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Starnet fall conference: Members look to finish the year on a high note

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

By Reginald Tucker

 

Screen Shot 2017-10-27 at 12.30.48 PMAtlanta—The momentum generated at Starnet’s spring conference and silver anniversary celebration earlier this year (FCNews, May 8/15) appears to have carried all the way over into the group’s fall meeting here this month as members expressed widespread optimism that business will finish strong to close out 2017.

“2017 has been good for Starnet members overall,” said Jeanne Matson, president and CEO, citing collective growth in the single-digit range. “Members have been busy this past summer and we expect a strong finish for the year.”

In terms of product categories, Matson said much of the action has been driven by hard surfaces. “We’ve been experiencing the shift from carpet and that’s been an ongoing trend. But this year I feel it has been a little more marked, especially with the LVT explosion and so many of our vendor partners getting into that business and hard surface in general.”

Ceramic is another hot category for Starnet members, Matson reports. When she joined Starnet about 11 years ago, roughly 30% of membership was active in the category; today that number is probably close to 60%. “We’ve had consistent good growth with Daltile, and a lot of that has come from more of our members doing ceramic work. Some of our members—particularly our larger ones—have built their ceramic business to about $1 million within a year. It’s a different kind of product to install, you need different technical labor and skills in estimating, but it’s very lucrative and it gives the end user a one-stop shopping experience.”

Contractor members like Randall Weis, CEO of New York-based R.D. Weis, can attest. “There is a visible shift from soft to hard surface. LVT and ceramic are the big winners and continue to take more share.”

That’s not to say that carpet is no longer desirable. “Carpet is being impacted by hard surface for sure, but we believe it will always be a factor,” Matson stated. “Obviously there are certain environments where soft surface is necessary. The area rug category, for example, has generated opportunities for our vendors and members alike.”

Starnet members are also benefitting from thriving end-use markets. “For our membership overall, corporate is a very strong market,” said Leah Ledoux, director of strategic accounts. “Hospitality is up and education seems to be coming back. Multi-family housing is still very strong, but that’s kind of at its peak right now. Healthcare, however, is down a little bit but continues to be an important market for us.”

But given the fact membership varies by region, it’s hard to paint the market in broad brush strokes. “Because our membership is so diverse, you may have some members doing a ton of work in education and others doing well in hospitality,” Ledoux said. “But we continue to look at the progress we’ve had in all these categories so we know where we need to be.”

Common interests, goals
Many longtime Starnet contractors attribute some of the success they have achieved over the years, in part, to benefits that group membership brings. Attending conference meetings also provides members with an opportunity to share practices that they might bring back to their own businesses. “I enjoyed meeting with my peers and manufacturing partners,” said David Meberg, president and CEO of Consolidated Carpets, New York. “Catching up and discussing the current events of the industry was the most valuable part of the conference.”

Screen Shot 2017-10-27 at 12.30.57 PMIn that spirit of cooperation, Meberg shared some of his insights with the group during the lead-off session, “Building profitable and sustainable business relationships,” along with Max Cavalli, director of education, Mannington Commercial; and Kathi Kennedy, business developer, Howard’s Rug, San Diego. Starnet’s Ledoux, who moderated the panel, explained the thought process behind the group session format. “The goal of the presentation was to put a member’s perspective on the three different positions of being a flooring contractor. For owners like Meberg, you’re driving business and specifying materials. A lot of the owners within Starnet are part of the process, they have their own accounts and they’re driving their own businesses and engaged in the process.”

It’s a position other longtime Starnet members can readily appreciate. “In my business I’m managing the cash flow, scheduling jobs and setting the strategy for the growth of the company,” said Jason Adams, president of Kingston Tile Co., Romeoville, Ill.  “The points I stress within the company are awareness of business opportunities, measurement of our initiatives and holding people accountable.”

The key to success for other members like Chuck Rajner, owner of Ohio-based Commercial Flooring of Toledo, hinges simply on taking care of the customer. “Our gross margin is enhanced by our relationships with our customers. If we make our clients’ jobs easier, then we’ll usually get the business.”

Regardless of the particular strategy, members stand to take away something of high value by learning about other contractors’ experiences. “People told me it was interesting to hear about different business models during the sessions,” Ledoux said, citing presentations that touched on various topics such as profitability, technology, management and environmental issues. “We may have 174 members but that’s really 174 different business models.”

