Competition is getting more rigorous, and it’s taking its toll on independent floor covering retailers. The number of independents still in business in the United States is currently pegged at around 9,000 to 10,000. Whether that number is completely accurate or not is not really the point. The point is that the competition is indeed tougher than ever, and to be among the living in five to 10 years, retailers are going to have to be smarter and going in directions never dreamed of five years ago.
Many retailers are expanding, acquiring competitors, adding non-flooring products such as cabinets and countertops and even appliances. Many are reevaluating their locations, exploring new ways to get discovered by millennials and giving technology a new look, all as means of ensuring their longevity.
A recent survey by UPS revealed that for the first time, consumers bought more online than they did in stores, 51% in compared with 48% in 2015 and 47% in 2014. Millennials, for example, are making 54% of their purchases online and older generations are quickly catching up. Also, upwards of 90% of millennials and boomers and everyone in between already shop online. They are not necessarily buying online, but they are certainly shopping online. Granted, floor coverings as a general rule are not selling online at the rate of books, computer accessories and clothing. But with the big online and big box majors readying themselves for increased web sales in the home furnishings sector and with more and more millennials buying homes, the smart money is looking for healthy growth across the board in home furnishings and floor coverings. And this is a trend that will put even more pressure on the independent floor covering retailer.
So what’s a retailer who has been disgruntled with his online competitors to do? For many, the answer may be, “if you can’t beat ‘em join ‘em.” Look at selling online yourself. We took that question to John Simonson, the president of Flooring Web Solutions, a guy who comes from the floor covering business and has been developing websites for the industry’s big and small online players for decades. We asked John about the wisdom of independent retailers selling their wares online, and the following are some of the excerpts of how he answered. We encourage you to listen to this interview in its entirety on TalkFloor.com in the FloorRadio section. Here are some of those excerpts.
TF: Consumers are buying more and more products online. Floor coverings are currently being sold over the internet right now, and I expect that number to rise appreciably as we go forward. What’s your take?
Simonson: I definitely think more retailers should stick their toe in the water and try some new things, especially selling some of their in-stock items online. It’s a great opportunity for dealers doing a reasonable volume with their in-stock products, especially when they can offer customers the opportunity to pick up the product at the store.
TF: What percentage of independent floor covering retailers would you estimate are currently selling product online?
Simonson: My guess would be somewhere under 5%.
TF: There are a number of players that are selling floor coverings on line: Amazon, BuildDirect, Wayfair and Overstock, not to mention the big box players, like Home Depot, Lowe’s and Costco, that are also doing business online. Do you expect we will be seeing substantial growth among these companies?
Simonson: Absolutely. As more and more the millennials, who are used to buying just about everything online, begin to buy homes, we will see a major increase from this demographic in internet sales. Competitors are showing product online, they are offering special deals and showing prices and giving consumers an opportunity to buy.
TF: I have read that a great many millennials are do-it-yourselfers. There is an abundance of click-joint and easy-to-install products on the market. Do you expect growth in these easy to install products?
Simonson: There is an attractive opportunity online with do-it-yourselfers and the various click-joint products. Consumers can find a product and a color they like online, read all the product information and the reviews, select the product and make a buying decision online. Many times, in a retail store, that is not possible. Many retailers are putting some manufacturer’s products on their websites that are coming from a catalog, and they tell the consumer to call for pricing. Consumers are not going to make a buying decision without knowing the price of the product.
If a consumer walks into a store and finds no prices on anything, they are more times than not going to be extremely skeptical. A consumer who visits a site and finds no prices and are asked to call for prices are going to wonder why prices have been omitted. For one, it does not build trust. You don’t see “call for pricing” on Wayfair, you don’t see it on Home Depot’s site, nor do you see it on BuildDirect’s Marketplace. I have visited the sites of these major online players, and they are not cheap, yet they are selling a great deal of product. Retailers have to realize that the consumer is in the driver’s seat. They want to see product, they want to see price and the ability to buy product 24/7.
TF: I get the idea that a great many retailers would do well to entertain the idea of a major shift in attitude in general when it comes to the consumer.
Simonson: I think they need to have a shift totally, not only about the consumer but about their suppliers. I have seen more suppliers agreeing to sell more and more product to e-commerce sites. I have talked with several retailers about flooring maintenance products, for example. These retailers told me that they used to do a healthy business in maintenance products. Do a search. Now flooring maintenance are everywhere: Bed Bath & Beyond, Walmart, Shopco, Home Depot and Lowe’s. These products used to be available only at independent retailers and were an excellent vehicle for bringing customers back in to the store. Maintenance products have been taken away from the independent retail store. I have talked with many retailers who told me they don’t even carry maintenance products any longer.
TF: There are many factors responsible for putting added pressure on independent retailers these days. It’s tougher doing business now than it was several years ago. Do these factors give reason for retailers to at least begin thinking about selling online?
Simonson: I look at it this way: retailers need to continually look for new ways of doing things, exploring new directions, constantly be on the lookout for ways to increase their visibility online, ways to engage more consumers online to encourage them to visit the store. The internet offers a retailer two opportunities, first to get them in the store and secondly to close the sale online. If you look around at the competition and then look at the independent retailer, for the most part, I feel retailers need to do more. They need to find new ways to engage consumers. Larger dealers who carry inventory need to promote it and show it online, furnish pricing online and sell it online, or give consumers the opportunity to visit the store to pick it up, or request a home estimate.
