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New multi-family housing rides rollercoaster in 2017

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

By K.J. Quinn

 

Builders and residential contractors experienced a rollercoaster ride serving the multi-family housing market in 2017, observers reported, as this volatile business saw demand fluctuate by quarter and macro issues impede growth.

“When the final data come in, we expect multi-family starts to be down almost 10% over the course of 2017,” said Robert Dietz, senior vice president and chief economist, National Association of Home Builders (NAHB). “We expect multi-family development to record additional, slight declines [in 2018].” Multi-family housing includes low-rent units and market-rate rental units in addition to condominiums.

Multi-family housing starts and permits (five or more units) declined 12% in October 2017 compared to the same month in 2016, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD). Additional construction data from Dodge Data & Analytics—which includes some units the Census Bureau and HUD consider single family—provide further evidence the market is in decline. “The [numbers are still being crunched for 2017] but we’re on track for multi-family housing starts as they are measured by Dodge to decline 7% to 475,000 units,” Kim Kennedy, manager of forecasting, said at the end of 2017.

Like peeling an onion, additional layers must be uncovered to view construction data in its entirety. The latest Census Bureau and HUD housing data reveals multi-family housing starts consisting of five or more units jumped 37% from September to October to a seasonally adjusted annual rate of 393,000 units. Authorization of building permits in housing with five units or more rose 13% to 416,000.

New multi-family construction saw fluctuations in market conditions influenced by such factors as Mother Nature, the economy and changing homebuyer demographics. For example, the supply of apartments and condominiums surged in recent years as builders responded to rising demand fueled in part by young Americans who preferred to rent rather than purchase a home in the aftermath of the recession, according to published reports. “Rental housing demand should remain solid, but it is no longer growing as it did in the year immediately after the Great Recession,” NAHB’s Dietz said. “Thus, the multi-family sector is currently seeking a balance between supply and demand.”

The market recovered approximately 96% of the previous, bubble-induced peak of 508,000 housing starts set in 2005, Dodge’s Kennedy observed. “Because multi-family recovered quickly beginning in 2010, it is also peaking earlier than single-family housing for this construction cycle. The 2016 level is very likely the peak for this cycle.”

Macro issues such as escalating building materials and labor costs are contributing to rising home prices while leaving less discretionary money for buyers to spend on flooring upgrades. Finding enough buildable lots to keep up with demand remains a major hurdle for the construction industry. And perhaps the biggest issue of all is a tightness in labor nationwide, which is reportedly contributing to keeping single- and multi-family housing markets from being overbuilt.

“Multi-family is solid, but there is some slowdown in new construction in certain markets,” noted Jay Smith, president, FEI Group, a nationwide network of interior finish contractors and showrooms that includes MultiFamily Solutions by FloorExpo.

One trend expected to continue is the movement toward smaller home designs, which traces its roots to around the time when the housing bubble burst. The average multi-family property is reportedly getting smaller, following years in which builders disproportionately constructed high-end homes. This situation may be short-lived, however, as multi-family developers build more for-sale housing units in the years ahead and older millennials settle down and start raising families.

“There is a trend toward smaller units but this only means more units and not less square footage as overall building sizes aren’t decreasing,” explained Randy Rubenstein, owner, Rubenstein’s Contract Carpet/North American Terrazzo, a Seattle-based flooring contractor. “But one trend we’re noticing is the increase in amenity floors trending with higher-end finishes.”

Demanding but lucrative
The overwhelming majority of residential flooring contractors are large, highly sophisticated and well-financed specialists. While multi-family housing can be a lucrative business given the amount of volume and growth prospects, it requires the necessary resources and financial wherewithal to keep up with daily service demands. “The overhead costs often exceed the margins,” noted Ron Dunn, co-founder and co-CEO of Alliance Flooring, the parent company of brands CarpetsPlus/Color Tile, Carpetland USA Color Tile, Floorco and Clean Touch Pro. “Most flooring dealers that are doing property management work typically specialize in it, and it is their main business model.”

Production building is a highly transactional business that requires builders’ dealers to pay close attention to managing their daily operations and overhead. If they cannot provide timely, cost-effective, turnkey service, builders have more options at their fingertips. “Dealers [serving] these markets will need to bring speed of service, high levels of productivity, modern systems, deep capital position, the appropriate facilities and readiness to satisfy very demanding customers,” FEI Group’s Smith said.

