ProSource Wholesale Floorcoverings: keeping costs at floor level
| ProSource, as its name suggests, is a company directed toward professionals - contractors, builders, designers, architects and others whose livelihood involves the installation of flooring, kitchen and bath products. In fact, unless you are escorted or sent in by a building trades professional affiliated with the company, you can’t even get inside to see its extensive showroom of products made by hundreds of suppliers from all over the world. That’s just fine with Tom Norris, the regional manager, whose responsibilities include oversight of the company’s three Pittsburgh-area ProSource showrooms. Its obscure Cranberry location - in a small business park on Leonberg Road - is actually part of a deliberate strategy to hold down its operating costs and provide its professional clients with the guaranteed lowest prices for their material. ProSource Regional Manager Tom Norris stands inside the company's well-hidden Cranberry Township showroom, but consumers will need to be accompanied by a dues-paying building trade member before they can be let in. Founded 24 years ago in St. Louis by the privately-held CCA Global Partners, ProSource currently includes 135 showrooms in North America. More than a dozen other franchise home improvement businesses are also part of its parent company’s holdings, including seven Carpet One stores in Western Pennsylvania. Their collective buying power provides significant bargaining leverage, contributing to the company’s low price guarantee. As a result, according to Norris, a number of better-known floor covering retailers in the Pittsburgh market actually seek out their own supplies from ProSource. However low-cost locations and strong buying power are only two of the company’s tactics for carrying out its low price strategy. Another is its inventory of material. Except for a handful of items like carpet padding, tack strips, glue and certain hardwoods which are in constant demand - the company’s warehouse holdings, which typically represent a major cost of any business - are miniscule. Essentially everything is delivered to order, usually in three to five days. In addition, the company doesn’t get stuck with bad debts. While most retailers have to absorb a certain level of losses from customers who end up not paying, nothing leaves the ProSource building unless it has been paid for in full. No bad debt gets written off, eliminating yet another traditional cost of doing business. Beyond that, very little is spent on marketing, advertising or promotion. “It’s very much a relationship business,” Norris explains. “The marketing for our business is primarily done by the account and showroom managers reaching out to builders through networking and phone calls. You will never see a ProSource billboard. You will never see us advertising or in a commercial. That’s a tremendous cost associated with the marketing side of a retailer’s business which we don’t have.” Still, the company’s business can be influenced by external events, as it was by the 2008-’09 recession. “When the housing bubble burst, it affected our business,” Norris admits. “A large section of our membership, the contractors and builders, suffered greatly. The Pittsburgh market took a dip. But the remodeling part of our business grew exponentially. “People still had money to spend on their existing homes - installing hardwood, replacing carpet in the bedrooms, putting in new kitchen cabinets - but not on purchasing new homes. Most of our business is residential - new home construction and remodeling. But we also provide supplies for schools, universities, and apartments. That’s probably a third of our business.” |