Our panel of experts was asked the following questions:
CHALLENGES:How would you assess the overall climate in flooring these days? What do you see as the biggest challenges?
GREEN:There has been a great deal of discussion about the “green movement.” How does this translate to the flooring industry and what is the best way to communicate this to consumers?
CHANGES:Overall, what changes would you like to see in the flooring industry? What do you feel should NOT change?
INSTALLATION:How would you assess the industry’s position as it relates to installation? Is the shortage of qualified pros still a big problem?
Chairman and CEO
CHALLENGES:It’s a tough climate in residential flooring. Low interest rates and credit availability created a boom in new residential construction between 2002 and 2005. In 2006, this housing bubble burst, along with significant increases in raw material costs, and the flooring industry has been negatively affected ever since. In 2007, homebuilder sales have declined at the sharpest rates in years. The redecorating market was also impacted. Consumers are more reluctant to invest in remodeling projects as they have less confidence that they will recover their additional investments.
This is not a unique phenomenon from historical cycles but may last longer. Challenges to retailers and manufacturers in this environment also offer opportunity. We can use this time to improve our business management and prepare for the rebound that always follows these cycles. We should all reevaluate our strategies, improve our costs, and focus on exceeding our customer’s expectations. Mohawk is working with our customers to better understand their needs, assist them during this period and help them maximize their sales and profit potential.
The good news is we still see the commercial channels doing well. It may be a challenging climate, but we will get through it, and be better positioned because of it.
GREEN:Social and environmental responsibility are on the minds of consumers in every industry, including flooring. At Mohawk, we are involved with literally dozens of projects that reduce our impact on the environment. We are the largest recycler in flooring and each year we divert more than 3 billion pounds of material from landfills. We follow a Reduce, Recycle, Renew and Reuse strategy and we call our initiative Mohawk Greenworks – Environmental Leadership that Works.
Some notable Mohawk Greenworks projects involve our innovations with EverStrand carpets, which are produced from 100 percent post-consumer recycled content (recycled plastic bottles), and SmartStrand DuPont Sorona carpets, which represent a breakthrough innovation in renewable technology; part of the fiber is produced from corn. In addition, we are in the initial startup of a new carpet recycling facility. These innovations help to reduce our dependence on petroleum.
Each of our initiatives is highlighted on mohawkgreenworks.com and our marketing team has developed in-store POP materials to help our retail partners promote these innovations to consumers.
CHANGES:The flooring industry continues to become more professional each year. We need to continue this effort and develop products and services that add more value to the consumer. We need to make flooring exciting to the consumer and give her better opportunity to trade up; in styling and price point.
We must improve the entire process from “dreaming” through “planning” to “purchase” and make buying flooring a wonderful and exciting experience. We have a great industry that will grow about 4 to 5 percent long-term. We should be able to increase the investment consumers make in flooring and expand the profitability for all involved.
INSTALLATION:Our industry is in constant need of more qualified, professional installers. We strongly support the efforts of groups like CRI, FCI, FCICA and others, and we run one of the most comprehensive installation training resources in the industry through Mohawk University. I believe studies presented in NFT show installation is less of an issue than it was a few years ago. However, it does not - and should not - deter our resolve in promoting professional installation services.
A critical part of the consumer’s experience and satisfaction with our brand comes from installation and ongoing maintenance. Mohawk is working hard to give professionals the information and tools they need to succeed.
Director of Operations
CHALLENGES:The flooring industry as a whole has slowed down as well as the construction industry. Basically the biggest challenge is the economy right now.
GREEN:We in the cork industry are at the forefront of the “green movement.” Cork is a wonderful green product, so the fit is perfect. Information is our biggest hurdle. Trying to provide and educate the consumers through print and electronic media is the best way to communicate.