While the segment is highly specialized, there are similarities with the commercial flooring business. “It’s really no different than any other major commercial construction project, with all of the same challenges since the major high-rise multi-family projects are being built by the same large general contractors who are also doing non-residential work,” Rubenstein said.

Finding and maintaining installation crews who can quickly install flooring in large projects is a major challenge given the restricted labor market and higher wages paid to skilled workers. “Dealers need a lot of installation crews and operational assets to service multi-family builders,” said David Holt, Mohawk Industries’ senior vice president of sales. “If they screw up with those builders, they’re going to go out of business.”

Similar to a doctor, dealers are always on call as notifications for next-day installations can be received in less than 24 hours. “This requires manufacturers and flooring dealers to be in sync with product and inventory needs like never before,” said Brad Christensen, vice president, business strategy, builder, Shaw Floors. “Flooring dealers, in an attempt to become more efficient, have inventories as lean as possible and, as a result, they have been very savvy with the management of their SKUs and do their best to avoid duplication.”

Working with flooring suppliers who provide high-quality products and, when necessary, are there to help minimize the impact of installation callbacks is imperative. “That way, the builder can continue to look forward to knowing you are there to take care of any problems,” said Rob Brockman, channel marketing manager for contractor, builder, developer and property manager at Armstrong Flooring. “Building a strategic partnership focused on the builder’s needs is the challenge that is built over time on a foundation of trust.”

Flooring choices evolve
Whether it’s inside a dealer or builder showroom, multi-family homebuyers are given opportunities to upgrade to better quality flooring. The incentive for builders and dealers to encourage upgrade purchases is two-fold: It ensures customers receive a good-looking, high-performing product that meets their expectations and profit margins are considerably higher than base-grade products. “Consumer knowledge and education result in higher sales dollars for the same amount of work,” Alliance Flooring’s Dunn pointed out. “It’s a win-win-win for the builder, the homeowner and the flooring dealer.”

Most flooring upgrades are allocated for kitchens and baths, experts noted, because both areas offer the greatest return on investment and time spent in the home. “Large kitchens and open-concept design are still things that homebuyers seem to want,” Armstrong’s Brockman said. “This creates an opportunity to sell upgrade flooring as there is no real separation of spaces in these open plans.”

While flooring choices vary by region, carpet is the leading surface for multi-family spaces, though hard surfaces and higher-end goods are trending up, suppliers reported. “In multi-family homes, many people have pets,” Mohawk’s Holt noted. “So carpet is being replaced more frequently, usually within four to five years.”

New hard surfaces such as LVT and WPC are reportedly gaining coverage in multi-family environments. “Buyer preferences are leaning toward hard surfaces—mainly LVT—because of their great looks, durability and water resistance,” Brockman added.

Homebuyers still desire natural products such as ceramic tile and hardwood, which studies indicate add value to the home. Upgrades to these higher-priced products are becoming more prevalent given looser loan standards that help customers secure additional financing. “We’ve seen strong growth in town homes and patio homes in which higher quality floor coverings and better finishes are being selected,” Alliance Flooring’s Dunn said.

Looking ahead, the multi-family housing channel represents a lucrative opportunity for dealers who are well positioned to service the many needs of builders and homebuyers. “FloorExpo [believes] the multi-family and builder segments to be the most challenging in flooring,” FEI Group’s Smith said. “If done right, dealers can be very successful.”

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Randy Merritt: Letter to the editor

Dear Friends,

Merritt, RandyWhere does time go? It is hard to believe that it has been almost 42 years since Shaw Industries offered me a job as a trainee in the spring of 1976. I remember the day well…I could not say “yes” fast enough! With everything I owned in the back of a Vega station wagon, Dalton became my new home.

Over the past 41 years I have been so blessed to be a small part of the incredible story of the growth of Shaw Industries and our community. Most of you know the history and what the company has meant to the flooring industry. For me through those years the greatest part of the story has been the wonderful people I have had the honor of working with. Every day, every year we all focused on how we could help create a better future…for our customers, our associates and their families, our communities where we lived and worked, and of course for Shaw.

As Sharon and I head toward retirement and full time grand parenting I want to say thank you. I wish I could see everyone face to face, but alas this is my best opportunity.

First, thank you to all of the customers across the country who have supported our company professionally and me personally. I am so grateful that I have been mentored by so many of you and have the privilege of calling you friends as well as great customers. I have had the pleasure of seeing your businesses grow and in some cases seeing second and third generations step in to continue the legacy of this great industry. Thank you all for your unwavering support and kindness. Nothing would have been possible with out each one of you.

