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QFloors highlights new partnerships, products and features during conference

CHR_6308Cozumel, Mexico—QFloors explored new partnerships, products and features during its 2017 “Dive Deeper” Users Conference, held on the Norwegian Escape, Nov 4-11. The 61 attendees participated in business and software training, collaboration and roundtable discussions during the days at sea.

At the conference Chad Ogden, QFloors president, announced a new partnership with Measure Square. “Partnering together, we’re able to create the strongest combination of estimation and business management software in the flooring industry.”

A great deal of buzz revolved around the new browser-based cloud software product, QPro POS+. Attendees were given a log in and invited to familiarize themselves with it. Ogden explained they would be able to see updates in real time as programmers continue to add to the browser-based cloud software product. The introduction of the new QFloors Mobile Suite was also met with enthusiasm by attendees. With new and better mobile technology, flooring dealers can now take care of everything from A to Z on an iPad or tablet computer, all before stepping away from the customer’s living room.

Trent Ogden, QFloors CFO, provided in-depth business training for attendees. “‘Dive Deeper’ is the perfect theme for this conference,” he explained, “because this is not just a high level “click here to do this” type of software training. We’re not just showing how to access important numbers and reports through QFloors, we’re teaching them how to evaluate and use those numbers to make the very best decisions for their business.”

In forum discussions, QFloors customers Jennifer Schmidt, Greg Besteman and Rex Fabrizio shared their experiences with topics such as utilizing B2B, wisely taking advantage of opportunities to distinguish your company and how using credit card tokenization can be a game changer when it comes to receivables.

The conference concluded with Chad Ogden leading a roundtable discussion on features attendees would most like to see added to the legacy QFloors software.

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Top distributors: Wholesalers overcome labor shortages, slow growth to post modest increases

November 6/13, 2017: Volume 32, Issue 11

By Ken Ryan

 

Screen Shot 2017-11-13 at 9.32.13 AMFormer NFL Hall of Fame football coach Bill Parcells used to say, “You are what your record says you are.” If that logic was applied to the flooring industry’s top 20 distributors, that record would be fairly exemplary as the group posted gains averaging 4% in 2016. By way of comparison, the gross domestic product—the monetary measure of the market value of all final goods and services produced in the U.S.—grew 2.9% for all of 2016.

Flooring distributors once again showed that even in a slow-growth economy, in which obstacles like an ongoing labor shortage delayed or extended projects, wholesalers were able to rise above it.

With regard to the lack of skilled labor impacting all construction trades, including flooring installation, there is no short-term fix to this issue, observers say. While many aspects of the housing market are improving—housing starts are up and prices have increased—the lack of qualified installers remains. This problem began surfacing in 2012 as construction activity picked up and the unemployment rate dropped; it has worsened in the years since.

Jerry Howard, CEO of the National Association of Home Builders (NAHB), said the cause for the shortage was workers leaving the industry after jobs dried up during the recession. Many workers fled to other industries or other countries, and many haven’t come back. Some took jobs in the manufacturing and auto industries, while others found work in the energy sector.

“Simply put, they were getting any work they could and had to go into other sectors to find ways to put food on the table,” Howard said. “We are now at the point that there is a serious shortage of workers. It’s a real problem that ripples throughout the home-building process that ultimately costs the consumer.”

Distribution executives said that while labor shortage is a concern, there are other issues such as land availability, affordability issues and modest activity that have held the market back from reaching its fullest potential. “There has been no real momentum in the discretionary replacement of existing floors without any other construction or remodeling activity,” said Jeff Hamar, CEO of Galleher, a top 10 distributor based in Santa Fe Springs, Calif. “I think this is due to the fact it has been roughly 20 years since the first introductions of natural looking vinyl products, second-generation laminate and urethane- coated, wider-width wood flooring.  Products installed after 1998 haven’t ‘uglied out’ and don’t need to be replaced.”

Despite some challenges, there have been positive signs that have fueled growth, namely an improved job market, favorable stock market, and—at least statistically—higher consumer confidence. According to the Conference Board, consumer confidence in October 2017 increased to its highest level in almost 17 years, boosted by the prospect of improving business conditions. However, not everyone is seeing this confidence translate into higher flooring sales. In fact, some say a lack of confidence continues to keep shoppers on the sidelines, thus impeding growth and contributing to less than normal existing home sales.

The inventory shortage that has plagued the housing market for over two years has lessened the pace of sales. The 1.7% decline seen this past August was the fourth in five months and brought the annual rate to the lowest level in 12 months.

Private label growth
In the past decade, the industry has witnessed a large increase in imported products, many of which are well suited for private labeling because they allow the distributor to tailor the offerings to specific markets, picking and choosing patterns, constructions and designs that fill voids in their current lineups or complement other flooring options. The ability to customize the program to suit specific market needs is a strong attribute of private labeling and is one reason why it continued to rise.

