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FCNews exclusive: Bob Shaw—The interview

January 22/29, 2018: Volume 33, Issue 16

 

The year was 2009. The economy was in a freefall. Carpet was losing market share to hard surface. You’re nearly an octogenarian with enough money in the bank to last multiple lifetimes. You’re golf game remains respectable. Conventional wisdom dictates that the last thing you would ever do is launch a carpet mill. But conventional has never been a word in Bob Shaw’s vocabulary. Quite the contrary. Mr. Shaw has always prided himself on pioneering step changes and disruptive technology, much like Henry Ford.

Almost a decade later, Engineered Floors has grown to become the largest carpet mill beyond the two behemoths. It’s a success story in every sense of the word. FCNews publisher Steven Feldman recently sat down with Mr. Shaw for an extremely rare, in-depth discussion on how the mill got from there to here while sharing what was going through his mind every step of the way from day one.

What is the mindset behind the launching of a carpet mill when the economy was anything but robust?
Why at 77 years old would somebody want to go back in a business called carpet when it looked like it was dying? Well, it was a situation where [the industry] was more than just about going to polyester. It was going to a way that we could better control quality. We were going to pre-dyed yarns, solution-dyed yarns. And if you look at the industry, we all have these continuous dye ranges. We still have probably 80% of residential carpet being pieced dyed or continuous dyed. Why? That’s what these yarn mills were designed to do. Most of the carpet was solid color in those days. So you had a hard decision. Are you going to replace yourself with less dollar sales because of PET being cheaper?

But the biggest thing I think we were missing is we had made up our mind that hard surface was going to take over a much larger percentage of the marketplace than it really would over a long period of time. And we had a lot of consolidation in the last 10-20 years. We probably lost at least 10 to 12 carpet manufacturers through purchase or just plain going out of business.

I would say [Engineered Floors] has been in a depression or recession business since we went into business in 2009. So why would somebody go into a depressed business? I saw capital moving away from soft floor covering, and my two major competitors were spending considerably more money moving away from residential. They were moving into the carpet tile business, because one of the biggest problems we always had in the commercial end of the carpet business was how do you install it. Well, to take a square or a plank is a lot easier to install. So we were spending money as an industry moving into the modular carpet business. But on the residential end of the business, more or less no dollars were necessarily being spent, no new products were being presented. And it looked to me like no one cared about being in the residential end of the business because they thought it was going to be replaced.

So, that was the opportunity?
I think the opportunity was there. But there’s another thing that came about. The ownerships were moving beyond the entrepreneurial ownerships into the Berkshire Hathaways, and Warren [Buffett] is a great investor, believe me, that’s what he does. He invests money. And then you take Mohawk, which was doing a fantastic job of assimilating worldwide manufacturers into their $9 billion business today. But they were spending very little money toward backward integration and growing the industry they were in.

We also had no foreign competition. Now that is a very important part of the whole thing. I’ll use LVT. You have to compete with the Chinese and you have to meet the Koreans. Because anybody can take a picture and be in the LVT business. It’s the same thing we had in laminate. So we basically had an industry where people were not spending any dollars to make better. And we knew that eventually, particularly as we got into multi colors, that we were going to be a lot better off with pre-dyed yarns, and I’ll use Pet Protect as an example. Invista said the important part of it was to be solution dyed. So their Pet Protect, their top brand, was solution dyed. They recognized the fact that you made a better product with a solution-dyed yarn.

Tell me about the name Engineered Floors.
That’s what we are. We’re engineering products on a regular basis. It just seems every time we talk about putting a product out we were going to engineer a system that would fit.

Immediate goals and objectives when you launched?
If you really get down to it, and I go way back to my original days with Shaw, we used to say you put a block together and you get up on the block and see a little more of the horizon. Then you put another block together and you see a little more of the horizon. We think that’s what we were doing in terms of what percentage of the business made sense for a small manufacturer to be in. But once we were making the moves, we were being accepted because we were giving products that were different. So we saw more of the horizon. Did I say in 2010 we wanted to be a major player in the carpet business? I think I would have been foolish to make that statement. I was 77 years old.

What about the decision to start only with PET?
We started with something we considered the growth end of the carpet industry. At the time we went in polyester, it was probably 175 million pounds. Today it’s a billion-pound marketplace in residential carpet. It seemed polypropylene was losing its position, and nylon was spending probably more time in the commercial end of the business.

But you eventually expanded into nylon.
Yeah, we’re in nylon a little bit. I think there are certain sections of the country and the builder business with more or less FHA design. Nylon has some advantages; if you want to talk about wear you can probably can get a little better wear there.

Everything we did up to a point was solution-dyed nylon. Nylon also needed the multi colors and the consistency of pre-dyed yarn I think.

The next evolution was into commercial?
If you look at what was growing in the commercial end of the business, we knew years and years ago that piece dyed could not be in commercial carpet. So, we went to pre-dyed, solution-dyed yarns in broadloom. But we also knew the ability to install carpet was the biggest problem in the contract end of the business and it became obvious that carpet tile was going to be the growth area of the industry. And we’ve been changing tiles and backings on tile, and we tried new backings on tiles that we’ve paid a lot of claims on. Well, a lot of this was being looked at by several manufacturers. What’s the best backing? What’s the most consistent backing? We went through two or three different backings and decided on a particular one that we just built the plant for.

But again, you have to look at the old carpet mills. Our buildings were on 20 acres. We thought 20 acres was a great big piece of property and when we built a 200,000-square-foot building on 20 acres we thought it was a big operation. Well, one of our plants right now is a 2.5 million-square-foot building.

