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Does Amazon pose a threat to flooring? Dealers say: ‘bring it on!’

January 8/15, 2018: Volume 33, Issue 15

By Ken Ryan

 

What if you’re a flooring retailer and you wake up tomorrow with the news that Amazon has entered your space. It’s an unlikely event, but not completely far-fetched—not the way things are going for the online giant.

Amazon has been shaking up the retail landscape over the last few years and may not be done. Besides Whole Foods, which it bought for more than $13 billion in 2017, Amazon now has 13 bookstores, dozens of pop-up stores and partnerships to put products in stores run by Kohl’s and Safeway.

According to The New York Times, Amazon also may open stores that sell furniture and household products. Just two days into the New Year, venture capitalist and tech analyst Gene Munster predicted that in 2018 Amazon would acquire discounter Target.

That may be speculation but this is not: For the first time Amazon includes a “physical stores” breakout in its net sales financial data. Observers say this is evidence of the company’s growing ambitions for brick-and-mortar retail. For the third quarter of 2017, for example, Amazon reported $1.27 billion in physical store sales, compared with $26.4 billion in quarterly online sales. Amazon CFO Brian Olsavsky said during last month’s earnings call that physical retail is here to stay. “You will see more expansion from us,” he said. “It’s still early, so those plans will develop over time.”

What’s to stop Amazon from getting into, say, the flooring retail world? Would specialty dealers put up “For Sale” signs and head for the hills? Hardly. In fact, the sense from many dealers is they would welcome the online mega-star.

“I would welcome them, I would,” said Phil Koufidakis, president of Baker Bros., with multiple stores in the Phoenix market. “I think they will realize that brick and mortar is far more difficult than they could imagine.”

Koufidakis recalled the case of iFLOOR.com, which had been a highly successful online flooring retailer. It ventured into brick-and-mortar stores but did not have the same success. In 2009, after closing 38 stores, it filed for bankruptcy.

Similarly, Empire Today, the shop-at-home giant, opened three physical locations in 2015, and then in 2016 collaborated with JCPenney to open store-within-a-store formats inside select JCPenney locations. In 2017, Empire Today closed all physical locations. Noting the failures of iFLOOR and Empire, Koufidakis said, “Obviously Amazon is more formidable than those companies … but let’s see.”

While Amazon’s physical footprint is growing, it hasn’t made any foray into flooring retail just yet. If it did, retailers say Amazon would encounter an environment unlike anything it has experienced, that is an industry heavily influenced by the flooring dealer’s ability to offer and manage the installation aspect of the business especially in the commercial, builder and property management segments.

“The question I have is: Are they going to offer installation?” asked Missy Montgomery, showroom manager with Montgomery’s CarpetsPlus ColorTile, Venice, Fla. “If not, then I really am not worried about it. Installers worth anything are very hard to find. My father has a saying—anyone can sell flooring but it is the installation and follow-up that has our customers coming back.”

Other flooring dealers expressed disdain that even a giant of Amazon’s ilk could ever successfully encroach on their turf. “Amazon’s presence is real, yet our products must be touched and felt,” said Billy Ward, owner of Artistic Carpet One Floor & Home, Lancaster, Calif. “Many items may be bought with the faceless purchase approach, but when expertise or service is needed, the consumer is the loser.”

Kevin Frazier, owner of Frazier’s Carpet One, Knoxville, Tenn., said he is not concerned about Amazon expanding into physical retail space, or for that matter any national competition, expansion or aggressive marketing they might be engaged in. “Which is to say my real thought is a strategy and not a fear or a concern. The more Amazon anchors itself to the physical world as a sales device the less they are capable of exploiting the loopholes an e-commerce retailer even has to begin with.”

As a retail entity—online or not—the magnitude of Amazon has to be respected for what it can do should it desire to force its will on a market. Some suggest that while Amazon does pose a threat, those most vulnerable are big box stores and cash and carry retailers. “Those types of retailers have been holding the same consumer percentage of the market for the past 10 years without growth, so I feel that consumer is already defined,” said Anthony Maye, general manager of Sparx Flooring, Lubbock, Texas.

According to Mike Foulk, owner of Foulk’s Flooring America, Meadville, Pa., Amazon would have the same problems all of the large retailers have had venturing into floor covering. “And that is quality installation that you can control,” he said. “At the same time, flooring dealers should always be conscious of the change going on around them.”

