We’ve had multiple perspectives here on the blog and today we’d like to share a distributor perspective through an interview with Mike Ross of Minda-AristoCraft Supply.
Richard Fitzpatrick:
I’m speaking today with Mike Ross, President of Minda-AristoCraft Supply Oxford. We will be talking about the distribution industry for professional textile care. First, welcome, Mike. Thank you for joining us, and thank you for taking the time to talk to me.
Mike Ross:
Thanks, Rich. I appreciate you having me.
Richard Fitzpatrick:
I thought it would be nice for you to give us a little bit of history about your family, your company, and how you got into the distribution industry.
Mike Ross:
Sure. So going back to the late eighties, early nineties, we were a manufacturer of neckties, and we were selling them to dry cleaners on consignment to resell them to their customers. My brother Doug came into the business and was looking for ways to grow it within the network of customers we already had, and we started inching our way into the full supply line, first with chemicals, hangers, tags, press pads, and items like that. That’s back into the nineties, and through the early 2000s, we were pushing into the industry, growing our market share in New England, and thriving, as the industry was doing well back then.
We leveled off, and we’re doing that through 2011. At that point, my brother Doug had left the business, and I connected with an outside of the industry person, Randy Zimmerman, who bought EJ Thomas out in the Midwest. After much discussion on how we could bring benefits to each other, with his skillset and our skillset, he and I decided to merge our businesses. AristoCraft, which had been family-run with my brothers and me since the beginning, became part of a much bigger entity throughout the Midwest and in New England.
We operated that way for about five years. I think we did it very successfully during trying times. Unlike today’s suffering, the industry was still struggling back then, and we consolidated our operations. We got rid of warehouses and merged them into bigger warehouses. We put in new systems and just gained efficiencies by taking the best of everybody. And that’s one of the benefits of when you merge or partner with somebody, you get the knowledge and the benefits of everybody, all the good things that everybody else is doing.
Through 2016, we acquired several distributors, both in the Midwest and up here in New England. My partner Randy decided that he had had enough of this industry and was looking to get himself out, and he sold his shares of the business to a private equity firm. My team and I continued to run the company for the next few years. We continued to acquire more operations and consolidate our businesses.
In 2021, my brother and I decided that we didn’t want to be part of the direction the private equity firm had decided to go in, so we partnered with Minda Supply down in New Jersey. We bought ourselves out of the equity company, and now are running Minda-Aristocraft in the New England states and have a partnership with Minda Supply, who’s running their business in New York, New Jersey, and parts of Connecticut. And that kind of brings us to where we are today.
Richard Fitzpatrick:
When I first met you, I think it was ’99; four, maybe five different distributors were servicing the New England market. Is that right? Do you remember how many competitors you had?
Mike Ross:
Off the top of my head six and that had already shrunk a little bit from years prior.
Richard Fitzpatrick:
And how many exist today?
Mike Ross:
Today, full-line distributors in all of New England? It’s just us right now.
Richard Fitzpatrick:
So, it’s fair to say you are the last man standing. You managed weather-changing demographics and market conditions and survived a bunch of stuff. To what do you credit that? I mean, you guys all sold similar products. You sold them for similar prices. What did you do that your competitors weren’t able to do?
Mike Ross:
When I first started in the business, and my brother was running it, we were always very aggressive. We were also competing against distributors still operating as if it was 1950. When I say that, I mean their whole approach to business was just very old school. We were aggressive in sales. We were very, very heavily built on service. For a lot of distributors back in those days, inventory was everything. That was the key metric, and you watched your inventory. It had to turn a certain number of times. That’s an important thing, but you also must serve your customers. Our philosophy has always been to take care of the customer. If that means you have a little extra inventory or must stock something for someone special, those are the things you do. And we were blessed with competition that didn’t think that way, which allowed us to continue to grow our market share over the years and push them out of the industry.
Richard Fitzpatrick:
How is business for you now? We’re still pulling out of the pandemic, and I think specifically in the Northeast, we shut down sooner, stayed in shutdown mode a little bit longer, and were slower to recover, but how are things for you guys now?
Mike Ross:
I think we’re no different than most, and it’s a challenge. We’ve probably come back to about 70% of where we were in 2019, but the positive side was that the pandemic allowed us to re-envision our business. And that’s what we did. We changed our sales model to have fewer salespeople covering a wider area. We now have inside salespeople working with them to allow them to do that, and we’ve become more efficient on the whole sales side.