But all in all, we had a yarn mill here, we had a tufting mill here and a dye house here. Distribution here. And you were constantly moving units around. We said, what if you can move all within one building where it comes in and goes out as carpet. There were a lot of savings and it also said you had just one person in charge of the quality.

You purchased J&J. What did they bring to the table?
J&J probably has been in business for 60 years. They have a good reputation of quality products. They had a joint venture in a tile plant. We’d known the Jollys and the Joneses for 60 years. They probably needed more product to compete rather than just be in the top end of the business. They needed a bigger market.

But to answer the question, “Why J&J?” J&J was a family business and was going into its third generation. And they probably knew they would not necessarily survive at the size they were. This was not too different from when [Shaw] bought Queen. Julian [Saul] had to make up his mind whether he was going to be a major part of the business. He was not a public company at the time. And you know the reason all of us went public back in those days was to raise capital. Today I think it’s a disadvantage to be a public company.

You don’t need to go public today to raise capital for growth?
Quite frankly, if you have credit and can borrow money, you can do it today for almost nothing. Now, when in the history of business have you been able to borrow money at less than 2%? It’s a lot different than if you’re borrowing money at 10%. Now, if you don’t have credit then you can’t borrow at any price. The opportunity was there for those who were able to either finance it personally or have a reasonable credit line. Money was cheap, money remains cheap—cheap meaning under 6%—and it will probably be cheap for another two or four years.

Now, and we all know this, there was no reason at all for the housing bubble to have been as big. We went all the way from 2.3 billion houses a year down to 600 million houses and now we’re at about 1.2 or 1.3 billion today. Our population is considerably larger. But also, what happened to the carpet business was multi-family turning over every five and a half years this last year. Five years ago, six years ago it was turning over every three years. Why? Because the family would form and have a house. So that bubble stopped a lot of carpet being sold.

You launched Pentz as your Main Street brand.
Pentz started as a division of the company that will be out of the specifying end of the business. There’s just a world of people selling carpet in the contract end of the business that is not specified. So Pentz is our Main Street brand and is doing OK.

The Beaulieu purchase.
We didn’t buy Beaulieu. We bought the assets of Beaulieu. It’s a world of difference.

How does that make Engineered Floors a better company? By taking them out of the market?
They took themselves out of the market; I didn’t take them out of the market. I would say they had some equipment that we considered modern, and we bought it based on what we considered the replacement value of the modern equipment to be. We emphasize we bought assets.

Some people say the backing plant was attractive.
Well, they had a backing plant that goes all the way back. We were not making our own primary or secondary backing, so that was attractive. Beaulieu also had a distribution center that was underutilized, so that was attractive. Their product line was not all that bad. They had some technology that had patents on them that we may capitalize on at a later date. And again, if yarn is going to be our bottleneck… Let me explain that. Remember all the staple markets are more or less gone. And they’re not coming back. We have yarn mills that will dictate how much carpet we can make. So they had a yarn mill that really came from a fire, but they had modern equipment and an extrusion mill that made sense.

I’m not sure they didn’t over-expand at the wrong time. Cheap money is wonderful, but the principal still has to be paid, and banks are not good partners. You probably need to be in a position to tell your banker to go to hell. The bank is your best friend as long as you’re their best customer.

Does the Beaulieu name mean anything to you or the industry?
We won’t keep it. I don’t think it’s any brand name. The market is a funny thing. You don’t have consumers saying, “I buy Mohawk because it’s Mohawk.” Like we used to talk about Armstrong; Armstrong had a brand name. Stainmaster had a brand name. I think brand names come from reputations now rather than from advertising. The consumer eventually makes up her mind.

What differentiates Engineered Floors from the other mills out there? What does this company do better for the customer?
The customer eventually decides who makes the best product. You know, the real dog food is what the dogs are eating. That’s the finest dog food you can have. Now, if you’re making a product the consumer is buying, that means you are going in partnership with your [retailer] customer, and only if he can make money can you make money from selling him that product. So the customer became very important.

We were seeing the big boxes—the Home Depots and the Lowes and all of those—basically going out of inventory of carpet. The Home Depots and Lowes don’t buy rolls of carpet; they buy pieces of carpet. They are a massive distributor of pieces of carpet. They don’t put the money in inventory. So it took a different type of mill. You can’t go in and say I’m going to sell a thousand rolls and I have the cheapest price. We have a little of that still—some people that stock carpet. But most people right now, with the multiple choices they have, want to know they can get a piece of carpet on time, cut order, that’s high quality. So your reputation goes a long way. Now I have to admit that Shaw was considered the best manufacturer in the business, and they still have a very high reputation in manufacturing.

I have a piece of carpet in my hand from Shaw and one from Engineered Floors. Is yours just as good?
Better. It’s better because we are solution dyeing ours. They still are piece dyeing 80% of theirs. So it was a step change in the way we’re manufacturing.

Anything else in the process that makes a piece of carpet from Engineered Floors better?
The difference is in how you go about styling a piece of carpet. Ten years ago, seven years ago, 80%-90% of your better carpets would probably be a solid color. Now your better carpets have some type of subtle tones to them. So 80% of the carpet we make right now is not solid color.

You’re still focusing on selling the neutrals. I don’t see blues or reds all over the place.
The reds and blues never did sell, except if you moved up the Eastern coast a little bit. It was a great ploy of DuPont—let’s make 50 colors of Stainmaster and we could have as much as 5% of our total dollars in samples—and the way we would change the color standards over short and long periods of time. Then we finally understood grays and tones of grays were 90% of the carpet being sold, and the accent colors we were cutting up as rugs after we made the first roll.

So you make what sells?
The answer is if they started demanding gold we’ll make gold. But are we going to try to convince them that gold will be the color of the year? No.