Second, thank you to all of the wonderful people of Shaw Industries. Throughout the years this has numbered in the hundreds of thousands. We have all worked together with a common goal to serve our customers with great products and great service…every day. And while we did not get it right some days, it was not for lack of heart or effort. Shaw Industries is a family and an unbeatable team of great people. That is truly the secret—great people doing innovative and creative things.

Third, I have to say a special word of thanks to Vance Bell, our CEO. I have been blessed to know Vance since my first week at Shaw. No one has worked harder, nor given more, in their time as a leader. Vance was a steady hand on the wheel through the worst recession of our time. He has made insightful and strategic decisions throughout his career that have helped lead us to where we are today. He has been, and continues to be, a great servant leader and I have been honored to work with him.

Finally, I want to say thank you to the members of the trade press. You all work tirelessly to support this industry and everyone in it. Through the years you have been fair to Shaw and fair to me. I appreciate the relationships and friendships we have built and will always be grateful. I will continue to follow the industry through your work.

As proud as I am of all we have accomplished at Shaw over the past 50 years, I am even more excited about the future that lies ahead for the next 50. We have an incredible team of talented, energetic leaders who are bright, hungry and dedicated. They all possess and live the core values of honesty, integrity and passion. My experience has shown me through the years that when one leader moves on, they are inevitably replaced by one that is even stronger and more talented. No one misses a beat and the former is soon just a fond memory. I am so excited that this will be the case for Vance and his team going forward. The men and women of Shaw Industries are more prepared than ever to lead the flooring industry for many years to come.

So, not only from me, but from my entire family, thank you for the distinct honor of working with you all for the past 41-plus years. Thank you for your advice, your support, your encouragement, and most of all, your friendship. My days as an every day participant in the flooring industry are about finished…but I hope my days as a friend to you all will never end.

In humble gratitude,

Randy

 

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My take: Who says there’s no news in flooring?

October 9/16, 2017: Volume 32, Issue 9

By Steven Feldman

 

Screen Shot 2016-07-15 at 3.46.11 PMIt’s a pretty rare occurrence these days when a big story breaks in the flooring industry. It’s not like 20 years ago when every five minutes Shaw, Mohawk, Beaulieu and/or Armstrong were making significant acquisitions.

So with that, consider this issue of FCNews somewhat of a throwback. In most weeks, the presentation of our Al Wahnon Lifetime Achievement Award would be in the lead spot. But in this case, Pierre Thabet, CEO of Boa Franc, a most deserving winner, had to step aside. In just about any other issue, the fact that Empire suddenly shuttered every one of its brick and mortar stores would merit top billing. But those two stories were usurped by Engineered Floors’ intent to purchase Beaulieu America and all its assets.

A little perspective on all three. First, the Lifetime Achievement Award. Thabet joins an illustrious group that includes Sandy Mishkin of CCA Global; Don Miller of Roppe; Ralph Boe, Jeff Lorberbaum and Don Finkell. Thabet has built a company with quality as its hallmark, not to mention high style and design. The Mirage brand is synonymous with quality, and a tour of the Boa Franc facility illustrates why. Thabet has also probably done as much for the city of St. Georges, Quebec, as anyone. He checks all the boxes when it comes to this award.

Now Empire. If you’re a flooring retailer, give yourself a pat on the back, have a drink. While Empire closed only two locations on Long Island, one in Virginia and a couple of store-within-a-store prototypes in JC Penney, it proved a salient point—just because a mammoth company tries to encroach upon your turf, it doesn’t necessarily mean they will be successful. Empire learned what all of you did from day one—it ain’t easy. It validates what you do day in and day out. I am not privy to any of the discussions that were held in the boardroom, but it stands to reason that a lack of success fueled the decision to lock the doors. Word on the street is the stores just did not meet expectations. Bottom line: No one knows the retail business as well as you. And having that local presence still means a lot.

Now Beaulieu. Where do I begin? There’s not enough space here for every one of my thoughts, and I may devote a column to this down the road. In short: It’s a bit ironic that Engineered Floors is the intended buyer given the birth of that company greatly contributed to the downward spiral as another serious competitor in a mature industry.

Next, Carl Bouckaert, a true gentleman, a favorite of retailers, a man who built the company into the only privately held billion-dollar mill. Once he reached the peak of the mountain, he had to deal with negative forces: a faltering economy as well as challenges that result from co-owning a family business when the family itself is going through its own trials and tribulations. No need to elaborate.