It’s precisely that sharing of experiences that keeps members coming to convention. As Weis explained: “A key benefit of two live Starnet meetings per year is for the members/shareholders to get an update on where we stand with our vendor partners, and how the co-op is doing overall. For me, one of Starnet’s biggest values is it provides professional training, education and networking that no other group provides its members.”

Even new members are already reaping some of the benefits of aligning with Starnet. Such is the case with Athens, Ga.-based DCO Commercial, which joined the group back in January. “The networking and relationships we have built with vendor partners, members and Starnet staff over the past 10 months has well exceeded our expectations,” said Curtis Blanton, vice president. “The networking amongst like-minded individuals is always the best part of these events. It is tremendous for companies to come together, network and share best practices for the good of the overall industry and to strengthen our alliance.”

The main goal, according to management, is to put members in the best position to succeed. “We’re always looking to grow the group both organically and in terms of our vendor base,” Matson said. “I think we’re poised for growth into 2018 and 2019.”

 

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Al's column: Managing multiple generations in the workplace

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

By Matt Beaudreau

 

(First of two parts)

Screen Shot 2017-06-09 at 10.52.32 AMAcross many businesses today—including the flooring industry—there are as many as five generations working together. That’s a phenomenon unprecedented in the history of the U.S. workforce. This represents both a challenge and an opportunity. I will share some insights about how the flooring industry can work collaboratively across the various generations to improve communication and work processes.

First, it’s important to understand how the different generations think before beginning to understand their views on work. The parents of millennials, for example, are predominantly boomers (those born between 1946 and 1964). I often make fun of them in my presentations, but the fact of the matter is they have a lot of the skills we [millennials] don’t have. What everyone needs to understand about the baby boomers is they were taught to measure work ethic in terms of hours per week—and those hours do not count unless they can physically see you. That’s why they get to work so early. Boomers also believe there are not shortcuts to success. They believe you have to put in your dues and have policies, processes and procedures.

As a manager or co-worker, if you’re dealing with the boomer generation, you need to acknowledge the time they’re putting in—not just that week but over the course of their career because there is a lot of wisdom there. Also, they are the only generation that can think in a linear fashion, which is a helpful skill if you have a project where you’re looking to make something more efficient.

Screen Shot 2016-07-15 at 3.49.34 PMNow let’s talk about millennials. This is not only your greatest group of customers but they are also now your largest group of employees. That being said, it’s important to dispel a common myth about millennials: They are not ‘tech savvy,’ as many people like to believe. Actually, they have no idea how technology works; they just know they can’t live without it. Rather, millennials are ‘tech dependent.’ That’s a critical distinction you have to make. As an employer of millennials, you also need to understand this: A generation that is tech dependent partially defines their relationship with you as a boss and with you as a company based on their technological relationship with you.

Then there’s ‘Gen Z,’ which is coming up right behind the millennials. They’re also tech dependent, but they paid attention to what the millennials went through. For example, they saw millennials get crushed under college debt, so for the most part they are picking less expensive colleges. That’s part of the reason why they are coming out of college with a lowered expectation of the workplace—which is great news for employers. In addition, Gen Zers tend to be very entrepreneurial and innovative, and they’re very hard working.

If you manage or work alongside millennials and Gen Zers, you need to understand the ways they prefer to communicate.

No. 1: Text messaging. Millennials hate detailed voice messages; they’re not going to listen to them. No longer is it considered unprofessional to text your boss or co-workers.
No. 2: Email. The magic for email is the subject line. What’s in there will determine if the employee is going to open the email in the first place. Use quick bullet points to get to the point.
No. 3: Social media. The shift has happened (similar to the move from radio to TV). Communication is all about getting attention.
No. 4: Telephone.
No. 5: Face to face.
Many millennials have degrees in communications, but eye contact freaks them out.

 

Matt Beaudreau is a certified keynote speaker at The Center for Generational Kinetics, headquartered in Austin, Texas. He is a millennial who has a reputation as a thought leader amongst his generation.

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Al's Column: Choosing the right business entity profile

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

By Roman Basi

 

(First of two parts)

Screen Shot 2017-05-15 at 9.35.04 AMIn the past, choosing a business entity under which to operate was easy. Either businesses operated as a sole proprietorship, a partnership or they incorporated as an “S” corporation or a “C” corporation. There were clear advantages and disadvantages to each one. The sole proprietorship and partnership had the advantage of simplicity and lack of formal arrangements. The C corporation was for national companies, and the S corporation was for those individuals needing asset protection and a formal entity in which to operate.