How has the consumer changed in the last 30 years?
I think back then a lot of the carpet we were making was for starter homes and then the upgrades. I think more permanency in homes means they’re buying better carpets. They’re not buying the FHAs. We’re selling better pieces of goods, and then you have the patterns.

So that’s how you respond? Better goods, patterns?
If we take a product out and the product doesn’t sell, we better change the product or change the consumer. I don’t think we’ve changed that much. What’s changed is everything we talk about is LVT, and what’s the first thing you do with LVT? Put a rug over it. We put carpet over our vinyl, not vinyl over our carpet. The rug business has gotten to be an important business.

Is there anything you learned in your past life, your time at Shaw, that makes Engineered Floors a better company?
I started Shaw in 1959, so if I haven’t learned something in 70 years… The biggest thing I think that’s an advantage is you either have a good or bad reputation as a businessman, and honesty plays a big part of that. And if you treat people right then they normally treat you right.

Are you the least bit surprised at how fast this company has grown?
Probably a little bit, but we knew 20 years ago there was a better way to make a tufted piece of carpet. Back then we were more or less being dictated to. “We’re going to sell you a white yarn and you’re going to color that white yarn in the best way.” So you had to have the ability to make your own yarn before you could make the step change in how you were making carpet.

Are you still having fun?
Sure!

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Randy Merritt reflects on four decades in the flooring industry

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

 

Randy Merritt officially retired as president of Shaw Industries on Dec. 31, 2017, after 40 years in the flooring industry, all for one company. He built a reputation based on honesty and integrity. A gentleman in every sense of the word. As humble as a man can be. FCNews publisher Steven Feldman for months was trying to convince Merritt to reflect on these past four decades with a front porch, rocking chair view. While it went against his humble nature, he finally agreed to sit down in December, the text of which follows.

The road to Dalton
The reason I was in Dalton was a guy named Bryce Holt. Bryce was the father of my college (NC State) roommate’s wife. Bryce is also the father of David Holt from Mohawk, who I’ve known since he was probably 14 years old. So, I got to know the Holt family very well in my college years.

When I realized I wasn’t getting into med school, I needed to find a real job. I’d always admired Bryce and his success, although I didn’t know much about what he did. I called him up and said, “Mr. Holt, you know I’m just looking to find a job working for a good company.” He asked, “What do you want to do?” I said, “I don’t really care. I just want to work for a good company where there’s an opportunity.” And he said, “I think I know the place.”

I had never heard of Shaw Industries, and of course it wasn’t Shaw Industries then. It was Star Finishing. It was the biggest thing I ever heard of. It was a $100 million company—1976 was the first year Shaw broke $100 million. And to be honest with you I wasn’t even sure how many zeros were in a million. As a college student you didn’t think of things in millions—hardly in thousands.

Hello, Dalton
When I got to Dalton, I thought, man, this is a small town. We didn’t have the Internet back then, so I didn’t really have a way to do any research on Dalton, Ga. I knew nothing about how big it was and didn’t know the carpet industry. The first week I remember someone mentioning the term “tufting machinery” and I had to go to a dictionary to find out what that meant.

I grew up in a very small town, a manufacturing-driven town very much like Dalton. It’s kind of interesting actually as Lexington, N.C., was right there in the central part of Piedmont, which was the furniture capital of the 
world, with High Point, Thomasville, Lexington. And
there were a lot of similarities
in the towns. The furniture 
industry was made up originally of a lot of tiny furniture companies. Most of my high school
 friends’ families had something to
do with the furniture industry. A
lot of them became very wealthy
 because the same consolidation
that ultimately happened in carpet happened in furniture. And the Burlingtons and Mascos came in and bought up the small family furniture companies. But that’s where the history of Dalton and Lexington went in opposite directions because in the furniture business they began immediately moving all the manufacturing to Vietnam, Malaysia and Asia, and the carpet manufacturing always stayed right here in Dalton. And Dalton has continued to prosper and grow, and Lexington is a ghost town of empty buildings that used to be manufacturing facilities.

David Wilkerson
I started May 10, David started Aug. 23. Two weeks after I met David he asked if I wanted to come live with him and a guy named Greg Wheat, another trainee. Greg’s parents had a farmhouse down Houston Valley Road. I said, “That would be awesome,” because I was living in a little one bedroom apartment with rented furniture and nobody to talk to.

I later bought a house and David moved in with my brother and me. They lived with me right up until I got married. In fact, David was building a house that was supposed to be finished by the time I came home from my honeymoon, but wasn’t. He and my brother actually lived with Sharon and me for two weeks after we got married. We lived in this tiny house, and I came home one day and Sharon is sit- ting at the kitchen table just crying her eyes out and said, “They have to go.” So we were roommates probably two weeks longer than we should have been. I introduced David to his wife, Becky, and they have been great friends of ours for 42 years. Our kids grew up together. We went on vacations together. He’s still one of my very best friends.

Vance Bell
Vance Bell was one of the first people I met—truly the first week I was here. Vance was one of four salespeople. All our customers were located in Dalton because we were making carpet for other manufacturers. Back then they didn’t sell carpet by the square yard; they sold it by the truckload of a color. You had Vance, Jim Morris, Doug Squillario and Bill McDaniel. Bill and Jim have passed away. Doug is still alive but has been retired for a long time.

We were close to the same age. Probably the first two years I just knew him as a salesperson. I was trying to learn about the industry so when I got a chance I would ask him questions. When Sharon and I got married in 1979 we bought a house downtown and ended up being almost next-door neighbors to Vance and his wife. Our wives became good friends, and Vance and I became better friends. Vance and I have literally worked together for our entire careers here.

