In spite of the consistently negative numbers emanating from traditional economic indicators — consumer confidence levels, the producer price index and unemployment rates — there seems to be no shortage of business optimism in many circles of the jan/san industry.

For example, Allen Soden, president of DEB SBS, Stanley, N.C., has never been more enthused about the way business is going. A manufacturer of soap and other hand-care products, DEB had its strongest month ever in September and also the best trade show in its history in October in Orlando.

“We are in a category that’s getting unbelievable visibility,” Soden admits. For one thing, the U.S. Surgeon General has been advising people to wash their hands after opening the mail, relative to anthrax contamination fears. Add the onset of the cold and flu season and soap sales are experiencing a significant boost, he adds.

In spite of a general recession, DEB has gone ahead with plans to enlarge its production plant. The expansion includes, among other things, upgraded laboratory equipment. The company has also implemented procedures that bring the plant to a sanitation level as stringent as those found in pharmaceutical operations.

The cost, according to Soden, is justifiable. “In these times we’ve made the biggest investment ever in this factory. We had more subcontractors here doing plumbing and piping than a lot of other places. We think that by moving up the ladder to make an even better product, we’re going to be able to go after the business of the people that have shifted out of the country.”

Soden says there have been no layoffs of any of the company’s 100 employees, either. In fact, he is also hiring part-time help. He wants to provide assistance to people who are having a difficult time finding work, and also keeps an eye out for top-notch talent.

Recently, one of these part-time salespeople (who had not been formally trained) took product out to demonstrate to four companies. The visits resulted in four sales. Soden was ecstatic.

“I told the story to our senior sales staff to remind them that there is no substitution for showing up.” Soden hadn’t concentrated much effort on those accounts, but the new sales made him realize he’d been wrong.
“We have to tell our story,” says Soden, who feels that when a company stops being aggressive it sacrifices the opportunity to get products in front of a customer at strategic times.

Still, says Soden, “it’s more difficult to make it. Salespeople have to work harder and smarter to survive.” He says this often requires “changing the rules,” of business, which may include concessions such as working later during the week and perhaps even a Saturday or Sunday. In a recession, companies have to make up for those customers who are no longer buying, or who are buying less.

“We have to make five calls for every call we used to make a year ago. Five to one,” he emphasizes. “Just to stay even.”

New Direction
When many companies are halting expansion, down-sizing inventory, and putting investment on indefinite hold, others are growing. For instance, Supply King of Neptune City, N.J., recently acquired Total Janitorial Supply of Linden. The acquisition was the third in five years for Supply King, and made it the largest independent janitorial supply firm in New Jersey.

The acquisition was in the works years before the recent downturn but Henry Levenstein, vice president of marketing for the company, says the recession’s possible effects didn’t influence anyone’s opinion or decision. In fact, Levenstein is encouraged by the economies of scale the acquisition should provide. The company’s employees are centralized at one location, and the biggest challenges, so far, have been related to absorbing the purchased business’s inventory, integrating the two companies’ computer systems and dealing with customers who are resistant to change — common acquisition-related considerations.

“You have to be confident that the business level is there,” Levenstein advises. “In a business like jan/san you’re looking to acquire dependable sales, so you have to have an idea how dependable those sales are.”

Even if a company is not able to expand or grow in the face of a recession, there are certain strategies that can be used to help distributors maintain their revenue stream, retain existing customers and grow market share.

“You’ve got to match your expenses with your revenues and watch overhead-types of things very closely,” Levenstein believes. “It’s also a time to be aggressive sales-wise. When sales are just coming in it makes it easy to be a great sales manager, but now’s the time where [sales] are not just going to fall from the sky.”

The potential for big sales and new markets is always there.

“A lot of our business is in the education and health care market and other institutions not likely to be affected by the economic cycle.”

It does make a difference what types of businesses make up a distributor’s account base. New York City, for instance, lost millions of square feet of office space and stores. Those tenants will move, and new distributors will pick up that business. Tourist areas are also feeling the brunt of the lost business. Also distributors with a large concentration of customers in the airline or hospitality business have seen business decline. These businesses are seeing some definite changes in buying behavior.

“We do have business service contractors that do cleaning for airlines and they’ve obviously been hit,” says Levenstein. “The airlines were directly affected by September 11.”

Jim Balthrop’s company, PR Cleaning Supply, suffered in September when some of the military bases he serves were closed to outsiders. Balthrop, president of the Pensacola, Fla., company, says his company’s revenues in September were down significantly compared to last year.

“For 10 days we could not deliver. No trucks were allowed,” he says of the U.S. Air Force base he services. “At that base, they eventually had to send a truck outside two weeks later just to get a toilet paper delivery from us.”

Sales have also suffered for Balthrop because of below-normal occupancy rates of hotels and resorts in the hospitality-driven beach area.

Though September posted a 14 percent decline from 2000, things are looking up for PR Cleaning Supply. Military buying has turned around and they are now buying more than ever. October even showed an increase over revenues from last year.

Balthrop says the events of September 11 are what have affected the company’s sales most — the economy has not been a big factor in decreased revenues. He attributes that to the fact there are few businesses in the area that are facing layoffs, so most ordering has remained consistent.

“We tend to watch more local [trends] than national [trends],” says Balthrop. For instance, if local schools were to trim their budgets, the company would be more concerned.

