January 8/15, 2018: Volume 33, Issue 15
By Ken Ryan
What if you’re a flooring retailer and you wake up tomorrow with the news that Amazon has entered your space. It’s an unlikely event, but not completely far-fetched—not the way things are going for the online giant.
Amazon has been shaking up the retail landscape over the last few years and may not be done. Besides Whole Foods, which it bought for more than $13 billion in 2017, Amazon now has 13 bookstores, dozens of pop-up stores and partnerships to put products in stores run by Kohl’s and Safeway.
According to The New York Times, Amazon also may open stores that sell furniture and household products. Just two days into the New Year, venture capitalist and tech analyst Gene Munster predicted that in 2018 Amazon would acquire discounter Target.
That may be speculation but this is not: For the first time Amazon includes a “physical stores” breakout in its net sales financial data. Observers say this is evidence of the company’s growing ambitions for brick-and-mortar retail. For the third quarter of 2017, for example, Amazon reported $1.27 billion in physical store sales, compared with $26.4 billion in quarterly online sales. Amazon CFO Brian Olsavsky said during last month’s earnings call that physical retail is here to stay. “You will see more expansion from us,” he said. “It’s still early, so those plans will develop over time.”
What’s to stop Amazon from getting into, say, the flooring retail world? Would specialty dealers put up “For Sale” signs and head for the hills? Hardly. In fact, the sense from many dealers is they would welcome the online mega-star.
“I would welcome them, I would,” said Phil Koufidakis, president of Baker Bros., with multiple stores in the Phoenix market. “I think they will realize that brick and mortar is far more difficult than they could imagine.”
Koufidakis recalled the case of iFLOOR.com, which had been a highly successful online flooring retailer. It ventured into brick-and-mortar stores but did not have the same success. In 2009, after closing 38 stores, it filed for bankruptcy.
Similarly, Empire Today, the shop-at-home giant, opened three physical locations in 2015, and then in 2016 collaborated with JCPenney to open store-within-a-store formats inside select JCPenney locations. In 2017, Empire Today closed all physical locations. Noting the failures of iFLOOR and Empire, Koufidakis said, “Obviously Amazon is more formidable than those companies … but let’s see.”
While Amazon’s physical footprint is growing, it hasn’t made any foray into flooring retail just yet. If it did, retailers say Amazon would encounter an environment unlike anything it has experienced, that is an industry heavily influenced by the flooring dealer’s ability to offer and manage the installation aspect of the business especially in the commercial, builder and property management segments.
“The question I have is: Are they going to offer installation?” asked Missy Montgomery, showroom manager with Montgomery’s CarpetsPlus ColorTile, Venice, Fla. “If not, then I really am not worried about it. Installers worth anything are very hard to find. My father has a saying—anyone can sell flooring but it is the installation and follow-up that has our customers coming back.”
Other flooring dealers expressed disdain that even a giant of Amazon’s ilk could ever successfully encroach on their turf. “Amazon’s presence is real, yet our products must be touched and felt,” said Billy Ward, owner of Artistic Carpet One Floor & Home, Lancaster, Calif. “Many items may be bought with the faceless purchase approach, but when expertise or service is needed, the consumer is the loser.”
Kevin Frazier, owner of Frazier’s Carpet One, Knoxville, Tenn., said he is not concerned about Amazon expanding into physical retail space, or for that matter any national competition, expansion or aggressive marketing they might be engaged in. “Which is to say my real thought is a strategy and not a fear or a concern. The more Amazon anchors itself to the physical world as a sales device the less they are capable of exploiting the loopholes an e-commerce retailer even has to begin with.”
As a retail entity—online or not—the magnitude of Amazon has to be respected for what it can do should it desire to force its will on a market. Some suggest that while Amazon does pose a threat, those most vulnerable are big box stores and cash and carry retailers. “Those types of retailers have been holding the same consumer percentage of the market for the past 10 years without growth, so I feel that consumer is already defined,” said Anthony Maye, general manager of Sparx Flooring, Lubbock, Texas.
According to Mike Foulk, owner of Foulk’s Flooring America, Meadville, Pa., Amazon would have the same problems all of the large retailers have had venturing into floor covering. “And that is quality installation that you can control,” he said. “At the same time, flooring dealers should always be conscious of the change going on around them.”
And that’s a key point other flooring dealers acknowledged. That while Amazon may play a bigger part in flooring at some point, independent dealers must adapt accordingly to combat new threats such as those Floor & Décor and Internet players could pose.