Vance has always been very strategic looking at business. And the trait I’ve valued most about Vance—and this was so valuable to us when he became the CEO in 2006 and I became the president, right at the beginning of the Great Recession—was he is so calm and steady. He doesn’t get real excited and he doesn’t get real depressed. During those very challenging years he said we are going to have to do some tough things, make some tough decisions. But the one thing we weren’t going to do is let our customers feel our pain. And that was a kind of a mantra for us—that we would do whatever we needed to better prepare ourselves for the future. Vance is a very steady hand and I’m more emotional. If I’m ticked off you’re going to know it. I wear my emotions on my sleeve. We made a good team in that regard.

From product development to sales
I was in product development, which is where all the trainees started. Back then we didn’t have a formal training program. We started in product development and would work in a dye facility and then a coating plant and then a yarn mill. One day Bob [Shaw] called me and said, “I need you to go see one of our biggest customers.” One of our first acquisitions was Magee Carpets, and the biggest distributor Magee had was Carson Pirie Scott. Carson at the time was a big distributor throughout the Midwest with
one location in Florida. So I went to Chicago to see Dean
 McKinney, Roger Hunt and
 Jimmy McDonell. The problem was Shaw Industries was growing, Magee Carpets was growing, Carson Pirie Scott was growing. But we weren’t growing together.

Back then you had more mills than you could count on all your hands and toes, and a distributor like Carson was buying from World, Galaxy, Salem, Horizon, Trend, you name it. They had lots of choices, so I just went in and said, “My mission here is one thing: We’re growing, you’re growing. Why aren’t we growing together?”

They looked at me and said, “Randy, we don’t know. We love Shaw. You make beautiful products; your salesmen are here at least once or twice a month. We don’t know why we’re not growing together. We have 13 branches around the country. Are you calling on them? Because we put all these products in our showroom and then those branch managers come in and they pick the products they think will sell in their market, and that’s what they inventory.” I said, “Maybe we’re not calling on them.” So I went home, met with Bob and said, “I think the problem is we’re not really calling on the right people.” About a week goes by and he calls me up and says, “You really think that would make a difference?” I thought it would. So Bob said, “Okay, starting Monday they’re your account.” I was now in sales and reporting to Vance.

I got out a map and plotted where these Carson locations were and decided I wasn’t going back to the main office in Chicago until I went to see all those locations. I still remember the people who ran those branches to this day: Buzz Grows in Chicago, Tom Mielcarek in Milwaukee, Joe Boisvert for Minneapolis, Don Penrod in Columbus, Dan Kaufman in Cincinnati, Harvey Johnson in Florida, Frank Hemmer in Cleveland. Sure enough we hadn’t been calling on them. So I started working on that relationship and trying to figure out what we could do to differentiate ourselves from all these other mills they were buying from. When I started we maybe did $7 million with Carson and within a couple of years we were doing $50 million.

What I learned there, and I still tell our trainees today, it’s great to know the owner of the business. It’s great to know the buyer for the business but you better pay attention to the people who are actually selling your product because they’re the ones who can help or hurt you.

Transition from soft to hard
It was not really difficult for me to transition from carpet to hard surface because once you accept the fact it’s all flooring and our mission here is to provide the right kind of floors. It goes back to what Mr. Buffett said was one of the reasons he was attracted to Shaw—every building he’s ever seen has a floor. So our job is to simply figure out what the consumer wants on her floor and give it to her.

The early customers
One of the first customers I
remember meeting is Larry 
Nagle. He was a great customer, a tough buyer and
bought a lot of product from
Shaw Industries. I remember Marv Berlin from New York Carpet World and Duke Goldberg from Rite Rug. Back then it was Mr. Berlin and Mr. Goldberg. They were huge. For most of my career I was just watching as other people dealt with them. I remember Miles McComas of Carpetland in Baltimore. And what I remember about Miles was that he was a true gentleman. Here was a guy who ran a big business and could be a gentleman doing it. Another guy I remember like that is Ron McSwain. He was such a classy guy. And I admire the way he ran his company and the way treated his people. And I think with his son, Jason McSwain, the apple doesn’t fall far from the tree.

I remember Michael Goldberg when he was a young whippersnapper and trying to be like his dad. And I think what’s made Rite Rug successful is Michael has been willing to do things differently than the way Duke did it. And he’s had to change. It’s a different world today. Duke would come into the Chicago showroom and buy 50 truckloads of carpet. That just doesn’t happen anymore. You know Michael will buy way more than 50 truckloads; he just doesn’t buy them all at one time.

I remember Rick Meyer and Jerry Rosenberg. I have great respect for the Blumkins at Nebraska Furniture Mart. Another one of my favorite people is Levon Ezell of L.D. Brinkman. He was just a worldclass guy. Dean McKinney was a world-class guy. Harvey Johnson is a world-class guy. Of course the challenge is that when I start naming people, I’m of course going to leave someone out unintentionally. I’ve met so many wonderful people in this industry, it’s impossible to name everyone.

While I remember those guys, I’m really excited about some of the young people I see in our industry, bright young minds. The Boyajian brothers at A.J. Rose in Boston. The Akin brothers of Akin Carpet One in Oklahoma. Dan Mandel in Southern California. Matt and Ryan Bechtel of Contract Furnishings Mart in Portland. Eric Langan of Carpetland in Illinois. Sisters Dana Chirico and Lauren Voit of Great Western in Chicago. All just really bright, creative people who are passionate about the flooring industry. They have all stepped into their family businesses and have successfully grown and moved their respective businesses forward.