Today the business structure is not a default arrangement. Businesspeople have an alphabet soup of business types from which to choose. Though many of the new forms offer limited liability and single layer taxation, the tax and legal differences are not nearly as clear as they used to be. This series will discuss three types of business entities and point out some subtle and not widely known differences between the chosen entities.

All three entities are excellent for any small businessperson to operate a company. When deciding which entity to operate under, the owner must take into consideration legal liability, tax circumstances while operating and dissolution, the person’s goals and the size of the operation among other factors. Tax circumstances are of utmost importance when choosing an entity. However, ease of transferability, legal protection and other factors are affected under each entity type.

Limited liability Co. With an LLC, there are no restrictions on ownership. An S corporation, on the other hand, has restrictions. To hold an S corporation status, one must be a resident and citizen of this country. Also, no more than 100 people are allowed to own stock. If the requirements are violated, the company losses its S corporation status and it can’t attain that status for years.

Screen Shot 2016-07-15 at 3.49.34 PMWith an LLC, these restrictions do not exist and its status is not jeopardized. While most LLCs will maintain membership of well under 100 members, the option or ability to expand the number of investors rapidly does exist. Many immigrants just starting business can benefit from this classification as well without suffering from double taxation.

While there are formalities with the LLC, failure to follow usual formalities is not grounds for imposing personal liability. This is a major convenience and aids in limiting liability. The other types of businesses identified here are all subject to being disregarded as an entity if the owner does not obey formalities. This is what is known as “veil piercing,” which happens when company owners don’t observe formalities in paperwork, meetings and otherwise use the business as an “alter ego.”

While the owner of the business cannot use the company to defraud people out of money, the LLC liability protection does not require the formality by which corporations must abide. Hence the LLC can be a better insulator against liability if maintenance of meetings and documents is going to be an issue.

Shares of an LLC are easier to put into a trust than an S corporation. To put shares of an S corporation into a trust, special trusts must be used. It can be somewhat complicated and LLCs tend to work very well instead of S corporations if you want to transfer ownership through a trust.

With an LLC, no unemployment taxes are due on income—unlike both the C corporation and S corporation. While this is not a huge tax savings it is significant. If your business is going to make less than $10,000 per year, LLCs might be the way to go. If you’re an at home business, this is particularly important.

Part two will cover the pros and cons of the other entities.

 

Roman Basi is an attorney and CPA with Basi, Basi & Associates at the Center for Financial, Legal & Tax Planning. He writes frequently on issues facing small business owners.

 

 

 

 

 

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WFCA presents winners of 2017 Gold Standard Awards

WFCADalton—World Floor Covering Association (WFCA) announced the annual winners of its Gold Standard Award which recognizes stores that have created an outstanding consumer retail experience. In the category including retailers with sales over $10-million, Sergenian’s Floor Covering based in Madison, Wis. took home the honors. In the under $10-million category, Classique Floors & Tile based in Portland, Ore. was recognized.

Sergenian’s Floor Covering received a choice of one of the following: two-day on-site custom CFI carpet seaming class; two-day on-site custom sales training; or one-year online WFCA University tuition. Classique Floors & Tile received the same options as above but only a single day of classes.

Each award category also recognized 2nd and 3rd place recipients. Second place winners in both categories received six-months online WFCA University tuition while the 3rd place winners in both categories were honored with three-months tuition to WFCA University online. Additional winners included:

Over $10-million:

  • 2nd place – Coles Fine Flooring (San Diego, Calf.)
  • 3rd place – Carpetland USA (Davenport, Iowa)

Under $10-million:

  • 2nd place – Independent Carpet One (Westland, Mich.)
  • 3rd place – Brian’s Flooring & Design (Birmingham, Ala.)

To receive the Gold Standard Award in either category, companies are reviewed and judged based on knowledge, customer service, quality of store image and code of conduct. A company also must be a member of the WFCA, have been in business for at least three years and have a clear Better Business Bureau report.

Companies interested in entering or nominating an entrant for the 2018 Gold Standard Awards can visit wfca-pro.org for more details.

