Janitorial Sales Continue Slow Climb Despite Market Competition

This is the first part of a three-part article about the jan/san distribution market.

Often preached during a recession, the one way a business can work its way through an economic meltdown is by selling its way out of it. And that’s exactly what jan/san distributors did. Since 2008, when the economy’s bottom fell out during the Great Recession, jan/san distributors have been slowly climbing their way back — doing it sale, by sale, by sale.

According to Sanitary Maintenance’s “Report on 2014 Sanitary Supply Distributor Sales,” jan/san distributor sales are the highest since the recession. Total sales in 2014 equaled $24.6 billion — the second-highest since the turn of the century (the highest was $24.8 billion in 2006). The 2014 sales numbers (up 2.3 percent or $561 million from 2012) reflect the fact that customers’ budgets have bounced back and they are spending once again.

“The recent growth is largely a reflection of an improving economy coupled with the industry’s refined focus on changing the way the world views cleaning and helping end customers understand that cleaning is properly treated as an investment and not a cost to be minimized,” says Daniel Wagner, director of facility service programs for ISSA, Northbrook, Illinois.

Since 2008, distributor sales have been steady — rising 2 percent every two years. But, distributors say selling to the jan/san marketplace continues to get tougher with increased competition from outside sources. Jumping into the ring to battle independent distributors are big-box stores and large online retailers that pack a punch worthy of stealing market share.

“Wall Street is in the cleaning business,” says Dave Frank, an industry consultant and CEO of American Institute for Cleaning Sciences, Highlands Ranch, Colorado. “We have 360 degrees of competition. You have capital equity firms; you have large integrators like Staples, Grainger, and xpedx; you have multibillion dollar companies that are selling cleaning supplies. Independent distributors are no longer in control of the industry. They are facing hyper-competitive market forces. They’re competing against companies that have an entire menu of business-to-business services and business solutions.”

Market Threats

In 2014, most distributors were able to protect their bottom lines, holding them at an even level or growing them modestly from 2012. But it hasn’t been easy.

“We are fighting to hold onto what we have each day. It is a battle,” says Daniel Josephs, COO and executive vice president of Spruce Industries, Rahway, New Jersey. “It is getting more and more competitive. Big-box companies coming into our segment stealing our market share, cutting pricings and shrinking margins. We need to be scrappy, we need to be tough, we need to be strong and we need to fight back.”

Competition in the jan/san market from big-box stores is nothing new. In fact, large retailers such as Staples, Home Depot, Lowe’s and Wal-Mart, to name a few, have maintained a foothold in the jan/san market for more than a decade. In the last couple of years, however, these stores and others, most notably, Grainger and newcomer Amazon, have aggressively expanded their reach through online marketplaces targeted specifically at jan/san customers.

These big-box retail stores bring a lot to the table. Their sheer size alone allows them to have massive facilities and websites loaded with thousands of competitively priced jan/san supplies. But before jan/san distributors think the walls are starting to close in on them, it’s important to remember the big-box business model is based solely on high-volume product turnover, rather than customer support and services — something in which local independent jan/san distributors take pride.

It is important for distributors to stick to their guns and show off their jan/san-specific expertise to customers, something that easily sets them apart from the purely logistic operations that are big-box stores, says Josephs.

“[Don’t] be something you are not,” he says. “Don’t get into a battle over logistics. We can’t win. Know who you are. Know what your customers want. Be proactive. If we remain reactive, we will be in trouble.”

Distributors also need to go back to their roots — focusing on industry knowledge and expertise.

“Big-box companies don’t have the knowledge nor do they want to learn it,” says Josephs. “They want to deliver the customer a box as fast and cheap as possible. Don’t ask them any questions about the item. We need to push training. We need to upgrade the skill level of our custodians. Get them a seat at the big table when it comes to health and wellness of a facility and its staff.”

There is no question that distributors need to reinvent their business in today’s increasingly crowded marketplace. Many distributors are looking to provide value-added service through consulting, training and positioning themselves as a true business partner.