Volume 46, Issue 8 - October 2007

Special Report: Selling Direct
The Reasons Why
Manufacturers List Financial Reasons 
for Eliminating Distributors

by Alan B. Goldberg, a contributing writer for Shelter magazine.

Why do door and window manufacturers go direct? To this question, there are many answers. Both Kolbe and Kolbe Millwork Co. and Andersen Corp. declined to comment for this article, but a number of other door and window manufacturers shed some light on why they decided to sell their products direct.

Going Direct
“We began in 1971 as a window manufacturer selling to dealers,” says Bill Schul, general manager of Air-Chek/Window Depot of Clifton, N.J. “In 1993, we changed direction and opened Window Depot to sell to the public and to install.”

Schul says the change had more to do with the financial issues of its independent contractor customers than trying to eliminate anyone in the distribution chain. The retail business proved to be more reliable as far as cash flow and more lucrative as the market shifted.

“We have seen the market change from being evenly divided between retail and wholesale to 80-percent retail,” Schul says.

In spite of the significant shift, Schul says there will always be some non-retail business.

“Small home-improvement contractors like to work with us because our pricing is competitive and they like our customer service.”

For smaller manufacturers, going direct often can be a matter of survival.

Royal Prime in Elizabeth, N.J., sold through distributors for 20 years but felt it paid a price in margins. 

“This is a very cutthroat business,” says Andrew Inelli, executive manager. “We could not continue with the level of price cutting, so we decided to go direct and open our doors to contractors and dealers.”

Inelli points out that the company has taken many steps to add more value to its windows. 

“We started using a better spacer system (warm edge) and made other material changes so we could sell our Energy Star® windows to the high-end market. We’re now providing a very good product at competitive prices and improving our margins at the same time.”

Hard to Compete
For American Window Products in Massillon, Ohio, the situation wasn’t much different. The company was selling to distributors and contractors initially.

“More manufacturers were getting into the window market making it even more difficult to compete,” says Roger Warnick, general manager. 

Warnick says big boxes have been selling standard windows at wholesale prices plus installation. “We had no protection from distributors who were competing locally,” he says.

Warnick realized that in order to survive, his company had to go direct. He explains the delicate balance that must be maintained between homeowners and contractors in order to avoid a pricing conflict. 

“I try to be very careful so that I am treating my customers fairly, whether homeowners or contractors, and giving everyone prices which are acceptable in the marketplace,” Warnick says. “We’ve had our fill of cutthroat.”

Control and accountability are other reasons why manufacturers go direct. Take for example, Champion Windows and Doors in Cincinnati.

“We believe very strongly in single-source accountability,” says Don Jones, president and chief operating officer. By supporting its 60 locations across the country, the company is in direct contact with the consumer.

“There is no disconnect between consumer and manufacturer,” Jones says. “From the feedback we get, we can maintain our pioneer status by offering additional options and features desired by the consumer.” 

Creating a Network
Some of the large door and window manufacturers determined that they could provide a distribution function without using distributors—and they did so by creating networks. 

Pella Corp., for example, established PDSN or Pella Direct Sales Network. Seventy-seven independent companies, some Pella-owned, were created, according to Ed Weinfurtner, executive vice president of Gunton Corp., the largest of Pella’s distributor companies.

Weinfurtner points out that Pella established this organization more than 30 years ago and it has worked very well. Pella makes the product, but it does not sell direct. Sales, marketing, customer service and logistics are handled by the Pella network.

“This plan is viewed as a key competitive advantage, because Pella has control over sales and customer service,” Weinfurtner says. “It is unique in the market place; nobody does this the same way. Our performance is benchmarked regularly against our peers (the other companies).” 

“We share with our peers, so we drive excellence as opposed to a dealer and independent arrangement where everyone does their own thing,” he says. 

But there are still door and window manufacturers that hold true to traditional distribution, whether it’s one-step or two-step, and Klamath Falls, Ore.-based JELD-WEN is one such manufacturer.

“We believe in our distribution network, because it is vitally important to supporting the JELD-WEN brand and our products,” says Jim Hackett, vice president JELD-WEN two-step sales. “Our channel partners provide valuable services to the end user customer, local market knowledge on product preferences and expertise on current building trends.” 


Shelter
© Copyright 2007 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.