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My Take: Finding diamonds on your computer

October 28/November 4, 2019: Volume 35, Issue 9

By Steven Feldman

 

Did you ever hear of Russell Conwell’s “Acres of Diamonds” concept? Basically, the theme behind this is a man who wanted to find diamonds so badly that he sold his property and went off in futile search for them. While the man was searching, the new owner of his home discovered that a rich diamond mine was located right there on the property. The central idea is that you don’t have to search the world over for the things you desire most. Your “acres of diamonds” often lie below your feet.

What does that have to do with the price of tea in China? Nothing. What does that have to do with retail? Everything. When it comes to your customers, people who have purchased from you in the past are disproportionately more valuable than new customers. Yet, so many retailers channel their marketing efforts on prospecting for new customers rather than reaching back for old ones. Finding new customers is difficult unless you are relying on word of mouth. Otherwise, to get them in your store you must have a compelling reason vs. another specialty retailer, home center, Floor & Décor-type chain, etc. It’s marketing, whether traditional or digital. And then you have to win the sale from square one.

Every retailer has his or her share of “lost” customers. These are people who bought from you at one point or another but have fallen off your radar. Maybe they moved. Maybe they have not been in the market for flooring since they last purchased from you. Maybe another retailer or retail outlet stole their business from you.

Sam Page, CEO of NeuroTriggers Group, offers five ways to dig into your own diamond mine of lost customers.

1. Figure out ways to prevent lost customers in the first place. Where is the hole in your bucket? Can you be more attuned to customers so you can catch them before they fall through that hole? (In managing continuity programs, there’s a science to monitoring which months people start dropping out and pre-emotively gifting them—with precise timing, to stop them in their tracks.)

2. Devise a system to periodically reach out to all lost customers accumulated during a period of time. This works best if you present some form of dramatic, irresistible offer to draw these people back into your universe. Can you offer something for free? Can you significantly discount a particular product you know they’ll be interested in? This can’t be one of those “whenever I get to it” things. Lock it into your calendar. Maybe it’s once a year; maybe its three times a year. Whatever it is, make it a standard.

3. Create a reactivation package or campaign every bit as elaborate as those you put together to attract new prospects. Don’t just send a cheesy postcard. Don’t assume they remember your whole sales story.

4. When you do recapture a lost customer, be sure you wow them with their first experience and your follow up to it.

5. Don’t be afraid to go deep in your old files. Be willing to incur the same cost in reactivation as in new customer acquisition.

Most mature businesses have the capability to grow sales 50% to 100% by mining their own lost customer files. The diamonds are often there, right beneath your feet—or at least in your computer files.

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Slowing economy will reverse tracks in 2020

October 14/21, 2019: Volume 35/Issue 8

By Steven Feldman

 

It’s been awhile since we checked in with our favorite economists, the Beaulieu brothers from ITR Economics in New Hampshire, the oldest privately held, continuously operating economic research and consulting firm in the U.S.

Since 1948, the company has provided business leaders with economic information, insight, analysis and strategy. It has an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Thus, with an accuracy rate hovering around 95%, we look to them to get a feel of what the immediate future may hold for our industry.

Right now, Brian Beaulieu, CEO of ITR, advises business owners, if they have noticed the business slowing down or activity becoming spotty, to plan on working through the slowdown phase of the business cycle through the first half of 2020. Keep track of the leading indicators and strategize about what resources you are going to deploy during the rising trend that ITR is projecting to begin in the second half of 2020.

While unemployment remains at historically low levels, it is no secret that the U.S. economy and global economy are slowing down. Outright contraction was evident with some of the recent data, but ITR believes “deceleration or flat-lining” is a more apt description of what to expect for the economy through the first one to two quarters of 2020. ITR advises businesses should have already planned how to protect profits based on that prior forecast.

But here is the great news. It is now time for you to think one-half business cycles ahead and plan what you are going to do for the next change. The next shift in the business cycle will be one of accelerating rise. Recovery in the second half of 2020 will quickly give way to a U.S. (and global) economy that is gaining ground on the upside of the business cycle. ITR is currently scouring the leading indicators in anticipation of seeing empirical data to support its upside forecast for the second half of 2020 and all of 2021. It has three leading indicators that provides reasonably solid positive signals for the next ascent. It needs two more before its confidence level goes into normal territory.

