In this, the second part of the exclusive B2B study conducted jointly by World Floor Covering Association and National Floor Trends, we focus on some of the nuts and bolts issues involved the flooring industry's approach to communications technology: How the technology is applied in the real world, what software applications are most commonly used, tech support issues and, of course, the amount of money spent last year on tech systems.
Opportunities to place, track and even anticipate orders, using IT systems are not being fully embraced. The reasons frequently cited include cost, loss of personal contact and security/privacy concerns (See page 18 for responses from software vendors to questions on these topics).
The retailers' acceptance of B2B technology is cautious, but appears to be growing. Asked if any of their "primary suppliers" have proposed online ordering, a clear majority said "yes" (65% of the emailed respondents and 82% of the mail survey responses.) Asked if they have received tech support from suppliers, 73% of the mail survey responses said "yes" as did 67% of the online respondents.
Asked how much they invest in hardware and software last year, the responses varied widely but skewed toward the modest side. About 40% of the respondents said they spent less than $1,000 on hardware and less than $500 on software in 2004. On the high end, about 4% said they spent more than $20,000 on hardware while about 10% said they spent more than $10,000 on software. Overall, the median hardware expenditure last year was from $1,700 to $2,000 while the median software expenditure was $500-$800.
Half of the respondents said they plan to increase their investment for computers/software within the next year.
When asked what aspect of their business was most closely tied to information technology, by far, the answer most frequently given was accounting/bookkeeping-an application that typically requires no B2B communications. While the No. 2 answer was order entry/processing, it was a distant second. Applications involving word processing and information storage were also prevalent-but that only means that many floor covering retailers are using their computers mostly for jobs once handled by file cabinets and typewriters.
Respondents said they used laptops for mobile management or for slide shows that reduce the number of samples taken to a home as an example of how they have adapted IT in a "unique manner." One retailer noted that he uses the Internet to locate rare products from around the world, which he then sells in his store. Perhaps more telling, though, were those respondents who reported that their "unique" use of the technology was creating a Website to attract consumers to their store or using emails to communicate internally.
The approach to technology was also reflected in the type of software programs most popular with floor covering retailers. The three most popular types of programs were: Internet access/E-mail, accounting/billing and word processing. Each was named by nearly 80% or more of the respondents (multiple responses allowed).
It also appears that computer training is not an area where retailers are investing heavily. Employee computer training is handled in various ways, including (the most frequent method) on-the-job training; and either with a fellow employee or alone with a manual. Answers to the question "How do you train new employees to use computers and software?" included "buddy system from within," "one step at a time," "as we go," and "memorize key functions." Although there were some that said they brought in outside trainers or incorporated CD-Rom training material, they were the minority. Overwhelmingly the responses suggested that floor covering retailers believe that training employees to use a store's computer system requires no more effort that learning to work a cash register or a multi-line phone.
A question about the frequency of Internet use for work related purposes found that fewer than half of the respondents log on everyday. Roughly one-third said several times per week and about one-fifth said they use the Internet once a week. The fourth response option available to those participating may be a reflection of the survey's two means of gathering information. Of those respondents who replied via email, 2% said they never use the Internet. Among those who responded using the U.S. Postal Service, the "never-use" figure was 11%.
About the survey
The National Retailer B2B survey was jointly conducted by the World Floor Covering Association, National Floor Trends magazine and BNP Media Market Research, which is owned by NFT's parent company BNP Media. The study was conducted using surveys sent via the U.S. Postal Service and email. Participants were selected from WFCA's membership and NFT's subscriber list.
The purpose of the study is to explore the role and importance of information technology in the retail flooring industry and identify specific areas where retailers are successful using technology to enhance their business. The research also endeavored to measure awareness of various information systems already on the market and identify the barriers that are impeding acceptance of the technology.
All told 6,899 surveys were sent: 4,899 by email and 2,000 via postal mail. The email recipients were culled from NFT retailer/contractor subscribers who have an e-mail address on file. They were selected on an nth name basis from qualified, domestic circulation. For the regular mail element, half were sent to those on the WFCA list and half sent using NFT's list.