Several distributors cited private-label lines as their best performers in 2016. For example, Denver Hardwood’s top selling line was Neptune, a private-label rigid core waterproof offering. Overall, the company’s private-label program was cited as a major factor in Denver’s success.

As opposed to brand name national programs that oftentimes are not market specific, distributors can design private-label programs for their specific markets. In so doing, they can increase margin opportunities, don’t have limitations to where they can take the product and can protect their customers from being shopped online. Indeed, private labeling ensures the distributor have single distribution on the products in that brand.

How companies fared
While macro trends such as housing and economy impact all distributors to some degree, there are those wholesalers who face challenges specific to their own markets. That was the case for T&L Distributing in Houston. Its string of unfortunate events actually began in February 2015, when Shaw decided to distribute its Anderson hardwood brand. Losing that business cost T&L $10.6 million for 2015. Later that year oil sunk to $30 a barrel, leading to a slow fall selling season. In 2017, T&L took another hit to the tune of $5 million, when Mannington sold its VCT business to Armstrong. “There have been some very bright spots and some negative,” Bob Eady, president, acknowledged. “Oil prices still are up and down. The rest of the country loves it; I hate it. Oil pricing has an effect on our economy. Texas lost 88,000 jobs last year.”

T&L, as well as Reader’s Wholesale and Swiff-Train Co., also dealt with the disaster that was Hurricane Harvey in 2017. The long recovery and rebuilding will eventually result in a spike in business for wholesalers in southeast Texas but probably not before 2018.

In the last seven years, Galleher has averaged 20-plus percent growth year over year to nearly 250% in that time. However, 2017 saw only a 7% gain, Hamar said, as the distributor experienced problems with quality, availability and styling of its domestically sourced products. “We also were forced to change from Roppe to Johnsonite mid-year and lost a couple million of sales in that transition. We also relocated our manufacturing operation from Los Angeles to a much larger facility in Phoenix, and that really impacted sales this year. Combine all of these negative headwinds and we would have had growth of close to 15%. I’m not making excuses—just putting into context that we have much sales momentum going on out here.”

For Lee’s Summit, Mo.-based Tingle Flooring, a newcomer to this year’s top 20, being nimble and opportunistic continues to pay dividends. While its flooring division was relatively flat, Tingle’s installation products division increased 11%. As Chip Moxley, president, put it: “Undoubtedly the economy is helping to sustain our business, but real growth is coming from new products that both retail and commercial customers want for their floors today.”

Like many others, Tingle increased the percentage of its LVT/WPC business from 20% in 2015 to 27% in 2016, while laminate (8%) and hardwood (27%) stayed relatively the same.

Herregan Distributors, Eagan, Minn., has been particularly bullish on LVT/WPC, with more than one-third of its business now devoted to the category. Other top-tier distributors are all in double digits percentage-wise in terms of product mix, a number that continues to rise. “We continue to take WPC market share which is impacting our business,” said Pat Theis, vice president of sales and marketing. “We feel the economy has also helped at retail.”

Similarly, William M. Bird cited a better retail market and LVT/WPC for its increase of 5% from 2016 to 2017.  “LVT/WPC is the fasted growing segment with our flooring,” Maybank Hagood, CEO, said, echoing a sentiment shared by virtually every other distribution executive.

Commercial slowdown

While the LVT segment produced strong gains on the residential side in 2016, commercial sales of LVT and other products were not as strong, resulting in less project activity, distributors report. “My fear from things I’ve read and what I’m seeing out in the market is that some commercial flooring selections are shifting to things like polished, painted and stained concrete,” said Torrey Jaeckle, vice president of Jaeckle Distributors, Madison, Wis. “Any market shift like that is going to hurt the traditional flooring distributor as well as manufacturers, as none of us that I know of are involved in that product category.”

Looking ahead, Jaeckle sees a mixed bag on the economic front, with the immediate future looking promising.

“On the commercial side, I expect more robust growth throughout 2018, as that is what key economic indicators are telling us right now. On the residential side, I think overall the industry for our region is going to see more lackluster growth compared to 2017 as GDP growth slows as the year progresses before entering a mild recession in 2019.”

Screen Shot 2017-11-13 at 9.33.54 AMScreen Shot 2017-11-13 at 9.34.05 AM

 

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Retail roundup: Despite challenges, dealers remain hopeful

November 6/13, 2017: Volume 32, Issue 11

By Reginald Tucker

 

Screen Shot 2017-11-13 at 9.28.15 AMAt Enhance Floors & More in Marietta, Ga., hard surface sales—especially wood—are driving the business, noted Elisabeth Stubbs, owner. A little farther south at Taylor Carpet One in Fort Myers, Fla., residents’ seasonal migration patterns are expected to boost business. “Our northern winter residents returning should continue to keep the momentum going for a strong end to the year,” said John Taylor, owner.