This was not the first time the company had its back against the wall. The most recent time was in the early 2000s, and Bouckaert hired the aforementioned Ralph Boe, who turned the company around, in part by rationalizing SKUs and hiring strong sales and marketing leaders. But “family dynamics” led to Boe’s departure and the appointment of Karl Vercruyssen, Boe’s polar opposite. It wasn’t long before Vercruyssen was also an ex-CEO. And by then the debt had grown to a point where people were outwardly questioning the company’s life span.

What happens next? Only time will tell. Beaulieu has good products. The commercial division was once well into the nine figures. Now a man named Mr. Shaw gets to fix things. Rumor has it the Coronet name will be resurrected. Who knows?

Just another issue of FCNews.

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Empire Today shutters all physical locations

October 9/16, 2017: Volume 32, Issue 9

By Ken Ryan

 

Screen Shot 2017-10-17 at 9.30.44 AMEmpire Today, the shop-at-home giant, has closed its three stand-alone locations in New York and Virginia, and shuttered its store-within-a-store concept in JCPenney locations in Florida and Tampa, FCNews has learned.

There was no official announcement from Empire Today, nor private equity firm H.I.G. Capital, which acquired Empire in November 2016. Brian Schwartz, executive managing director of H.I.G., did not return calls for comment. (In announcing the acquisition of Empire Today last November, Schwartz said, “We are very excited to partner with Empire Today. The company is a market leader with a compelling customer value proposition, a unique business model, an incredible brand and significant growth prospects. We see tremendous opportunities in the business and look forward to supporting Keith Weinberger and the entire Empire team.”)

Weinberger, CEO of Empire Today, told FCNews that he could not comment on the store closings; an internal email to Empire Today employees notified them that all physical locations, including JCPenney store-within-a-store formats, would cease operations at the close of business on Sept. 22. A sign posted outside the vacant Westbury, N.Y., location read: “As of 9/22/2017 Empire Today Retail Stores are permanently closed.” In the parking lot at the rear of the building, piles of inventory were sheltered under blue tarp with a message scribbled: “Scheduled for pick-up. Do not touch.”

The abrupt closing stood in stark contrast to the much ballyhooed grand opening Empire Today threw in February 2015, when it opened brick-and-mortar stores on Long Island—in Westbury and Commack—and in Fairfax, Va. To kick off the launch, Empire Today hired singers and other entertainment acts and talked about the physical locations as a natural extension of the shop-at-home business.

What went wrong?

Executives whose companies supplied Empire Today stores said the company failed on many fronts. One carpet mill executive who attended the grand opening in Westbury told FCNews, “It seemed like they were doomed before they ever got off the ground. They never manned their stores with people who knew the business well; they never promoted their stores; they didn’t do much with updating their showrooms, and they were closed-minded. When we made suggestions on certain products, they said, ‘We will do business our way.’ They never listened to us.”

Screen Shot 2017-10-17 at 9.31.03 AMBill Schollmeyer, CEO of Johnson Hardwood Floors, said he, too, was not surprised by the failure. “They didn’t sell [anything] for us. It’s kind of scary when a big company with cash behind it and a really attractive store doesn’t make it. But I’m not really surprised. We had basic hand-scraped ¾-inch solid samples in there and they didn’t sell anything to speak of. It should have been a no-brainer.”

Another industry source told FCNews the Empire Today locations closed because they did not meet expectations.

Specialty flooring retailers who learned about the closings said succeeding in the flooring retail channel takes a special commitment and that business size does not matter if the model itself is not trustworthy. “Businesses like Empire Today don’t sell tactile product the way we do—they specialize in selling dollars, not floor covering,” said Steve Weisberg, president of Crest Flooring in Allentown, Pa. “To be successful in our type of business you need to be sincere in everything you do and follow through with your promise to do good work. No matter how big you are, you cannot lose sight of that fact or else you lose.”

Screen Shot 2017-10-17 at 9.31.08 AMAdam Joss, co-owner of The Vertical Connection Carpet One, Columbia, Md., agreed, adding that scale alone does not guarantee success in the floor covering arena. “There’s always the David vs. Goliath cliché. Small businesses have the benefit of being more nimble and more passionate with a better sense of their local market. There’s also a lesson here for us—large companies will test new products, services and models all the time. Some work, some don’t. And that’s OK. We can’t be afraid to test and fail. The world is constantly changing and we need to change with it.”