Our partnership with Minda Supply allowed us to become more efficient on the delivery side. We have cut off our territory at a certain point in Connecticut; as they cut off their territory, I’ve probably saved 100,000 miles a year in travel time. It has been a challenging time, but with difficult times come opportunities. I think we’ve seized the opportunities out there, and it’s allowed us to continue to push forward. I don’t want to say things are great, but we’re surviving and doing okay. We’re ready for the pandemic to end, hopefully, thrive again, and hopefully, everybody in the industry will thrive again.
Richard Fitzpatrick:
You are the primary distributor for dry cleaners and laundries within the New England area, and there used to be several. Some people would look at that and say, “Well, I have less choice.” Or “I can’t negotiate on pricing like I used to.” And that’s one side of a consolidated market, but some benefits come from consolidation. You talked a bit about getting the best of different companies and bringing them together. How do you see consolidation helping your clients? What can you do better and more efficiently through consolidation?
Mike Ross:
I want to address the first thing you said about people thinking they can’t negotiate and things like that. In today’s world, that is the furthest thing from the truth. 60% or 70% of the items we sell get mailed out in a catalog twice a week. We have to compete against that. The more significant things are the hangers, the poly, the Kreussler products; distributors have websites all over the country and are willing to ship anywhere in the country. I can’t speak for anybody else and how they would operate, but we shop the websites around the country. We make sure that we’re competitive with what’s going on. We don’t want our customers to feel that we’re taking advantage of them. We have always tried to be fair with the pricing. If the end-user, the dry cleaner, or the laundry are not thriving and doing well, I’m not going to succeed and do well. Their success is my success.
So, I did want to address that part of your question, but the consolidation allowed us to focus just a lot more on trying to service the end market, make sure we have the products that we need. We have more resources, which allows us to be healthier than we would have been, allowing us to have inventory, pay our bills, have the correct number of drivers, and have these inside sales support people. We’re no different than a dry cleaner. If you have five dry cleaners on the street in a town, and they’re all doing $1000 a week and are skimping by, if three of them go away and the other two pick up those sales, they’re healthier. Essentially that’s kind of what’s happened to us. With the competition going away and us getting those additional sales, it’s allowed us to be healthier so that we can service and support our customers better than we would have been able to if I still had five competitors within New England fighting for that same piece of the shrinking pie.
Richard Fitzpatrick:
That’s a great point; people have the perception that they’ve lost choice or can’t have these conversations with their supplier, it’s great that you guys come forward and say, “Look, you do have choices. We know we are not the only place you can buy this particular item from, and we want to be fair.” Also, it reminds me of a conversation I had with one of my clients who had said to me, “My customers should not be worried about what I charge them for a shirt. They should be worried if I’m going to be in business next week. I need to do whatever I need to do to make sure that I’m here to serve the community, and if I have to charge a little bit more, or I have to change my hours or structure things differently, then that’s a priority for me right now.” I think that’s true for everybody in the industry.
Mike Ross:
I think you said it very nicely there. And just a story I always like to tell is, 20 years ago, my most significant customer, we were at a NEFA event, and he came up to me, and he said, “Mike, are you charging me enough for my supplies?” And I took a step back because I was waiting for the trap. Where was he coming from on this? And we ended up having a very nice conversation, and he said, “Look, you need to charge me an appropriate price so that you’re here tomorrow. If you’re not here, I’ve got big problems.” and that’s the same thing. To me, it’s all about being fair. I need to make a dollar. You need to make a dollar. The cleaner needs to make a dollar. And that’s all we’re looking to do, all of us. Nobody’s looking to take advantage or do anything like that. We’re just all looking to make a fair dollar.
Richard Fitzpatrick:
That leads to the next question I wanted to ask, and when I say this, it’s a broad brush that I’m painting with. Still, dry cleaners tend to focus on their supply costs disproportionately as part of their overall P&L. And that’s always been the case. I have my opinions about why they do that, I used to be a dry cleaner, and I knew that when I was operating my family’s business, we paid a lot of attention to the supply costs. I’m curious, why do you think, or maybe I’m wrong, and you don’t think this at all, but why do you think dry cleaners tend to overly focus on their supply costs?