In the Midwest, dealers like Sam Presnell, owner of The Rug Gallery in Cincinnati, feel 2017 will end up better than projected—“just a gut feeling,” he said. Crossing over into the Plain States, at Grigsby’s Carpet, Tile & Rug Gallery, Tulsa, Okla.—an NFA dealer—sales are currently running about 5.5% ahead of last year. “We are hoping to pull that up later in the quarter to hit 7%,” said Penny Carnino, director of operations.

Anecdotes such as these are echoing across the floor covering and home furnishings landscape as retailers continue to express optimism that the year will end on a high note. This is due, in large measure, to rising consumer confidence, a generally bullish stock market and economic patterns that support purchases of big-ticket items.

“Traffic has been up, and better quality sales have led the way,” Presnell told FCNews. “I am very pleased at this point and see a bright future for us going into next year.” Stubbs echoed that sentiment, adding: “My outlook is optimistic. We are selling and installing a lot of bathroom makeovers.”

The good vibes many floor covering dealers and home furnishings retailers feel are reflected in the numbers. According to a newly released report from the U.S. Census Bureau, sales at furniture and home furnishings stores in July, August and September were up over the corresponding periods last year. (Through the first nine months of 2017, sales in this sector grew 3.8% over the corresponding period in 2016). For many observers, this signals a willingness of consumers to spend more of their discretionary income on home improvement/remodeling projects—which also bodes well for the floor covering sector.

Other general economic reports may confirm consumers are loosening the purse strings. According to a newly released Kiplinger’s forecast, sales of building materials—along with automobiles—are gaining in the fourth quarter. Some of that activity, analysts say, can be attributed to post-hurricane spending. Kiplinger’s research shows sales rose 1.6% in September as many sought to replace flood-ravaged cars in Texas and repair damaged homes. Likewise, restaurant business picked up, and a spike in gasoline prices from damage to refineries also contributed to spending. Excluding gasoline, 2017’s sales will likely end up 3.8%—the same as 2016’s pace. Kiplinger analysts expect building materials should rise 8%, up from last year’s 5.7%, when all is said and done.

The positive movement in retail sales is not limited to brick-and-mortar operations. Kiplinger analysts expect e-commerce sales will grow 15% this year, which is in line with 2016. E-commerce has shown remarkably solid growth over the past seven years, and will account for 9% of retail sales (13% of all goods sales) by the end of this year.

Screen Shot 2017-11-13 at 9.29.22 AMAnalysts at Deloitte expect a more robust contribution from this category. The firm forecasts an 18%-21% increase in e-commerce sales in 2017 compared with 2016. E-commerce sales are expected to reach $111 to $114 billion during the 2017 holiday season.

“The projected uptick in holiday sales ties to four primary factors affecting consumer spending, starting with anticipated strong personal income growth,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Last year, disposable personal income grew 2% over the year to the holiday period, and we may see that rise to a range of 3.8% to 4.2% this season. Consumer confidence remains elevated, the labor market is strong and the personal savings rate should remain stable at its current low level.”

Sure, that may certainly apply to more portable items such as electronics and clothing, but what about big-ticket items like flooring? If you put faith in the trends online operators like Wayfair are reporting, then this indeed might be a broad-based rebound. For 2016, the company reported direct retail net revenue consisting of sales generated primarily through Wayfair’s five sites increased $273.4 million to $959 million. Economists expect the retailer’s 2017 numbers will be equally impressive.

Mitigating factors
While fundamentals remain positive, Deloitte’s economists also cited potential uncertainties that could affect income growth and bring the forecast in at the lower end of the range, such as an increase in the savings rate that would cause spending to expand more slowly. The threat of a government debt ceiling crisis—which has loomed over prior holiday seasons—could also cut employment and income growth. The impact of the unusually active hurricane season remains too early to project, as it could depress spending or increase it, particularly in the home improvement sector, due to rebuilding activity.

“Sentiment and spending indicators are firing on all cylinders, but the question is: How will retailers respond given the profound disruption across the industry?” said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader. “The good news is retail is thriving, and it is the proliferation of new, niche retailers that is resulting in share constantly changing hands.”

Floor covering retailers don’t appear to be too concerned. “I think the last quarter of 2017 will be much stronger compared to last year,” Denise Fike, owner of Fike Brothers Carpet One, Selinsgrove, Pa., told FCNews. “We are past the election, which was on everyone’s mind last year, and our economy is stable. We anticipate an 18% increase over last year and I feel 2018 will be a little stronger.”

