Donny Phillips is the founder and president of Atlanta Flooring Design Centers, a large and diverse floor covering operation and one of the largest in the country. We had an opportunity to sit down with Phillips to talk about the growth of his flourishing operations and the industry. The following are excerpts of that conversation, which you can access in its entirety here.
TF: Give us a little thumbnail of your organization and how it’s grown over the last several years.
Phillips: We’ve been blessed and have grown considerably over the last 10 years. We’ve always considered our balanced approach to the market a key factor, meaning we’ve always done retail, builder, custom builder and commercial business. So in 2009 and 2010 when things got bad, we made a move with Atlanta Flooring Design to move more into the tract home builder market. It turned out to be a very positive move. Today we are still balanced going forward within all of the market we serve with all these various sectors. And thankfully, I have a great partner in Frank Winter, who runs all operations; so as a result, our approach to the markets is very balanced and covers these various segments and that’s because I have a great operations guy.
TF: Talk about your various locations. I’m aware you started the operation in the Atlanta area and now you are all over the South East.
Phillips: That’s correct. We started in 1985 in Duluth, Ga., and are now headquartered in Suwanee, Ga., which is seven miles up the road. That’s because we outgrew the first location several times over. We are now in five states and have 10 locations. The main driver of our growing into those other states was the tract home builder market. The more business we did with builders where we did an outstanding job with the service we provided, we were invited into their other markets.
TF: Service is a subjective word. Good service means different things to different people. How do you make sure that you are providing that high level of service day in, day out, year in, year out?
Phillips: Well, that’s a great question and thank you for asking it. Let me start with retail. I feel big box stores may not have the best salespeople, but their structure is an advantage when it comes to service. So specialty store guys have to understand that just because we’re here doesn’t mean we’re going to get the business. We still have to do the job. But looking totally at installation, I feel the specialty store guy would be far ahead as his or her store seems to do a much better job on the installation side once a sale is made.
So now to answer your question about how you grow and how we at Atlanta Flooring Design Centers keep up with our service side, even though we have many different approaches to the market and we do run them somewhat independent of the other day-to-day activities. I’m personally over the commercial department so I make sure that my commercial salespeople do their job on the bidding, estimating, selling and purchasing, and then certainly I follow up on our installation and go on job sites. I’ll probably spend a little more of my time going to a job site than I would helping to make a sale. That is who we are. As we say at our store, we don’t sell a product, we sell a service; so we must continue with that.
Retail does the same thing in that they have quality control people and service techs out in the field and then on our builder side we have numerous of those quality control guys and service techs.
So if I brought it back home now and tried to answer the question you asked, I think it’s that we have invested in field people to follow up on installations. We, like all the other specialty stores, are not perfect when we put floors down. But we want to be the best at getting back up to the homeowner or to the building or to the job site and make a correction, fix whatever we didn’t do correctly and turn a negative into a positive. So I believe that the answer is investing in field people to respond as quickly and as positively as possible.
TF: It appears that quality and service are second nature to your people.
Phillips: It is a culture that we want to create. I mean, it comes from the top down that our culture needs to be that when we have a problem, take the phone call and answer it. And I can only tell you that many times over the years, whether it happens late one night or on a Saturday afternoon, I may be working and when I get that phone call, I always try to remember to tell that customer, “thanks for the phone call.” ‘Cause if I had not gotten the phone call, the problem would be worse. So we want our culture to be, get the phone call, solve the problem.
TF: You have put a lot of resources into the builder trade. What about retail? Do we see retail growing exponentially going forward?
Phillips: Well, times are good. So I think that while we’re all in these times that are better, we see retail growth and I believe we will continue to grow in good times for specialty dealers. When I look forward in the retail market and try to figure out the path products will take to the consumer’s floor, it’s a little murkier than it used to be. Clearly we’ve gone from specialty stores to some big boxes to now outlet centers and we are experiencing pretty good inroads on the part of online players. So as we go forward, I think the specialty retailer will continue to have to do a great job in service and they will have to make his or her presence known within the community where they live. And I think then we just continue down this path to see where retail goes. But, I don’t think we can ever sit on our hands and think consumers will come to us.
TF: Do you see more people buying floor coverings?
