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Future Bright for Replacement Market as New Construction Slows

By Jeff Golden
August 31, 2000
As new construction slows, the replacement market becomes a bright spot in the industry marketplace

The floor covering industry continues to rack up record sales amid today’s robust economic climate. Federal Reserve Board chairman Alan Greenspan should get most of the plaudits here, as his economic programs have continued the strengthen the U.S. economy. Month after month, new home/apartment construction starts have eclipsed those of the previous year — until the last month or two.

In just-released June figures though, starts fell to their lowest level in more than two years as the housing market showed modest signs of slowing due to higher credit costs, according to the government. The Commerce Department said starts fell 2.6% in June to a seasonally adjusted annual rate of 1.554 million units from the1.596-million-unit pace of May.

The downturn in new housing should signal to the industry a need for increased effort in the replacement market. And really, isn’t the replacement market the segment in which all in the industry can participate?

Get ready for this increased business. Make sure your store is consumer friendly, clean and well lit. Be sure to feature displays and room vignettes, and showcase product lines in a full range of colors. Don’t forget to offer window and wall coverings in your product mix. Also, consider a group of floor covering and installation products for do-it-yourselfers.

Product selection, service and installation can really set your store apart from the competition. Make sure your salespeople and installation crews are well trained. Salespeople should have design knowledge, or at least work with a staff designer. And for your installers, consider offering advanced or new product category training. Invest in your installers — they can truly make or break that sale.

And, consumers will like those industrywide credit programs when they come looking to update their current residences instead of relocating to a brand new home. Make sure to have those no-interest or low-interest programs available. You need to plan ahead to take advantage of these credit programs.

I don’t believe mortgage interest rates will return to the 6% range in the near future, so consumers will probably stay in their current homes and invest there. The recent increase in interest rates driven by the Federal Reserve Board has really given the floor covering industry another opportunity for more business other than new construction. So on behalf of the floor covering industry, thanks Mr. Greenspan.

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Jeff welcomes your comments. He can be reached via e-mail at GoldenJ@bnpmedia.com, or you can write him in care of NFT.

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