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National Floorcovering Alliance: Spirited discussions on thorny issues set the tone

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

By Steven Feldman

 

Screen Shot 2017-10-27 at 12.01.40 PMNewport, R.I.—The National Floorcovering Alliance (NFA) is 42 retailers and 256 storefronts strong, representing a collective $1.1 billion in annual sales. But the issues these dealers face every day are no different than every other flooring retailer; in fact, it can be argued that their sheer size creates an even greater depth of challenge than most.

The key topics discussed at the group’s fall meeting were diverse, ranging from ways to find quality installers and sales associates to dealing with manufacturers who want to eliminate discounts for paying invoices within a certain time frame and dealers who encroach upon fellow members’ territories—legal by bylaw but challenging the spirit of the group.

Dave Snedeker, division merchandise manager, Nebraska Furniture Mart and president of the NFA, called this one of the best meetings in a long time. “I feel we heard the voice of everyone—just a lot of participation.”

Participation is often fueled by issues that can affect the bottom line, and that was unequivocally the case when Shaw and Mohawk announced they were doing away with “terms”—percentage discounts for paying bills within a certain time frame (see related story on this page). Eventually the NFA and the two major mills reached an accord, but not before members weighed in vociferously.

“For a lot of people terms are a sacred cow,” Snedeker stated. “You have little control over price increases, but terms is a part of the business we believe is earned for being a good steward of your financial responsibilities. It’s not necessarily part of the price; it’s about paying your bills on time. So to have that taken away would be a negative for a lot of stores.” (There is no group terms rate as NFA members negotiate their own deals, just as they do on pricing. However, the power of the NFA is such that this one voice speaks at exceptionally high decibel levels.)

Screen Shot 2017-10-27 at 12.01.33 PM“[The elimination of term discounts] would seem to penalize the better customers who pay their bills,” said Phil Koufidakis, president of Phoenix-based Baker Bros. “They would seem to be taking away an incentive for people to pay their bills on time. I don’t know why the mills are doing it. They never communicated that to the group nor myself.”

Sam Roberts, president of Roberts Carpets and Fine Floors in Houston, said terms are very important in the specialty dealer community. “I think most quality specialty retailers are opposed to the removal of terms, specifically going to zero discounts in their terms, and I think the vendors need to think very carefully about what’s in everyone’s best interests.”

While the terms issue may have been resolved, another controversial subject lingered. That involved one member’s recent new store opening. But it was not your typical expansion. That’s because the store encroached upon another member’s turf, something not illegal by bylaw but a questionable decision in the eyes of some.

“Expansion into the territory of another member is not disallowed,” Snedeker stressed. “The NFA’s position is there are no bylaws that preclude it. In the case of a prospective member, anyone can protect their turf, but once they are established it gets a lot grayer.”

While not necessarily a common practice, it is certainly not unprecedented. For instance: Nebraska Furniture Mart expanded into Dallas, where Carpet Exchange is a member; and Star Lumber expanded into Oklahoma City, where Akin Bros. does business.

The prevailing issue is that one of the major benefits of NFA membership is the sharing of information and best practices. The fear is two competing members may be uncomfortable giving away secrets of their stores, which can be detrimental to the group at large.

Screen Shot 2017-10-27 at 12.01.20 PMMembers are divided on the matter. “I did it, so I understand the issue,” said Roger Voge, division president, Star Flooring, Wichita, Kan. “I let the NFA board know I was coming to Oklahoma. I was working on an acquisition and had a non-disclosure, so I couldn’t call the competitor in town. At a certain point you need to go to another market for growth. I understand this could hurt the sharing of information within the group, but a lot more of that occurs in informal settings.”

Stuart Perque, president, Perque Flooring, New Orleans, has a different take. “I’m not too comfortable with that unless it is discussed prior. We were the eighth member of the NFA. There was pretty much a gentleman’s agreement when we were 10 people in the room that we would not expand into another member’s territory without bringing it up first.”