Back at Grigsby’s Carpet, Tile & Rug Gallery, the outlook is also positive. “Retail traffic has been pretty good leading into the holiday season, and it should continue as long as the weather holds in our area,” Carnino explained. “Comparing the end of the year  to last year, traffic is better, people have more confidence in the economy right now—and that seems to be reflected in our increased sales.”

 

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Technology: Mohawk’s Omnify program drives results for retailers

Web-based solutions, tools aim to boost dealers’ online presence

August 28/September 4: Volume 32, Issue 6

By Lindsay Baillie

 

Screen Shot 2017-09-05 at 12.31.57 PMMohawk’s Omnify, a program introduced at the company’s Solutions conference last year, is beginning to make an impact on dealers’ online initiatives. The program, named for its ability to provide “omni-channel solutions,” aims to simplify digital marketing by capturing and tracking leads, and streamlining social media publishing and search engine marketing.

Specifically, Omnify was created to provide a number of solutions for dealers. Among them:

  • Improve social reach and convert potential customers into qualified leads;
  • Tailor the dealer’s digital storefront to engage consumers and promote enhanced content;
  • Build and strengthen local reputation of retailers through rankings and reviews;
  • Increase store visibility and improve search rankings, and
  • Build trust and confidence with consumers.

“Omnify connects the [consumer’s] online and in-store experiences,” said Mollie Surratt, senior director, public relations and inbound marketing, Mohawk Industries. “Omnify is all about simple connected retail. It is an omni-channel solution empowering retailers to own their market in the digital space. It’s giving them the content, tools and reporting they need to take their digital marketing presence to the next level and drive more traffic into their stores.”

Retailers have provided positive feedback since the program’s launch. For instance, Harry Schillings, president of Houston-based Spring Carpets, is definitely seeing an increase in traffic due to Omnify. In fact, his store is recording an average of three call-in leads a day since the program’s launch.

One of Schillings’ favorite features about Omnify is its ability to record phone conversations between consumers and employees. “That little feature is absolutely priceless. On our website there is a contact button that allows the customer to call the store from her phone. When I had the chance to listen to these recordings I [discovered a shortcoming] in my business. We had a large void that I was able to fix, but I would have never found that flaw without listening to those voicemails.”

Schillings is not alone. Scott Allen, general manager, Carpet Corner, Kansas City, Mo., has also generated a great number of leads. “Since the Omnify site went live our customer contacts— specifically the number of folks requesting quotes—has increased to double what we were generating at a fraction of the cost. These are high-quality leads with a higher closing ratio than other Internet leads.”

In addition to seeing increases in quality leads, dealers like Adam Pace of Metro Floors, Lancaster, Calif., are already seeing a major return on investment. “Within the first month, the revenue off the sales [from these leads] has paid the cost of the program for the whole year.”

Mohawk is receiving recognition from not only its dealers but other companies as well, according to Seth Arnold, vice president of residential marketing. “We have some of the best companies in the digital space telling us we got the recipe right. When Mohawk is challenging some of these companies to up their game, that makes me feel like we’re pushing the envelope for the sake of our retailers. We have the power to fight hard for independent retailers so they have the tools they need to excel.”

Looking ahead, Mohawk is continuing to develop content and solutions for Omnify to further assist specialty retailers. As Austin Messerman, marketing brand manager, explains: “Our team is working on developing our advertising strategies in local markets as well as our content strategies—all of which will work together to make the tool more powerful and see that it continues to drive success for the retailers.”

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Rise in e-commerce concerns flooring retailers

July 31/Aug. 7: Volume 31, Issue 4
By Ken Ryan

Screen Shot 2017-08-07 at 11.20.23 AMAs e-commerce grows in the retail channel, specialty flooring retailers have expressed concern that online sales could negatively impact their business. It’s a subject that has many store owners and managers on edge.

“Don’t get me going on this topic,” Ben Boss, owner of Boss Carpet One Floor & Home, Dixon, Ill., told FCNews. “Looking out 10 to 20 years, I wouldn’t be surprised if the flooring retail landscape is completely different.”

Andrew Wiebe, co-owner of Red Deer Carpet One Floor & Home, Red Deer, Alberta, Canada, echoed those sentiments and fears, adding, “It’s coming, folks.”

Cathy Buchanan, owner of Independent Carpet One Floor & Home, Westland Mich., had this observation: “Just look at Amazon and how it has taken [online retailing] by storm. Our world and the interpersonal relationships are dwindling. I am concerned.”

Looking at news reports, you can understand why dealers are feeling uneasy. Through June 20, there have been 5,300 store closing announcements in the U.S. this year, making 2017 the second worst year on record at the six-month mark. The worst year ever for store closings was 2008 during the Great Recession, when Credit Suisse counted 6,163 closings. Some believe 2017 might eclipse that number.