ITR Economics will be able to measure the performance of the upside leading indicators and come to some statistically reasonable conclusions once it has the five positive leading indicators in place. It will develop a working model based on empirical data on the 2020-2021 rate of growth for such indicators as retail sales, total industrial production and GDP.

Right now, ITR’s theoretical input to the next rising trend is suggesting the cyclical ascent will be milder than many people will expect. That means you will need to carefully calibrate your talent, working capital and geographic reach to get the most of the ascent without outrunning the cycle as the probable recessionary downside of the cycle develops.

For some of us, that very specifically means don’t overinvest in what we currently do. Rather, invest in leveraging resources to develop the means to stay out of the next recession. You can beat the cycle by selling new products/services other than what you are already doing or moving into a new demo- graphic or geographic market.

A frequent question these days is how the 2020 elections might impact the forecast. ITR advises not to worry about the election; it is the business cycle that is going to drive your business up and down in the 2020-23 period.

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My take: Reasons why flooring sales might feel off

September 16/23, 2019: Volume 35, Issue 7

By Steven Feldman

 

I recently spent three days with some of my favorite people—the National Floorcovering Alliance members and its suppliers. Really good people, great businesspeople. Keep your mouth shut and your ears open and you may learn a thing or two.

During the group’s closed-door meeting, where the members share best practices and business conditions, it was revealed to me after the fact that, on average, members are flat to slightly up after the first eight months of the year. It’s a little concerning in that NFA members, given their vast resources and buying power as a group, traditionally show greater increases. If NFA members are flat, the industry has to be down.

There are a number of reasons contributing to this. For some, like Deb DeGraaf of DeGraaf Interiors in Grand Rapids, Mich., weather played a key role earlier in the year. When your governor is telling people to stay indoors because of frigid temperatures, they are not going to be out buying flooring.

One of the biggest culprits is the changing product mix. Today, it’s all waterproof all the time. That’s what people are buying, which is nice except for the fact that retailers tend to make more money on a carpet or wood job than they might on a rigid core installation.

I was talking to Michael Longwill of Airbase Carpet Mart about this phenomenon. Waterproof is spreading like wildfire. My thoughts? I don’t think anyone really wants to buy carpet or vinyl or laminate or tile or wood. Those are products; I believe people gravitate toward attributes. Waterproof is an attribute. Stain-proof is an attribute. Comfort is an attribute. Soft is an attribute. Those are solution-providing words. Do you know what would happen if we changed the word waterproof to rigid core at the consumer level? You don’t want to know. Maybe we should change the word hardwood to “home- value-enhancing flooring.” Kidding.

Another factor impacting retail flooring sales in 2019 is something few people talk about today—something I broached more than 15 years ago, a few years prior to the Great Recession. Back then hard- wood and ceramic tile were all the rave. The economy was good and people were investing in their homes. Real estate prices were through the roof, and for many housing was so exorbitant that owners were investing in their existing homes rather than move.

It was a Catch 22. On one hand, retailers were making good money selling hardwood flooring and ceramic tile—maybe a little high-end carpet as well. But here’s the thing: The replacement cycle for carpet is supposedly seven to 10 years. Do you know anyone who ever replaces a hardwood floor or ceramic tile floor? I don’t. Well, I do; when someone moves into a new house. Maybe. But they surely are not replacing the floor they installed 15 years ago. If they would have bought carpet instead of wood, they would have been back in your store by now. Now you’re hoping to sell their kids, friends or possibly another room in their home.

Then there’s Floor & Décor. We don’t talk about this disrupter enough. Look at its sales volume. You don’t think a lot of that is coming out of your hide? They’re as much a threat as Home Depot, Lowe’s and Empire ever posed.

But possibly the biggest culprit impacting today’s sluggish flooring sales is the media. For whatever reason (I’ll keep my theories to myself), they want to scare people into thinking another recession is right around the corner if not here already. Doom and gloom. Lower people’s confidence. Doesn’t matter if unemployment is at historically low levels. Doesn’t matter that the stock market remains near all-time highs. Doesn’t matter that the economy is good. Doesn’t matter that people have disposable income. Yes, housing is off. And yes, we’ll go into a recession at some point because those things are cyclical in nature and we are due. But the top economists know it will be brief and won’t be bad. That’s bad news for the media, which would love nothing more than a recession—real or fabricated—to last, I don’t know, for about 14 months?

