Ouch! Just writing that headline makes me cringe. But consider this: Just 18 months ago, gas in the U.S. averaged about $2.50 a gallon. People thought that was high. In February of this year, when President Bush was asked about the prospect of gas hitting $4 a gallon, he said, “That’s interesting. I hadn’t heard that.” In June, when the average price in the U.S. zoomed past $4, the Associated Press said the nation was “passing the once-unthinkable milestone.” A few days ago I paid $4.63 a gallon at a station near my home in Los Angeles. Even if $10-a-gallon does not (we hope) materialize in the U.S., the prospect of dramatically higher fuel prices looms over the flooring business like a foul-smelling toxic cloud. (I don’t have to tell you it already stinks.)

Higher fuel costs hit our industry from all sides: Raw materials, production, shipping, installing, retail merchandising…they are all heavily dependent on petroleum and its derivatives. It’s crucial to every link in the supply chain, and that does not even take into consideration consumers who can’t afford to drive around to shop these days. Thus, sky high gas prices become yet another obstacle to the sale. Add to that a persistent housing slump that is strangling demand of residential flooring and you have, in effect, the perfect economic storm. Costs are going up significantly at the precise time disposable income is shrinking for most American households.

But wait, there’s more! All of this comes at a time when consumers have never had more options to buy floor coverings. The big box stores continue to flex their muscles. The Internet, while still accounting for only a tiny percentage of sales, has achieved a level of influence beyond the hard numbers. Consumers can now spend hours clicking on different flooring images until they become so overwhelmed they delay the purchase decision. Did I mention that there is enormous pressure these days to address environmental concerns?

Compounding the situation is the constant drumbeat of bad news that shapes consumer confidence. When people hear that others are hurting financially, they instinctively tighten their belts. They will still buy necessities, but they’ll cut back on Starbucks (which is now shuttering 600 stores) and stay close to home during vacation. They will put off buying big ticket items like the new flooring they’ve been planning.

The veterans in this business will tell you: as the U.S. economy goes, so goes the flooring industry. What’s worse is we still don’t know how long this slump will last. There is an excellent chance I will fondly reminisce about paying only $4.63 a gallon. Five-dollars-a-gallon seems imminent, but there are plenty of people who would love that price; they live in the United Kingdom, France and Germany. At press time, when the U.S. average hit $4.31 (even higher in L.A.), drivers in England were paying the equivalent of $8.79 for their “petrol.” It’s all relative.

So remember, flooring is still a terrific investment that offers long-term value and helps people achieve the home of their dreams. That came up recently when I asked someone who has been in flooring since before I was born, “What if gas hits $10 a gallon?” The matter-of-fact response: “They’ll still need flooring-even more so because they won’t be able to leave their homes.” So, the good news is you are in a business that is rock solid even when the economy is soft. To put it another way: Just be glad you are not running a Starbucks (and if you are, you’re reading the wrong magazine).


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