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.)
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.
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?
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.
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
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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What if Gas Hits $10 a Gallon?
August 12, 2008