CHANGES:Direct changes in the flooring industry have come with the import of lower-grade merchandise for competitive purposes. It has made it hard for the consumer to base a sound decision on their flooring needs. They are consistently bombarded with low prices and the standard of quality is not there. When the products fail, they think all flooring of that kind, whether it be cork, wood, laminate, etc., will perform the same. We need to combat that with higher quality customer service and products to ensure our market share.
INSTALLATION:There is always a shortage of professional qualified installers in our industry. There really is not a major program for installers. Licensing by state and local counties is a must to assure a customer of quality workmanship.
President and CEO
Armstrong Floor Products
CHALLENGES:Market conditions are tough. The state of the new construction market has been well publicized. In addition, retail activity is spotty at best. Fortunately, we have been able to anticipate and plan for a challenging 2007. We have taken the obvious steps to reduce spending. However, we also see this period as a great opportunity to help our customer grow their business during tough times. Armstrong will continue to bring differentiated products to the market. In addition, we have increased our advertising of hardwood to include television in 2007. We see this as an opportunity to provide our customers the tools they need to drive their business, and through that effort, grow in a tough market.
GREEN:As a global leader in the building materials industry, Armstrong is committed to environmental sustainability. We fulfill this commitment by systematically reducing the environmental footprint of our operations and by providing products and services to customers that enable them to reduce the environmental impact of the buildings they create. Armstrong’s Policy on the Environment articulates the operating fundamentals that support its commitment to sustainable growth, and we have selected four Environmental Priorities to reduce its environmental footprint: Energy, Greenhouse Gases, Water, and Responsible Forest Management. (Please visit www.armstrong.com/sustainability for additional information.)
In addition, Armstrong is embarking on an initiative which furthers this commitment not only on a global basis, but on a divisional basis too, and crosses over product, manufacturing, marketing, etc. We will be announcing this strategy in the near future.
CHANGES:One change that I believe needs to take place is to address the continued commoditizing of the hardwood category. The consumer is willing to pay a premium for a differentiated product. Focus on selling 2 1/4” strip is not a winning strategy for anyone long-term. Our aggressive new product strategy has been geared toward mix improvement and providing the retailer value-add products that they can profitably sell to their customer.
Armstrong has introduced more new products in every category in which we participate, and has led the industry with cutting-edge technology. Over the last couple of years, we launched in excess of 600 new wood SKUs alone, by far the largest launch in our history, with still more to come in 2007 and in 2008.
We feel that the emphasis should continue to be on innovation and driving products that meet customers’ needs. New products have been the cornerstone of driving sales in both the resilient and wood business and will continue to be so.
INSTALLATION:We’ve been ahead of this question for the past 18 months. Armstrong has presented options from locking hardwood to luxury vinyl tile that saves installation time and money, for the pro and the consumer. For example, our patented NextGen technology for locking engineered hardwood flooring eliminates the need for glue, nails and staples, permitting faster, less expensive installations.
In laminate, Armstrong Grand Illusions and Bruce Park Avenue feature Lock&Fold planks. This makes installation faster and easier with a simple two-step process –no more angling of the short end and then the long end. In resilient, we offer installation innovations including new StrataMax – an exclusive structure available only from Armstrong. Its modified loose-lay installation method allows you to install directly over OSB, eliminating the need for underlayment and providing cost and time savings. Also, MODe luxury vinyl tile provides easy down, easy up accessibility. Its QuickTac installation system requires less adhesive dry time and clean up.
Director of Marketing
CHALLENGES:The climate in all residential building products today is being affected by the downturn in new home construction and existing home resells. With that said, the biggest challenge we face is to increase the value of a floor as a trendsetting part of the home’s interior design.
GREEN:“Green” can mean different things to different audiences. Green should include maintenance and cleaning costs as well as low-emitting adhesives or adhesive-free loose lay installations for improved indoor air quality. This can be achieved with our FiberFloor and laminate flooring systems. The end consumer wants a safe environment for their family, knowing that the floor is often the playground for their children. The consumer desire for in-home safety has been heightened, as of late, due to several non-flooring consumer product recalls affecting their child’s safety.
