: To me this makes great business sense. Ferguson may have given up a few points as a Kohler Tier 1 distributor, but it will pick up added revenues on both the retail and commercial side with American Standard. I wouldn't be surprised if Ferguson picks up some margin points as well. I think Ferguson is giving up a little to gain more. But will Kohler sit back and watch a very large piece of its business go away? I think not! There probably are a number of strategically located American Standard wholesalers who would love to have the Kohler line. I'll bet there are a lot of doors being knocked on that have not been pursued in the past! American Standard may have gained Ferguson, but it may lose (or have to share) some of its business with the folks from Wisconsin. I believe it will take LIXIL a couple years to get its arms around the American Standard and Grohe acquisitions. While it does that, Kohler will be working hard to gain back and grow its market share. I believe another positive out of all this is Kohler will have to relax some of its very stringent policies that it "dictated" to its distributors. I believe this and a more generous "tier program" will bode very well for the existing independent wholesalers. In the long haul I see a win-win for all concerned. Time will tell and it will be fun to watch it all unfold. I almost wish I was still involved on a full-time basis. The LIXIL acquisition of American Standard and Grohe: In my opinion LIXIL gives American Standard a serious shot in the arm! LIXIL is big and it wants to grow its business in Europe (Grohe) and the U.S. (Grohe and American Standard). I hope the economy continues to improve and I hope LIXIL Has done and will continue to do its homework on what it takes to be successful in the U.S. There's a whole lot more involved than just signing up Ferguson. But let's face it, the Ferguson deal will immediately bring the better part of a $100 million in revenues into its cash register - residential and commercial (a Darlington guesstimate). The Grohe acquisition should be good for all concerned. Kohler reaches a sales/distribution agreement with Winnelson in the U.S. and TOTO makes an agreement with Wolseley Canada: I did a consulting job with TOTO a number of years ago and after visiting in Japan and learning about the company I am not one bit surprised it has been able to make inroads and great strides in both the U.S. and Canada. The Ferguson/Kohler change will only open up more doors for these folks. TOTO is very patient, very tenacious, makes a fine product and will become even stronger as all these changes play out. It's going to be a horserace and let's face it, there's plenty of business to keep all three major players (Kohler, American Standard and TOTO) strong and vibrant for years to come. Strong and honest competition is great for all concerned! It's what makes America the greatest country in the world. IMAP programs: I'm told Kohler's IMAP program has been very successful. Good for Kohler for having the intestinal fortitude to implement and enforce it! Grohe also uses an IMAP program and I heard recently that it has shut off Amazon.com for not adhering to its distributors' IMAP policy. Internet minimum advertised price programs help manufacturers strengthen their brand value and support consumer satisfaction. I'm excited to see these changes. Now we will see Kohler, American Standard and TOTO side-by-side in showrooms across America. No more sneaking product in the back door! We will have real head-tohead competition. Quality will improve, programs will improve and we will have a much more level playing field. I truly believe everyone will benefit and I'll bet all of this will lead to more changes. Hurray to America and our free enterprise system. Happy selling! Hank Darlington, owner of Darlington Consulting, writes several monthly articles for magazines, teaches seminars, and offers a full range of small business consulting services to kitchen and bath dealers, distributors and manufacturers. Darlington was inducted into the Hall of Fame by the National Kitchen & Bath Association in April 2004. He can be reached at 2010 Granite Bar Way, Gold River, Calif. 95670. Phone: 916/852-6855, fax: 916/852-8866, email: firstname.lastname@example.org. How a free enterprise system affects the heavy hitters in our industry. We can either adapt and roll with change and turn it into an advantage, or we can fight it and let it roll over us.
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