Past Winner Stories
Directwood.com
www.directwood.com
We manufacture high quality hardwood flooring at our facility right here in Indianapolis and offer our product to the public on the internet at substantial savings.
The Challenge
After eighteen years in the lumber business selling plywood and lumber to industrial accounts, I thought it was time to diversify. In the summer of 1998 I had the opportunity to purchase a small hardwood flooring plant in Tennessee that was having financial problems. Since we were already in the lumber business, hardwood flooring seemed like a great fit for our diversification. After a year in business and half million dollars invested, we found the hardwood flooring industry was controlled by the giants in the industry: Bruce, Harris-Tarkett, and the Armstrong Companies.
The way the hardwood flooring industry works is like this: a manufacturer of flooring like our company makes the flooring and sells it in truck load quantities to distributors across the country, who sells the flooring in small quantities to the local retail flooring stores, who then sells the flooring to the public. Because the giants in the industry have great buying, own their own sawmills, flooring plants, and finish line facilities; our company could not be competitive selling to distributors. With the flooring plant in Tennessee, we could not manage the manufacturing plant efficiently. In early 2000 we moved the flooring plant to Indiana to have better control of our manufacturing processes. After a year of fine tuning our process, we still could not be competitive in the market place against the huge companies.
We tried to find niche markets as we have done in the lumber business, but found we could only break even at best. Since we didn’t own a finish line, we tried to sell unfinished flooring. This made us more competitive in some areas of the country, but we still couldn’t be a full service manufacturer for our distributors, and still had trouble keeping their business. If we would find a distributor and get an order, the big players could easily undercut our price and recapture the business. Everything we tried would always be countered by the big companies in a manner that the only way for us to compete against them was so tell our products below our cost.
We continually struggled to break even, but continued to lose money. After two years in the flooring business; our investment had mounted to almost a million dollars, and no way to compete against the giants controlling the industry. We were told that the hardwood flooring industry had been that way for 75 years, and probably would be that way for the next 75 years. Should we just take our million dollar loss and move on? Or should we continue to fight for the business with the companies controlling the industry? I didn’t want to just give up and lose a million dollars, but how do we compete against the giants?
The Solution
In the Fall of 2000, I was playing racketball in a league in Indianapolis. As I pushed off on my left leg, a muscle pulled away from my bone in the area of my left knee. After a trip to the emergency room, I was told to stay at home and off my leg for a week. To pass the time away, I decided to surf the web and see what I could find in the way of hardwood flooring on the internet.
What I found was hundreds of web sites that sold hardwood flooring. I also found that not ONE site was actually the manufacture of wood flooring. I discovered too that the pricing for high quality hardwood flooring on the internet was much higher than we could charge a distributor. With a little more research, I found that distributors were marking up our flooring 40% and the flooring stores were marking up the flooring an additional 40% to sell to the public.
It was right then that I decided that the only way to compete against the giants of the industry was to change the rules of the game that had been in existence for 75 years. I could go direct to the public with high quality hardwood flooring on the internet and save our customers 40% and still maintain a 4% mark-up for our company. Since we were shipping direct to the public, I thought directwood.com would be the perfect name. We purchased the name and found an internet web design firm in Indianapolis to help with the design of our web site.
After several weeks of working on the web site and lots of money, we were ready to launch. I hired a company out of Cincinnati to get us listed on all the top search engines. I soon found that people really would buy hardwood flooring on the internet. My two sons joined the company, and we began to look at new ways to attract customers. We had high quality flooring and samples that customers could buy to see our quality and colors. Our pricing was about half of what a customer might expect to pay in a flooring store. With my plant manager and my sons, we developed a web site of high quality flooring with all the accessories needed to lay the floor for the do-it-yourselfers. All this with free shipping anywhere in the United States. We had a lot of happy customers, but we needed more.
In April of 2002 we decided to try the pay-per-click approach to reach more internet users. It worked. In the next thirty days we had over 1.3 million hits with over 23,000 unique visitors. Even more important, we had phone and internet sales of over half a million dollars with a bottom line of over seventy thousand dollars. We now are off and running. For high quality hardwood flooring at the lowest possible price it doesn’t get any better than www.directwood.com.
