Fluctuating fuel prices…an ever-worsening shortage of installers…off-shore, lower-priced competition…a softening real estate market…these are only a few of the issues confronting the flooring business these days. Yet while the terrain may get a bit rocky, top executives in the industry say there are also plenty of encouraging signs. They maintain that product offerings are stronger than ever and the competitive climate encourages innovation.
In an effort to better understand the trends shaping the industry, National Floor Trendsasked several key suppliers for their perspective on a number of important issues. Essentially we asked three questions:
- Flooring industry concerns: In the flooring industry these days concerns include high fuel prices, the growth of lower-priced off-shore competition and a persistent shortage of qualified installers? How are these issues affecting your long-term strategy?
- Consumer marketing strategy: How are you reaching out to consumers shopping for flooring? How has your consumer marketing strategy changed in recent years?
- Future of the industry: What is your overall assessment of the flooring industry? Are you optimistic or pessimistic about the future and why?
Jeff Lorberbaum, Chairman, President and CEOFlooring industry concerns: Energy and oil influence a significant portion of our total costs by impacting the material and distribution cost. We are taking many steps to minimize the impact of these higher costs. We continue to invest in our assets to improve efficiencies, productivity and quality. We have reduced waste and the environmental footprint in many areas. In distribution, we are using new computer systems to improve service and the utilization of our long-haul freight.
We are also looking at installation and supporting programs that train hard for soft surface installers. We recognize installers play a significant role in how our products are perceived.
Our strategy has not changed. We continue to be focused on a complete assortment of products to all channels and markets. We provide what is needed to meet the requirements of any customer for any project at any budget. Our strategy is to provide not only the products but the tools to help the retailer or contractor create value for their customer. We will continue to invest in product and systems innovations to bring value in durability and ease of maintenance with products like SmartStrand carpets, Scotchgard protector Advanced Repel Technology on all Wear-Dated carpets and some Mohawk wood products.
Consumer marketing strategy:We promote our brands through consumer advertising and support for our dealers by providing them access to TV, radio, print, direct mail and web to co-brand their stores with Mohawk. Web tools like Mohawk Dreamvision allow web shoppers to select a product, apply for a line of credit and then find a local dealer.
Future of the industry:The flooring industry will continue to grow and evolve. Today’s consumers are deciding to spend their disposable income between big screen TV’s and flooring. As an industry we need to make the experience more exciting and less intimidating. Investing in a new floor should be fun. The customer wants the best she can afford and we need to assist her in making her home beautiful. After the sale, we need to make the installation process more professional and improve the experience. We have a wonderful product that customers want.
Randy Merritt, Exec VP, Sales,Flooring industry concerns:High fuel prices are a concern on several fronts: One, they are indicative of high oil prices and that means higher raw material costs for carpet. Two, higher fuel costs obviously drive up freight costs as well as contributing to higher prices for our products at the consumer level.
Finally, higher fuel costs certainly impact consumer attitudes about spending. When their monthly gas bill doubles and their heating/energy bill is much higher, the average consumer is simply not going to be as motivated to spend on a remodeling project. Offshore competition is certainly a bigger factor in some areas like rugs, laminate and hardwood.
Installation has and will continue to be a challenge. At Shaw we continue to invest with local groups to provide materials and expertise for training. Most recently we collaborated to help begin an installation curriculum at Mississippi Gulf Coast Community College where there are tremendous demands for installers post-Katrina. The first class included teachers at the college and new installers who graduated and immediately went to work. We now have a template that we can replicate at other locations successfully. Installation and the opportunities it creates will never go away; we just need to continue to work to improve the situation.
Consumer marketing strategy:We continue to work to build on the Shaw brand....it is a brand that the industry, consumers and end users trust. We are investing in a number of channels to reach the consumer and end user on the web, in the stores where they shop and in various forms of media from national print advertising to television. Looking forward we will continue to be more visible in the market.
