using or from another Interline catalog.
Understand Customer Needs
It's also important to understand how customers view certain product lines, Sanford said. For example, Interline's institutional customers see janitorial and sanitary distribution as a "service," while they view Interline's plumbing business as just a source of product.
Because of this, Sanford said that Interline is more successful in the institutional markets at converting jan-san customers to its other product lines than the other way around. "They are much more willing to listen to our story on plumbing and electrical products than the reverse," he said.
In the contractor market, Interline has spent time learning and understanding the customer base -especially after buying Barnett in 2000. At the time, Barnett was a mail-order business with just 3-7 percent of individual customer spend. The distributor's customers were primarily plumbing contractors. But the company also had a "very good product offering," Sanford said, "and were pioneers in Asian sourcing in the plumbing industry."
So Interline asked Barnett's customers how it could become a more important supplier. "They told us, ‘You need to be local, and you have to have will-call. Fill out your product offering and offer more things like HVAC and copper tubing.'"
In addition to taking in these concerns, Interline also looked at how it could save money for the contractors. The distributor found that it could help manage shrinkage off contractor trucks by creating a truck stock program, using private label product where it could to save the customer money and replenishing only what was written down the day before as used. As a result, Interline has brought the average shrinkage of its contractor customers from 15 percent down to 2-3 percent a year.
"We can manage each truck as a profit center for the owner of that business, and we can get 100 percent of that business," Sanford said. "During the last 12 months we have seen some softness in that space, but we have continued to set up new vendor managed inventory and truck programs. & hellip; We have a lot of prospects in the pipeline and a lot of signed deals in the pipeline that will be implemented in the next 12 months."
To successfully integrate its company and grab market share, Interline Brands has had to pay close attention to and respond to the needs of acquired and current customers, Interline Brands President William Sanford said recently at the JPMorgan Basics & Industrials Conference.
In fact, learning about customers starts before an acquisition is even made, he said. The relationships we acquire are important. We have to understand how strong those relationships are before we make an investment," Sanford said.
The $1 billion distributor of facilities maintenance products was formed through a series of mergers of more than 20 companies in the plumbing supply and facilities maintenance industries.
Last year it bought American Sanitary Inc., a rollup and national distributor of janitorial and sanitary supplies, providing Interline a higher-margin and complementary product line. This has beefed up customer spend with Interline from just 10 percent of a customer's wallet to a potential 30-40 percent, Sanford said.
AmSan also nearly doubled the number of customers in Interline's portfolio. The two companies fortunately had just a 5 percent customer overlap. That has provided clear opportunities for Interline to cross-sell.
Interline also owns Wilmar, Sexauer and Travco brands, along with Barnett, Hardware Express, Maintenance USA, U.S. Lock, Leran and Barnett of the Caribbean, and others. Interline sources private label product by the container from China. Private label comprises roughly 20 percent of the distributor's product.
"Increasingly customers will price-shop different items at a retailer and when a contractor comes in they can minimize the contractor's gross profit by forcing that contractor to buy an item at a retailer," Sanford said. "But by using our exclusive brands, the contractor can buy the product at half what it would cost at a retailer and mark it up to increase his profitability but still save the customer money."
The Name on the Door
Every brand -private label or otherwise -reaches a different customer niche, and many came from distributors Interline acquired. "In MRO, the name on the door is very important," Sanford said. "The customers prefer to do business with companies they've done business with over the years." At Interline, sales reps are also brand-specific, and the catalogs look and feel the same as they did when Interline acquired them, he said.
Sanford said it is key to "approach a customer the way the customer wants to be approached."
For example, Interline has two MRO catalogs in place for facilities maintenance. Its Wilmar catalog includes 99 percent of what an apartment community can use. But that customer also requires Interline have a field sales rep in place and Interline trucks for delivery. The distributor is able to charge a premium for this high level of service.
On the other hand, Maintenance USA, Interline's other MRO catalog for facilities maintenance, focuses on smaller properties that don't have a maintenance manager on site. That sales model relies on telesales and direct mail, rather than the high-touch model Wilmar uses. For Interline, that means a lower cost to serve and a lower price for the customer.
Despite the fact that Interline carries many brands on the front-end as displayed in its many catalogs, on the back-end many of the products are the same. They are not branded until they hit the shipping dock.
This integrated operating platform, with one distribution network, enables Interline to cater to its diversified customer base in an efficient manner. To manage the platform, Interline has a proprietary IT system with a relational database for the multiple part numbers and price points.
Using an integrated back-end fuels Interline's desire to build out the number and types of products it is selling at specific customers, either from a supplier it is already