CHANGES:What should not change is the drive for manufacturers to continuously improve the quality, design and education about our products and services.
INSTALLATION:The lasting image of a floor is determined by the quality of installation and its maintenance. A poor installation makes a floor look bad. The shortage of good installers is an ongoing problem for all manufacturers.
President and CEO
CHALLENGES:After years of boom time we’re seeing a market correction, probably a necessary market correction to ensure our building economy gets back to more sustainable growth levels. The biggest challenge is to make sure our customers as well as contractors do not down-trade in the quality they are trying to deliver to the consumer. There’s always this pressure with pricing versus quality. But if you down-trade, the labor cost will turn out much higher than the product cost. We think there are other ways to lower costs without compromising the quality of the installation.
MAPEI has product systems that are so easy to install that the total cost of the installation is lower. There’s a couple of products such as Ultraplan Easy self-leveling underlayment. You don’t have to do shot blasting or other scarifying or grinding to prepare the substrate. These kinds of solutions allow our partners to be much more cost-effective in installation. We’re also introducing Dust-Free Technology. With this technology we’re eliminating 95 percent of the dust particles. It’s healthier, safer and you don’t have to worry about the cleanup. You’re in and out much more quickly. And your customer is much happier because you didn’t have to repaint their walls.
GREEN:Today, architects and municipalities want to discuss the sustainable aspects of a project before other considerations. We have seen a dramatic change in the American public’s perception of the environment and how we interact with it in the past 18-24 months. And I am personally committed to this cause.
MAPEI contributes to environmental health from various angles. At MAPEI we only develop products that allow for LEED points. We eliminate the volatile organic compounds in our products. We also have a hazardous air pollutant-free strategy. And we were one of the first in our industry in the U.S. Green Building Council. We’ve been in there since 2001, helping to shape green building standards. We strive to incorporate information on our Green Innovations technology in advertising and publicity. The Green Innovations logo is on all of our products. We try to marry that together with the safety discussion. Because as a company, we are looking at things from an environmental, health and safety standpoint.
CHANGES:One thing that should not change is the industry’s current commitment to sustainability. Not only sustainability in product design but in manufacturing processes. This is an industry that goes from huge corporations to very small privately held companies, and we’re seeing generally that sustainable practices are being led by the leading manufacturers. We want to see environmental commitment spread industry-wide, no matter the size of the players. We as an industry also need to continue to invest in the qualification of our installer base.
INSTALLATION:The MAPEI Training Institute has literally trained thousands of people. Whether you’re supplying carpet, tile, vinyl or adhesive, at the end you will only succeed if it’s a successful installation. You need qualified people to do that. It is a rapidly changing environment. During the building boom we as an industry started to attract all kinds of people into the profession for a lack of hands. But now that the market is correcting itself, it’s more important than ever to provide quality, dependable installations.
We support CTEF and NTCA in their training efforts in order to ensure that more than minimum standards are met in the installation of our products. We support these associations both financially and provide instructors and materials. We also sponsor the Contractor Safety Program with the NTCA, so for us it goes beyond just a correct installation. We also want to make sure the techniques that are used are safe for installers. Safety is always an issue, and we want to keep it in the forefront.
CHALLENGES:The market conditions are very difficult due to decreasing housing starts and no evidence yet that the remodeling business is improving.
The greatest challenge in the prefinished segment is related to manufacturing and merchandising the wide range of species, widths and colors being demanded by consumers and builders. Our biggest challenge in the unfinished segment is related to the excessive domestic flooring products that are keeping selling prices depressed.
GREEN:We are seeing an increase demand in Green products. Mullican Flooring has recently released our Green statement. Mullican Flooring’s prefinished products are “Verified Sustainable” under the Appalachian Hardwood Manufacturers’ confirmation that all Appalachian hardwood timber is growing at more than twice the rate of harvesting/decay. A study by the U.S. Forest Service shows what we always knew as an industry - that the Appalachian Hardwood forest is sustainable. This message can be communicated to the consumer through our distribution channel at the retail level.