Future of the industry:Fueled by a record residential construction market over the past five years and by a commercial business that has rebounded significantly from its low point in 2003, the flooring business has had a great run. In the short term, the signs seem to suggest that the residential new construction market will cool some and there are some questions about how consumers will spend dollars that have been going to home improvement. Long-term, we believe that the demographics, the lifestyles of Americans and the importance of comfort in the home bode very well for the flooring business over the next 10-20 years.
Melissa Quick, Marketing CoordinatorFlooring industry concerns:With high fuel prices and overseas competition, we have to focus on cutting costs without depleting quality or service. Those are two things that we pride ourselves in which we will never sacrifice. We continue to work toward recycling and using as much material as we can to cut down on scrap and product cost. This practice also helps our products qualify for LEED certification.
Consumer marketing strategy:We have several new offerings in the works and continue to strive to make product offerings that are easy to understand and affordable to purchase. We are always looking for innovative products that will provide the customer with what they want.
Our marketing effort has changed in that we continually are researching the new testing methods and requirements to qualify our products under groups such as USGBC. Architects and designers spec products strictly based on some of these merits and we have to be sure that our products can make the grade.
Future of the industry:We are excited about the future of flooring. Our company has been in business for more than 50 years and has seen many changes in the flooring industry. Tried and true. When it comes right down to it, consumers want a brand and product they can trust.
Frank J. ReadyFlooring industry concerns:We do anticipate that hard surface flooring will continue to gain market share. As a company, we will continue to focus on driving productivity and quality initiatives, and we remain dedicated to developing products that are both innovative and cost-effective. Our goal continues to be to provide our customers with superior products and timely service.
President & CEO, N.A. Floor Products, Armstrong
The key to our long-term strategy in both the residential and commercial categories is continued profitable growth through innovative new products.
Consumer marketing strategy:We have increased our investment in consumer advertising and created new programs for our retailers and distributors, including a complete facelift of our merchandising. We are continuing to invest in merchandising and retail programs that deliver the retailer the tools and incentive to sell.
We will continue to offer broad-based marketing programs aimed at building consumer awareness of the array of new products and increasing retailer sales. The power of our portfolio depends on three key essentials: differentiated and innovative products that meet consumer needs, brand awareness and our retail partners sharing our message with their customers.
Main vehicles to communicate brand to consumers: Product; Consumer Advertising; Merchandising; Web/ Relationship Marketing; Trade Communications; Sales Training; Literature/ Samples; and Public Relations.
Future of the industry:We are extremely optimistic. Despite softness in market conditions, we are well-positioned for future growth. Our goals are: grow faster than the market; continue to execute our product and brand strategy; and continue to improve operationally.
Going forward, our focus will be to continue growing our business, increasing profitability and improving our products and market share.
Rainer Blair, CEOFlooring industry concerns:We are addressing the issues through near-term and long-term strategies.
Fuel prices - We work closely with our suppliers and customers to identify ways to minimize the effect of fuel costs on our value proposition. We constantly and aggressively pursue improvements in our own productivity through operations excellence.
Off-shore competition - We focus on providing solutions to our customers’ needs through the appropriate mix of products and services. Our value proposition is unique in comparison to offshore installation product suppliers and we do not face competition from them at this time.
Shortage of qualified installers - We will continue to invest significantly in the quality of installers through the educational efforts of our MAPEI Technical Institute. We also continuously innovate to make our products easier for installers to use.
Consumer marketing strategy:We are concentrating on an informational approach to consumers that educates them on the characteristics to look for in a flooring installation in order to get maximum enjoyment from their expenditures. Our strategy today is focused on market segmentation and targeted to the needs of specific audiences than it was in past years.
Future of the industry:I am extremely optimistic about the future of the flooring industry, both in the consumer and professional segments. We anticipate healthy growth through technological innovation and product differentiation. Our industry has an enormous opportunity to show our customers through differentiated value propositions that investing in technology and professional installations are the best long-term solutions for their flooring needs.
