The US Carpet and rug industry is experienced a decline in the number of manufactures because of mergers, acquisitions and bankruptcies. Mid 1980, more than 300 companies in early 2000, about 100 companies were eliminated from industry, 96 US based and Canadian based, most of which are private held companies. By 1999, it was estimated that 10 companies in the industry produced 91% of carpet and rug sales in US. Three companies, Shaw industry, Mohawk Industry and Beaulieu of America, accounted for about 85% of US residential carpet and rug sales. There have been three major competitive trends that occurred within the industry. Firstly, In Mid-1980, the largest carpet and rug manufacturer ...view middle of the document...
In mid- 1990s, carpet and rug industry leader, Shaw Industry, began to operate its own retail stores and commercial dealer network. Also, manufacturers should be involved in the retail environment because of enhancing the viability of our industry and reducing the risk of losing profit dollar.
Cardon Carpet Mills, Inc. is a private company. The company produces medium-to high-priced carpet primarily for the residential segment. Cardon Carpet Mills, Inc. products’ name as that are the Masterton and Chesterton. The company currently distributes its line through seven floor covering wholesalers located throughout the United States. These seven wholesalers supply 4,000 retail accounts that include department stores, furniture stores, and floor covering specialty stores. Contract sales to institution and businesses of Cardon and Carpet Company are made %28 of the company sales. A total sale of the company is $ 75 million with a profit before tax of $3 million. Company’s % 80 of residential segment sales was through % 50 of its retail accounts. According to the review of distribution records; it cost Masterton %6 of its residential segment sales to service the 7 floor covering wholesalers. Advertisements of Masterton appeared in shelter magazines and newspaper based on fiber type colors, durability and soil residence.
Materton Caper Mill wholesalers meet to employee 10 salespersons and make one sales call per month. These wholesaler sales representatives are responsible from checking inventories, carpet samples, arranging point of purchase displays, handling retail questions and complaints, and taking orders. % 25 of sales person times was spending on non-selling activities such as preparing call reports, acting as a Liason with manufacturers and traveling. % 40 of each one hour sales call separated for Masterton sales, while %60 of each one hour sales call devoted to selling non-competing products. In addition, Wholesales also should take care of stock carpet inventory.
Inventory levels sufficient for four turns per year were necessary to service retailers. End the results for these activities: wholesalers received a % 20 margin on sales at the price to retailers. Also, 1200 current retailers were members of buying groups.
Direct Distribution of Competitors
There are some important conclusions about direct distribution of competitors;
1-Competitors with their own warehousing or direct distribution operations located them in or 7 metropolitan areas.
2-$5 million in wholesaler sales are necessary to operate at an annual fixed cost of $ 700,000 that is rent, personal, operations.
3-Salaries and expenses of highly qualified sales representatives would be about $70,000 each annually. One field sales manager would be needed to manage 8 sales representatives. Sales and expenses would be approximately $ 80,000 per sales manager. Sales administration cost, including fringe benefit, were typically % 40 of sales....