What's in Store for 2004
This very special panel of retailers/contractors shares its outlook for this year. They focused on "What's In Store for 2004," key trends that will directly affect the business of retailers and contractors. This far-reaching exploration covered a wide range of areas. The subjects put on the table included whether their businesses will grow, the best prospects for sales, a look at some products that hold promise for sales and profits, the major problems retailer/contractors will have to overcome and key changes panel members already made or intend to make for a healthier business year.
Panel members are:
Neal Anderson, Carpet King, Glendale, Calif.
Brian Bisk, Wall-To-Wall, Salt Lake City
Jeff Cowan, House of Carpets, Modesto, Calif.
Patricia Davidson, Aztec Flooring, Louisville, Ky.
Alan Delahunty, Floor Coverings by Certified, Salt Lake City
David Hunt, Vermont Custom Rug Co., Bristol, Vt.
Tom Jennings, Bud Jennings Carpet, Lawrence, Kan.
Ron Katz, Harry Katz Carpet, Mineola, N.Y.
Brooks Mancini, B. T. Manacini Inc., Milpitas, Calif.
Marty Murdoch, M. E. Saboski Associates, Point Pleasant, N.J.
David Stafford, Commercial Carpets of America/Alexandria Carpets, Alexandria, Va.
Betty Sturdevant, Street & Associates Floor Covering, Salt Lake City
With few exceptions, retailers/contractors are confident their businesses will grow this year. Some see substantial growth, some modest, some minor growth -- but nevertheless growth is in their picture. At worst, a few see their businesses holding steady.
Reasons for the optimism vary. The improved economy, of course, is a reoccurring theme in their responses, as it has a positive effect on commercial and residential business. Here's a sampling of reasons for the panelists' optimism: Homeowners are not just investing in floors for their homes, they are buying better floor coverings. Record-breaking new home construction and sales of existing homes are fueling the business; accompanied by remodeling going at a strong pace.
With the market up, commercial customers will feel more comfortable releasing funds -- something many were reluctant to do last year. Many businesses have been holding their breath and their money. Now, rather than relocate, they are beginning to renovate and expand. By the way, the panel points to healthcare facilities, educational facilities, food/grocery stores and tenant refits as especially strong areas.
What follows are the opinions on a variety of subjects by our panel members.
Where the business is and how to get itCowan: In residential, sales to existing homeowners will be strong because people are putting big dollars into their homes, and buying higher-end products Fashion will drive the market, along with easy payment plans. In commercial, we feel healthcare facilities will be strong, and we will continue to focus on new commercial construction -- but not in the public sector.
Mancini: Because California is still using up the bond money passed two years ago, school reconstruction will be good along with hospital reconstruction for seismic upgrades. Which means that target lists should include school districts and hospital administrators.
Jennings: We primarily sell better quality goods to middle- to upper-end consumers. As the baby boomers continue to age, we see them buying a higher grade of product than the ones they are replacing.
Stafford: To reach the residential customers, we address specific residential remodeling companies, designers and small residential builders that specialize in higher-end new construction. For commercial sales, we seek out commercial property management companies, certain general contractors and federal and local governments (in some areas).
Hunt: The best prospects for residential sales are consumers who understand that quality, individualized service, style and design can never be found in a "cookie cutter" big box or discount chain store. The same is true for the best commercial prospects.
Anderson: Extremely valuable sources of prospects for residential and commercial sales are real estate agents, designers, property managers and mortgage brokers. By building trust with them, they become salespeople for you -- in essence recommending you to their clients who need flooring.
Major problems to overcomeStafford: Two challenges we must face head-on are how to maintain an acceptable (to the client) level of customer service, and competition from unqualified or less-qualified flooring dealers or contractors. Other areas are shrinking margins on some items and finding qualified installation personnel that are affordable.
Katz: There is still some uncertainty out there in the marketplace. In contract, it really has become a game to see if a general contractor can get the flooring contractors to finance jobs.
Jennings: The major challenge our industry faces as a whole is to raise awareness of floor coverings when the customer sorts through her wish list of "gotta have" products for her home. We have consistently taken a back seat to electronics, etc. This must cease for our industry to move out of the "have-to-buy" and into the "want-to-buy" category by consumers. Easy to say, harder to do.
Cowan: We need to deal with escalating costs exceeding inflation for workers' compensation insurance, health insurance and liability insurance. Skilled labor shortages, qualified people at all levels are major challenges. Finding good people gets tougher and tougher.
Murdoch: Business has always been a challenge. Costs go up, and there is constant pressure to keep unit costs down. If you can successfully sell quality and installation excellence, you can elevate yourself from the competition. Mold and mildew will continue to be a big challenge in the decade to come.
Ashley: Most flooring businesses have to re-learn how to sell. The great economy a few years back made a lot of salespeople successful order takers. Now they have to work with skill. Some weak salespeople have been exposed.
Sturdevant: We focus on commercial work, and carpet tile seems to be the most promising product at this time. Specialty floors are also promising. Our biggest problem every year is carpet mills selling direct to end-users.
Changes made or you intend to makeDavidson: Last year, we got rid of borderline, unproductive personnel and combined job descriptions. Management has taken and will continue to take a more active field role in completing projects. We are also being more particular about what projects we want to take on, i.e. smaller projects in the $30,000 to $60,000 range (material and labor) where we can get in and out quickly and get paid in the same fashion. These seem to be the most profitable.
Ashley: We're using more in-house installers. We are expanding custom resilient installation training and stressing better customer service. It's easier to keep customers than to find new ones!
Stafford: We're looking more carefully at specific financial results for each business segment and finding out the overall profitability as a whole, rather than focusing on gross margin and gross profit dollars. We're doing a complete review of each market segment to make sure we are staying in touch with what our clients demand.
Murdoch: A tightening of the purse strings is very much in order. We are looking at the good payers. They will get the preferential treatment.
Anderson: A key business change vital to our profitable growth has been the broadening of our product offerings. By offering carpet, tile/stone, hardwood, vinyl, laminate, window coverings -- and training our sales staff and installation crews to become experts on each material -- we have a distinct competitive advantage and increase potential sales to each customer.
Thoughts on products and programsMore than ever, the panel shows a keen interest in finding and adding different and unique products and programs. Interestingly enough, one such example is finding commercial designs adapted to the residential market. In commercial, the panel see new novelty in carpet tiles, specialty resilient products, custom installations, upgrade vinyls and environmentally friendly floor coverings.
Hunt: I look for products that are unique and individualized -- products that can't be shopped. Not just products being shopped for price at a competitor, but also products not easily shopped that will be turning up in the neighbor's or friend's house. After all, how special is your floor if everyone else has one just like it? We do special every day, and special is never on sale!
Mancini: The key remains to control the specs. If you can do that, a decent margin can be achieved. Salesmanship is everything to the commercial contractor. Without it, he is just a bid mill.
Davidson: Our position as resilient experts -- specifically in heat welding and flash coving vinyl, linoleum and rubber -- will remain our profit center. Carpet is very competitive. In the commercial market, there are still those out there who will install it for next to nothing.
Stafford: Niche products are high on our list, including higher-end residential carpet, laminate, hardwood and ceramic. For commercial, it's carpet tile, vertical-lift installation, attached cushion and broadloom carpet. The key is products and services that allow "best-value determinations."