The economy is good. Do what you do best, drive people into your stores, increase your closing rates and you’ll be fine.

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My take: Much to do about nothing

September 2/9, 2019: Volume 35, Issue 6

By Steven Feldman

 

As a member of the media, I have always tried to publish information as accurately and objectively as possible. I have never been concerned about ratings points or “sensationalist” journalism, which seems to be the norm these days. Whether it’s the political, economic or meteorological arena, it’s all about capturing eyes and ears en masse.

I was reminded of this last month when just about every media outlet had this country on the brink of recession when the two- and 10-year treasury yield curves inverted. That is never good for business, including ours.

First, some historical facts about recessions:

1. There have been 11 since WWII, occurring, on average, one year in seven, and, on average, they last 11 months.

2. An inverted yield curve refers to when the yield on the two-year treasury is higher than on the 10-year treasury. The economy has experienced a recession, on average, 17 months after an inversion occurs.

3. The inversion that occurred Aug. 14, which resulted in a one-day drop of 800 points on the Dow Jones average, lasted about five minutes while the two- year yielded 1.628% and the 10-year yielded 1.619%—a difference of 1 basis point (1/100 of 1%).

4. There hasn’t been a recession since 2008-09, and the inversion in the yield curve said to have predicted that recession occurred about two years prior.

In sum, the financial media catastrophized for close to a week about this. Given that recessions happen about every seven years and we haven’t had one in almost 10, we don’t need any particular media prognostications to know we should expect one. Of course, we still can’t time it, nor does it matter.

What has been the default response of investors to this “news?” According to the Investment Company Institute, investors dumped $18 billion into money market funds for the week ended Aug. 16, pushing total money market assets to a near 10-year record of about $3.4 trillion.

So, here we sit, living through the most powerful bull market in a generation, yet investors are still expressing fear. The most recent American Association of Individual Investors (AAII) sentiment survey shows the percentage of investors expecting stocks to rise over the next six months is 23% (near record lows) while those expecting a market fall stood at 45%.

Profit-seeking companies—unlike Western governments—will react rationally to conditions as they find them; the best will continue to grow and prosper. Economic life will go on.

Here is some real good news that you won’t get from the financial media:

1. In the first quarter of this year, household net worth soared 4.5%, its biggest quarterly rise in 14 years, reaching $108 trillion (up from its 2007 prerecession peak of $68 trillion).

2. According to JP Morgan, household debt payments as a percent of disposable income dropped to 9.9%, a 40- year low.

3. Total wages rose 4.6% in the 12 months ending in May.

4. Unemployment stands at 3.7%. In May, the median duration of unemployment fell to 9.1 weeks, while the percentage of unemployed who voluntarily quit rose to 13.5%. These two metrics are indicative of a tightening labor market rather than an economy that is stalling out.

5. Target and Lowe’s, two large consumer-driven companies, reported second-quarter earnings up 20% and 10%, respectively. This serves as confirmation that the consumer, and our economy, is alive and kicking.

Flooring retailers have reported business to be inconsistent this year. But not many have told me business is down. That’s reality. Sure, a recession will come. In fact, ITR Economics, which has a 95% accuracy rate, have long predicted a slight recession during the second half of 2019 or first half of 2020. But generally speaking, the next nine or 10 years will be fine. And if that sounds too boring for the national media, well, it can find something else to sensationalize.

 

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My take: Marketing initiatives should give more than they take

August 19/26, 2019: Volume 35, Issue 5

By Steven Feldman

 

It’s sometimes easy to lose sight of why we’re in business—as crazy as that may sound. We all have a million fires to put out each day. Everyone always wants something—employees, customers, vendors—and they want it now.

It’s a constant battle, so consider this little reminder: Business is about one thing and one thing only—selling stuff. Yes, you’re innovating. Yes, you’re creating value. Yes, you’re improving the lives of your customers. Yes, you’re providing a livelihood for your staff. But none of that means a thing if nothing’s being sold.

So, where does marketing fit into all this? Sam Page, founder and CEO of NeuroTriggers Group, a boutique consultancy that focuses on the underlying principles of human nature to get more customers, believes marketing is just psychology applied. He notes what everyone knows: marketing is the precursor to sales. Its purpose is to make the selling part of the equation both easier and faster. The better your marketing, the more sales you make and, therefore, the more money you make.

