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Technology: Chameleon Power gives dealers, suppliers an online edge

Photographic room visualization tools ease flooring selection, specification processes

 

By Reginald Tucker

 

If you’re not incorporating photographic visualization, virtual and augmented reality in your marketing, prospecting and lead-generation initiatives, then you’re missing out on potential sales opportunities and literally leaving money on the table. That’s according to the folks at Chameleon Power, a software company specializing in proprietary tools designed to help manufacturers, distributors, retailers and contractors deliver online and in-store/in-home presentations for their respective clients.

“Our core space is photographic visualization that lets users alter a photograph online while maintaining the photographic integrity of the original image,” said Dan Dempsey, Chameleon Power president and CEO. “Whether it’s for specification purposes or online and in-store selling, our technology moves the buyer down the path toward purchase.”

How it works: Chameleon Power dynamic visualization solutions provide real- time rendering of outcomes during usage. (Users may select from stock room scenes or upload their own rooms for instant viewing and selection of flooring products.) A website visitor or mobile app user can make instant changes of flooring and complementary surfacing to help with decorating decisions.

Chameleon tools are deployed as website solutions, in-store kiosks and mobile apps, virtual reality (VR) and augmented reality (AR) solutions as well as product design and simulation technologies. Chameleon complements its tools with a suite of rendering, product photography, color correction, product simulation and print services. “We morph ourselves into whatever our clients need to help them embrace our software tools,” Dempsey said.

What’s more, Chameleon Power’s technology is flexible in that it can be applied toward various uses depending on the end-user channel. Online merchants, flooring retailers, homebuilders, designers, architects and many other channels servicing the end-user can implement Chameleon tools and services. For example, flooring dealers utilizing online tools, in-store kiosks, AR and VR tools can help their customers with colors, patterns and textures as they move to close the sale.

“That’s one of our key differentiators,” Dempsey stated. “Chameleon can ensure continuity from 2D to 3D, VR, AR, product simulation and beyond, which provides a more fluid set of tools and creates efficiencies and cost-savings for the suppliers.”

Constantly evolving
While Chameleon Power is by no means a newcomer in its field (it has been around for 20 years), the company has accelerated its product development in the 3D/virtual reality/augmented reality areas over the past several years. Many innovations from Chameleon spawn from client needs, including technologies for “blending,” which, according to Dempsey lets users to create unique mosaic combinations of tile and stone configurations.

Chameleon also creates simulation and print services to accommodate carpet manufacturers looking for more cost-effective, photo-accurate sampling solutions. “We have two color experts on our staff, including a color scientist who is our vice president of R&D, and our engines are developed based on our color science expertise,” Dempsey stated.  “Chameleon color tools help with product decisions and specifications, and we also help suppliers evolve their color palettes. In fact, the world’s largest paint and fabric companies use us to manage and enhance their product palettes.”

Today, Chameleon covers the gamut of visualization platforms, offering many different types of tools that all spawn from its original visualization engines.

Chameleon Power has also ramped up other aspects of its business, namely the Render Services category. The company employs more than 30 graphic design professionals who provide assistance for a range of commercial and residential clients. “A leading commercial flooring client works with us to specify products in projects all over the globe,” Dempsey stated. “They have 400 salespeople that we interact with daily to create outcomes with their products in a theme or a 2-D drawing of the floor plan or 3-D rendering.  We send back the project typically within the same day and help them close deals. Our graphics team even helps with flooring designs since they are graphically trained professionals. We also have render farms that do nothing but churn out volumes of vignettes based on numbers of products and scenes.”

Happy campers
Dempsey rolled off a litany of projects for clients such as Arizona Tile, Armstrong Flooring, Emser Tile, Shaw, Milliken and Ply Gem, to name a few—each with their own needs and requirements. Arizona Tile, is a case in point.  Over the course of the past five-plus years, the supplier worked with Chameleon Power on three different site projects—a standard visualization site, where customers can view the company’s products in various residential and commercial settings, as well as two customized portals specifically developed for Arizona Tile’s needs.

“In each case, Chameleon was able to accommodate very specific, custom requests we had and accomplish what we wanted to achieve,” said Adria Harrison, director of marketing. “All three sites are core components to our marketing strategy.”