The growth of e-commerce and what retail experts say is an overbuilt retail landscape has contributed to this situation. According to the U.S. Census Bureau of the Department of Commerce, e-commerce sales in the first quarter of 2017 accounted for 8.5% of total retail sales. That compares to 7.8% of total sales in Q1 2016, 6.9% in Q1 2015 and 6.2% in Q1 ’14. Five years ago, for example, e-commerce represented 5.1% of total retail sales.

So while flooring dealers worry about e-commerce’s rise, there is some encouraging news. The retail consultancy Alix Partners tracked five years of financial performance for 20 publicly traded retailers. For the group, online sales grew from 10.5% of total sales in 2012 to 15.5% in 2016—but margins steadily declined by 150 basis points to 9% in the year. It concluded that retailers’ store fleets were subsidizing their online businesses.

What’s more, it cited a recent study of millennial shopping habits in which 82% of respondents said they still prefer shopping in stores.

While the tactile, face-to-face experience of shopping for flooring in a brick-and-mortar store will likely never go away, retailers like Wiebe said dealers must come to terms with the growing trend toward online sales, particularly among DIY and low-cost segments.

Deb DeGraaf, owner of DeGraaf Interiors, Grand Rapids, Mich., agrees there are consumers who will always want to touch and feel before they purchase, “but in that case some of us are going to be used for the touching and feeling of the product and the customer will then purchase online. I see this being a problem particularly with case goods. Rolls of carpet will remain primarily through retailers and box stores because of the challenge of receiving the roll. It is very important that we as independent retailers create an experience and romance the customers when we get the opportunity.”

As e-commerce sales grow some flooring retailers say they will turn to more private-label goods as a way to slow e-commerce’s growth. Others, however, worry that suppliers can use e-commerce to leapfrog the retail channel and sell directly to the end user.

“We should be very concerned,” said Casey Dillabaugh, owner of Dillabaugh’s Flooring America, Boise, Idaho. “Anything that eliminates the friction of the purchase decision in the eyes of the consumer ought to be considered serious competition. As such, as retailers, we must be willing to explore other non-traditional ways of relating and communicating with our potential customers. With all that said, I do believe there will always be a sector of the community that still wants the experience that only a specialty flooring retailer can provide. In the end, it’s how we relate to the customer that will ensure our survival.”

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Marketing Mastery: Creating profitable referral relationships

July 3/10: Volume 32, Issue 2

By Jim Augustus Armstrong

 

(Third of three parts)

Screen Shot 2017-03-06 at 10.45.16 AMIn parts one and two I presented strategies for developing and nurturing referral relationships with other businesses, and how those relationships can generate $250,000 to $1 million or more in annual revenue with extremely low marketing costs. Essentially the goal is to round up, nurture and profit from a herd of businesses that send you ongoing referrals. In this part I’ll cover more strategies for nurturing and profiting from your herd.

Affiliate appreciation events
Let’s say you’ve got 20 businesses in your herd. Here are some events you can host to nurture the relationship and position yourself as the “hub.”

Host a drinks and hors d’oeuvres networking event in your showroom. Send a series of email/print invitations to your group. Hire a photographer to take photos for your newsletter.

Throw an appreciation dinner at a hotel and give awards to the top referrers. You can defray the cost by having other business owners speak during the dinner. This gives them exposure to your group and provides valuable information. Have them each pay one-third of the event’s cost.

Educational events
Every month I co-host the FCNews Marketing Mastery webinars with Ken Ryan, senior editor. Oftentimes these webinars feature business experts speaking about topics that apply to any industry. Invite your referral partners to attend at your store. Set up a large monitor and seating, and provide snacks and drinks. This demonstrates to your partners that you care about their success and provides a great networking opportunity.

Affiliate marketing
Let’s say you’re working with an interior designer. Offer to send your monthly newsletter to her list and include her photo and business name on the front page, alongside yours. Offer to either split the cost or pay for the entire mailing. The cost is worth it because you’re now marketing to an entirely new list of customers who already know, like and trust her. The designer is the ambassador introducing her customers to your business. A dealer in Utah did this very successfully with both a designer and a realtor. This produced ongoing referrals to his business, including a $40,000 job from one of the realtor’s customers.

You can take this idea further and do a host/parasite mailing. This is a bit more complicated but I’ve made a lot of money doing it. Here’s how it worked when I did it with a designer:

I wrote a letter from the designer to her customers. This letter had a photo of her at the top and introduced me and my business to her list. In the letter she raved about my business, and said “enclosed is a letter from Jim with a special offer because you’re a customer of mine.”