This isn’t rocket science. The hard part is remembering it and making it the core of everything you do. It’s easy to lose sight of this. It’s easy to just “do” marketing. But every marketing initiative, every campaign must be held accountable—sort of like a real person. Pretend the campaign was a real person. Ask it how much of your money and time did it take and how much did it yield. If it took more than it gave back, you would fire that person, err, campaign.

Many retailers are guilty of holding on to failing campaigns for too long. Two reasons: No. 1, they don’t know they’re failing; or No. 2, they think they’ll eventually turn around. And the decision to scrap a particular strategy, campaign or initiative gets even harder when you throw things like “branding” into the mix.

For small businesses, this can be a trap. This may sound sexy or seem like something you should be doing, but the truth is for most small and midsized businesses, unless you’re over a certain threshold of sales, unless you’re making tremendous profit already, it really should not be at the top of your list.

Just for the record, if you are a small retailer with a limited budget, here is what your marketing objectives should be, in order of importance:

1. To attract immediate response (affordably)
2. To sell or directly lead to the sale of products and services (profitably)
3. To clearly and memorably communicate a marketing message engineered to facilitate No. 1 and/or No. 2.
4. Possibly to “set up” additional, future response from follow-up advertising or marketing
5. Possibly to add to name/brand identity

Marketing objectives should not include:

1. Being entertaining
2. Adding to pop culture
3. Creating things that look pretty
4. Creating casual water cooler conversation

It would probably be a good use of your time to write down all the marketing activities on which you’re currently spending money. Then, cross-check each activity against the objectives listed above. I bet there’s one or two in there you could stop doing altogether, or at least put on the backburner for now, while you concentrate exclusively on activities assured to give more than they take.

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My take: 10 ways to ensure your brand stands the test of time

August 5/12, 2019: Volume 35, Issue 4

By Steven Feldman

 

Ever hear of the Young Entrepreneur Council (YEC)? No? That makes two of us. Anyway, YEC is an invite-only organization comprising the world’s most successful entrepreneurs 45 and younger. To date, the organization has accepted less than 10% of the 14,000-plus applications and is helping disrupt business mentorship and the professional business organization model as we know it.

The YEC recently addressed brand building through an article in Forbes magazine. The fact is numerous sources and studies show the majority of businesses fail early on. Those that do survive beyond their first few years then face the challenge of becoming memorable and recognizable to consumers.

It’s not easy to craft a brand identity that both reflects modern tastes and trends and still has staying power to keep it afloat for years to come. Here’s how 10 YEC members recommend building a brand that’s made to last.

1. Produce consistent messaging. As the business landscape evolves and fads fade, many companies make the mistake of constantly changing up their messaging and adopting the latest trends in an effort to stay relevant among consumers. This only ends up confusing their audiences. Instead, businesses should stay consistent with their messaging in order to build a timeless brand. Avoid getting caught up in current events and viral topics. Rather, you’ll want to tell a story that will always resonate with your customers.
- Firas Kittaneh, Amerisleep

2. Deliver on your brand promise. A flashy logo or nice website is one thing, but you have to live your brand in every action with a prospect or client. Incongruence between how you position yourself and the actual experience of working with you is the fastest way to kill your brand. People remember great, proactive customer experiences.
- Marjorie Adams, Fourlane

3. Think of your brand as a person. Everyone has beliefs and values that define who we are and how we are remembered. For people, it’s intuitive to have a personality, but when you’re building a brand it’s vital to have a similar understanding that is communicated to your buyer. When you are creating your brand based on a persona you craft, consider traits such as congeniality, familiarity and trustworthiness. These traits never go out of style. Steve Jobs built Apple, not the other way around.
- Matthew Capala, Alphametic

4. Focus on your value first. Many businesses mistakenly focus on the sale first. Over time it will destroy a brand as consumers will only see your business in the position of ask and not give. In today’s competitive space, the business that gives the best value will win. Consumers purchase based on emotion. If consumers see your business constantly providing value, most of them will be willing to become your customer during the giving value process as your business has already established authority and trust.
- Fred Lam, iPro Management Group

5. Determine your values and culture. It all comes down to a business’s real integral values and culture. Trends, tactics and teams will change, but values are forever. They are the pillars that represent a company’s principles. A timeless brand has good values that people believe in—and supports a vision that is bigger than any single person.
- Arry Yu, Tenta Browser