Emser Tile is another satisfied customer. The manufacturer credits Chameleon Power with the creation of the room visualizer built into its website. “Chameleon has demonstrated a commitment over the years to be on the cutting edge of visualization tools, including the utilization of VR in their offerings,” said Bob Baldocchi, chief marketing officer and vice president of business development. “We believe customers’ expectations to visualize their selections with quality imaging in real time is increasing, and Chameleon is helping Emser Tile to meet these expectations.”

Upside for dealers
Chameleon’s manufacturer clients are not the only ones who stand to benefit from the suite of products offered. Floor covering retailers—those on the front line with consumers—have something to gain as well. According to Chameleon, sites that deploy its tools see user site times increase threefold. But the benefits don’t end there. “We’ve learned if someone actually gets to the point of saving a virtual room scene or project they’re working with, they will end up buying that product more than 75% of the time,” Dempsey explained. “It’s a fantastic lead generator—the best sales guide RSAs are going to ever deploy.”

Some of the big names on the retail client side of Chameleon’s business include the likes of Abbey Carpet & Floor, Carpet One, Empire Today, Floor & Décor and Rite Rug. The company also has distributors and interior designers that use its products regularly. “We offer a customer-facing technology, designed for someone who’s thinking about flooring and is now trying to decide where she’s going to buy it and which product she’s going to use,” Dempsey explained. “Providing technology at the website level ensures the customer is committed when they walk into the store. Having a website version that is also accessible on a kiosk at the store connects the dots between online and retail.”

Statistics and anecdotal data compiled by Chameleon Power show close rates and usages rates are significantly higher with a visualizer than without it. What’s more, the rate of return on investment in Chameleon systems is fairly quick. As Dempsey explained: “We have dealers that come in at $2,500 to start to use the tool, so one to two sales will pay for it. And we have some dealers that spend $50,000. It’s all based on complexity, product ranges, geographic scope, others.”

Regardless of a particular retailer’s size or market, Chameleon Power believes virtual marketing is no longer a luxury—it’s a necessity. “This used to be a premium tool that only the companies with the biggest budgets employed,” Dempsey stated. “It was a differentiator back then; today it is a standard technology.  Consumers who begin their research online expect retailers to offer it.”

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Installation: Flooring dealers grapple with tight labor market

February 19/26, 2018: Volume 33, Issue 18

By Ken Ryan

 

A strengthening economy coupled with an increasingly tight labor market—with unemployment at 4.1% nationally—has exacerbated the installation crisis for many dealers, observers say. The issue has forced some to turn work away because of a scarcity of crews, while others are having to pay substandard mechanics more just to retain them.

While flooring dealers say business is still up in 2018, they believe the installation challenge is stunting this growth. “Our business is being affected in three ways,” John Taylor, president of Taylor Carpet One, Fort Myers, Fla., told FCNews. “First, the shortage of labor is affecting our growth. Second, because of the shortage, our labor prices are going up because [installers] know there is a shortage. Lastly, the quality of the installers out there has gone down drastically, and the workmanship is not where it should be. This will continue unless we all somehow pull together and figure out a way to recruit and train people for our trade. Not everyone is meant for college and there is a great opportunity installing if it is done the right way.”

Such a tough labor market makes finding skilled workers more difficult in sectors like flooring installation. As such, some dealers are forced to pass on certain jobs, unable to fulfill their customers’ needs. In other cases, wages appear to be rising even for mediocre installers. “Unfortunately, I only see this problem getting worse as our labor force is aging—unless we can get the next generation interested in the trades,” said Josh Elder, owner of Gainesville CarpetsPlus Color Tile, Florida.

For Carlton Billingsley, owner of Floors and More, Benton, Ark., the labor market is challenging his business to be more strategic, particularly on the commercial side as he picks and chooses which partners to work with. However, as the backlog grows, his business suffers. Rather than bemoan his situation, Billingsley has a solution he believes will pay off. “We are creatively working with other skilled/non-skilled laborers to learn flooring skills to grow with our business. We continue to invest in training at manufacturer facilities, our facility and in our regional area, too, to diversify the mechanics’ skill set so they can do different types of flooring. This way we can accelerate our growth together.”

Due to the shortage of qualified installers, Tim Schoolfield, owner of CountrySide Flooring America, O’Fallon, Mo., said he is “less confident” these days in spite of an improving economy. “I am less confident we can get flooring installed in a timely fashion or in the ability of new hires to exceed the expectations of an increasingly demanding customer,” he explained.