Underneath this letter was a second one from me with my photo at the top. It thanked the designer and had a special offer “exclusively for customers of XYZ.” The letters were on slightly different colored paper and written with different fonts.

I made it easy for the designer and handled everything: writing the letters, and handling the printing, postage and mailing. The only thing the designer had to do was supply me with address labels. I made at least a 20-1 ROI with this campaign and repeated it several times.

 

Jim Augustus Armstrong specializes in providing turnkey marketing strategies for flooring dealers. For a complimentary copy of Jim’s book, “How Floor Dealers Can Beat the Boxes and Escape the Cheap-Price Rat-Race of Doom Forever,” visit beattheboxestoday.com.

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Dear David: Managing a business amidst sibling rivalry

July 3/10: Volume 32, Issue 2

By David Romano

 

Dear David:

Screen Shot 2017-03-06 at 10.37.51 AMMy father transferred our business to my three siblings and me quite some time ago. We didn’t pay for it and all have equal ownership. I now find myself doing more for the business than my siblings. When I ask them to work harder and play a larger role they throw our equal ownership in my face. I am now considering opening a separate flooring store without them. Do you have any suggestions before I make this decision and cause more conflict?

Dear Owner,

Starting a separate company may cause even more strife than your current situation. The thought of starting a new company may get your heart pumping and sound like a good solution, but when the adrenaline wears off and you are hit with your new reality it may be more than you can handle. If you are the one carrying the largest workload, you will most likely end up with two full-time jobs because completely exiting the family business could cause irreparable harm to your family.

If your father had structured the transfer differently you could have avoided this mess. Not assigning one of you controlling interest is the main issue and is a real impediment to an effective solution. Here are some recommendations:

  • Sit down with your dad and siblings and discuss what you’re feeling. Let them know just how bad it is and that you are considering opening your own flooring store without them. During the conversation ask for a renewed commitment from each sibling. They may not know what they are doing is having such a negative effect on you or the business.
  • If they do commit, define roles and responsibilities. A clear understanding of what is expected is important for everyone whether or not he or she is part of the family. This exercise may be enough to get them re-engaged. You need to define what each should be doing and what each task looks like when done right. Check on their progress in 90 days to ensure no momentum is lost.
  • Make adjustments to how everyone is paid so they are rewarded for their direct effort. Just because you are all equal owners doesn’t mean you all need to receive the same amount of pay. If you all sell, set up a plan where each gets a lower salary and then earns commission or bonus once their salary is covered. If anyone’s function is not sales related, research what his or her position would be paid if you were to hire someone else to do the job. If the position should be paid less, pay them less. If the position should be paid more, pay them more.
  • If all else fails get an objective evaluation of the business done to find out the value of each shareholders’ stake in the business. If some are not willing to pull their weight buy them out. If you do not have enough cash to pull this off, I suggest you look at getting some funding. If you cannot get the funding you may consider buying enough equity from them to gain controlling interest.

Best of luck in this venture, and if you one day find yourself in the same position as your father where you want to transfer the business to your children do not repeat the same mistake. Have them buy into the business, assign controlling interest and be involved in setting clear expectations.

 

David Romano is the founder of Romano Consulting Group and Benchmarkinc, a group that provides consulting, benchmarking, recruiting and software solutions to the flooring, home improvement and restoration industries.

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Mid-year report: After dull half, dealers, distributors hope for rally

July 3/10: Volume 32, Issue 2

By Ken Ryan

 

Screen Shot 2017-07-10 at 2.40.40 PMFollowing a first half that some flooring retailers and distributors described as “fair at best” and “lackluster,” industry executives are hoping the second half will yield more robust activity. At the same time, however, they expressed concern that pent-up demand remains bottled up and could dampen what many hoped would be a strong 2017.

To be sure, some dealers reported healthy increases in the first half but there was clear consensus that the business climate today is uneven and lacking any discernible momentum.

The macro view of the economy would seem to bear that out. The Federal Reserve Bank of Atlanta’s GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 was 2.7% on July 6, down from 3% on July 3. The expectations have dipped amid fears of lackluster consumer spending.

These days encouraging news seems to be tempered. The Labor Department on July 7 reported the U.S. economy added 222,000 jobs in June, more than economists were expecting. However, wages grew 2.5%, well below the goal of 3.5% set by the Federal Reserve. Wages are one of the last indicators to take off since the recession ended in 2009, and economists suggest the paltry increases could be one reason why consumers are still hesitant to splurge for high-ticket items like flooring.

Retailers don’t need to read government reports to know that business on the retail side continues to underwhelm. “Retail floor covering remains relatively weak, and absent income tax reform and/or reduction, I don’t see legitimate cause for confidence in near-term improvement,” said Sam Roberts, president/owner of Roberts Carpet & Fine Floors, with 12 locations in the Houston area, echoing a sentiment shared by others. “We all have to persistently adjust to new realities.”