The toughest negotiators
Sandy Mishkin and Alan Greenberg at Carpet One. Marv Berlin at New York Carpet World. He was tough. Michael Goldberg is tough. Olga Robertson is tough but fair. One of the toughest was Allen Stein. I’d see Allen and Mishkin argue over a nickel for three days.

I think one of the things people are beginning to understand is that fighting about the nickels you pay for something isn’t as important as solving how we can sell it for a dollar more. We should be asking ourselves how do we work together to sell products for more money? How do we trade consumers up instead of trading consumers down? Buying is still extremely important, but how we work together to sell for more and to create better, more innovative products are what’s really important. The whole LVT category is a great example of where we’ve learned to sell products for more and together we have made a greater profit. How do we continue innovating and giving consumers a better, more stylish product, all while making more money?

St. Jude
Our partnership with St. Jude Children’s 
Research Hospital started in 2012, and until
 then I didn’t know any more about St. Jude
than you do. My children were healthy. But
 Shaw was looking for a nationally recognized 
philanthropic effort that we could support 
and our customers could relate to. The one that kept rising to the top of the list was St. 
Jude, which was great for me because it fit right in with my passion for children.

I’ve always had a soft spot in my heart for children. You saw it from our conventions, from the day we started a show for our network that was about the families. And I’m really proud that some of those first children at the Shaw Flooring Network conventions are today working in their family businesses and selling Shaw products. I’ve also worked for years with our Boys and Girls Club here in Dalton. I spent years on the Big Brothers/Big Sisters board of directors.

So when we had the opportunity to develop a partnership with St. Jude it was a perfect fit for me personally. I took a special interest in it from the first trip I made out there. It’s a life-changing experience. You see all those children and what they’re going through and what their families are going through. And you realize what St. Jude does for those families and for children all over the world who are diagnosed with these horrible diseases.

But the point I make about St. Jude is while it’s a good thing to do and it makes you feel great supporting them, it’s also good for business because we’ve been able to leverage that relationship with customers by saying, “You can support St. Jude too by supporting these products and we will give a portion of whatever you buy back to St. Jude on your behalf.” And since 2012, we’ve given just under $8 million back to St. Jude. We’ve built a good partnership that our customers heavily support and believe in, and I think there are plenty of people at Shaw who are passionate about that goal and will carry it on for a long time.

Miss the most
Easy answer. All the people here at Shaw and all the customers. I did not stay at Shaw for 42 years because it was a $5 billion company. I did not stay at Shaw all these years because I had a big job. I didn’t stay at Shaw for any other reason than I love the people I’ve worked with and the customers we worked with. It’s a great industry. People have given way more to me than I’ve given to them.

The constants
The constant is caring, passionate people who work hard to do those things we’ve talked about, who pay attention to the customer, who listen to what the customer wants. When Vance was first selling he would go to his mill customers and say, “This is what we can make. What color do you want to buy?” Today it’s, “What do you want” and we have to figure out how to provide that, whether it’s color or style, texture, or flooring type. There are so many choices today. We have to give customers what they want. The thing I’ve always felt about the flooring industry is there are good quality people who care about making lives better, people who care about making your home happier and something you’re proud of. They care about making your office building more functional and more pleasing. Our goal is to make the spaces where people work and live more beautiful.

Customer evolution
When I started, most
of our business was selling to other manufacturers and those manufacturers were selling primarily through distributors. When we started selling directly to retailers, the largest retailer in America was Sears. Sears used to stock every SKU they showed on their floor in a giant warehouse. Imagine dealing with the style variation and all the things we have today and then trying to stock every SKU. In fact, Shaw Industries is the one that convinced Sears to just show and sell the product and let us service it for them. Other large flooring customers during that time were department stores Macy’s, Rich’s and Kaufmann’s. Today those stores either don’t exist or aren’t where consumers go to shop for flooring.

Advice
I’ve had literally hundreds if not thousands of trainees come through Shaw Industries and sit in front of me, and the first question is always the same: “What kind of advice would you give me?” I tell them it’s not rocket science. It’s things most of us have been taught since we were little. And I think the most important piece of advice I can give is the Golden Rule. My mother told me very young to treat people the way you expect to be treated and 
things will be fine. So throughout
 my career, whether I’m someone’s
guest or trying to figure out how to
 do business, I try to treat people
the way I want to be treated. For a salesperson that’s the key to selling. Treat people the way you want to be treated. Here in Dalton I want to eat at a place where the people treat me the way I want to be treated. I don’t care if it’s the best food in town.

In today’s world product is the price of entry. Everybody has to have good product. The difference is the way you’re treated, the way you’re serviced, the way people take care of you. The best salespeople, when they’re talking to you, you’re the most important person in the world to them at that moment.

Ch ch changes
The entire world has changed more in
the last five years than it had in the previous 20. Technology, the speed that
 things happen, is amazing. You’re sitting here with two smart devices and a computer—20 years ago you would have been writing in shorthand. The world is faster and it’s going to change more in the next five years. I think it took something like 30 years for radio to reach 50 million or 100 million users. It took half that time for television to reach that many users. It took four years for the Internet to reach that many users. And today there are millions and millions of searches per minute. Information flows so much faster and consumers expect things faster.

What’s next
Consulting? I would never say never but I don’t see that happening. I wouldn’t do anything that would hurt or compete with Shaw Industries. If there’s a way I could share some of my knowledge and help one of my good retailer friends, maybe. If I could do some training about leadership for someone, maybe. I don’t have any plans right now. I just plan to be a granddaddy. I plan to continue helping children in some way.