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Mistakes that can kill your business

January 16/23, 2017: Volume 31, Number 16

By Ed Fountaine

Mickey Mantle struck out so often early in his rookie year management sent him back down to the minors. Peyton Manning threw a career-high 28 interceptions in his first season with the Indianapolis Colts. George Lucas’ directorial debut, “THX 1138,” was the box-office bomb six years before he made “Star Wars.”

In short, everyone makes mistakes. But as the saying goes, “Life’s greatest lessons are usually learned at the worst times and from the worst mistakes.” FCNews spoke to several flooring retailers who, like Mantle, Manning and Lucas, stumbled a bit coming out of the gate but applied those painful lessons to get back into the race.

George McMurtry, owner
America’s Carpet Outlet, State College, Pa.
Screen Shot 2017-01-16 at 11.43.08 AMDespite having a Bachelor of Science in Economics from Penn State University, when George McMurtry opened America’s Carpet Outlet in State College, Pa., he struggled to deal with what he calls his “just-because” costs—the everyday expenses that come with running a business, over and above what each individual job might cost.

Not budgeting properly—not really understanding the impact of non-job-specific costs—is, to McMurtry, the single biggest mistake a small-business owner can make.

“The biggest mistake retailers make is not paying attention to their profit margin, not understanding what their overhead costs truly are and how that impacts their bottom line,” he said. “Just because I’m open [for business] I have certain expenses. We have rents; we have taxes; we have insurance; we have utilities.”

This was something McMurtry didn’t know in the beginning and a lesson he learned the hard way.

“We opened a little more than 20 years ago, and I thought I knew a fair amount about flooring and a fair amount about selling and about our product,” McMurtry said. “But I didn’t know nearly enough about running a business. It took me five or six years to realize that, if we’re making money on every job, how come at the end of the month I’m not seeing my bank account grow? Why am I still struggling to pay some of our bills?”

According to McMurtry, getting a handle on “just-because” expenses by taking a look at where you write checks every month is the key to correcting a common but consequential mistake.

Screen Shot 2017-01-16 at 11.43.14 AMDavid Hage, managing director
State Contract Carpet Co., Framingham, Mass.
With family in flooring for over four decades, Dave Hage and his brother Mike are looking to make their own way in the business. According to Hage, one mistake they’ve made was being too aggressive at times and over-extending themselves when it came to taking on new work.

“My brother and I were the younger generation, and we were pretty hungry to grow and get any business we possibly could,” Hage said. “I think we realized sometimes that can be a mistake, too. When you’re trying to grow you might have to turn down a job or two.”

The reason, Hage explained, is some jobs present issues with timing or moisture. “What I’ve learned is that time is also worth money. So sometimes there are opportunities that you missed because you get caught up trying to grow too fast.”

It’s not just a difficult job that should be turned down at times, Hage discovered. “Maybe it’s a difficult customer. Our philosophy is to do everything we can for our customer, but I think there comes a time where you’ve got to decide whether it’s feasible because there’s also a business side to it.”

According to Hage, another pitfall to avoid is underestimating the importance of your installers. “My dad taught me that the installers are by far your most important asset.”

Screen Shot 2017-01-16 at 11.43.22 AMLarry Lauger, managing director
Lauger’s Carpet One Floor & Home, Findlay, Ohio
Larry Lauger, an Air Force vet, was thrown into the deep end when he took over Lauger’s Carpet One after the sudden death of his father. With limited knowledge of the flooring business, he was literally starting from scratch.

“My biggest mistake was learning who to trust,” Lauger said. “You’ve got all these folks trying to sell you advertising, trying to sell you everything under the sun. You’ve got to be able to pick through what’s good, what’s bad and just be able to say, ‘No, I’m not interested.’”

Lauger started out in the Air Force, working in the VA when his father, who founded the business, got sick. “Monday they said he had pancreatic cancer, by Friday he was dead, and Saturday they said, ‘OK, you’re in charge.’”

Lack of experience wasn’t the only obstacle. Lauger took over the company at the point in time when the housing bubble burst. With very small funds to work with, Lauger attributes the company’s survival to his staff.

“You’ve got to have good people working with you, and the big thing is being able to trust your people,” he said. “I had to fire two people when I took over. They didn’t like me at all.”