The email effort yielded 354 usable returns, creating a response rate of 10 percent. The regular mail effort generated 420 usable returns for a 21 percent respond rate. Research analysts from BNP Media Market Research report that there was no discernable difference in the answers supplier by the two groups.
In addition to a series of multiple choice questions, respondents were also invited to submit anecdotal information about their experience with information systems. The information enabled the study to include qualitative as well as quantitative information.
(Floor Covering Most Valuable Practices):
Super Floors of Alaska, LLC
Editor's note: As part of NFT's commitment to identifying those floor covering retailers who are working to optimize their information technology, we bring you another FC MVP (Floor Covering Most Valuable Practice.) Although the retailer highlighted in this installment is not yet completely using the B2B platform to directly order product, he is very pleased with the efficiencies. Specifically, the B2B system in use assures there is no lag time been the time a wholesale price increase is announced and when it is implemented. The success has prompted the dealer to plan an expansion of the information technology.
Super Floors of Alaska, LLC, Anchorage, Alaska
Executive in Charge of IT:
John Dixon, co-owner
How did you become involved in technology?
I had been a partner at a five-store chain and I began to fee like it was a situation where the business was not leveraging the technology. I then worked as a manufacturers' rep for two years. When I got back into retailing it was with the understanding that the operation would be computerized. My business partner Tom Leonard agreed. I showed up for my first day with a box of wire under my arm ready to link the computers together.
How did it go?
Tough at first. Getting the basic network was easy but we had a bad network card. We had to de-bug the network before we got it up and running. When we did, we where able to build a monstrous data base for the employees to work with. Every SKU. Every color.
How does your system work?
Product information is input into an FTP by the supplier. The information goes to a mail box we set up to pull in data. We can then review and approve updates like changes in selling prices or new product introductions.
How has it helped so far?
Great! Over the last year when we had six or seven price increases to handle, it probably took us three hours the entire year. We immediately saw our gross margin increase by 4 -5 percent. So many dealers beef about the frequency of price increases. We can very quickly put prices where they should be and that helps fight margin erosion. It has enabled us to react more quickly.
Any other benefits?
It improves communications throughout the company. Sales and operations always know what's in the backroom and accounts payable does not have to ask "Did we get this?" Everyone has the same information.
Did you hire a computer person?
Didn't have to. Once it was up and running it was fine. When something goes wrong we have a local company come service us. It also helps us make presentations that are more professional. We know what product we have and we can help the customer think the job through.
What has been the investment so far?
I'd say we spent about $14,000 on hardware. Rather than use our own server, we are also spending $500 month to make sure we have space on a server for the B2B programming. That includes an automatic backup nightly.
What type of ROI are you seeing?
Our gross profit margin has continued to grow and I'd say it's up by about 12 percent over the last two years. The technology also reviews each sale to make certain we are getting an acceptable margin. If the salesperson tries to go below the established margin, the computer says you're not allowed to do that. It also helps us optimize all of our inventory because we know what is available. If we have a short roll of carpet and the customer places a small order, we know we can use what's left on the short roll rather then start another roll.
Well, there is always going to be a learning curve. You also have people who are not comfortable with the technology. I mean there aren't enough hours in the day to learn everything about the system when you are running a business. Then some times you have to baby sit with someone who is not getting it. We had a manager who just said "I'm too dumb to do this." He almost quit, but now he says I don't know how we got by without this for so long.
Have the manufacturers been helpful?
The big manufacturers certainly have. But I will say that the manufacturers that really need a B2B platform-the companies with many inexpensive skus-are the least likely to have it. Hopefully that will change.
What do you say to those retailers who resist using this technology?
I can't tell another guy what's good for his business. But I think you owe it to yourself to go out and see what is available. Look at yourself as a consumer of the goods and services available in technology. I mean, the successful retailers are the ones leveraging the technology. Look at Wal-Mart. They may look like a mass merchant, but they are really a technology company that has store fronts. But even if you are a 12 by 20 foot mom and pop store you should at least know what is available. If you are living hand to mouth, if you are running your business by the seat of your pants- that's fine, if that's what you choose to do.