TF: My immediate reaction is that selling online is not as easy as it looks, and a retailer, if they decide to start selling online, would have to make some major changes in their operation.
Simonson: When retailers elect to sell online, they first need to have their catalog online with products and prices. They will need to have sufficient staff that are able to answer consumer questions via email or telephone and assign someone to follow-up on inquiries. I would recommend interested retailers start off slowly, unless their plans are to spend a bundle per day on pay per click advertising to quickly drum up business. The most prudent approach is to start off slowly and build the business over time and put a larger system together as business increases.
TF: What about the retailer’s website: how much more sophisticated should that be to sell online?
Simonson: First, they need a product catalog with all the products, images, descriptions and details, as well as prices. The will also need a calculator to convert square feet into cartons. Then, they will need a shopping cart in which to place the products. The website will also need to give customers the option of either picking up the product or having it shipped to them. If it’s the ship-to option, there will have to be a mechanism to calculate the charges for freight on the site, and it will also need to include a checkout process. I recommend an additional function to handle the credit card transaction, so the retailer will not have to store credit card data on the website, and then the final function will be to issue an authorization number to the customer.
TF: As a potential buyer, I would be extremely squeamish about ordering something as expensive as floor coverings without the assurance from someone in the know to be assured that I was ordering the right product in the right quantity and that I had the correct measurements.
Simonson: That is exactly what happens in a great many cases. The customer will pick up the phone and ask questions about the product options, the colors and other factors about the products in question. They will also need answers to questions about the ancillary products needed for the job. Some customers already know what they want and already have an installer ready to put the floor in.
TF: Sampling. It seems to me that very few consumers are going to invest in floor coverings without looking at it and being able to touch the product beforehand. That means retailers planning to offer product online are going to have to initiate some sort of sampling system, aren’t they?
Simonson: What has become prevalent in flooring and in other products is the idea of private labeling. Many retailers are already private labeling. In these situations, a consumer is either going to have to visit the store or the retailer is going to have to establish a sampling method online. Sampling is really only practical for in-stock products. Some charge for samples may be necessary, offering a credit for the amount invested for the sample amount when customers purchase. Many offer samples a no charge.
TF: Getting found on the internet—absolutely a necessity if one is planning to sell online. This is not an inexpensive venture. What kind of cost are we talking about to get noticed online?
Simonson: First, looking at the local area, retailers should already be geo-targeting for their local area, working on getting a higher ranking on a Google search in a natural search as well as Google Local and Yelp. I would recommend retailers start in their local area and not go national right away. For a local retailer, their prime power is within their local base.
TF: So a retailer decides they would like to expand into selling online. What kind of an investment are we talking about?
Simonson: It really depends on the degree to which the retailer wants to become involved. If they elect to build out an entirely separate e-commerce website to sell all of the basic products from all of the floor covering product categories and all of the trim pieces and moldings and include LTL freight calculator and a square-feet-to-carton converter, he is going to be in the $20,000-plus category. Looking at adding on to a retailer’s existing site, the price would most probably be in the $5,000 range.
TF: As you estimated earlier, less than 5% of independent retailers are currently selling product online. Pressure is mounting on independent retailers to be able to adequately compete. Big box home improvement retailers and online retailers are expanding their market share not only in at their brick and mortar locations but they are aggressively seeking growth in the flooring category online. It would seem a good time for retailers to carefully investigate selling online as a means of keeping abreast.
Simonson: The competition is tough and getting tougher. Currently, the big box players have a market share of 25% to 30% of the flooring category, and it’s not shrinking, it’s growing. When you add in the online players, Amazon, BuildDirect, Wayfair, Overstock and others, the total may be in the 40% to 45% range.
TF: Getting discovered online is the pivotal point. Say a retailer is focusing on selling to local customers and offering the option of buying online. The retailer, however, has to get potential customers on the site, and they pretty much have to be on the first page of a search. How much would you say that is going to cost?
Simonson: That really depends on several things, including the retailer’s marketplace and his competition. If the retailer is in a metro area, say Chicago or Los Angeles, to get on the top of an organic listing, it will cost more than if you are in Calhoun, Georgia, for example. There is no doubt, however, that a retailer will have to spend money for pay-per-click advertising and to have their site optimized to achieve a higher ranking in organic listings. Bottom line: retailers are going to have to invest more in the internet because their competitors are. And many of their competitors have deep pockets. Every day, the business of most retailers is eroding and they don’t realize it.
TF: You work with a number of retailers in the floor covering business. Give us an idea as to what kinds of expenditures some of these retailers spend to show up well on internet searches.
Simonson: For the most part, they spend in the range of $250 to $500 per month. Many spend in excess of $1,000 to $1,500 per month.
Editor’s note: There is more to this conversation than space permits. Check out the entire interview by visiting www.TalkFloor.com and clicking on the Floor Radio tab.
We’d love to hear your feedback of this and other conversations you’ve watched or listened to on the site, as well as any people or companies you’d like to see interviewed. You can contact Dave Foster at firstname.lastname@example.org.