Ask anybody, and they’ll tell you that Dave Elyachar, the founder of Big Bob’s Flooring Outlet, is a character. Many have a one-of-a-kind Elyachar story they have told at cocktail parties. My guess is that most of these stories are true, and that Elyachar is certainly one of the flooring industry’s more colorful personalities. Aside from his eccentricities, Elyachar has been an extremely successful and imaginative floor covering retailer, an innovative businessman, as well as a shrewd and visionary entrepreneur. We had an opportunity to sit down with Dave recently for an interview, which you can listen to on FloorTrendsmag.com. The following are some excerpts from that interview.
TF: The Big Bob’s franchise operation with stores throughout the country has been sold. You still operate three Big Bob’s stores in the Kansas City area. Talk about those stores.
Elyachar: In the last 15 years, the landscape of retailing in Kansas City and across America has changed drastically. Fifteen years ago, there was no Home Depot, Lowe’s or Menards in Kansas City. Fifteen years ago, there was no Floor Décor or Lumber Liquidators in town, nor was there Empire Today, and Nebraska Furniture Mart was only in Nebraska. Combined with the ’07, ’08, ’09 turmoil that hit our economy and the expansion of these national giants, our market has changed drastically. I estimate that probably in the range of 40% of mom and pop retailers have gone out of business. I would estimate that these big retailers have picked up 60% of retail. The forecast for retail mom and pop brick and mortar businesses in Kansas City is dismal for probably another 30% of independently-owned and operated floor covering stores.
We have had to devise a plan to survive and thrive and carve out a niche. Our operations in Kansas City have been very successful at entry level cash-and-carry, value proposition retail. That’s true not only for Big Bob’s in Kansas City but across the country. Value proposition is still key to who we are and how we are going to survive and carve out a niche. This proposition, however, is being challenged by the dominance of the big boxes. In Kansas, there are 44 Home Depots, Lowe’s and Menards and there are only three Big Bob’s, so it’s difficult for us to maintain market share. As a result, Big Bob’s have launched an aggressive outside sales effort going after general contractors, real estate companies, flippers, renovation contractors, restoration companies and others that have a high propensity for buying floor coverings. And we have been successful with this outside sales effort, picking up about 30% of our business, where we are prepared to work on a smaller margin to gain market share.
TF: What are your thoughts on Domotex USA, which is scheduled for February 28 to March 2 in Atlanta?
Elyachar: Absolutely phenomenal. I think many Americans have been putting their heads in the sand and are not as aware of what’s happening globally as they should be.
TF: Retailers, buying groups and manufacturer affiliate groups are putting a great deal of resources toward enhancing the customer’s in-store experience. What’s your take on this trend?
Elyachar: There is a couple of things retailers have to do: they have to increase traffic, increase their gross profit margin, and they have to increase their closing ratio. Enhancing the customer experience is about increasing the closing ratio, and that is one of the components of being successful.
TF: Manufacturers’ relationships with independent retailers. Are those relationships changing, and how do you expect to see them change further in years to come?
Elyachar: Forty years ago, we were manufacturers’ only customers. They talk very nicely and very respectfully, but they are not our partners. They are more like our competition, and they are feeding our competition better stuff than they are feeding us. I love Shaw. I love Mohawk. I love Engineered and Dixie, and I do business with all of them, but they are also doing business with the big boxes that I have to compete with. The big boxes deserve better because they are buying more volume, but I think they have missed the point. Without the small independents to balance their business, they are going to put their business in jeopardy.
It’s better to have 20,000 customers responsible for 100% of your business than 20 customers giving you 80% of your business.
TF: We can all remember when carpet manufacturers manufactured only carpet, but now they are involved in all of the flooring categories. What are your thoughts?
Elyachar: Once again, a business is built on these basics: increasing closing ratio, increasing gross profit margin and increasing traffic. Our traffic has decreased, our closing ratio is up, and our gross profit margins are decreasing because of competition. The answers are global. It’s not one simple answer. I don’t think I am high enough on the mountain top to see this situation globally.
TF: In your opinion, what characteristics are retailers going to have to possess to be around in 10 to 15 years?
Elyachar: I’m not sure where society turns. It turned 10 years ago away from price to service and value. I don’t know where it turns next. Everything is cyclical, so maybe someday it will go back to price. I don’t know. However, if it doesn’t go back to price and stays with service and value and the Costcos and Home Depots stay in business, what will the independent brick and mortar retailer have to do? The answer is exemplary customer service and selection. They will have to do something different from the big boxes.
TF: What do retailers need to do to compete against the big boxes?
Elyachar: I’d love to know how many flooring stores have opened in the last 10 years versus the number of stores that opened in the prior 10 years. There are very few new independent ma and pa stores opening up; but for every one that opens, there will be five to 10 that will close. The big boxes are gobbling up share. I had thought when Home Depot and Lowe’s opened that they would be regional facilities, but they have turned into neighborhood facilities. My feeling was that when they came into town, they would open two, three or perhaps four locations. That totals about one store for every 45,000 people. In the Kansas City market, adding up all of the Home Depots, Lowe’s, Menards, Nebraska Furniture Mart, Floor and Décor, Empire Today and Lumber Liquidators, I would estimate they have an over 60% market share. And this is the case in just about every market, with the percentages changing a bit.
TF: What’s the solution to the lack of qualified installers?
Elyachar: My recommendation for a new campaign slogan for president Trump’s 2020 campaign would be, “Rebuild the Middle Class.” The United States is not just missing out on floor covering installers—we need more electricians, plumbers and tradespeople of all kinds. Right now, I think one of the problems in America is that a young 16-year-old kid has two choices: he goes in the military or he goes to college, incurs a $100,000 debt with many getting a liberal arts education, which will be worthless.
As a society, I think we have to give them another choice, which is a vocational school where they learn a trade. We have to do a better job of remaking the middle class for a number of reasons: for the economic base, the tax base, a way to get people off welfare, avoiding the massive debt involved in going to college, providing a means of self-worth, of home ownership and an opportunity live part of the American dream.