6. Keep it simple. To create a timeless brand, go for simplicity. Your customers will remember your brand as the one that made their lives easier. Whether it’s adding live chat customer support so your customers don’t have to wait on hold for 30 minutes or making your products easier to use, find ways to help them and improve their lives.
- Jared Atchison, WPForms

7. Make time for your customers. No matter how much effort a business might put into its marketing, what makes a brand timeless is its customers. As long as your customers continue to grow in numbers, so will your business. It’s a good idea to give your customers a voice when it comes to formulating and implementing new policies as well as creating new offerings. The time you spend in understanding your customers will help take your business a long way.
- Derek Robinson, Top Notch Dezigns

8. Know your customer well. The customer ultimately determines your brand by the perception of who they think you are. Understanding who your customer is, continually engaging them and speaking to their needs is key. Many companies focus on what they have to offer instead of the benefit to the client. Why have Coke, McDonald’s and other famous brands endured? It’s not the quality of their food so much as it is the perception of how the product will make their lives easier, better or more connected that has made them timeless.
- Daniel Griggs, ATX Web Designs, LLC

9. Evoke positive emotions. Building a solid brand means creating good feelings. Take a look at a store like Louis Vuitton. Its handbags are nice, but it is the brand that sells its products. Beyond that, I have never left the store without receiving queen treatment. This is why I keep going back and purchasing other accessories from them. High-end fashion brands develop large followings by tailoring everything to the customer and their preferences. The in-store shop- ping experience is impeccable.
- Sweta Patel, Silicon Valley Startup Marketing

10. Build a great product first. The timeless nature of a brand ultimately will have more to do with the value put into the product. While the marketing will carry the image of the product forward, the core of a great brand is always a great product. It means reiterating the product, looking carefully at the market for innovation opportunities and, most importantly, always delivering value.
- Nicole Munoz, Nicole Munoz Consulting

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My take: The one column you must read

July 8/15, 2019: Volume 35, Issue 2

By Steven Feldman

 

Back in the Oct. 15/22, 2018 issue of FCNews, I wrote an editorial about my friend Steve Joss, owner of The Vertical Connection Carpet One in Columbia, Md. For those who suffer from memory loss or are new to this publication, Steve was among the 100,000-plus people in this country awaiting a kidney transplant. My intention was to offer four takeaways from that column:

1. All the money in the world may get you lavish cars and luxurious estates, but it still doesn’t buy health. So stop killing yourself trying to make every last nickel.

2. You can complain about what you don’t have—in Steve’s case, a working kidney—or you can be thankful for all the good things in your life. Steve never complained about driving to dialysis three times a week and getting hooked up to a machine for four hours; maybe he griped about the traffic to get there.

3. In times of adversity, you have two choices: feel sorry for yourself or cling to hope and stay positive. You never know what the future holds.

4. If you ever have a loved one who finds himself or herself in this unfortunate situation, know that the University of Maryland kidney trans- plant center has made it easier than ever to donate. You are home in one to two days, back to work in a couple of weeks. And if you donate a kidney and ever need one, you move to the top of the list. It’s almost like an insurance policy.

Anyway, about nine days after the Oct. 15/22 issue hit the streets, at 4:39 p.m. on Halloween, as ghosts, vampires and superheroes were beginning to populate the streets, a real superhero emerged. No costume. No weapons. No superpowers. He did not walk into my office looking to save the day. Rather, his words showed up in a late-day email looking to save a life:

Hey Steve,
I was reading your article about Steve Joss on Monday, and I was extremely touched by it. After doing my own research about the donation process and everything it entails, I would love to see if I’d be able to help Mr. Joss. I understand that there’s an extensive vetting process to see if I’d even be a match, but if it gives him a fighting chance to go back to a normal life, it’s something I’m willing to commit to. I’m 25, in good health and have no past health issues to speak of, so I’m hoping my odds of being a good match for him are decent. I understand that time isn’t much of a luxury he can afford right now, so you or any of his family are welcome to contact me on my personal cell anytime. Thank you for putting Mr. Joss’s story out there and I hope to hear from y’all soon.

The email was signed by someone named Jes Smothers. Jes works on the sales side at WC Carpenter in Virginia Beach, Va., a successful Starnet member. He has hardly been in this industry for a year.