That sentiment was shared by other flooring dealers such as Cathy Buchanan, owner of Independent Carpet One Floor & Home, Westland, Mich. “It is an uneasy feeling to sell high-quality woven products, hardwood, LVT, laminate, etc., not knowing if you’re going to overwhelm your existing installation crews,” she said. “And then once their knees give way—who do you have? Having a back-up plan just isn’t the case today. No offense to millennials, they just aren’t driven to the challenge of such a difficult job. And when talking about the sales floor, office/support staff, [they] seem to get bored quickly and look for a better position.”

What’s regrettable, Buchanan added, is the flooring retail industry should be primed for growth. “There is so much opportunity in our field of retail—not so much with the shopping centers—because Amazon can’t quite get the touchy-feely experience of buying carpet. People have an opportunity to make a lot of money selling and even more so by installing, and also taking pride in the field of installation. It’s a scary thought.”

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Declining retail traffic is not necessarily bad

January 22/29, 2018: Volume 33, Issue 6

By Ken Ryan

 

For all the efforts to increase store traffic through search engine optimization and other lead generation tools, the consensus is that fewer customers are walking into flooring retail stores today than they did five years ago—a trend that is likely to continue, observers say.

This is true across all segments of brick-and-mortar retail. Despite the fact roughly 90% of all retail transactions are still done in physical stores, the growth of e-commerce and the resulting drop in store traffic is undeniable.

While that news sounds troubling, it might not be such a bad thing, observers say. The reason: while fewer people are visiting stores, those who do are more than likely in the market for flooring and have done copious amounts of research online. “I would say I have fewer customers today than I did five years ago,” said Tim Jacobi, owner of Jacobi Carpet One Floor & Home in Hastings, Neb. “But my average ticket price is higher than it was five years ago.”

Most flooring dealers would gladly trade quality for quantity if it results in greater revenue. As Chris Kemp, owner of Kemp’s Dalton West Flooring, Newnan, Ga., put it, “If we can just get them into our showroom they are our customers to win or lose.”

Experts say it is crucial for brick-and-mortar retailers to create a memorable customer experience. That’s what Gerry Holden is trying to achieve in his three-pronged strategy to entice customers to his Flooring America store in London, Ontario, Canada. “First, you can no longer just put in a bunch of different supplier displays and hope mass selection works,” he explained. “You must build a shopping experience for the customer. You display less but you display better with larger samples installed on the floor. This way the customer can see what it will look like and they can’t get this anywhere else.

“Second, you need to offer more things they need for their renovation—non-flooring products like paint, vanities, sinks, kitchens, window coverings,” Holden continued. “Make yourself a one-stop shop as much as possible. Third—and most important—private label everything. Brand names are [detrimental] for a retailer when it comes to the Internet. You have to make it tough for your competitors to figure out what your products are.”

Eric Langan, CEO of the nine-store Carpetland USA in Davenport, Iowa, said declining floor traffic coupled with the changing buying habits of today’s consumer puts flooring retailers in a challenging spot. Despite this he still feels he has leverage. “There is still a need and want for the brick-and-mortar stores and the goods and services they provide. The flooring purchase is a significant one, and there is a lot that goes into making that buying decision as well as the execution of the installation, if needed. I feel some consumers will buy flooring online and not be concerned with the process at all.  However, I believe the majority of consumers still want to see, touch and feel the product prior to purchase and surely want to deal with a person directly in regard to scheduling and performing the installation.”

While technology is being implemented to help drive traffic into stores, it has also allowed consumers to stay at home and research products, in addition to virtually designing their spaces. From the applications of these tools many shoppers know flooring options early in the process, in addition to how selections will look in their homes and the associated costs before they ever enter stores. To be part of the solution, flooring dealers are using new means to be more efficient (i.e., laser measuring/electronic blueprint estimating, mobile credit card readers). “We have to be experts and we have to be ready to assist customers in completing the project because many of them know what they want, how it will look [in their homes] and what it will cost before they arrive in our showroom,” said Carlton Billingsley, owner of Floors and More, Benton, Ark.

Not everyone agrees that store traffic is down or that it even matters. Although consumers today gather information and determine their options online before they ever venture into stores, at the end of the day they still trust a more personable interaction when purchasing large-ticket items. That’s according to Bobby Merideth, president of Flooring America OKC in Oklahoma City, who said Apple and Microsoft can serve as perfect examples. “Both corporations sell devices that are poster-child products for being sold online, and yet both corporations are building retail stores to allow the end user to experience their respective technologies. We, as flooring retailers, need to move away from simply displaying flooring options and allow the consumer to experience flooring in her home. Adopting technologies such as virtual reality may be one way of creating such an experience.”