Other companies, like Brookmeade Hardware & Supply Co., in Nashville, Tenn., have evaluated internal business processes and adjusted accordingly in order to maintain profit levels.

Bill Nourse, Brookmeade’s president, says these steps included trimming three people from the staff — one a temp, and two salespeople.

“We’re down a little bit in our growth but not down from last year’s numbers,” Nourse says. The company doesn’t anticipate any further layoffs and actually has two more employees than it did this time last year.

Nourse can’t put a finger on how, exactly, his customers are being affected by recent events.

“There’s just a general drifting downward of the size of the order. The customers are buying a little less frequently and a little less in their orders.”

Nourse says people’s general apprehension has made it difficult to predict what’s going to happen, and in which markets.

“What I’m hearing from the reps is that it’s up or down throughout the country. It depends on what the customer base is.” When Nourse mentions to reps across the country that his business is still doing well, he’s heard over and over: “You’re lucky.”

The Good Fight
Softer, lighter orders have made things difficult for many distributors, but in the cleaning industry — in light of recent events — there are dozens of product categories that now offer a range of possibilities for distributors.

“There are many new opportunities if people want to consider expanding their product lines,” says Steve Epner, of BSW Consulting in St. Louis. For example, dust masks that offer protection from airborne anthrax.

“They’re going to buy them from someone, so why not sell them?” he adds. “Take the opportunity to sell products that aren’t in your traditional mix.”

Balthrop has seen the markets for some products take off in light of recent events. For instance, there’s been a surge in demand for surgical gloves.

“We’ve had to order 10 to 15 times what we normally would,” he says. Balthrop has brought on board a whole new group of customers, including post offices. He says the local newspaper has also been placing orders for dust masks.

Soden says that with heightened awareness of cleanliness and safety, the jan/san business is in a unique position to supply some items people are now demanding.

“I don’t think there’s ever been a better time to be in our industry than right now for those people that can solve problems and be trusted,” he says.

Case Study: A Lesson in Efficiency
For years, many distributor companies have applied the 80/20 rule as an accurate representation of their customer base, helping them determine where they should be concentrating their efforts in tough economic times. The rule says 20 percent of a firm’s customers account for 80 percent of business.

Not always so, says Steve Epner of BSW Consulting, St. Louis. Case in point: a distributor firm Epner worked with recently was experiencing falling profits — even as sales grew slightly. To analyze the problem, the company did an activity-based costing report in which they assigned a cost to every aspect of taking and processing an order. They then looked at the gross margin that each customer contributed to the organization.

“What we found is that the top 20 percent of the customers provided 117 percent,” he remarks. “If we fired the other 80 percent of the customers we’d make more money.”

Obviously that figure isn’t valid, in that costs for overhead and other expenses need to be spread out across the customer base. Instead, Epner decided to focus on the bottom 20 percent, who, he figured, contributed almost nothing to profitability. An experiment was hatched:

Those companies were no longer allowed access to a sales rep. They had to order through telemarketers and online. Number two, those customers could no longer make special orders, which are very expensive. They would order what was in stock and on the shelves. Finally, invoices are expensive. The 20 percent would now be required to pay by credit card and use standard shipping. And best of all, the company increased this sector’s prices by 15 percent.

“We thought we’d lose all the customers, but we didn’t lose any of them,” Epner says.

The findings: this sector was not buying based on cost; they were buying based on availability. The worst customers had become the best and most profitable for the company. The moral?

“Sometimes distributors have talked themselves into a corner by thinking that they know why somebody buys from them,” he says.

“You can make money by understanding what things cost you and what you’re willing to pay for. You’ll be surprised to find people want different things than you think they want.”

Giving Something Back
The jan/san industry’s outpouring of support to victims of the September 11 tragedies has been tremendous. The International Sanitary Supply Association, member companies, regional associations and many more organizations and individuals have given generously.

Cherokee Equipment president Vincent Marchetti is a little different than most. His life was directly affected by the terrorist attack — he lost one of his best friends in Tower 1 that day.

That’s what prompted Marchetti’s company to give approximately $8,000 recently to a group they could all feel proud to support — the surviving families of those killed in the Trade Centers. Cherokee Equipment was the winner of three manufacturer’s rep-of-the-year awards at the recent ISSA/Interclean show. Shortly after, the company’s three employees, Marchetti, Jim Muraca and Danny Ayaz, made the decision to donate all their winnings.

“The way I feel is, the impact of the World Trade Center tragedy indirectly affected, emotionally and psychologically, everyone in the country, and personally, it has affected me where I feel a tremendous need to do something — to assist in the recovery emotionally and financially of the families that lost relatives,” says Marchetti, whose company is located in West New York, N.J., just 5 minutes from where the Trade Centers stood.

“I felt my hands were tied, and this is the least I could do.”

Marchetti’s company, whose motto is “building a stronger army by creating better soldiers,” was awarded rep-of-the-year awards by Envirox, North American Cleaning Equipment and Kaivac Systems. The manufacturers, when told of Cherokee’s intentions were “totally supportive, and honored to be a part of it.” Cherokee has won at least one rep-of-the-year award each year in its four-year history, but this was the first time the company won three at once.

And Marchetti’s actions (he also volunteered near Ground Zero days after the attacks) are serving as inspiration for others. Numerous people have approached him congratulating him on his actions, and wondering what they can do as well, he says.




POSTED ON: 12/1/2001