The one thing I will do is keep reading Floor Covering News and keep up with the industry. I told Vance my next role for Shaw is cheerleader, booster club, whatever I can do to help. And I have Vance’s cell phone number; if I see something I don’t like I won’t hesitate to pick up the phone and call.

 

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Executive forecast: Industry leaders look forward to robust year ahead

November 27-December 11, 2017: Volume 32, Issue 13

By Ken Ryan

 

Words like “sluggish” and “tepid” to describe growth in the flooring industry are being replaced by “healthy” and “sustainable” as some of flooring’s top executives see an industry that is now accelerating to a respectable cruising speed as we approach 2018. The catalyst driving this momentum is winning products—the still-booming LVT market and across-the-board innovations in other segments.

We expect 2018 will be even better than 2017. Continued GDP expansion, employment growth and rising wages will drive consumer spending. Residential new construction and refurbishment growth is responding to demographics, and lack of housing inventory with mixed use development continues to shine. After a lackluster 2017, commercial should be stronger in 2018 with rising business confidence.

The big unknown for 2018 could be corporate and individual tax reform. This could be an accelerator for all of the above.

In terms of the biggest challenge facing the industry—short and long term—it is adequate supply of qualified installation. Manufacturers are responding with easier-to-install flooring, but attracting and retaining qualified installers must be dealt with on a local basis. In general, the greatest opportunities are for manufacturers to truly understand consumer and end-user needs and requirements, which result in innovations with real solutions. Also, manufacturers need to transparently provide information and tools for consumers to make better flooring decisions.

We continue to invest and spend capital at record rates, [dedicating resources to] new businesses, new manufacturing platforms and new technology. We will continue to expand our revolutionary StrataWorx carpet tile platform with new looks and new installation methods. We are also investing heavily in our key brands with the rollout of the new Anderson Tuftex brand, a new consumer campaign on COREtec and exciting soft and hard surface introductions from Shaw Floors.

As an industry, we must be diligent about changing consumer purchasing habits—the move to digital, her desire for transparency and ease of transaction, and the reputation and integrity of our products. If we acknowledge and understand the consumer, and offer products, services and selling environments that relate, we will continue to prosper.

 

The variables that tend to drive the success of our business—employment and income, the equity markets, inflation, consumer confidence—are in a good place.  Flooring is a discretionary purchase; therefore, [consumer] confidence is important. If you look overall at the market there are a lot of things that are favorable for the consumer. The GDP is now tripping above 3%, so all things collectively are positive for the floor covering business.

What’s driving it? Never has there been more innovation nor excitement than we see today. Every category is being impacted by true product innovation. We think that is weighing in on stimulating the consumer to come into the category. Air.o is just one example of an innovation that is driving industry growth. To be successful innovation has to be understandable—it has to be executable on the retail end, and it has to be promoted.

Our biggest challenge as an industry is standing out in front of a very inundated consumer. Of all the things that keep me up at night it is that flooring [must] stay top of mind. Are we, as manufacturers, doing everything we can to make the product exciting? Are we adding value and making it relevant at a time when that consumer is about to part with $1,000 to $3,000? Are we continuing to excite consumers? (And that starts with first exciting our retail partners.) The charge of the industry is how do we stand out in front with the most innovative products—not just vis-à-vis flooring but vis-à-vis other big-ticket products like electronics or refrigerators with Internet capability.

As a company, we are going to continue to refine and improve our execution in digital marketing and consumer lead generation in conjunction with our retail partners. Most consumers are starting out in the digital universe in their journey. Mohawk wants to be front and center in that process so our retail partners win in that selection process.

Our whole business culture is built on product innovations that are brought to market with exciting stories and opportunities for our retail partners to upsell their customers. As for big initiatives for 2018, you’ll just have to stay tuned for January.

 

Across the industry, we expect to see a continuation of the measured growth we’ve seen this year, with ongoing migration to hard surface flooring and continued robust growth in the LVT/rigid core category. At Armstrong Flooring we are well positioned to capitalize on the market surge in LVT with the recent increase in our domestic LVT production capacity and leading the way with the introduction of revolutionary new products such as our Diamond 10 Technology, rigid core and exclusive Pryzm LVT flooring.

There are tremendous opportunities out there. As one example, we recently repurposed part of our Stillwater, Okla., resilient sheet plant to produce LVT. This increases our domestic LVT production and leads to better capacity utilization for our sheet business.

Ongoing challenges within the industry include recruiting experienced installers and retail associates to help educate the consumer/end users on their purchase decisions.

As our economy heats up, likely increases in raw materials, energy, transportation and operating costs would likely need to be covered with increased pricing. Additionally, the industry is dealing with overcapacity in some product categories.

Our strategy in 2018 is to improve our mix of sales to higher-growth products like LVT and rigid core, while maintaining strong competitive positions in our legacy categories. At Armstrong Flooring, we’re focused on innovation—not just in products themselves—but in the way we do business. Our marketing campaign, “The Floor Is Yours,” goes beyond illustrating the design and performance of our floors and enables us to tell stories that really connect with consumers. We recently launched a new website to inspire homeowners and guide them through the purchase journey, and we will continue to collaborate with our distributor partners and aligned retailers to ensure we are delivering not only exceptional products but also an exceptional experience for our customers.

One initiative in 2018 is our retailer-centric program, Elevate, which helps independent specialty retailers grow their businesses. Elevate offers resources to drive store traffic, maximize the in-store experience and enhance sell-through via an aligned connection with Armstrong Flooring. We will continue to expand that program in 2018.