Better-trained RSAs
Declining store traffic usually portends a drop in revenue for stores; however, those sales associates who are able to convert customers and upsell them will become the retail rock stars going forward. The Vertical Connection Carpet One in Columbia, Md., is one such dealer placing greater emphasis on training. “In the short term, we’re focused on increasing close rates and order size,” said Adam Joss, co-owner. “This allows us to grow in the face of less walk-in traffic. Additionally, we look to take advantage of every opportunity, whether that’s meeting someone outside of the store, a phone call coming in or any other type of interaction. Long term, it’s no secret that e-commerce will be a common way to shop.”

The way Josh Elder of Gainesville CarpetsPlus Color Tile in Florida sees it, while online shoppers are impacting the flooring business like never before, they still need to touch and feel the samples. And, ultimately, they will require professional installation for their carpet or vinyl. To that end, his salespeople work to bridge the gap between online and physical retail. “My RSAs do a great job of contacting those online customers and offering free in-home estimates. They will take the sample selected online along with some other options to the homeowner when we go there to measure. What I find interesting is more than 50% of the time the homeowner selects something different than the one she chose online. The majority of the time [the customer] will also make a trip to my showroom, which I update quarterly, to look at more options after meeting with my RSA. I think as technology continues to improve it will be harder for my RSAs. I am looking into and working on changing my e-commerce business to make us more prepared [for the future].”

Lighter store traffic in an omni-channel retail world has flooring retailers like Kevin Rose also wondering how to effectively allocate marketing dollars. As the owner of Carpetland USA, Rockford, Ill., he knows traditional methods no longer apply.

“The most successful retail companies spend 8%- 10% of their gross sales on marketing to bring that client in the front door; therefore, fewer customers is always a concern. Having said that, the retail landscape is changing at a dramatic rate and we must change with it—or we perish.”

 

Busting brick-mortar vs. online myth
For all the talk about staggering declines in foot traffic at physical retail stores in the face of sharp increases in online shopping, hard evidence suggests there’s no cause for alarm. According to a recent business.com article, 94% of all retail sales in the U.S. still take place in a physical store. Another sobering statistic: 1.1 million brick-and-mortar retail locations in the U.S. generate a whopping $3.9 trillion in annual sales.

By that same token, a growing legion of online shoppers prefers the flexibility of being able to shop anytime or anywhere thanks to the bevy of mobile devices available today. Stats provided by business.com show online shoppers generate $294 billion in annual sales. (Online shopping this past holiday season alone grew 17% over last year, research shows.)

The good news for retailers of big-ticket home furnishing items (i.e., furniture, appliances, cabinetry and, yes, flooring) is the online platform doesn’t always lend itself to these categories. For some items, it seems, consumers still prefer the tactile experience.

If there’s one area where brick-and-mortar stores need to improve, research shows, it’s customer service. Studies across various channels and end markets continue to show consumers value the total retail “experience” over price and even product quality, in some cases. In other words, it’s how the retailer makes Mrs. Consumer feel. At the same time, physical retailers are integrating their online marketing strategies with in-store merchandising and educational initiatives. Bottom line: Both physical and online can co-exist.

 

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Secret sauce: How flooring dealers thrive no matter the economic climate

January 22/29, 2018: Volume 33, Issue 6

By K.J. Quinn

 

The evolving retail landscape is causing flooring retailers to take a hard look at how they conduct business. Large and small store owners are embracing new ideas, entering new product categories and altering their sales and marketing approaches.

Yet, some retailers—no matter what they do—continue to struggle. Unable to compete, they’re being swallowed up or boarded up, observers say. The survivors consistently fine tune their businesses to solidify their market positions in good times and bad.

Following are 10 business strategies to consider from dealers who continue to thrive.

Build relationships. “The biggest key for us is to try and develop personal relationships with our customers,” said Dave Hage, managing director, State Contract Carpet, Brockport, N.Y. “I realize a lot of companies try to accomplish that, but it’s easier when you’re a small business and truly take time and appreciate each customer.”

