Supply House Times Master Distributor
Master distribution — comprised of distributors who sell only or mainly to wholesaler-distributors — has arisen as an increasingly distinct third step in our industry's traditional "two-step" distribution channel. In recognition of their growing importance, Supply House Times has made it a point to devote at least one major article each year to focus on this part of the channel. For this edition we sought input from more than a dozen leading master distributors representing a cross section of our industry's major product groups — plumbing, industrial PVF, waterworks, fire protection and HVAC. Nine of them accepted or returned our phone calls and agreed to speak for the record about their experiences. Here is how they responded to a few simple questions put to them about their business fortunes and other pertinent topics.
WHAT'S YOUR IMPRESSION OF BUSINESS CONDITIONS DURING 2010, AND WHAT DO YOU SEE COMING IN 2011?
Steve Livingston, Kelly Pipe: (Editor's Note: Based in Santa Fe Springs, CA, Kelly Pipe Co. has been in the distribution business since 1898 but in recent years has transitioned from selling to a wide base of customers into a full-fledged master distributor selling only to PVF wholesale-distributors — with the exception of its headquarters location, which various local clientele has come to depend upon for many decades. My conversation with Kelly's Central Region Vice President Steve Livingston took place within the context of that transition, which was the subject of our August 2007 cover story, "Kelly Pipe Evolves Into Master Distribution.")
For us 2010 started off like everybody else's, as a big question mark. What we found was it was the most effective year for us in the master distribution business because many of our customers were financially unable to stock product the way they used to. So 2010 was a profitable year for us, and really entrenched us as a master distributor. After a number of years of saying to our wholesale customers that we will not sell to their customers, we proved it and they began to trust us.
For 2011, I think the economy is picking up and our business plan is pretty aggressive. The west coast may be a little flat but we think the rest of the country will be up quite a bit revenue-wise. What concerns us is how much of that will be due to pricing issues in the steel industry and how much from units.