 

Overall, we anticipate the industry in general—and Mannington specifically—will continue to see good growth in the residential market. We expect to experience a similar pace as we’ve seen over the past 18-24 months: Roughly a 10% increase in single-family starts and a 4%-5% increase in remodeling activity. LVT/WPC will continue to be the stars of the show. There is nothing on the horizon right now that will change the momentum of that category relative to the other categories. All the other product segments are more aligned with the growth curve in remodeling.

Whereas the economy has driven consumer sentiment in the past, today I think the wild card is the political scene. The X Factor, I think, is tax reform and its impact on both spending and investment decisions.

The biggest challenge we face in the industry is the rapid change and shift in consumer preferences. I can’t think of a time the industry has seen such a shift between categories like we’ve seen over the past two to three years. There’s been incredibly rapid growth in LVT coupled with the emergence of WPC as a major category in and of itself. It has literally changed the game overnight, and that continues to evolve. With so much change in the product mix, retailers and consumers alike are finding it confusing. Our greatest opportunity lies in how we, as manufacturers, help them simplify and focus amongst so many choices.

As always, Mannington has an outstanding lineup of new product introductions rolling out at Surfaces. We can’t tell you much more than that—you’ll just have to come to our booth to find out.

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Interview: Piet Dossche, the ‘father of WPC,’ mulls the evolving composite core landscape

FCNews Ultimate Guide to WPC: July 17/24, 2017

 

Screen Shot 2017-07-31 at 9.42.32 AMIn the mid-1990s, Pergo paved the way for a brand new category—laminate flooring—in the U.S. market. Initially, the category generated a lot of buzz and excitement (and perhaps some overzealous product claims) before experiencing a fairly rapid shakeout of players. During that same decade, other innovators such as Anderson and Mannington introduced the industry to rustic and hand-scraped floors. Not too long after that, virtually every hardwood flooring manufacturer had some variation of scraped or distressed product in their offerings.

Fast-forward to 2013, when USFloors broke new ground with the creation of an entirely new category of flooring, WPC, which is based on composite core technology. In the few years since the launch, the WPC category has caught the attention of retailers and distributors alike. More importantly, it has seized a greater share of dealers’ showrooms, nipping sales from competing hard surface categories. At the same time, recent iterations within the WPC category have spawned the creation of exciting new products that stand to impact the overall composite core sector in many ways.

FCNews managing editor Reginald Tucker recently sat down with Piet Dossche, CEO of USFloors, to hear his assessment on how WPC has evolved since the initial launch and where the market is headed.

What are some of the main advantages of WPC vs. other composite core products such as rigid core?
There’s a lot of confusion in the market regarding where WPC and rigid core boards (RCB) fit. In my mind it is very clear, one category is not better than the other; they both complement each other. The analogy I use when I try to explain the differences between WPC and RCB is carpet. Most people know what carpet is all about, and most people know the difference between level loop commercial carpet vs. cut pile/saxony/plush type of carpet. I take a piece of 10-gauge level loop in one hand and a 40-ounce saxony carpet in the other hand. The 10-gauge level loop is my RCB product, and the 40-ounce saxony is my WPC product. Both products are made for certain purposes. Carpet 10-gauge level loop is not made for comfort; it is designed for performance. It’s a tight, dense construction that provides durability. The 40-ounce saxony, on the other hand, is a cut pile and has a more open construction. It’s plush, warm, soft and comfortable—you can really lie down and live on that floor. You wouldn’t really lie down on a 10-gauge level loop product.

You can make exactly the same comparison between WPC and RCB. With a rigid core construction, you have a very dense, tightly packed core with a high percentage of minerals and calcium carbonate in the formulation. It’s made more for performance as opposed to comfort. It’s designed for applications where indentation resistance is the most important factor.

With WPC, on the other hand, there is a foaming agent in the formulation, which creates air pockets within the core during the extrusion process. Inherently, these air pockets act as insulators for both sound and temperature, providing a higher level of comfort for the consumer. For example, if you have a customer who operates a hair salon, she needs a product designed to withstand heavy foot traffic—most likely high heels. That floor also has to be waterproof and resistant to chemicals. From a performance point of view, the RCB product will best fulfill the requirements in this situation.

But for the homeowner/housewife with an active lifestyle—kids, pets, etc.—she will want something that’s more comfortable, warmer and sound dampening like WPC. It will perform very well under these conditions, be waterproof in case of a spill and provide the level of comfort she is looking for.

Both products are perfect examples of how this composite core category has evolved since USFloors launched its COREtec collection about four years ago. WPC started and basically took hold of the market, then RCB came into the picture. I look at RCB as an extension of the solid LVT 3.2mm/4mm click LVT. In the end, I see these products complementing each other and helping to build the overall composite core category. WPC was just the start and RCB followed. Without a doubt you are going to see many products that follow on that path.

Do the various construction methods involved in WPC and RCB production factor into the final cost of the respective products?
Yes. For example, WPC with an LVT top layer is a more complicated product to make. It requires more capital investment. First you have to extrude the WPC coreboard. Then you have to create your LVT top layer (usually 1.5mm) through a calendaring process. A print film and wear layer are consequently pressed onto this LVT base. This slab then goes through an annealing process, which “shocks” the product to create the stability required. This top layer and WPC extruded core are pressed together and depending on the product, an attached underlayment is glued on the back (cork or another material) before the board is cut into planks or tiles and profiled with a click system. Several processes, steps and various pieces of equipment are required to make a WPC product.

By comparison, RCB, for the most part, entails a one-step process. The core, which is extruded with a high-density format, is fused with a print film (decorative layer) and wear layer before again being cut into planks or tiles and profiled with a click locking system. It’s a much less capital-intensive process.