In May 2016, Empire Today announced an agreement with JCPenney to open its own stores within certain JCPenney locations. At the time, Weinberger told FCNews the JCPenney test enabled Empire Today to expand its physical presence without the cost of building a new facility. “This is much more efficient,” he stated back then.

In mid-September, Johnson Hardwood was about to place a 24-SKU program in several JCPenney locations, but the supplier said those orders were abruptly halted. “I was told the entire program was dead,” Schollmeyer noted.

JCPenney, which has had its own struggles, announced earlier this year its own plans to close 138 stores by year’s end. It did not include any of the stores with Empire Today.

 

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Armstrong Flooring receives FloorScore certification for solid hardwood products

Armstrong Logo 2016Lancaster, Pa.—Armstrong Flooring has achieved FloorScore certification for the company’s solid hardwood products including the Armstrong, Bruce and Capella brands. All Armstrong wood manufacturing facilities including Beverly, W.Va., Warren, Ark., and West Plains, Mo., are now FloorScore certified.

FloorScore is a certification program that helps specifiers and end users easily identify manufacturers and products that adhere to the strictest standards for indoor environmental practices and production.

Armstrong has a long history of recycling and environmental stewardship—from re-using cork waste for linoleum floors in the early 1900s to using waste wood dust as a source of renewable energy for its manufacturing facilities.

“Achieving FloorScore certification for our solid wood products further demonstrates the Armstrong Flooring commitment to provide safe, high-quality products to our customers,” said Amy Costello, sustainability manager, Armstrong Flooring. “As the leading manufacturer of flooring in North America, Armstrong Flooring is committed to sustaining natural resources and reducing our environmental impact. A supporting certification program such as FloorScore help advance Armstrong’s corporate to the environment and responsible product manufacturing.”

Over 95% of all Armstrong Flooring products by volume are FloorScore certified including engineered wood, laminate, luxury vinyl flooring, linoleum, vinyl tile and vinyl sheet flooring.

For more information, visit armstrongflooring.com.

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Laticrete taps Maheu as North America director, product management

Maheu_142-221-001prtLBethany, Conn.—Laticrete has hired Spencer Maheu as the North America director, product management. Maheu will supervise the Laticrete team of product managers in driving new product innovation across the North American region through the continued development and diversification of the company’s integrated marketing communications.

“Spencer has the background and experience that will push our company’s product innovation further, allowing Laticrete to continue providing cutting-edge solutions for our customers,” said Sean Boyle, Laticrete vice president, marketing North America. “I look forward to seeing his contributions to the North American division as we continue to expand our product offerings.”

Maheu comes to Laticrete from Osborn International, a division of Jason Industries, where he led the product management, marketing and business development teams. Prior to working at Osborn, Maheu led product development teams at Stanley Black & Decker.

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CFI annual convention sees records attendance

CFIForney, Texas—The 24th annual CFI Convention saw a record-breaking number of attendees from every sector of the flooring industry, according to Robert Varden, vice president, Certified Floorcovering Installers Association. The event, which kicked off Aug. 16 at the Rosen Shingle Creek in Orlando, spanned three days and commenced with a welcome reception sponsored by Royal Adhesives, Traxx, Tarkett, Parabond, Tools4Flooring.com and Sponge Cushion.

The event included programs, training and networking opportunities. It also featured the Associate Showcase, an expo highlighting new products and tools from numerous flooring manufacturers. Attendees experienced hands-on interaction with the latest tools and products as well as opportunities to talk with developers behind new technologies that are changing the face of installation.

The convention also included a host of presentations from renowned industry speakers and celebrities including: Scott Humphrey, chief executive officer, WFCA; Darryl Ross, author and motivational speaker; Jeff King, general counsel for the WFCA; CFI trainer Jonathan Varden; Phil Zolan, executive director, fcB2B; and CFI-pro Tom Cartmell—to name a few.

The convention concluded with the CFI Annual Awards Dinner, where several industry leaders were honored. The Chris Davis Award, given each year to an individual who stands out in his or her efforts to promote quality installation and support across the flooring industry, was presented to Rick Herr, installation technology leader from Armstrong World Industries. The Gress Award, the highest form of recognition available to a professional flooring installer, was given to Dwayne Pruitt of Pruitt Flooring in Wichita, Kan.

The final award, Walk of Excellence, was presented to John McHale and Jill Sheets of CFI for their outstanding achievement and all-around excellence. These individuals have helped cultivate CFI’s success through a combined total of 43 years working in the CFI office. Sheets was also presented with a plaque in recognition of her hard work and dedication over the years.