As a man who prides himself on keeping his emotions in check, it was at that moment where I completely lost it. I started shaking uncontrollably. I was excited to help connect Jes and Steve. (For the past 25 years all I’ve been doing with my life is trying to make floor covering retailers more profitable and professional.) Noble, maybe, but difference making? Eh. The notion that one 600-word column could potentially help save a man’s life was way beyond the realm of my existence. I couldn’t even remember Steve’s phone number to give him the potential good news. My brain shut down, and I could not find it anywhere. Didn’t even know where to look. I dialed about 20 wrong numbers. No joke.

That evening I connected the pair, but you know, a lot can go awry from the time someone says, “I want to donate a kidney,” to going under the ether. We’re talking about six months here. There are a litany of medical tests that must be satisfied, not to mention relatives, significant others, friends and co-workers who will try to convince you that you’re insane. Jes encountered little of that, and when he did he was undeterred. Nor did he ever second-guess himself. Not once.

Then you have the hospital asking about 500 times, “Are you sure you know what you’re doing?” Oh. And then there’s one more hurdle to clear:

the donor and kidney recipient must be a match. Everything else can fall into place, but if you’re not a match, well, all you have is good intentions without execution.

As it turns out, Jes and Steve were not a match. But the story doesn’t end here. (Spoiler alert: It gets better.) Jes was still able to donate a kidney, and because of that, not only was Steve able to receive one from the kidney bank but a 12-year-old boy’s life was saved and is now walking around with Jes’ kidney. So not one, but two lives were saved by this heroic human being.

As I write this on July 2, all three are doing well today. Not every story has a happy ending, but this one does. Recently I met Jes in New York City for the first time since the procedure. He’s an incredible young man who you will be learning a lot about in the pages of FCNews going forward.

I must say watching all this unfold over the past seven months has changed my outlook on life, and I want to offer up a few nuggets to consider:

1. It only takes one. Probably 40,000 eyes, give or take, view this column from week to week, but only one person sent an email in response to the column on Steve Joss. Jes was the one.

2. Never give up hope. Greek mythology tells us when Pandora opened her jar, all evil escaped, but Pandora (under Zeus’ will) held hope inside by closing the lid. Hope will always live.

3. Just when you thought everyone on this planet is only looking out for themselves with no regard for their fellow human beings—especially strangers—along comes Jes Smothers.

Last but not least, our role as journalists—and I not only speak for my fellow editors/publishers in the flooring industry but any journalist who has a forum—affords us the ability to make a difference in this world. It’s both a responsibility and a privilege that we all must embrace.

The end.

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My take: The numbers—What you need to know

June 24/July 1, 2019: Volume 35, Issue 1

By Steven Feldman

 

The most arduous task of the year is now in the rear-view mirror. The FCNews team has been combing through industry statistics for months, making countless phone calls and trying to extrapolate data from annual reports. But at long last, the 2018 statistics are in the can. When the dust settled, FCNews pegged U.S. floor covering industry sales for 2018 to be a shade under $23 billion as well as 19.625 billion square feet, resulting in a gain of 4.57% in dollars and a 0.56% decline in volume. Interestingly, we saw a larger percentage gain in dollars than for 2017 but the first drop in volume in seven years. Carpet was the culprit.

Every year I like to remind our readers that these statistical reports are like... well, never mind. Let’s just say, everyone has one. While we are quite confident in our assessment of the industry, we know other reports will have different results for varied reasons. First, some reports contain sales of stone flooring. I have seen some reports that have pegged stone flooring to be around $1 billion. Stone includes marble, granite, travertine, slate, etc., which have uses beyond flooring. We could call stone suppliers and get their assessments, but that would be purely anecdotal.

Another part of the floor covering world not included in this report is polished concrete. My friend Curt Thompson, formerly of Wilsonart, is in that business today and argues that polished concrete is bigger than anyone in our industry wants to admit. If our commercial volume numbers are less than what you thought, polished concrete may be the culprit.

Now, when it comes to ceramic, that number may be larger in other reports. That’s because those may include wall tile. Today, so much of ceramic can be used interchangeably on the floor or wall. We have reached out to many industry insiders, and the feeling is floor tile represents about 75% of the total ceramic number, give or take. So that’s what we use.