CHANGES:One of the greatest challenges is our inability to persuade many builders to install hardwood flooring in the proper conditions recommended by the National Wood Flooring Association. There are still too many floors installed 3 to 4 weeks prior to completion of the home instead of at the correct time, which is at very end of the construction process. This causes problems with prefinished flooring – both solid and engineered - due to the exposure of the product to high humidity levels and abuse of the product by non-flooring subcontractors. If we could change the schedule to have flooring installed during the final week it would reduce claims tremendously and create a higher level of customer satisfaction.
There are far too many brokers and importers attempting to sell to dealers, builders and consumers on price alone. This approach does not provide any training, education or advertising that is needed to keep the business healthy. The distribution channel of selling products through two-step independent distribution needs to continue as the breakdown of the channel causes confusion and reduces value-added services provided by distributors.
INSTALLATION:I believe that the NWFA has done an excellent job of training installers through its regional and St. Louis-based installation seminars to complement the training performed on a daily basis by manufacturers and distributors in their respective local markets. In my opinion there is not a shortage of qualified professionals, but there is a need for our industry to continue its aggressive training effort as the qualified professionals retire or exit the industry.
President, North America Div.
CHALLENGES:It is no surprise that the market is much different in 2007 than it was in 2005. What is ahead in the immediate future? New residential construction will continue to struggle in all price ranges – though mostly at the entry level and low-mid range. With people moving less frequently, there remains a strong market in the replacement and renovation category – this typically grows as new home construction declines. Commercial construction remains very strong, and that strength is likely to extend through 2008.
We have to avoid a “doom and gloom” mentality. Sure, times are tough compared with two years ago – but look at the high we were on then! We need to keep everything in perspective, and take a look at the business over a 5- or 10-year period. This downturn will look a lot less dramatic in retrospect – once we have some distance from it. Slow periods are a great opportunity to assess your business, your suppliers and your customers to see what might need to change. I’ve talked with several large distributors who report sales being down, but margins up. So, the sales they lost were the least profitable ones – all in all, they’re better off without some of that business. Painful in the short term, healthy in the long term.
GREEN:Consumers have long been aware of the “green movement.” Remember – Earth Day started in 1970. We’re finally getting some good commercial options that allow people to act on their desire to make a difference. People instinctively recognize that we can no longer continue to consume at the rate we do. Some of this stems from economic realities, some of it is political, and some is moral. The fact is, people want to be a part of the solution, if it is a REAL solution. People resent bogus hype and overblown marketing. We should all remain focused on eliminating waste, using the most eco-friendly products available, and selling products that require the least ongoing maintenance. Having a real, visible commitment to being “green” is something that is done in practice, across an entire company – and is a lot more than creating a slogan or an ad campaign.
CHANGES:Less focus on price, more focus on long-term value. Ours is a very dynamic industry populated by some amazing characters. Strengths of the industry are strong salesmanship and entrepreneurial drive. I hope we never lose those qualities.
INSTALLATION:We have a real problem in this country in that skilled installation labor is not as respected as it should be, and therefore is not viewed as a viable career choice for many young people. When you look at all the young men and women in college getting degrees in areas where there is no real demand, it is a fact many would be better off getting high-quality vocational training – possibly in floor covering installation. We’ll eventually do something about the imbalance, and will start training enough people to do this kind of necessary work – I just hope we do it sooner rather than later.
Laticrete focuses solely on ceramic, and the lack of trained and qualified installers is a very real problem. Growth in consumption of ceramic cannot continue to grow without this problem being addressed. Many of our industry organizations and many distributors are actively involved in recruiting and training installers – but those efforts must increase if we hope to fulfill and grow demand for our products.