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Private-label programs support distributors, dealers

August 28/September 4: Volume 32, Issue 6

By Reginald Tucker

 

Screen Shot 2017-09-05 at 12.42.20 PMFor many floor covering distributors, private-label programs provide opportunities to differentiate themselves in a marketplace or region where competing companies might offer the same, or similarly constructed, products. By that same token, some specialty retailers—particularly those who are buying group members—see private-label offerings as a way to compete against the big boxes that often carry well-known manufacturer brands. While some major manufacturers service a variety of retail channels, developing differentiated offerings goes a long way in managing potential channel conflict.

In realizing the importance and significance of these trends, manufacturers are positioning themselves accordingly. “Private-label programming is all we do—that’s our specialty,” said Allie Finkell, executive vice president of American OEM, a U.S.-based custom hardwood flooring manufacturer. “Everyone who buys product from us basically puts their own name on it.”

Like other private-label suppliers, American OEM saw an opportunity in the marketplace to fill a void. While many companies see advantages in importing entry-level, low-quality product, American OEM prides itself on better-grade products that present high-margin opportunities for its distributor partners. “Our customers are looking to buy more of the high-design products, not the low-level commodity items,” Finkell told FCNews. “In fact, we can’t even get down to the price some of them are looking for.”

Effective private-label brand strategies extend to other product categories as well. For instance, LVT supplier Nox Corp. offers customized programs for some of the biggest names in wholesale distribution—some of which are top 20 distributors.

According to a company spokesperson responsible for sales, Nox offers distributors an advantage because it manufactures product in the U.S. This addresses distributors’ concerns about having a consistent source of supply. “Our plant in Fostoria, Ohio, is brand new and state of the art. Our lead times are very acceptable to our customers and shipping out of northern Ohio is pretty good. It’s very convenient for trucking routes.”

Another advantage, according to Nox, is its experience in LVT production and the diversity of its offerings. “There’s so much LVT out there,” the spokesperson said. “With us, distributors don’t just get a white box that they can find at 15 other distributors around the country with the same décors. We offer distributors a complete program that allows them to build their own designs.”

For floor covering dealers, private-label programs represent another way to differentiate themselves from big boxes. At the same time, it’s an opportunity to charge more money based on exclusive programs. Just ask dealers like Birmingham, Ala.-based Ted’s Abbey Carpet & Floor, where Ted Gregerson, owner, puts more emphasis on the Abbey-branded offerings or private-label programs such as Alexander Smith. “We find promoting ourselves, our store and our story carries more weight with customers than simply a brand name. Many flooring companies believe their brand names are well known, but they are not as renowned as they would like to think.”

While private labels can certainly help improve profitability, some believe exclusive brands are the way to go. “We provide our members with exclusive brands, not just private-labeled products,” said Eric Demaree, president, Carpet One Floor & Home. “We add exclusive colors, product attributes and guarantees that cannot be offered by simply slapping on a private label.”

This approach was on full display at the recent CCA Global Partners summer convention, where Carpet One dealers previewed extensions to a few established exclusive brands (i.e., Lees and Invincible H2O) as well as altogether new private-label offerings manufactured by Armstrong, Hemisphere Imports, Mohawk and Shaw, to name just a few.

As Jim Aaron, CCA Global’s vice president of merchandising, put it: “At the end of the day, our exclusive products, brands and warranties all help differentiate us from our competitors.”

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

August 28/September 4: Volume 32, Issue 6

By Steven Feldman

 

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

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

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

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

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

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

It begs the question: What would you do?

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

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

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

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

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

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Lanning to stay on as Haines senior CEO advisor

Screen Shot 2017-08-31 at 2.22.56 PMGlen Burnie, Md.—Haines’ Hoy Lanning has agreed to stay with the company as senior CEO advisor. Lanning originally planned to retire at the end of 2017. After working with the new leadership team at Haines there was mutual agreement for Lanning to remain as part of the executive leadership team for the foreseeable future.

“We have worked very hard the last three years integrating Haines and CMH,” Lanning said. “The payoff to our work is now happening. When Mike Barrett (president and CEO) discussed me staying on with Haines longer to help maximize our efforts, I was happy to agree. I really enjoy this business and the people (employees, customers and suppliers) in it. We can do great things together.”

Barrett also expressed excitement about the decision. “[Lanning’s] advice and experience are a key part of the success Haines has been having this year. He is a trusted advisor to me and someone I have tremendous respect for as both an industry leader and a person.”