Screen Shot 2017-01-16 at 11.43.30 AMFred Scharm, owner
Scharm Floor Covering Des Plaines, Ill.
In his 13 years running a business his father and mother started 46 years ago, Fred Scharm has learned to avoid a mistake common to any company—trying to manage an employee who can’t cut it.

“Employees are probably the most challenging [part of the business],” he said. “I have six employees, and we depend on each one to do the things we need them to do. Let’s say my warehouse guy is having problems at home and he comes to work with that, doesn’t feel like working, and pushes it off to the rest of the team. The team falls behind in their work, and it gets clogged up.”

Mistakes can be made in trying to train an employee who simply fails to understand what is expected of her. As an example, he cited a former employer, a showroom coordinator, who kept making the same mistakes over again. In the end, Scharm had to make the tough call.

“I’ve had to let some people go,” he said. “It’s one thing if you’re in a learning process and you make a mistake. That’s pretty common for everybody. But when you make the same mistake the second time, now you’re a little suspicious. When it goes on to be a repetitive thing and they’re making the same exact mistake over and over again, then that means they’re not learning.”

According to Scharm, employing people without experience in floor covering is a stumbling block. “What I’ve learned is you need to hire people from the industry,” he said. “With flooring, there are so many moving parts: the carpet, the tile, the laminate. There are so many different things you need to learn, and if you can’t grasp that it’s very difficult. If you’re in the flooring industry, you’ve already got that concept and know what it’s all about.”

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Pacific Solutions tech conference educates, informs

November 7/14, 2016: Volume 31, Number 11

By Reginald Tucker

screen-shot-2016-11-14-at-2-43-53-pmFloor covering retail and commercial contract software provider Pacific Solutions recently held its annual fall user’s conference in San Diego. Scores of Pacific Solutions’ customers as well as company employees were on hand for the comprehensive, multi-faceted event.

“The objective of the conference is to bring all our users together and provide them with that one-time-a-year opportunity to interface with Pacific Solutions’ employees in a social environment,” said Bob Noe, president and CEO. “It’s a wonderful opportunity for them to get to know us better so they can understand our core values as a business.”

At the same time, the conference allows a variety of Pacific Solutions’ software users—both retailer and commercial clients alike—the chance to network and benchmark. As Noe explained: “The users all have the systems in common with one another. So when they are here at the conference they can talk to other businesses about system usage and discuss with their colleagues how they adopted the system and adapted it to their business. This allows them to evaluate their company from a technical and operational perspective.”

The Pacific Solutions event—now in its 10th year—is not your typical educational conference. It is structured in such a fashion that attendees can tailor their participation based on their unique educational needs. For instance, the main event takes place over a two-day period, with the first two days comprising general sessions each morning. Then, in the afternoon of the first two days there are three blocks of education with three separate classes going on during each educational block. All totaled, there are nine educational opportunities in the first afternoon, followed by nine opportunities in the second afternoon.

“This allows attendees to sit in on whichever educational breakout session that best suits their needs and those of their company,” Noe said. “For example, if the retailer’s accountant attends, he might be interested in the classes that focus on the general ledger. But if someone in operations attends, she might be interested in subjects that focus on the B2B product catalog.”

The educational opportunities don’t end there. Beyond the initial two days, attendees are also invited to stick around for another two days of extended education in a lecture hall format. About half of the 100 attendees opted to stay for additional training.

In developing the curriculum for its annual conference, Pacific Solutions closely examines user trends. For instance, management reviews its tech support logs for the year and then confers with the training department to identify areas where there’s the greatest software need.

“If we focus those needs on that extended education, people will come out becoming better system users,” Noe explained. “In turn, they provide feedback that helps guide our future development and directives.”

 

Positive feedback
Those who attended the conference had glowing remarks. “Many companies say, ‘Our customers always come first,’ but at Pacific Solutions it’s true,” said Alan Schwartz of Master Care Flooring in Baltimore. “They are extremely professional while remaining laid back and friendly. It’s a great combination.”

James Gray of Hawthorne Interiors, Calgary Alberta, is a regular attendee. “Pacific Solutions hosts an excellent event that is informative about current and future developments with their software. The structure encourages interaction between Pacific Solutions staff and attendees as well as numerous networking opportunities to find out how other users succeed with the system. It’s a must-attend event for anyone looking to maximize their investment in the system.”

