Posted on

State of the industry: Laminate holds its own at the sweet spot

Screen Shot 2014-03-10 at 10.31.19 AM

Volume 27/Number 21; March 3/10, 2014

By Jenna Lippin

The expression “no news is good news” proves to be true when considering the laminate flooring market in 2013. The consensus among industry executives suggests the category posted low single-digit increases in both dollars and square footage, contradicting the sentiment on the part of some that laminate is about to be placed on the endangered product list.

Thanks to improvement in the U.S. housing market, refreshed product design and rising hardwood prices, laminate is firmly holding its place in the market. “There’s been a revitalization of the category,” said Dan Natkin, Mannington’s director of hardwood and laminate. “We’re doing things with visuals that we weren’t doing five to 10 years ago. Also, price increases in hardwood have helped create a spread between upper-end laminates and low-end woods. From my own experience, from retail or builder, you can get entry-level oak or a nice laminate at one price, and on the showroom floor people are choosing laminate.”

According to George Kelley, president and CEO, Kronotex USA, and Milton Goodwin, vice president of product, Armstrong, laminate’s growth can be attributed to a more stable housing market. “As home values improve, people feel more empowered to release the pent-up demand for home improvement dollars and tackle new projects around the home,” Kelley said.

Goodwin noted that any increase in category sales would be attributed to a better builder market. “New housing starts were up last year, while remodel/replacement was basically flat.”

Roger Farabee, senior vice president of marketing for Unilin, also has faith in the builder market. “We are getting more builder business than ever before in laminate,” he said. “Hardwood has become more expensive,  [so] laminate is now being used a lot in playrooms or family rooms,―places where it was not used before. What we are bringing to market now in terms of the style, design and texture is just so good that there is no reason why it would not be used.”

Consumer confidence and knowledge are also providing the category with a well-deserved push. Because there is a readiness to buy, those who are spending dollars are making more educated purchases, meaning they know exactly what they want and what they will get from laminate.

“I think [the category] is up in square footage because consumers are more aware of what laminate flooring can deliver and more aware of what the product should deliver,” explained Bill Dearing, president of the North American Laminate Flooring Association (NALFA). “They want something with quality, something they can feel, something that looks great. And they are rewarding manufacturers that are delivering the looks they want because they are willing to pay more for it.”

Why specialty retail wins

While laminate is continually overcoming the lingering effects of a national economic slump, price erosion is something many executives believe is becoming less of an issue. There is a niche market for higher-end products where multiple companies have carved a place for themselves, but with special deals on these appealing offerings, home centers can pose a threat.

Derek Welbourn, CEO of Inahus, the North American sales and marketing arm of global manufacturer Classen said, home center activity did, in fact, continue to put price pressure on the laminate category. “Overall prices were stable, but Screen Shot 2014-03-10 at 10.32.08 AMproducts such as hand scrapes and beveled planks were being sold as promotional products with promotional pricing, which have traditionally been offered at higher retail prices.”

Kelley’s view is that price erosion is on its way out thanks to a differentiated group of offerings. “As consumers look at their project budgets, we see demand in laminate moving away from the basic 7mm products and up the product spectrum into more 8mm, 10mm and 12mm products that have a variety of features across the good, better, best price points.”

Similar to Kelley, Natkin explained that the laminate category “has a profound hourglass shape now” in terms of pricing. What’s emerged in the last few years—in the face of lower-priced, entry-level laminate—is “this nice, upper-end laminate that sounds better, feels better underfoot and offers more realistic visuals. We see home centers continually lowering prices; as soon as one goes down, the others go down. A specialty flooring retailer can compete with differentiated products at the upper end.”

Because of the range of laminate products available, in terms of both quality and pricing, it is difficult to pinpoint exactly where most are being sold; many executives cite a 50/50 split between home centers/big boxes and specialty retail. However, because of the time, training and resources available to independent dealers, most manufacturers of higher-end products believe the large stores are only an issue when it comes to selling offerings at the opposite end of the spectrum.

For example, Goodwin explained how Armstrong, like many manufacturers of high-end laminate, is focused on providing differentiated products for the independent retailer. Though some may say there is a large amount of laminate being sold at home centers, they are not noting the quality of laminate being sold. Many products offered by top names in the market are of a completely different class than those being sold in high quantity at the big boxes.

“We’re not the commodity guy,” Goodwin said. “Yes, smaller retailers have lost share in commodity products. But the reality is most of the products we sell to independent retailers are not found in the big boxes. We have a small amount of the 7mm $0.69 or 8mm $0.79 laminate that everybody has, but we’re about differentiated, high-fashion flooring.”

Welbourn expressed a similar sentiment. “Specialty retail requires well thought out programs and higher-end boutique styles. The big box channel requires volume—broad products that appeal to the mass market. Specialty retail may not move the largest volume, but if a customer wants something unique—a whitewashed hand scrape, for example—that is where the best selection can be found.”

What are the threats?

Because of similar performance attributes, there seems to be the general idea that laminate will falter in the face of LVT. However, according to top executives, this theory is not much more than a misconception. As the current darling of the industry, LVT is creating the most buzz, but experts say it is hardly something to worry about; like all flooring categories, laminate will stand strong exactly where it is meant to do so.

“I think [laminate and LVT] go after the same customer base: someone who wants a good product that’s easy to install,” Goodwin explained. “A lot of LVT growth has been on the back of commercial installs, and laminate hasn’t really been a commercial product. Laminate is an easy target today from LVT growth. I think if you’re a customer seeking an easy install and good-looking floor at a competitive price, LVT and laminate are a good fit for you. There are positive and negative Screen Shot 2014-03-10 at 10.32.14 AMattributes depending on application. If you want a floor that is somewhat indestructible, it’s hard to beat laminate.”

Plus, while LVT is hot now, laminate has earned its place as a longstanding, reliable product in a class of its own. Think Jennifer Lawrence vs. Meryl Streep.

“It’s one more product that’s in the marketplace today,” Dearing said. “It is not taking any more share from laminate than it is from other products. Laminate has more maturity than LVT. People are finally treating laminate as a category of its own instead of a product trying to be something else.”

Gary Cissell, director of Bob’s Carpet and Flooring Mart, a 15-store operation in Florida, agreed. “Our laminate business continues to be double-digit strong year over year after the last couple of years. We are feeling some pressure from other categories, especially LVT, which is growing at a faster pace than laminate, but there is still good growth. The rising price of wood also lends to the [boost].”

In addition to opposing categories, Chinese imports are on the minds of most industry figures. But U.S. executives believe Chinese laminate producers are simply very good copycats, leaving the real work to trusted manufacturers at home.

“These imports have a presence in the market that cannot be ignored, but I have honestly not seen any true innovation in the Chinese imports,” Farabee noted. “They are good copiers. Some are very good, but they still depend on us to innovate.”

Mannington’s Natkin agreed. “We spend a lot of money investing in style and design and research; sometimes we hit singles and sometimes we hit home runs, and we pay the price for that. [Chinese producers] don’t have to do that. They can just copy or emulate the home runs.”

As laminate manufacturers continue to remain on the edge of innovation, they subsequently provide retailers with the tools they need to be successful. Some go above and beyond with training programs and enhanced showroom displays, but many companies are simply delivering top-notch product.

“I think manufacturers have gone to extraordinary lengths to make sure our sales team has been adequately trained to sell laminate,” Cissell said.