Remain nimble. There are retailers who re-engineer their companies periodically, which is essentially throwing away everything they know about their business and starting from scratch. Some benchmark business practices of dealers considered best in class. Others advocate a read-and-react approach during economic downturns.

Some retailers, such as Malkin’s Flooring, Menomonee Falls, Wis., are better able to cope with changing economic conditions because they diversify.  “We have a commercial arm, an apartment rehab arm, a retail business, and we do a fair amount of builder business,” said Marty Schallock, owner. “So by design, when one business is down, another one picks it up.”

Play to your strengths. Dealers face formidable challenges considering mass merchants, shop-at-home retailers and competitive retail groups are all fighting to attract the same customers. Competition is even more fierce whenever the economy goes south.

While dealers say there is no single strategy deployed against any of them, they are playing up to their strengths: a diverse product mix, superior service and beautifully merchandised showrooms. For example, Northern Flooring & Interiors, Lake Orion, Mich., created a showroom it considers unique. “When you walk into the flooring showroom, you’re given a menu which lists complimentary snacks and beverages, and there’s a warm fireplace and chairs where the husband and kids can sit and watch T.V.,” said Matt Pfeiffer, owner. “We try to create a unique experience for customers from the time they walk in to the store.”

Drive traffic to your store. The challenge in competing for customers, oftentimes, is never getting a chance to see many of them. It imperative for dealers to utilize whatever means necessary to drive people into their stores. “Every company should have a ‘sweet spot’ for what percentage of their gross business it spends on advertising,” said Lou Morano, president, Capitol Carpet & Tile and Window Fashions, Boynton Beach, Fla. “Whatever that percentage is, spend that amount 100% of the time in any economic condition.”

Maintain an even keel. Retailers aim to boost foot traffic and market their products/services largely through social media and imaginative digital, print, radio and T.V. advertising. “Year to year, we are very consistent with our advertising,” said George McMurtry, owner, America’s Carpet Outlet, State College, Pa. “If the business is terrible, we don’t stop advertising or spend three times as much hoping to get one or two extra customers.”

Diversify your offerings. Consumer research indicates shoppers want to look, compare and see differentiation between products. That’s why many dealers display a diversified mix of soft and hard surface styles and price points for every budget. “I have an interior designer on staff who can provide help to those who need some guidance,” Northern Flooring & Interiors’ Pfeiffer said. “When you have the right product mix, you can show them something that can’t be shopped around.”

Industry members also advise retailers not to abandon low-end goods as significant volume moves at low price points. “We cater to everybody,” noted Larry Lauger, president, Carpet One Floor & Home, Findlay, Ohio. “When the economy is bad, you want to show more customer-friendly products that are not necessarily less expensive but something more palatable.”

Create a unique customer experience. A key area for retailers to focus on is the customer experience, experts say. “We try to provide even better service to obtain more referrals,” said Lee Courson, owner, Carol’s Carpet Flooring America, Montgomery, Ala. “We beef up in-house education with our salesforce.”

Post-sale support is critical for ensuring customer satisfaction, creating repeat business and referrals. “We offer a lifetime installation guarantee on our carpet,” Schallock noted. “We have installers who have been with us for many years. If there’s a problem, we jump on it.”

Adjust on the fly. Successful retailers continually tweak their businesses to reduce overhead while raising profits and customer service levels. “We always try to be mindful not to grow too quickly,” State Contract Carpet’s Hage said. “We watch our overhead closely and try to monitor the market and competition the best we can.”

Implementing even minor changes throughout the year can lead to major savings. “We instituted ACH payments for all subcontractors, eliminating mailing costs and saving time,” said Paul Riemer, vice president, Riemer Floors, Bloomfield Hills, Mich. “We eliminated our server and [went] to a hosted environment, which not only saved us a large purchase, but the monthly maintenance is less than what we were paying. We used Google Express to order all our store supplies, delivered the next day for $5.”

Don’t be afraid to tighten your belt. This practice is common during slow times, retailers say, as expenditures and investments are scrutinized with a fine-toothed comb. “We look at our budget numbers on a daily, weekly and monthly basis,” Malkin’s Flooring’s Schallock said. “If we see things going in the wrong direction, we back off on some of those items.”

Some dealers adjust staffing levels and overtime hours. “You can survive at almost any sales volume if you can adjust staffing and overhead to the current volume levels,” Riemer said. “Keeping close tabs on ‘people’ costs is the key.”