Olga Robertson, president of the FCA Network in Shorewood, Ill., sounded another familiar theme when she said there was no “rhyme or reason” to what is happening in the market today. She noted that retail has been dull, commercial is flat, and the builder business is either booming or non-existent. “If you go to states like Tennessee, South Dakota, Kansas, Iowa—the Corn Belt, so to speak—they are building 800-home subdivisions. Even in Illinois, a home doesn’t stay on the market for more than two weeks so inventory is down but not a lot of new homes are being built.”

Some flooring observers suggested that 2017 was going be the year when pent-up demand would finally be unleashed after years of tepid activity. However, dealers and distributors told FCNews that consumers still seem unwilling or hesitant to spend on flooring. “There is a lot of desire to do projects out there; it is just a question as to whether people will go through with them or not,” said Mike Foulk, owner of Foulk’s Flooring America, Meadville, Pa., who called the 2017 first half “a roller coaster.” He noticed there is no set pattern for when consumers shop. “They purchase when the mood strikes them, and they are not going to purchase unless it is on sale or some type of discount or incentive is being offered. My concern is people are on edge and may hold off on purchasing.”

Robertson wonders why consumers aren’t making the investment considering there is very encouraging data out there. “The stock market is up and everyone’s 401(k) has increased over 13% this year; the banks are lending with low rates on [refinancing] with no fees. Everyone should be spending money on their home—as that is your best investment—but for some reason they are not willing to pull the trigger.”

Screen Shot 2017-07-10 at 2.40.51 PMCarlton Billingsley, owner of Floors and More, Benton Ark., noted that while the consumer is cautious as a whole on the retail side “many of our older clientele are spending bigger dollars to upgrade for more luxurious items with walk-in showers, under floor heating, etc., to help offset some of the cautious consumer spending.”

What’s frustrating to flooring retailers and distributors is there have been pockets of decent activity in 2017, albeit with no carryover quarter-to-quarter or sometimes even month-to-month. Bob Eady, president of T&L Distributing in Houston, said 2017 has been a “month-to-month battle for business due to the softness in the economy. I believe that until our political leaders (both parties) improve consumer confidence with lower taxes, both personal and corporate, the healthcare reform debate, deregulation, etc., we will continue to find business very sluggish. I believe the news media has done a tremendous job of ruining consumer confidence.”

Scott Roy, president and CEO of Gilford-Johnson Flooring, Jeffersonville, Ind., observed that while the spring was slower than what had been forecast, he remains optimistic the market has or will turn. “June was better than May, and I’m seeing and hearing retailers are getting busier and commercial business for us is looking more optimistic. A lot of my optimism is based on what we are doing to generate more business.”

Allen Gage, president of Tri-West in Santa Fe Springs, Calif., said business has been “good but not great,” and that demand has been inconsistent in the West. He noted sales have not matched the enthusiasm shown in the stock market, especially in the commercial sector. As for the second half, “If people believe something is getting done on healthcare and taxes then things will take off nicely.” However, he is concerned that issues such as failure to pass legislation could put a damper on the second half.

The Vertical Connection Carpet One in Columbia, Md., enjoyed a stellar first half with double-digit sales increases driven primarily by the investment in new hires during the second half of 2016. For Adam Joss, co-owner, the concern isn’t so much today but the future. He is worried that the retail shopping environment is changing faster than ever and that the flooring industry is not insulated.

“E-commerce will become a more common way for consumers to purchase flooring online,” he said. “We all know, at this point, that homeowners begin their research online. That’s not good enough, though. More consumers want to complete the entire buying process online. I’m a firm believer that store traffic will never return to what it once was.”

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Flooring retailers find balance in ‘Goldilocks’ economy

June 5/12, 2017: Volume 31, Issue 26

By Ken Ryan

 

Screen Shot 2017-06-09 at 10.46.11 AMNot too hot that it causes inflation and not too cold that it supports a recession. Economists refer to this phenomenon as the “Goldilocks” economy. In May, for example, a record 34% of respondents to a Bank of America Merrill Lynch Fund Manager Survey described the economy in those terms.

By some measure, Goldilocks is what you want because it is predictable. Viewed another way, it can be considered underwhelming. To be sure, there are good economic signs. The unemployment rate is as low as it has been since 2001; durable goods orders are rising, which equals a growing economy; and the stock market is stable, which is a healthy sign. Conversely, gross domestic product (GDP) growth of 1.2% indicates sluggish movement. In a healthy economy, GDP growth should be around 2-3%. During the month of May, 138,000 jobs were created. A healthy economy should generate 150,000 jobs on average.

FCNews surveyed flooring retailers to ascertain what is happening in their markets.