Likewise, our rubber numbers include only tile and sheet flooring. Two years ago, we made the decision to eliminate cove base, accessories, stair treads, etc. We revised our numbers back five years to reflect this change. So, that $227.4 million encompasses what we seek to identify.

Other reports rely solely on government numbers, which requires massaging if you stress accuracy. For example, there isn’t anyone who believes the U.S. hardwood flooring market is over $3 billion. The government number for hardwood flooring includes things such as wood for tractor trailer beds and mislabeled engineered wood-based flooring products that use MDF or HDF as their primary cores.

Arguably the most difficult category to nail down accurately is resilient. There is so much that constitutes the segment: sheet, LVT and its subsegments WPC and rigid. You also have VCT and the inexpensive peel-and-stick tile.

FCNews has taken a unique approach these past few years. I personally call every manufacturer that does any appreciable business in the category with the promise of confidentiality. That’s what 25 years of not betraying anyone’s trust has earned.

This year posed some new challenges: first, trying to get a handle on imports and deciphering between WPC, rigid and straight LVT. Second, in a word, Armstrong. It’s like the “Iron Curtain” over there. Its annual report reveals as much as an Amish woman’s dress. Hey, here are our sales and we’re about 20% international and 40% residential/40% commercial. Well, first, a former employee in the know told me the business was 60% commercial. I know the VCT number. So, if you take the overall number, factor out the international business, give the company a 40/60 commercial split, factor out the VCT component, you wind up with about $230 million residential sheet and tile, and $130 million commercial sheet and tile. From there, the research boils down to assessing the sheet/tile split. Luckily, we don’t have to do that exercise too many times.

Are our numbers exact? No. Are they as good or better than anything out there? Yes. And for the record, WPC/rigid for 2018 was $1.6 billion residentially and another $150 million commercially. That’s where all the industry growth is coming from, in case you’ve been sleeping under a rock for a year. (Since I’m asked that question at least once a week.)

As for determining that “other” LVT/WPC/rigid number, this is the piece we estimate. There are a lot of companies doing between $2 million and $10 million in imported product; it would be impossible to talk to each and every one of them. But we think we have a good handle on what’s coming in.

Enjoy the report.

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My take: Capitalizing on the sense of belonging

June 10/17, 2019: Volume 34, Issue 26

By Steven Feldman

 

Membership. It’s a concept we don’t really think about much, yet seven out of 10 people belong to some sort of club or organization, according to the American Society of Association Executives. This could be anything from a religious group to a frequent flyer program or the Chamber of Commerce. Putting it another way, 70% of us are “joiners” who like the sense of belonging.

This is why American Express and other credit card companies refer to their users as members, why there are travel clubs and so on. There are even clubs that start out of their own volition, like the Parrotheads—fans of Jimmy Buffet—or the Deadheads, which pledge their allegiance to the late Jerry Garcia.

Each political party has different “clubs” used for fundraising. Magazine and newsletter subscriptions are positioned as memberships, i.e., the National Geographic Society.

Even without attaching a name to it, Hugh Hefner brilliantly marketed Playboy magazine from its inception as something more. The “what sort of a man reads Playboy?” advertising convinced a generation of men that reading the magazine meant being part of a uniquely appealing lifestyle and philosophy. Even the wearing of logo apparel is, in a way, striving to “belong.” If you pay attention, you’ll see “membership concept marketing” at work all around you.

Here’s the thing: Not only do people respond to this concept, they also derive reassurance from it. Instant credibility can be created solely via the right association branding. Response percentages almost always go up when marketing is done under the auspices of an association or membership.

In addition, in an ever-more-confusing marketplace, consumers use their memberships as a shortcut for sorting out choices. For example, members of Sam’s Club or Costco feel comfortable ignoring ads and coupons from competing grocery stores, instead buying everything where they are a member, trusting they are getting the best deal there.

Taking this concept one step farther, like cats that are always eager to get into whatever room has a closed door, people tend to desire most what they can’t have. Whether we want to admit it or not, we lust after other people’s things—cars, jobs, even significant others. A closed door is as arousing to humans as it is to cats.

This was the subject of an article I recently read that was referred to as “red room/blue room marketing.” The premise is that it’s easy to make everybody in the red room desperately want to join the group in the blue room, and to make everybody in the blue room want admission to the red room. This has many applications, including making prospects “qualify” to buy.