Mike Ross:
We’ve had thousands of conversations over the years about that, and it all comes down to one thing, at least from our perspective. It may not be accurate, but the supply cost is the one thing the dry cleaner truly has control over. You can’t negotiate your utilities. The oil price is the oil price. The gas price is the gas price. You must pay labor at whatever the market price is, but your supply costs, they feel they have control over, and they can manipulate that and control it. And I think that’s why they overly focus on it. I’ve always said, at least with my better customers over the years, if it’s a certain percentage of their sales, they’re comfortable because they know it’s not the most critical thing in the business. If I was selling them and their supplies were 12% of sales, we’d be having a conversation. But if it’s in an acceptable range that the industry has dictated it should be, they don’t worry about the small stuff because they’re worried about their labor. They’re concerned about getting new customers in the door. They’re worried about their efficiencies, things like that. I think many people just focus on it because it’s the easy thing to focus on.
Richard Fitzpatrick:
I agree with everything you just said, and it’s always been frustrating for us because we spend a lot of time in dry cleaning plants, working with operators and owners, and seeing a lot of inefficiencies. We see inefficiencies in equipment under some state of failure or inefficiencies in the way they’re setting up their workflow, knowing that labor represents 30% to 50% of their total expenses. And by making minor adjustments in those areas, they would have tremendous savings. Instead of beating up vendors, trying to get an extra quarter of a percent off on a supply cost that already represents such a small number. That’s always a tough challenge. And I think, as you said, they have the perception that that’s the one thing they can control quickly, and the other things are much harder to influence.
Mike Ross:
Right.
Richard Fitzpatrick:
That idea of price-driven purchasing, trying to get the best price on that box of hangers or that roll of poly, that’s not new in the industry. I think everybody’s always tried to get the best pricing they can, but certainly, over the last 15 years, or maybe a little longer, that has created a situation within the manufacturing sector, responding to the demand for lower-priced products. I know you guys have seen this, and we’ve seen manufacturers move away from our market segment or even shut down operations. What’s your opinion about that? The causation, correlation between dry cleaners trying to get the best price they can, distributors competing for that business, lowering the cost, and putting pressure back on the manufacturers? How do you see that as affecting the market?
Mike Ross:
I’ve been doing this since 1989, and as I look out at the picture, and I call it the Walmartization of our industry, I believe it began with the catalog, which brought to light pricing. It drove everybody to do exactly what you’re saying, pushing those prices down. Let’s all take a step back in time to the year 2000. How many hanger manufacturers were there in the United States of America? There were six or seven. There were, I think, four, five, six poly extruders in the services industry. There were other chemical companies. I think what we’ve done by driving these prices down, from the dry cleaner to the distributor to the manufacturer, is caused distributors to go out of business. We’ve caused manufacturers to go out of business, and it’s made the industry not as good. You’ve lost a choice. You’ve lost value because we’ve taken away good, valid options for people to help improve their businesses. And I think it all started back at the beginning of the century. It was, like I said, the Walmartization of the dry cleaning industry.
Richard Fitzpatrick:
Do you think that’s still going on today?
Mike Ross:
I do. It’s not as pronounced because things have been driven down so far. We talked about how many distributors used to be in New England. Only so many more people can go away until you’re at rock bottom, and I think we’re probably approaching rock bottom. The pandemic has changed things on the manufacturing and distribution end, with the costs just going through the roof. We have reached the point where there is no more negotiation. This is the price. I think the same thing on the distributor side. From my perspective, I don’t have room to play. You import your products from Europe; I import from Europe and Asia. I’m paying $26,000 in freight. The actual cost of a hanger is less than the freight cost in most cases today. It’s taken away the wiggle room. I think it’s there a little bit, but certainly not like it was in the last 15 to 20 years.
Richard Fitzpatrick:
Because so much manufacturing has moved offshore these days, we’re all relying on a global supply chain to get the commodity items and many specialty products that come in, and those supply chains are under tremendous pressure. You had said before the cost of logistics, bringing containers over, and I deal with that all the time. We have five or six containers a month that come across the Atlantic, and the costs and the availability, just finding empty containers or finding space on a ship, is becoming a real problem. That’s causing issues down the supply chain to the end-user, your client, the dry cleaner, who eventually must absorb these costs, which causes a lot of pain. Is there any advice you can give to your clients, to the dry cleaners out there, that if they could maybe be more flexible or weren’t so brand loyal, anything that could help them mitigate some of these issues and make it a little bit easier for themselves and you?