“Goldilocks seems very fitting to describe the business here at the Rug Gallery,” said Sam Presnell, owner of the Cincinnati-based store. “We had a soft first quarter and a good, above-goal last two months. We are up in traffic the last two months and selling better quality goods. I’m feeling insecure and am cautious in my buying at this point.”

Foulk’s Flooring America, Meadville, Pa., is another dealer seeing an uptick in residential foot traffic and a trend toward better goods. “A big surge has been in walk-in showers; as the baby boomers age we see people replacing bathtubs with walk-in showers and all the design capabilities that go along with that,” said Mike Foulk, president. “Our commercial work is surging—both Main Street and contract are extremely busy. We are as busy as we can be with the available installers.”

Good vibes can also be felt in San Antonio, where Billy Mahone III, manager of Atlas Floors Carpet One, reports “a general sense of optimism. Retail traffic and sales have been up, so we are doing our best to take advantage of this renewed sense of confidence and close as much business as possible.”

However, there are some flooring dealers who report somewhat disappointing numbers, or at the very least inconsistent sales month-to-month or quarter-to-quarter. As Phil Koufidakis, owner of Baker Bros., Phoenix, explained, “As usual the economy is hard to predict. Oftentimes at a 20,000-foot level everyone says how great it is, but it doesn’t always translate to the street. Q1 and April were good; May softened. So…we find it here to be middling-plus so far this year and we are mostly bullish on the rest of the year. That either makes me an optimist or an idiot.”

David Snedeker, division merchandise manager-flooring, Nebraska Furniture Mart, called 2017 “underwhelming” to this point. “While we are up single digits for the year, it has yet to meet the expectations we had coming into 2017. Hopefully the second half will be more robust, and the industry can enjoy a bigger slice of customer demand.”

Back on the East Coast, a mild spring gave some retailers reason to believe 2017 might be a banner year. “In Q2 our business was not as robust for what we forecast as the spring broke early due to the mild winter in our market,” said Brian Witkin, executive vice president of sales for Cherry Hill, N.J.-based Avalon Flooring, with 14 locations in three Mid-Atlantic states. “We are working smarter to sell the entire home to provide a one-stop shopping experience leveraging the large breadth of products we carry.”

Hanover, Pa.-based Charles F. Zeigler & Sons got off to a relatively hot start before business cooled off at the end of April. Not to worry, said Bill Zeigler, co-owner, noting, “Our area is usually immune to the extreme conditions.”

Favorable business conditions have been shining brightly on some dealers in the Sunshine State. Montgomery’s CarpetsPlus, with two locations in the Sarasota, Fla., market has enjoyed a 6% increase in sales over last year. “We are in one of the most desirable areas to live and we are experiencing tremendous growth right now,” said Missy Montgomery, co-owner. (Sarasota, she noted, will be the new winter residence of the Atlanta Braves, and 20,000 new homes are expected to be built in her market over the next 10 years.) “This is the slower time of the season for us because the snowbirds leave. However, that being said, the year-round residents get things done now.”

For John Taylor, owner of Taylor Carpet One Floor & Home, Fort Myers, Fla., sales in 2017 to date have exceeded the previous two years. “We seem to be seeing larger jobs coming through as well as better opportunities in the commercial side of the business.” About the only thing holding Taylor’s business back is the paucity of installation labor, which he said has impeded his ability to grow. “We have, however, seen a number of quality people applying for sales and other jobs, which I attribute to people moving south to our area.”

 

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NAFCD, Caliper enter partnership

Screen Shot 2017-06-05 at 11.58.36 AMChicago—The North American Association of Floor Covering Distributors (NAFCD) has entered a partnership with Caliper, a New Jersey-based talent management firm that guides businesses in developing their workforce and aligning talent with strategy.

Caliper is designed to make personnel decisions, from hiring to succession planning, more seamless and precision-based for association members. NAFCD members will receive discounts on Caliper’s pre-employment assessment tools and other services that have been proven to help businesses become more agile and innovative, attract the best candidates, and promote from within.

“In partnering with Caliper, we, at NAFCD, are taking steps to provide solutions for our members who face challenges related to attracting young talent to the industry, diversifying their teams, and building a pipeline of future leaders,” said Kevin Gammonley, executive vice president, NAFCD. “Our goal is to give our members the tools to be successful and partnering with Caliper serves as an important piece of delivering that promise.”

Caliper uses a proven science-based approach to evaluate the performance potential of job applicants for sales, customer service, leadership, and technical roles in construction, manufacturing, distribution, retail, and other business segments. They are equipped to serve companies of all sizes, from two-person firms to global corporations.

Association members who want to take advantage of the discount on Caliper’s employee-assessment instruments and other services can visit the associations website for details.