Jason Strong, VP of SalesFlooring industry concerns:We welcome competition from offshore manufacturers. In the long run competition actually helps to raise consumer awareness of exotic hardwood flooring. With that said, lower-cost product does not necessarily equal premium quality and brand recognition. We will continue to drive the exotic category.
BR-111 Exotic Hardwood
The lack of qualified installers is a concern for everyone in the industry, from manufacturers to dealers. A poor installation tarnishes everyone’s reputation. To address the problem, BR-111 has introduced the BR-111 Road Show, a series of training seminars. The program is free to all Fashion Under Foot dealers and installers. Attendees increase their technical knowledge of exotics, review product installation guidelines and learn more about specifying the right product for each installation.
Consumer marketing strategy:BR-111 continues to build brand awareness through a targeted advertising campaign featured in leading consumer shelter titles nationwide. Overall, the marketing initiative stresses quality, fashion and lifestyle, positioning exotic hardwood flooring as an essential design element for discriminating homeowners.
Future of the industry:The hardwood category continues to grow annually, as new high-quality products help drive consumer confidence and raise awareness of the long-term benefits provided by hardwood flooring. Exotics have done particularly well over the last several years, substantially outpacing hardwood flooring as a whole. Consumer awareness of exotic hardwood flooring continues to grow, and with it, demand is rising as well. The continued introduction of new species, solid and engineered products, and specialty items like hand-scraped flooring, will also continue to drive the category.
Juan Flores, PresidentFlooring industry concerns:We keep working on and advancing the latest technologies to obtain both competitive manufacturing cost as well as a differentiation factor in our innovative laminate flooring products. Additionally we are training installers all over the nation through the National Laminate Flooring Training Center, located in Calhoun, Ga., Los Angeles and Dallas. Our regional technical managers also conduct seminars and certified courses together with the distributors’ efforts following our direction.
Finally, we have offset the offshore competition by becoming one of them. We now have a laminate manufacturing plant in China with a high-end touch with embossed in register and bevel.
Consumer marketing strategy:We are sending a simple message: Real floors for real life. High-end product with style and design. Then, we are coordinating our marketing and merchandising to focus on the same message. An important part is advertising and retailer training. If you have a great product, just tell the consumer, otherwise it is going to get very difficult for any company with a different proposition.
Future of the industry:Our company is optimistic. Here is why: We have a passion for our customers. We have the best partners in the industry. And, we have superior innovative products that differentiate us and appeal to consumers. We are investing strongly in Europe, Asia and the U.S. to increase our capacities of manufacturing high-end laminate flooring and continue the innovation race we started 10 years ago. The global scope is providing us a competitive edge that our customers recognize and consumers enjoy.
Tony Sturrus, President and CEOFlooring industry concerns:We remain committed to growing our brand and providing increased value in our products. However, there is little doubt that higher energy/transportation costs threaten to slow the U.S. economy and the overall flooring business. While the immediate situation seems to be improving (i.e. lower gasoline prices), there is very little we can do in the short-term to minimize this threat. Lower-priced products from Asia and Europe are also having an affect on the market. While we are always looking for new opportunities to improve manufacturing and supply efficiencies, we continue to focus on developing new technologies that deliver increased value to our products. We believe Pergo, as the industry leader, must meet and exceed our customers’ expectations for unparalleled performance, cutting-edge design, easy installation and superior marketing. Finally, Pergo will continue to take a leadership position in providing installation training through our on-going Pergo Endorsed Installer program.
Consumer marketing strategy:We continue to aggressively market the Pergo brand to the consumer. This takes many forms including advertising, innovative products, in-store merchandising and promotion. Our strong commitment to building the Pergo brand with the ultimate user will continue into the future.
Future of the industry:While the industry continues to change and mature, we see the future in very bright terms. Consumer preference for the Pergo brand and laminate flooring remains very strong and promises healthy growth into the future. We see tremendous potential to continue to drive innovation though the enhancement of our product’s appearance and performance. Additionally, we continue to receive strong support from our distribution and retail partners. All of these factors make us very optimistic about the future.