And that’s a key point other flooring dealers acknowledged. That while Amazon may play a bigger part in flooring at some point, independent dealers must adapt accordingly to combat new threats such as those Floor & Décor and Internet players could pose.

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My take: Make no mistake—The future of retail is here

August 28/September 4: Volume 32, Issue 6

By Steven Feldman

 

What does Amazon’s purchase of Whole Foods mean to you? Probably nothing. Possibly everything.

Screen Shot 2016-07-15 at 3.46.11 PMAt the very least, if you are a Whole Foods shopper, you are going to see lower prices. Gone are the days of referring to Whole Foods as “Whole Paycheck.” It happened immediately after the $13.7 billion deal closed Aug. 28. Shoppers realized an instantaneous markdown in prices on a number of items, including salmon, avocados, baby kale and almond butter. Other foods that will be cheaper after Labor Day include bananas, eggs, ground beef, rotisserie chicken, butter and apples.

But this is about more than cookies and cream. It’s really about retail, specifically, the changing face of retail. And rest assured, this is about much more than online shopping. Sure, Amazon Prime members are certain to see special discounts and in-store mark-downs. People who live nowhere near a Whole Foods store will now have access to delivery—provided they become Amazon Prime members, boosting revenue for the company.

Truth be told, Amazon has had its eye beyond the online experience for some time. It had been dabbling with traditional brick-and-mortar activities for a few years already—from owning a few physical stores to running experiments like Amazon Fresh and Amazon Go. When the news of the Whole Foods purchase broke a few months ago, some experts saw it as a sign the company had finally caved and made a large investment into physical stores in order to grow. What many didn’t see, however, is the fact this acquisition is in complete alignment with Amazon’s view of the world of retail.

So the 2,000-pound gorilla in the room is the question, what happens if Amazon were to buy a national chain that just happens to sell flooring? What happens if one day you wake up and find Amazon to be your competitor? Don’t think it couldn’t happen? Ask the grocery chains who had previously viewed Whole Foods simply as an expensive alternative with prices about 15% higher.

Let’s take it one step further. What if Amazon then purchased a flooring manufacturer to supply those stores so they control the entire chain? That hardwood or ceramic tile floor would conceivably become more affordable to the masses, just like the organic beef and chicken will now become at Whole Foods.

It begs the question: What would you do?

Make no mistake: Amazon’s purchase of Whole Foods marks the beginning of the end of retail as we’ve known it. Or maybe the beginning of the retail industry as it should be. How does this relate to the disruptions that will inevitably come to the flooring industry?

Retail is a ruthless business. It has incredible uncertainty and risk built in. Groceries can go bad in unpredictable ways. The sale of flooring can be affected by unexpected fashion trends, political uncertainty and economic turmoil. To succeed, retailers have to compete on many fronts: they have to invest in the right location; they need to carry the right inventory at the right time; they have to operate with exceptional excellence and provide supreme convenience, often at razor-thin margins.

Technology is going to play a major role going forward in ways none of us have yet to realize. Historically, the flooring industry took a while to adopt technology to disrupt itself. It wasn’t until the 1970s when point-of-sale systems were introduced to replace the very limited electronic cash registers, so retailers could start tracking transactions and tie them to orders and buyers in order to start managing inventory with more certainty. This technology did not reach our industry for decades after that. In contrast, Amazon has approached the problem of retail in a more scientific way since day 1.

Amazon will not be the only company to innovate in this space. The Economist recently unveiled stories of French retailers that had been using software for eight months to mine shoppers’ movements and facial expressions in real time. When surprise, dissatisfaction, confusion or hesitation was detected, clerks were dispatched to help. Sales rose by 10%.

Bottom line: The future of retail is here. Keep your eyes open. Wide open.

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First Mover Advantage (FMA): Seven LATICRETE technical design manuals now available on Kindle

LATICRETE, a global manufacturer of premium installation and finishing systems for the building industry, announced the availability of its seventh Technical Design Manual eBook on all models of the Amazon Kindle.

Now in its fourth generation, the Amazon Kindle enables its users to “shop for, download, browse, and read e-books, newspapers, magazines, blogs and other digital media via wireless networking.” The device can be extremely helpful to those seeking technical information in a pinch, and is an ideal tool for progressive businesses which subscribe to “First Mover- Advantage (FMA).” Continue reading First Mover Advantage (FMA): Seven LATICRETE technical design manuals now available on Kindle