Essay About Crafton Industries Case Study And Total Industry Sales

Crafton Industries Case Study
Austen ReichholdMBA – 8650: Strategic Marketing ManagementChannel Modification AnalysisCrafton Industries, Inc.TO:   Suzanne GoldmanRE:   Crafton Industries, Inc. Channel Modification AnalysisProblem Statement: Analyze and present both strategic and economic advantages, disadvantages, and feasibility of abandoning Crafton Industries’ current wholesaler distribution network and developing a direct distribution channel to retail outlets and buying groups in the residential carpet and rug market. Situational Assessment:US floorcovering market is made up of a number of different categories of floorcovering products, the largest of which is carpet and rugs. The industry itself has suffered harshly from the recession in 2008, total industry sales for manufacturers of floorcovering products slipped by 29% from $23B in 2007 to $17B in 2009. Carpet and rugs account for 54.5% and $9.335B of the total industry sales in 2009 (down from 56.7% in 2007), the next largest category represents 10.8%. Floorcoverings are sold for commercial and residential use, residential sales account for two-thirds of the market or $11,333B. The economic downturn resulted in consolidation of the carpet and rug industry and less than 100 manufactures remain. Much of the industry sales and market share is held by the top manufactures, the competition is mainly based on price and the industry as a whole has historically spent little money of marketing, only 0.9% of sales on advertising. Shaw Carpet Mills represents 32% of the $9.355B in carpet and rug sales in 2009, the next two companies hold a combined 37%, and the following two hold 10%. The top 5 carpet and rug manufacturers represent 85% of the industry sales.  The distribution channels of the residential market have fluctuated over the past three decades and recently consolidation of specialty and smaller retail outlets has led to the introduction of buying groups. The purpose of a buying group is to increase buying and pricing power by combining purchases/gaining quality for large discounts. This lead to direct contact with manufacturers as well. Movement toward direct distribution and retail consolidation is expected to continue into the future.         Crafton Industries, Inc. is a medium sized, privately held, and profitable manufacturer of carpets. In 2010, the company recorded $75M in sales, 72% or $54M of which were sold in the residential market. While Crafton manufacturers and sells products primarily for the residential segment, 28% or $21M of 2010 sales were contract sales sold to commercial businesses.Currently, Crafton Industries distributes products to the residential market through seven wholesalers servicing 4000 accounts in major metropolitan areas around the US. These wholesalers sell Crafton product lines as well as competitors products to individual retail outlets and retail buying groups.