Steve Brannen, COO, Carpet King, Minneapolis, may not be opposed to the idea of expansion into another member’s area, but he agrees with Perque in that communication is key. “If you are up front with people and tell them what you are going to do, that’s OK. When you do it stealth it’s not the right thing to do. This group is based on openness and sharing.”

Koufidakis, a former NFA president, sees it as an issue between the two members. “The group has no bylaws about people expanding into other areas. Obviously we can’t control how members expand their business, and we do from time to time run into that expansion. That’s for the members in question to deal with on a direct basis more so than the group getting in the middle.”

Roberts, another former president, agreed. “Once you are a member of the NFA, there is nothing in the NFA bylaws that precludes any dealer from expanding into any market they choose to expand into. The only time we can pay attention to geographic-protected areas is when somebody joins the group. My thoughts are if somebody wants to expand, they are totally welcome to do that wherever they want. And as far as the impact of sharing best practices with competitors in the room, is it potentially an issue? Yes. Is it potentially a major issue? No.”

Desperately seeking salespeople
Replacing an aging sales staff is somewhat surprisingly a key issue for many NFA members. And they all go about it in different ways. For example, networking is the secret to success for ICC Floors in Indianapolis, but not at the management level. “We get some young people and then the word spreads amongst their group of friends,” Cam Haughty, president, explained. “The first one came through a Daltile rep a couple of years ago, and then we tapped into his network. They are big on social media, and they talk about our good work environment and that we pay pretty well.”

Screen Shot 2017-10-27 at 12.01.10 PMCarpet King’s Brannen told FCNews finding good salespeople is a perennial problem. But he has a unique way of accumulating good ones. “Ads don’t really produce. It’s more about interactions with people in other industries. If you find someone who offers good service you have to approach them.”

An aging salesforce is a big issue at Perque’s. “I’m finding the older people are just staying around for the health insurance,” Perque said. “We’ve been trying to find new salespeople for the last two years. We are bringing in people who have never been in the flooring industry. We can’t find anyone who wants to go on 100% commission, so we do the training, put them on a salary and then evaluate them after a year. It’s a very expensive venture, but we can’t seem to find anyone who wants to work full commission.

“We found one interior designer, and one was a schoolteacher. I find those who go on full commission, after four or five years they are going to make a good income. But it’s a process, and very few people want to go through a four- or five-year process.”

Baker Bros. has had four or five people retire this year. “We are finding them predominately through job postings,” Koufidakis said. “We have expanded the range of people we look for. We don’t worry about just looking for ‘flooring people.’ We look for really good people who fit the company and our culture. That’s the big issue for us—fit. We can teach them the rest.”

 

In other NFA news…

  • NFA members as a whole are up about 5%-7% in 2017. “Hurricanes have hurt overall numbers for a few dealers,” Snedeker said.
  • There were two fewer suppliers at the vendor-member round-robin meeting with Royalty shutting its doors since the last meeting and Beaulieu choosing not to come. “The board is looking at all the options about what we will do going forward,” Snedeker said. “We can bring in new core vendors, or we can keep it at 24. We have a couple of people interested in taking a spot if we choose to go that way.”
  • Snedeker is excited about the NFA’s Specialty Vendor Showcase, held the day before Surfaces in Las Vegas. The 2018 version promises to be the biggest yet with nearly 60 vendors lined up, up from a record 42 in 2017. “It’s a great opportunity to see different things you might not spend a lot of time seeing at Surfaces. The list is very strong this year.”
  • Carpet Den Interiors in Nashville could potentially be the 43rd member of the NFA pending unanimous member approval. The $30 million retailer has been in business almost 40 years, has 55 full-time employees and more than 100 installation crews. The stocking dealer is a Stainmaster Flooring Center and has a nice blend of builder, residential and commercial business.
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Flooring dealers laud mills’ decision to reinstate terms

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

By Ken Ryan

 

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

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

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

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

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

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

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

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

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

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