Another attendee, Claudia Smith of Aggieland Carpet One, College Station, Texas, likes the communal aspect. “This conference is not only informational but a great source of networking and sharing best practices. I definitely enjoyed it and would strongly recommend it.”

 

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Top distributors: New home construction, LVT/WPC surge help flooring wholesalers cope with slow economy

October 24/31, 2016: Volume 31, Number 10
By Ken Ryan

screen-shot-2016-10-31-at-11-46-41-amSlow and steady may win the race but many flooring distributors are frustrated by the pace of the economic recovery that continues to trudge along with growth in the low single digits.

Not every market in the U.S. is stagnant. California, particularly the San Francisco/San Jose market, is very strong, executives say. However, there are other regions that lack robust growth for various reasons. Take Florida, for example. “With the large population of retirees on fixed incomes in our state, and the concern regarding the election, people are not spending their money on big-ticket items like flooring,” said Buddy Faircloth, president of Cain & Bultman, Jacksonville, Fla., which covers all of the Sunshine State and parts of Georgia.

What many executives are experiencing is uneven and unpredictable growth, with not much consistency between months or by quarter. “Last year I said it was going to be OK, but disappointing; you could probably replay my notes from last year for this year,” said Bruce Zwicker, CEO of Glen Burnie, Md.-based Haines, the industry’s leading flooring distributor. “Last year the market grew about 3%-4% and we were all hoping for 5%. The last three years it has been less than 5%; 2013 was up 7% and it was the last year of good growth. This year it’s about 2%-3% growth. The first quarter was very strong—above 4% but still less than 5%, but we were happy. The second quarter was not as strong.”

On the West Coast, Jeff Hamar, president of Galleher, Santa Fe Springs, Calif., said his business has been growing briskly for the past few years, but he recognizes that is not the case for everyone. “For three years it hasn’t been what people expected. If you talk to the big guys no one is lighting the world on fire.”

Some leading economists—including Larry Summers, former Treasury Secretary and now Harvard economics professor—suggest we are in the midst of a phenomenon called “secular stagnation,” which refers to a condition of negligible or no economic growth in a market-based economy.

Hamar, for one, hopes this slow growth is not the new world order. “It doesn’t have to be but it might be,” he said. “The regulatory environment, the tax on capital gains, the slow-growth economy compresses wage inflation. Until you have 3%-4% economic growth you won’t see the economy take off.”

Where the market is strong is at the very high end, which in Northern California means homes valued at $2 million and above. “There is so much tech money out here it’s just unbelievable, so much Facebook and Google money—thousands of millionaires,” Hamar said. “It costs $3,500 a month to rent a studio in San Francisco. A $1 million home in Silicon Valley will get you 1,100 square feet for a house built in the ’50s that hasn’t been redone. Crazy.”

During the recession from 2007-2009, California suffered tremendously while cities like Houston were faring better than the rest of the country. Now, however, oil prices have plummeted and that has impacted distributors that serve Texas, Oklahoma and Louisiana. “Those three states do a lot better at $100 per barrel economically, which we had during the recession that the rest of the country experienced so dramatically,” said Bob Eady, president of Houston-based T&L Distributing. West Texas Intermediate (WTI), which is used as a benchmark in oil pricing, has ranged from around $45 to $50 a barrel in recent months.

Market segment activity
The retail/residential remodel market, a bellwether segment of the flooring industry, has been fairly soft in 2015-2016, which reflects continued softness in consumer spending. Americans’ personal savings rate, which measures savings as a percentage of overall disposable personal income, climbed to a three-month high of 5.7% in August. This would suggest many consumers are in a good place and have money to burn, and yet consumer spending fell 0.3% in August, indicating consumers are sitting on the sidelines. This kind of inaction hurts flooring, which is deemed a postponable purchase.

“This marks 41 years in the business for me and I don’t remember a time when I have seen retail so challenged to rise above it all,” said Jeff Striegel, president of Elias Wilf, Owings Mills, Md. “Retail is under pressure by a host of things—more competition from non-traditional guys including the big-box stores and emerging retailers like Floor Décor with its cavernous stores. Then there is technology and the fear of it. The better dealers have embraced this and I have seen a renewed interest in higher-end goods, and the need to be more knowledgeable on the product they are selling and to offer more differentiation. The guys who are doing what they did five years ago are struggling. Overall, retail has flatlined the last 12-18 months.”