Mike Ross:
I’ve done a couple of DLI calls regarding these issues, and the biggest thing I stress to the cleaners is communication. Communicate with your distributor. He’s your partner in this. We’re not adversaries. And you have got to be flexible. Last year, we went through a period where I did not have a white shirt hanger in my building for three weeks, but I had gold, black, blue, and varieties of things that I made sure I could offer. Communicating to the customers and back and forth with the distributor and the dry cleaner, letting them know what’s going on was critical, and being flexible to say, “You know what? I have to use gold shirt hangers today.” Or, “I don’t have a spotter from ABC company. I’ve got to use a similar product from company XYZ.” I think that’s critical to everybody’s sanity and survival these days because depending on what day of the week it is, we’re having a problem with one product or another. You fix a problem on Monday, and a different one comes up on Wednesday. You fix that problem on Wednesday, and it’s something else on Tuesday the following week. And there’s just no rhyme or reason to it. It could be imported items. It could be domestically made items that rely on imported raw materials. I’ve described it as a whack-a-mole game; knock this one down and this one pops up. Communication and flexibility are the two most significant things that I think a dry cleaner-distributor relationship, and manufacturer for that matter, need to be working on so that we can all get through this together.
Richard Fitzpatrick:
Are they responsive to that? Have you found, for the most part, that dry cleaners are willing to be flexible, or have you found that they’re a little stubborn in some of these things?
Mike Ross:
It’s like everything with our customer base. I could probably tell you the 75% that will be responsive and good about it, and I could probably tell you today the 25% that will be stuck in the mud and fight about it and say, “I need to have this.” You have people that are just stuck in their ways, and they don’t want to hear it. They don’t want to understand what’s going on. This boggles my mind, by the way, because it’s all over TV and the news. You can’t buy a car. You couldn’t buy a bicycle for some time. Hangers are no different. Chemicals are no different. The vast majority of our customers are really, really good about it, but you have that smaller piece that are a little tough.
Richard Fitzpatrick:
There are a couple more items I wanted to cover with you, and one has to do with e-commerce. I just bought a couple of things on Amazon today, and I realized that I spend a lot of my money through e-commerce sites. I think about other companies and businesses and how they use e-commerce to streamline goods and products. However, it seems to be a sticking point in our industry, and many dry cleaners hold onto the old “salesman model,” and I want your opinion. Do you see that also? And why do you think that is? And how is it either helping or hurting the dry cleaner by holding onto that?
Mike Ross:
I do see it. Absolutely. And this is a small, very nuanced industry, and it’s a personal touch industry, partially; I think that is why we see that. And the other part is, other than your 5 or 10 or 15 large dry cleaners in a marketplace, the smaller cleaners, they’re working in their plant. I think they need somebody to come in and focus on what they need because they’re running around in a plant, and they don’t take the time to get on the computer and place an order. And I do think there’s also value-added that a rep brings with them, and they do enjoy those interactions and that learning opportunity. What we did was try to get the best of everything. By the way, we’ve attempted e-commerce. Going back in 2000, we launched the website, and we brought computers to a NEFA trade show and offered to give them away to any customer that would order online—bought five computers. Do you know how many we gave away?
Richard Fitzpatrick:
I would say none.
Mike Ross:
You are correct, none. And we’ve tried again over the years, and certainly our partner Minda is doing a lot of that, but most of the customers don’t lean that way. The model that we have put in place as I had said earlier is we’ve scaled back our sales force that goes out and just does a milk run and takes orders. We’ve made them consultants. We’ve made them problem solvers. So they’re still out on the road maybe two days a week, and they’re making sure they see everybody on a rotational basis to go into the plant and see if they have problems. Maybe they see a leaky steam trap. Perhaps they see press pads that need to be changed. Things that the cleaner is too busy on his own to notice. Then we back that up with inside sales. We’re still contacting our customers every other week. We are reaching out to them by email, phone, and text. However, they’ve determined it is the best way, but we have the option to have a person go in there once a month, once every six weeks. It still gives in-person support. I don’t know if we will ever go entirely to an e-commerce marketplace in this industry. The people seem to like the in-person presentation. That’s dry cleaning, by the way. Coin-op owners that we do a fair amount of business with are much more open to e-commerce than dry cleaners, for some reason.
Richard Fitzpatrick:
That’s interesting. We see that same pattern when we get away from professional textile care. Suppose we get into OPL and hospital, or even hospitality or commercial laundry. In that case, we see a more accepting approach to using more automated systems for dosing and controlling and technical support. But within PTC, it’s very much you have to have somebody there.
Richard Fitzpatrick:
So your company specifically and the distribution industry itself, it’s kind of a big ship, small rudder. It’s not that different from some of the larger dry cleaning clients. You have brick and mortar. You have trucks. You have staff; in your warehouse alone how many people do you have employed on any given day?