Phillips: So much depends on the economy. First of all, I agree that hard surfaces will continue to grow, although I think the rate of growth has slowed considerably. We are presently at about 41% soft surface, which leaves the remaining 59% in hard surface. I think the innovation in hard surface continues to create excitement. The carpet people are not as innovative. Maybe there’s not much more to innovate out there, but colors and designs still matter. So I think that as one specialty floor covering store, I know that my profit center is a little better on carpet presently than it is on hard surface. Hard surface is shopped so much harder than carpet, it’s a little bit better as a profit center. So I see guys like me still very interested in selling soft surface and continuing to do that.
As far as just the retail sector growing, I’m not sure where all of our competition is going to come from in the future. I know where it is today and I know that we are presently growing incrementally retail wise, but I don’t know that as a fairly good retail flooring store in Atlanta and four other states that I’m going to say it’s going to grow a lot for us. But I do believe that if we do our job that we can hold our own against big boxes, outlet stores and online trading.
TF: Millennials are the biggest category of consumers out there. And the group coming up behind them are sizable as well. I suspect these two groups go to the Internet first whenever they buy anything, including floor coverings. I’m wondering if that means that five, six, or more years down the road we’re going to see these people that have grown up online are going to be buying more of their floor coverings online?
Phillips: Oh yes. I think it’s an interesting study for now. Clearly millennials are different in their buying habits. I don’t think they’re so different though that we have to continue to, if you will, push them away and say, we don’t understand them. We don’t know how to do it. We had an interesting guy come to our church and he did a whole program on “if you’ll embrace them, they will embrace you”. So we’ve kind of taken on that culture. At our stores, when a younger person comes in, we don’t automatically assume that all they want to know is what’s on the Internet. We understand that we still have to do our job. So we believe that part of the feel and the touch that they desire on products they can still get from a trusted advisor. So again, we want to reach out and say we believe in them and we understand them a little and we want to work with them.
TF: Is the shortage of installers, installer recruitment and training a problem for the Atlanta Floor Design Centers, and what do you see as the answer industry-wide?
Phillips: Number one, yes, it is a concern and a problem for Atlanta Flooring Design Centers. I’m not sure who in America wouldn’t be concerned as the labor shortage continues to get tighter and tighter. We don’t have people coming in as the older ones continue to exit. We still need quality installers. We can get some installers, but the question is, can we get quality ones? So the time to train them and to be able to trust them out in the field continues to be a problem. So you say, how do we deal with it? We are trying some training. We’re trying to pair newer guys who have an interest and look at installation like it’s a career with some older guys.
We also provide supplement training and we also are big advocates of the CFI. Robert Varden and his team do a great job. They come to our shop and take average installers and make them better. And that’s part of the process too, to get the average ones to make them better. And then they also have training schools where Robert shows up and trains. The World Floor Covering Association is working with the U.S. Department of Labor to try to get some government money secured so that they can do training and do internships with people. That’s more industry-related, but because I’m involved with both associations, I want to make sure that I am there if there’s any internships, training and processes in Atlanta.
So I think that it’s very important that we realize associations can help the mom and pop dealer out there. The other thing we do with our present installers is that we make them feel good. I mean, it may seem small to some people, but we put an ice machine in each of our buildings to make sure that when they show up in the morning, they can fill their ice chests. We give them, depending on how many people are in their crew, bottles of water that day so that they can leave there and they can feel a little bit respected and understood. We do those small things.
TF: Do you see the basic setup with installers acting as subcontractors as opposed to employees being a part of the solution to the installer shortage?
Phillips: As we look out on the horizon I think we will see the change taking place state by state. There are states that are looking unfavorably on 1099 subcontractors — they look more favorably on employees. Those states will change first and faster to employees. I think that’s good. We really don’t have a problem in Georgia. We don’t have as much pressure, but yet we make sure every month, every day, every year that we distinguish between a subcontractor category and an employee category. But if it changed tomorrow, as long as it changes for the state and for the industry, I think it is a good way to pay the subcontractor. And I think quite possibly it may be more appealing as a career. So if it is, I’m all in favor of it and I think that it would be great. I think part of that will come through lawmakers and part of it will come from competition itself.