New home construction has shown some vibrancy, with some builders moving into entry-level homes—something they weren’t interested in doing in the past. As Zwicker explained: “The luxury home market is getting saturated so they are now interested in entry-level homes, which is a more compelling proposition [for prospective home buyers.]”

Several distributors report new home construction is strong in their markets. Scott Roy, president/CEO of Gilford-Johnson Flooring, said that sector is better than expected, especially in the Southeastern areas of its territories.

FlorStar Sales in Romeoville, Ill., is also reporting strong activity. “Net-net is new home construction is pretty good and commercial is good,” said Scott Rozmus, president. “The residential retail replacement market has been spotty, alternating between good months then slow months.”

Multifamily remains strong and is expected to continue to grow over the next three to five years fueled by an increase in rental demand, particularly from younger households. According to Census construction data pertaining to buildings with five or more units, the share of new multifamily units built for rental purposes was more than 92% over the last two years.

Trends
In the last five years, Galleher has grown from $60 million in 2011 to a projected $185 million in 2016. Its growth has come from many factors including an acquisition, a fertile California market and a larger percentage of private-label goods. Nearly 35% of Galleher’s business is private label “and going up,” Hamar said. “Private label is compelling and it is product driven.”

Private-label offerings allow distributors to provide their dealers with looks that are customized to their specific regions as opposed to a product that is styled nationally in scope but might not resonate in local markets. Private- label laminate offerings, in particular, have trended higher in recent years in light of the product’s commoditization.

The major distributors have added more private-label brands to their portfolio, and that trend is likely to continue. At the same time, as the shift from soft surface to hard surface accelerates, distributors are adjusting their portfolios accordingly via a greater mix of LVT/WPC products and higher-margin supplies.

In an era of consolidation, the top 20 distributors continue to be successful by taking market share from weaker competitors, expanding their territories or product ranges, and investing in technology to become more nimble and efficient.

All Tile, a top five distributor, made what CEO Bob Weiss called “a huge, huge investment” in 2016 when it integrated Epicor Prophet 21, a leading enterprise software solution, into its business. Prophet 21 is said to provide complete business digitization from e-commerce to mobile sales and field services, to wireless sales counters and warehouses, and customer optimization tools. “We went live in August and had a real good conversion,” Weiss said. “We had a positive month when we went live.” The Carpet Cushion side of the business will be going online in spring 2017.

Looking ahead, flooring distributors are optimistic that 2017 will be better. “We are hoping and expecting more robust growth, due to a better economic environment, additional improvement on the housing side of things as well as market-share gains,” said Torrey Jaeckle, vice president, Jaeckle Distributors, Madison, Wis. “I am looking forward to having the turmoil of the Presidential election behind us and returning to some higher levels of consumer confidence, which really dipped in the latter half of this year. I think a lot of that can be attributed to this contentious election rather than the underlying fundamentals of the economy. But I am very confident growth will be much better next year than it was this year.”

Other distributors are also looking for at least a modest increase in business in 2017, citing a post-election economy in which consumers—presumably—will be motivated to spend on flooring again.

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Wood: Proven strategies for selling bamboo at the retail level

October 10/17, 2016: Volume 31, Number 9

By Reginald Tucker

screen-shot-2016-10-17-at-11-17-27-amBamboo flooring might be considered by some as an unusual, exotic product. However, there’s really no mystery in how to market and position the product for success.

First and foremost, retailers need to partner with suppliers that have a good track record and solid reputation manufacturing the product. “There used to be a time when people were bashing the category due to bad experiences with companies that didn’t know how to manufacturer the product,” said David Keegan, president and CEO, Bamboo Hardwoods. “There were also many retailers that didn’t experience any problems. But I think we’ve moved on and the good manufacturers are left. Overall, the companies that have survived are the ones making good product. So much depends on where you buy it and how it’s made.”

If Keegan had his way, he would like to redirect the conversation from, ‘Hey, let’s give bamboo a try; it’s not so bad,’ to ‘It’s time to talk about the incredible resource bamboo flooring represents.’ “That’s the story and it needs to be told again. With bamboo you get all this performance, great style and design. Plus, this plant is the most efficient plant in the world that basically turns sunlight into biomass, sequestering carbon and producing oxygen 365 days a year, and it creates an amazing story.”

