Retail
This segment is said to more closely parallel the residential replacement market than any commercial sector. As consumers feel more confident about spending money to spruce up their homes, they are also in buying mode for other products. And one major way in which retailers compete for those dollars is by providing the best possible shopping environment. “We are starting to see a bit of pent-up demand come back here, Shaw’s Baucom said. “Retail is very conscious of their appearance, so they don’t want to look thread bare.”
Natalie Jones, vice president, commercial brand development and creative product, Mannington, called retail “one of our strongest segments” in the first half of 2010, but noted it’s all renovation and hardly any new construction. “If you have a retail space, you can’t delay [refurbishing] forever.” She attributes the company’s success in retail to the fact it can offer one point of contact. “Carpet, hard surface and wall base can ship to job site together. That’s more important for retail than any other segment.”
Mannington is also finding a more educated end user. “We’re seeing lifecycle cost and maintenance cost part of the conversation more today than ever before,” Jones said.
Retail has been historically strong for Masland Contract, which is also seeing good numbers the first six months of 2010, according to Dolan. “Sales are finally rebounding. Companies held back at least two years in upgrading or re-doing their stores, but many have freed up the purse strings.” It’s because some stores are getting tired. “They are looking for a newer, fresher look. Maybe be more relevant.”
As for product, Dolan noted the higher end the retailer, the higher-end product they spec. “They look at sales per square foot, so they also look at cost per square foot. For us, retail is a custom segment requiring a specific look, texture, etc.”
Hard surface suppliers are also seeing some projects that had been on hold starting to let loose. “Companies are looking for jazz, easy maintenance and performance,” said Amtico’s Apostolos. “Retail is all about image, and a floor speaks volume to their image.”
Apostolos said the hot button in this segment today is service. “Many people have brought their inventories down. In our case, the fact we are a domestic manufacturer provides us with a significant advantage because often budgets get approved at the 11th hour and the project needs to be started immediately. We have a shorter lead time because we have the ability to make to order.”
J+J’s Rogers agreed that it’s all about service in this segment. “We are not the lowest price, but they keep coming back to us because of service. Our designs are good, our pricing is good, but it’s the service that wins the day. We have a secure inventory position so we are never delayed. We also have a customers relations department – will send out help on installation, etc.”
Government
While government represents a small portion of the commercial market, it nonetheless has been a bright spot for many flooring manufacturers over the past year. Some companies cite their GSA contracts, while others say it’s a whole lot more than that. “It’s all branches,” said J+J/Invision’s Rogers. “Veterans Administration, Homeland Security, EPA. I think it will only continue to get bigger.”
Bentley Prince Street’s Minite agreed government work is booming, citing court systems as one example. Environmental attributes and price are the drivers. “Government work is moving more toward sustainability. We are under a GSA contract; products have to be competitively priced, which creates opportunity for volume.” The biggest change, Minite said, is product mix. “We are seeing more carpet tile usage in this segment, which traditionally had been a broadloom user.”
Interface’s Wells noted the good thing about government is it will spend money whether they have it or not. “We are seeing a lot of project work tied to funding. It’s more tile in GSA-type work, but we still do a bit of woven on government properties that are owner occupied, like a library or museum. It’s about life cycle costing and longevity.”
Amtico also attests to a “phenomenal” amount of activity, “not just GSA but state and local governments as well,” Johnson said. He noted that Amtico’s “made in the USA” story accomplishes what government is attempting to do from a nationalism standpoint. “With the stimulus money being released, there is no shortage of programs for military housing, aircraft carriers. Not just U.S. but global as well. This is one of our stronger segments.”
Domestic manufacturing also plays well for Mannington. “BioSpec is the only homogenous sheet made in the U.S.,” Zehner said.
Shaw Contract is finding the bulk of the business at the federal level while classifying business at the municipal and state levels as “a little dicey,” Baucom said. “So many local municipalities are tied to housing values, so as value has come down, revenue has come down.”
Baucom also attested to the fact government has become its own segment within the commercial market. “We used to think of government as corporate products with a different selling process. Now we are seeing it as its own segment. They want to change patterns and behaviors, and they are the ones driving many of the environmental programs. The target numbers on recycled content is being driven by the government.”
While government has been good for Masland in 2010, Dolan noted that this is peak season. “This is the government’s time of year to buy. Their fiscal year ends Sept. 30, so it’s a use it or lose it.” When it comes to product, he finds government looks at long-term performance over anything else. “Products must have a 10-year warranty and 15 is even better.”
Hospitality
This segment, covered extensively in the June 14/21 issue of FCNews, was down more than 35% in 2009 and was easily the most negatively impacted by the economy. Shaw’s Baucom attributes the stagnation in large part to the credit crunch. “There are problems getting financing in hospitality. Property owners can’t get the renovation capital they want.”
However, some manufacturers said they are finally seeing some projects come off the sidelines, but the rebound is slow. “There’s not a lot going on,” said Masland’s Dolan. “Some things are freeing up, such as larger hotels doing projects that had been frozen.”
Bentley Prince Street’s Minite is also seeing hospitality coming back a bit, but it’s mostly boutique hotels, he said. “We are playing well in that arena.”
-Steven Feldman