So it sounds like there is a lower barrier to entry with respect to RCB-type products.
Yes, the RCB manufacturing method has resulted in many companies in China jumping on that wagon. Due to the issues with formaldehyde in some Chinese laminate products over the past few years, many Chinese laminate manufacturers were left standing with all this manufacturing profiling equipment. They saw their business dwindle because of the reduction in orders from the U.S. Making WPC was too expensive a process for some of these manufacturers. But when rigid core products were introduced into the composite core segment, it provided a very simple process for manufacturers who did not want to make the capital investment required to produce WPC. For many of those former laminate manufacturers in China, it made for a very easy entry into the RCB category. And because it’s a cheaper product to make, it usually sells for less money than WPC at the retail level.

Does this lower cost structure give some companies advantages over others?
Sure, in an effort to get some traction in the market, many of these newcomers revert to lowering their prices to sell their products. It’s one thing to price it lower, but it’s quite another to import the product and distribute it. Only the professional companies who can properly bring the product to the market and service the channels efficiently will be successful.

Looking through your crystal ball, how do you see rigid core’s market share growing as a piece of the overall composite core pie?
Right now RCB is still in its infancy, although it is being introduced into the market at a fast and furious pace. However, WPC has had a four- or five-year head start and it’s still growing strong. There’s no doubt about the popularity of the RCB category. Here at USFloors we are also coming out with a COREtec rigid core construction, because we don’t see it as a cannibalization of WPC. Rather, we view RCB as a complementary item that’s needed in our lineup. My sincere hope is the rigid core market becomes as big as it can, which can help to grow the category overall. Could it become as large as 50% of the total composite core category? Who knows. But even in that case, I don’t necessarily see it as WPC giving up half its market share to the rigid core category. As the market continues to grow, and when the dust eventually settles, it will transition to a more normal growth track compared to the high, double-digit growth curve we’re seeing today. Over the next three to five years, when all this stabilizes, I predict the composite core market will probably be three to four times as big as it is today. By then I expect rigid core will have taken a sizable market share next to WPC. With RCB construction more focused on commercial applications and WPC more residential, the residential share will be larger than the commercial volumes. Who knows—in three years’ time there could be three or four different composite core constructions on the market.

Speaking of the ongoing evolution of the composite core category, what are your thoughts about some of the early iterations we’re seeing?
It just confirms what I’ve been saying. We’re only on the cusp of innovation. These products are brand new in the market, and I believe they will be successful if they bring a solution that previous versions did not provide. But if we begin to see new products that are merely a gimmick, or a change in the core or construction just for the sake of change, then they’ll face an uphill battle. But if these new products are bringing certain advantages over existing constructions, then they will be successful.

What’s the next step for USFloors?
We are in the midst of commissioning our first WPC/COREtec plant at the state-of-the-art Shaw facility in Ringgold, Ga. We started up production in the last two weeks and we’re already making product. We are the innovator and leader in this category and are committed to remain in this position. We’re very excited about the future; the best is yet to come. Stay tuned!

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Dear David: Crafting the perfect job interview

May 8/15, 2017: Volume 31, Issue 24

By David Romano

 

Dear David:
I’m finding that I have to conduct too many interviews before I can fill just one position. It seems like I am wasting time on people who are not even qualified to do the job. Even worse, when I find someone who can do the job they decline the offer. Any ideas?

Dear Frustrated Owner,
Screen Shot 2017-03-06 at 10.37.51 AMKeep in mind that 29% of candidates refuse a job offer because of how poorly the interview went. In order to avoid this, let’s create a protocol for your interviews so you can determine the best hire for your business and stop turning good people away or wasting time. Follow these three tips:

Establish an interview agenda. Build an outline for the entire interview, which should take no more than 45 minutes. Sketch out the framework with a set length of time for each section, covering information about the company, the job scope, position requirements, compensation. Include time to find out about the candidate through probing questions. Reserve a few minutes at the end for question and answer.

Focus on the candidate. Before asking the first interview question, review the job description, especially the hiring criteria, as well as everything the interviewee has submitted: résumé, cover letter, online profile, etc. This allows you to hone in on what you’re looking for in candidates. It should give you:

  • Firsthand information about the candidate’s background, work experience and skill level. It’s your chance to clarify what you learned from the résumé, profile or previous interviews;
  • A general sense of the candidate’s overall intelligence, aptitude, enthusiasm and attitudes, and whether he/she fits the job;
  • The capability to evaluate a candidate’s motivation to tackle job responsibilities, desire to join the company and ability to integrate into the current work team.

Don’t improvise. Prior to the actual interview, write down questions you intend to ask based on key areas of the candidate’s background. While it’s a good idea to have a core list of questions that you ask every candidate, it’s also helpful to jot down some targeted questions for clarification as you review the job description and résumé. Keep your list of questions in front of you during the interview.

Try this technique in your next interview; you will be surprised how much you learn. You can also mix up the types of questions you ask, but ask more open-ended questions since they require more thought on the part of the interviewee and will help he/she open up. Ask two or three hypothetical questions that are framed in the context of an actual job situation. Feel free to ask an off-the-wall question to see how the candidate thinks on his or her feet.

Pay attention to the candidate’s answers; don’t rehearse your next question in your mind. Although you have your questions written down, don’t hesitate to veer from those if you want to reword or follow up on something, or eliminate questions that were already covered.

After you’ve given the candidate a chance to ask questions, close the interview by thanking him/her for his/her time and tell him/her when to expect to hear from you.

As soon as the candidate leaves from the interview, collect your thoughts and write down your impressions and a summary of your notes. Collect feedback from any other interviewers while the interview is fresh in everyone’s mind.

You’ll find that if you focus on your business needs during your interview process you’ll find the best new hire every time.

 

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.