The Challenge
After eighteen years in the lumber business selling plywood and lumber to industrial accounts, I thought it was time to diversify. In the summer of 1998 I had the opportunity to purchase a small hardwood flooring plant in Tennessee that was having financial problems. Since we were already in the lumber business, hardwood flooring seemed like a great fit for our diversification. After a year in business and half million dollars invested, we found the hardwood flooring industry was controlled by the giants in the industry: Bruce, Harris-Tarkett, and the Armstrong Companies.
The way the hardwood flooring industry works is like this: a manufacturer of flooring like our company makes the flooring and sells it in truck load quantities to distributors across the country, who sells the flooring in small quantities to the local retail flooring stores, who then sells the flooring to the public. Because the giants in the industry have great buying, own their own sawmills, flooring plants, and finish line facilities; our company could not be competitive selling to distributors. With the flooring plant in Tennessee, we could not manage the manufacturing plant efficiently. In early 2000 we moved the flooring plant to Indiana to have better control of our manufacturing processes. After a year of fine tuning our process, we still could not be competitive in the market place against the huge companies.
We tried to find niche markets as we have done in the lumber business, but found we could only break even at best. Since we didn’t own a finish line, we tried to sell unfinished flooring. This made us more competitive in some areas of the country, but we still couldn’t be a full service manufacturer for our distributors, and still had trouble keeping their business. If we would find a distributor and get an order, the big players could easily undercut our price and recapture the business. Everything we tried would always be countered by the big companies in a manner that the only way for us to compete against them was so tell our products below our cost.
We continually struggled to break even, but continued to lose money. After two years in the flooring business; our investment had mounted to almost a million dollars, and no way to compete against the giants controlling the industry. We were told that the hardwood flooring industry had been that way for 75 years, and probably would be that way for the next 75 years. Should we just take our million dollar loss and move on? Or should we continue to fight for the business with the companies controlling the industry? I didn’t want to just give up and lose a million dollars, but how do we compete against the giants?
The Solution
In the Fall of 2000, I was playing racketball in a league in Indianapolis. As I pushed off on my left leg, a muscle pulled away from my bone in the area of my left knee. After a trip to the emergency room, I was told to stay at home and off my leg for a week. To pass the time away, I decided to surf the web and see what I could find in the way of hardwood flooring on the internet.
What I found was hundreds of web sites that sold hardwood flooring. I also found that not ONE site was actually the manufacture of wood flooring. I discovered too that the pricing for high quality hardwood flooring on the internet was much higher than we could charge a distributor. With a little more research, I found that distributors were marking up our flooring 40% and the flooring stores were marking up the flooring an additional 40% to sell to the public.
It was right then that I decided that the only way to compete against the giants of the industry was to change the rules of the game that had been in existence for 75 years. I could go direct to the public with high quality hardwood flooring on the internet and save our customers 40% and still maintain a 4% mark-up for our company. Since we were shipping direct to the public, I thought directwood.com would be the perfect name. We purchased the name and found an internet web design firm in Indianapolis to help with the design of our web site.
After several weeks of working on the web site and lots of money, we were ready to launch. I hired a company out of Cincinnati to get us listed on all the top search engines. I soon found that people really would buy hardwood flooring on the internet. My two sons joined the company, and we began to look at new ways to attract customers. We had high quality flooring and samples that customers could buy to see our quality and colors. Our pricing was about half of what a customer might expect to pay in a flooring store. With my plant manager and my sons, we developed a web site of high quality flooring with all the accessories needed to lay the floor for the do-it-yourselfers. All this with free shipping anywhere in the United States. We had a lot of happy customers, but we needed more.
In April of 2002 we decided to try the pay-per-click approach to reach more internet users. It worked. In the next thirty days we had over 1.3 million hits with over 23,000 unique visitors. Even more important, we had phone and internet sales of over half a million dollars with a bottom line of over seventy thousand dollars. We now are off and running. For high quality hardwood flooring at the lowest possible price it doesn’t get any better than www.directwood.com.