Update your showroom periodically. Keeping showrooms updated with the latest merchandising racks and products are imperative to draw in customers and keep them there. Making these investments is a lot easier during times of prosperity, retailers say.

“If there is equipment or software updates needed, this is the time to do it,” Capitol Carpet & Tile’s Morano explained. “You need to make sure the staff has everything they need to be efficient and successful to facilitate the influx of work coming in.”

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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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Flooring dealers laud mills’ decision to reinstate terms

October 23/30, 2017: Volume 32, Issue 10

By Ken Ryan

 

Screen Shot 2017-10-27 at 11.57.44 AMSpecialty flooring dealers who say their profits rely heavily on term discounts offered by the two major mills applauded Mohawk and Shaw for reinstating terms on residential carpet products.

Terms are percentage discounts for paying bills within a certain time frame, often within 10 days of receipt of invoice. Terms are a huge deal for legions of flooring dealers, as many view the payment discount as the single largest contribution to their profitability. As such, losing such a perk would strip thousands, if not tens of thousands, right off a dealer’s bottom line.

“I would say 99% of retailers base their selling price on the cost of the material with freight added,” Paul Johnson, owner, Johnson Floor & Home/Carpet One, Tulsa, Okla., explained. “No one subtracts the discount term and then figures their margin. So the best, most financially astute retailers pay their invoices on time and take the discount. The discount literally drops to the bottom line.”

Johnson noted that the World Floor Covering Association has conducted many profitability studies over the years and on average a “good” flooring retailer makes 2% net profit. “So you can readily see the positive effect discount terms have for the profitability of retailers. The best thing hard surface manufacturers and distributors could do to help the profitability of their retail partners is start offering discount terms for timely payment.”

Cathy Buchanan, owner of Independent Carpet One Floor & Home, in Westland, Mich., can attest. Each Thursday at noon she sits with her office manager and goes over the existing bills. She takes pride in knowing that over the past two to three years Independent Carpet One Floor & Home has been taking discounts. “We are totally caught up to Nov. 14 [on Oct. 24] we paid $21,824.44 [in bills] and took in a total of $841 worth of discounts from Shaw alone. To think we would be losing those discounts truly hurt and cut into my excitement every Thursday of showing my mother how much money we saved and to see her smile.”

Buchanan said a price increase of 5% isn’t the same as losing a 5% discount on terms because with price increases she can pass the increase on to her customers and reprice her showroom floors. “Yes, it is a burden especially within my 10,000-sq. ft. showroom to do that but the burden is a lot less than punishing the retailers that do take discounts. When we make our desired margins—and make money at the end of the year—everyone is happy.”

On Oct. 12, as part of an announced price increase on residential and Main Street carpet products, Mohawk had announced plans to eliminate discounted terms on residential carpet products, if purchased on that basis, in lieu of a price increase. But perhaps bowing to industry pushback, the carpet rescinded that portion and allowed the exchange of discounted terms in lieu of the announced price increase. The announced price increase of 5-6% on all of its residential and Main Street carpet products will be applied to all customers in similar manner for orders placed on or after Nov. 27 and shipments after Dec. 29.

In an Oct. 6 letter to dealers Shaw stated that instead of a standard price increase, it would move to standard billing terms of net 30 days company-wide. The manufacturer said the move would standardize terms across flooring categories and bring it in line with other building material suppliers and providers. For carpet products already sold on net terms, prices would increase 5-6%, with the changes to take effect with orders on or after Nov. 13, and shipments on Dec. 4. Shaw similarly reinstated the discount.

Flooring dealers understandably let out a collective sigh of relief. “We were happy to see they rescinded doing away with terms and decided to raise prices instead,” said Ben Boss, owner of Boss Carpet One Floor & Home, in Dixon, Ill. “Shaw and Mohawk’s concern of a level playing field is valid. Shaw and Mohawk have competitors that do not offer terms. Many dealers and their sales staff forget about the terms Mohawk and Shaw offer and will take a price without terms and unfairly compare the two prices.”

The way Billy Mahone III, manager at Atlas Floors Carpet One in San Antonio, sees it, terms are a win-win for both parties. “To me terms are an important tool for both mill and retailer, improving cash flow for the mills and helping retailers with their bottom line. I’m glad both mills reversed their decision to do away with terms because we take advantage of terms any chance we can get.”

 

 

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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.”