Others agree that it’s time to turn the page from the period when claims dominated the discussion. “Years ago bamboo had a bad reputation among some consumers, because when it first came out there were some issues with product quality among some manufacturers,” said Vicki Jewell, customer relationship manager for Dasso, which markets the EcoTimber line. “There were a lot of problems with people buying the floor to find that it wasn’t holding up. But we’ve been doing it for years, and the company that makes our bamboo uses a method that’s been tried and true. The important thing for retailers to know is all bamboo is not created equal.”

Phillippe Erramuzpe, COO of USFloors, attests to the strides manufacturers have made in recent years. The turnaround, he said, came about as a result of companies paying closer attention to the details. “Bamboo over the past few years has had a bad reputation due to an onslaught of claims due to issues with solid strand bamboo which—if not manufactured properly—will not perform well,” he explained. “You have to be very careful where you source your strand woven bamboo. In addition to that, you have to make sure you have the proper density and manufacturing method because if you don’t have that the product can shrink.”

Today the major bamboo manufacturers and suppliers are putting more emphasis on re-engineering the product by developing new formats. USFloors is one of those companies. “We have been working very closely with our manufacturer to see what can be done to improve the product,” Erramuzpe said. “Today there are several manufacturers in China that are making a very good product in terms of solid strand bamboo. But in the meantime what we have decided to do as a company is to focus on engineered strand bamboo whereby the platform is on an HDF substrate. In addition, the edges are sealed with wax to prevent penetration of moisture that could affect the joints. That product is performing extremely well and we have not had any issues.”

All in the presentation

USFloors has increased its assortment of bamboo with unique decors and different constructions.
USFloors has increased its assortment of bamboo with unique decors and different constructions.

Technical issues aside, many customers respond more favorably to the visual story line. In short, that means positioning the product in such a way that consumers will be drawn to it. “Many retailers perceive bamboo as being just a green product, but it should really be placed side by side with other hardwood floors,” Keegan stated. “That’s something that a lot of retailers learned was a mistake in the past. If they’re selling bamboo—and we believe they all should be—they need to put the bamboo right next to similar colors and patterns and let people choose on the basis of aesthetics, price and performance, and what appeals to them for their particular installation. That’s the biggest lesson retailers can learn.”

Bamboo Hardwoods knows this all too well. To date the company has placed several thousand displays in the field. The results have been tangible. “A lot of retailers are making good money selling bamboo,” Keegan said. “If they’re selling a high-quality brand that shows the right colors and styles, they can make a good margin on it.”

Another key to presenting the category properly entails “under-selling.” In the early days, there were a lot of misperceptions about bamboo regarding its overblown performance attributes. For retailers to continue to succeed, they need to dial back the hype. “Consumers were taught to think that bamboo is bulletproof or that it can’t be scratched,” Keegan said. “But you have to remember that it is a natural fiber and you have to care for it like you would any other product—don’t get it wet, you must acclimate it properly and install it according to NWFA guidelines. The misinformation hurt the category in the past because people had certain [unreasonable] expectations about the product.”

Of course, there’s nothing wrong with highlighting the product’s natural attributes and documenting them accordingly. “Bamboo needs to be marketed for its durability and density,” Jewell said. “On the Janka scale, bamboo is going to be in the mid-3000s vs. oak, which is 1100. Then there’s the environmental story; you can grow bamboo and harvest it within five years. It’s rapidly renewable resource. Our bamboo is formaldehyde-free which is good for people who are concerned with healthy homes. And it’s priced well compared to some of the exotic woods on the market.”

All things considered, the pros outweigh the past cons when it comes to selling bamboo. As evidence, one need only look at the rate of new product development. At Wellmade Performance Flooring, for instance, the focus is on developing products that mimic the look of wide plank European oak. Dubbed Villa Grand, the textured line of solid strand bamboo is fully embosssed for added depth and is offered in trendy designer colors, according to Steve Wagner, director of sales and marketing. Also available from Wellmade is a new line of parquet bamboo floors designed to integrate with Wellmade’s engineered strand products.

Innovative products are also the focal point for Bamboo Hardwoods, which recently launched a line of wire-brushed, hand-scraped products. The line also features a multi-ply core and backing for added strength and durability.

Not to be outdone, USFloors is expanding its bamboo offering with new colors and patterns. It’s a testament to the company’s outlook on the category. “We believe bamboo will be a very strong category into the future,” Erramuzpe said.

 

 

 

 

 

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