There are two ideas you might want to consider in your own marketing initiatives. No. 1, packaging certain benefits, services and products you now sell and/or deliver routinely together as the privileges of “membership” in a named club or organization; and No. 2, creating a new “club” to market, and to use that as the means of attracting customers to your stores who might otherwise ignore you and/or sustaining greater customer loyalty and higher margins.

Think about this for a second: What if you created the “XYZ Flooring Loyalty Club” for past customers. Send them special offers every month or so. Private sales would fall into this category. Be creative, but make these customers feel like they are receiving something they will not obtain anywhere else. Make them feel like they are getting the best deal possible.

Taking this one step farther, get a list of new homeowners in your area. They will be purchasing flooring now or in the not-too-distant future. Induct them into the club. Provide them with special offers. Make them feel special. Create perceived value.

Of course, you can reach out to anyone and offer them membership. But the key, like American Express has conveyed for years, is that “Membership has its privileges.” Or at least we believe it does.

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My Take: Award of Excellence—Behind the results

May 27/June 3, 2019: Volume 34, Issue 25

By Steven Feldman

 

This issue of FCNews is a bit different than the other 25 we publish throughout the year. For starters, it offers a commercial slant given its distribution at NeoCon, the premier event for the contract design industry. This issue also heralds the 23rd Award of Excellence winners, which produced results that were quite similar to the year prior with a few exceptions. That’s not so surprising given that a company in one year isn’t likely to fall off a cliff in their partnerships with retailers—unless something has gone terribly wrong.

With that said, while FCNewspublishes the winners in their respective categories, what you don’t see are the voting trends from year to year as it relates to specific companies. So here it is—Award of Excellence: Behind the results.

First, I am always fascinated by the voting in and of itself—in particular, the “other” category, which encourages the voter to write in a somewhat lesser-known company that does not appear on the ballot but is still a key partner to their business. Note: You don’t have to write in Shaw or Mohawk here; they already appear in category A. I also enjoyed seeing the votes for Beaulieu. Maybe next year I’ll get a few Kentiles.

Anyway, the most interesting thing to me this year was the Cushion category. For the past few years, Carpenter and Leggett & Platt staged an all-out war in the voting with Carpenter winning by less than 20 votes each time. This year Leggett & Platt won by more than 100 votes. When something like this happens, you have to wonder why. In this case I am guessing Leggett & Platt has underlayment for the burgeoning LVT segment where Carpenter does not. Beyond that...?

The second thing I found interesting was how Armstrong fared in the voting over the last couple of years. Two years ago, the company that once owned the resilient category garnered 10.6% of the LVT vote, 15.3% of the sheet vote and 2.3% of the WPC/rigid category. This year the numbers were 6.4%, 12.6% and 2%, respectively. Again, is the competition stepping up their game or is it internal? It’s not for us to say because we don’t know.

The third voting trend that caught me off guard was the Hardwood B category, where Mirage returned to the winner’s circle after a two-year absence. The Canadian company, considered by many to be at the pinnacle of quality, had previously won five straight until the streak was snapped. USFloors, which pioneered the WPC category, still offers hardwood flooring, lest we forget, and gets a whole lot more votes than people would ever imagine.

Some other observations:

  1. Mohawk took 54% of the carpet vote two years ago and 55% this year. Consistent.
  2. In the Carpet B category, Anderson Tuftex, Dixie and Phoenix all increased their shares of the vote by at least two percentage points.
  3. In the Commercial Carpet category, Mohawk went from 50% of the vote to 42.5%, still a hefty number, with Mannington Commercial picking up almost the exact same percentage gain. It was its best showing ever since the category launched a few years ago.
  4. Almost every company dropped share in the Hardwood category except Mannington, which more than doubled its 12% share from a year ago. Shaw was obviously the strong player this year, winning the category after taking a back seat to Mohawk last year.
  5. Karndean impressed in the LVT B category, going from 25.5% of the vote to 36%.
  6. For the second year in a row, Mannington commanded a 38% share of the Commercial Resilient votes. This is after being swamped by Johnsonite every year since the category’s inception a few years back.
  7. Mannington also took Resilient Sheet with 31.1% of the vote. The company commanded just 16.9% of the vote the year before.
  8. Mohawk might not like the word “laminate” but it had a dominant position this year thanks to RevWood.
  9. The Laminate B category was tight again between Inhaus, Alloc and Swiss Krono. Only 10 votes separated the three.