Mike Ross:
Warehouse and drivers, we’ve got about 12 or 15. We’re not nearly as big as a big dry cleaner, believe it or not.
Richard Fitzpatrick:
It is still it’s a lot of infrastructure.
Mike Ross:
Yes
Richard Fitzpatrick:
And you have office people, and you said inside sales. The industry itself right now, again, I’m painting with a broad brush, but we’re seeing things change a little bit with what happens within a dry cleaning plant. We’re not seeing as many traditional dry cleaning garments come in. We don’t see as many loads going through a dry cleaning machine. We’re seeing more household or bulk laundry, fluff, and fold. However, you want to describe it. And the requirements to do that type of work are different from what a dry cleaner would probably prefer to see, which is suits, ties, shirts, and that kind of thing. So that changes the dynamic a little bit. First, are you seeing that? And is it difficult for a distributor who builds up his business around one model to quickly switch to providing products and packaging for something that maybe they weren’t geared up to do?
Mike Ross:
Yes, we see that, especially a big push into the wash, dry, and fold, with everybody doing that. But to move in that direction wasn’t very difficult for us because we always had our foot in the coin-op door. We always had our foot in the linen rentals, uniform rentals, and things like that. So because we were in adjacent types of businesses, we were already there. And when a cleaner comes to us and says, “We’re looking to expand in these areas,” we’ve got the resources to point them to help them learn what they need to be doing and then provide them with the supplies that they need to do it the right way.
Richard Fitzpatrick:
What do you see happening for the industry over the next five or ten years in our industry? It’s a guess. But if you had to guess?
Mike Ross:
Five or 10 minutes is tough.
Richard Fitzpatrick:
Exactly. So if you had to guess, what do you think the industry will look like over the next five to 10 years?
Mike Ross:
That is such a tricky question; I think we will continue to see consolidation. I think the larger, more professionally run operations will dominate in each market, in all honesty, because they’re the ones putting the resources into developing new avenues of business to attract new customers. I think your smaller mom and pops, as we’ll call them, are going to go away, as they have been. I think they’re going to continue to go away. Your larger cleaners continue to strengthen themselves. Beyond that, if you could tell me if the 20-something-year-olds today are bringing in the wash, dry, and fold because they don’t want to do laundry at home, are they going to start wearing suits again? That’s the question at hand.
Mike Ross:
I think this industry is here to stay. It’s always going to be doing some form of textile care. It’s just a matter of is it wash, dry, and fold? Is it a lot more shirts and dress shirts because people wear jeans with dress shirts, but they’re not wearing suits? That’s the question. I don’t know where the country is going style-wise, but I think your overriding picture is going to be, you’re going to see the larger cleaners taking over the markets they’re in. I think you’re going to see them offering more services as you had mentioned. Whether it be the wash, dry, and fold, a blind cleaning, draperies, or a lot more households, those types of things are what’s going to sustain them, and then we have to see where society takes us, as far as fashion, and how people are dressing, and going to work, for that matter.
Richard Fitzpatrick:
Just a quick follow-up on that one. Do you think we’ll see any return of some offshore manufacturing coming back into the US, with costs and transportation costs going up? And when costs go up, they generally don’t come back down. Maybe they might come down slightly, but do you think we’ll see any manufacturing returning to a more local base?
Mike Ross:
My gut tells me, no, and it’s simple. For somebody to invest the money, they would need to invest in starting to make hangers or corrugated products. There’s just no return on the investment due to the industry’s scale and scope, and that’s the problem. If I wanted to open a hanger factory and I must invest $5, $10 million to get it started, where’s my return on a two-cent hanger or a four-cent hanger? I think that’s where the issue is. I have looked at equipment in the United States and available since four or five years ago, and it made absolutely zero sense to get it up and to run again because of that reason.
Richard Fitzpatrick:
It is a funny industry that way. I worked with one of our distributors, he’s the only distributor in his marketplace, and his offices and warehouses occupy maybe 25,000 square feet, directly across the parking lot is a stone and tile distributor, and the building has to be 100,000 square feet, and he was probably one of five that serviced the market. You think about that scale, you’ve got the only distributor for dry cleaning and laundry in a market, and he’s one-fifth the size of one-fifth of one of the suppliers, just for stone and marble.
Mike Ross:
It’s kind of incredible when you put it into perspective like that.
Richard Fitzpatrick:
Mike, I want to thank you very much for taking some time to talk to us today. I appreciate it. Mike Ross, Minda- Aristocraft Supply, is really a great company.
Mike Ross:
Thank you, Rich. I appreciate the time.