Our exclusive year-end survey of 310 dealers and contractors shows the effects of the severe real estate slump. The result: 70% of retailers surveyed say their builder and new construction business was down last year. The average fall off was nearly 40%.

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Having felt the sting of a major recession last year, flooring retailers are not quite certain whether the new year will see business conditions rebound, remain the same or-worst-case scenario-continue their downward spiral.

What is clear is that an overwhelming majority of flooring dealers were eager to bid good riddance to 2008. Nearly nine out of 10 reported a dip in sales last year: half of those polled described conditions as much worse than 2007; while 37% said business was slightly worse. (Only 5% said business was up slightly; 8% said it was flat.) When asked about business conditions for the industry in 2009, about half of those in the survey said they expect things to get worse. The other half was almost evenly divided: 25% said conditions will be about the same and 22% said they will be slightly better. (Only 1%  respondedmuch better.

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Survey participants were also divided when the question focused strictly on their operation and how well it would fare in the year ahead: 37% said they expect their sales will go up, 36% said sales will dip and 27% said things would be status quo.

Overall,NFT’s exclusive year-end poll of 310 floor covering retailers reflects the far reaching effect of the real estate slump. Most notably, the level of flooring sales generated by builders and new construction fell sharply. About 70% of those participating reported a decrease in that end of the business last year, while 21% said it was flat and 9% said they saw an increase. And the business dip was steep: among those quantifying their  decrease in builder sales, the average fall off was 38%. 

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Even so, in each of the other three major areas that drive the retail flooring business  - residential replacement, contract/commercial and Main Street commercial - the picture was not nearly as bleak. A solid majority of the retailers in our survey said business was either flat or had increased in those three areas. Notably, one-third of the respondents said their resident/replacement sales were up last year while about one-in-four retailers reported increases in their sales of commercial flooring.

A breakdown of floor covering categories indicates that no single area escaped the slump. A majority of retailers saw sales dip in all but two categories: ceramic tile and area rugs. (It’s worth noting that 27% of those in the survey said they saw an increase in ceramic tiles sales - the strongest showing of any category.) Among the other product areas--hardwood, vinyl/resilient, carpet, laminate and stone/marble - the poorest showing was seen in carpet, where 62% of the retailers said sales decreased last year.  

The survey offers evidence that retailers plan to take action rather than ride out the rough times. Three of four retailers in our survey confirmed that they plan to invest in their business over the next two years. Most frequently, they said the focus would be on marketing and advertising. The next most popular answer was training and education, followed by showroom design and computer software. The question also drew a number of responses that underscore the current struggles. One participant said the investment would be used to “move to a better location” while another said the money would be spent to “train for a different business.”

Retailers also confirmed they’d rather stick with person-to-person contact when ordering product. Sixty-four percent of the respondents said they still order through a local manufacturer’s rep or distributor, while 25% said they contacted someone directly at the manufacturer’s office. Other, more technically advanced methods were scarcely mentioned: Only 7% of the respondents said they order through a manufacturer’s web site or use a direct B2B computer application.

In terms of manufacturer relations, on time delivery, competitive prices and the ability to effectively handle customer claims were identified as the top three attributes retailers look for when selecting or purchasing from a specific supplier. All three attributes were described as very important by close to 90% of the participants. The two areas that ranked at the bottom of the list were consumer advertising and effective co-op advertising. Less than a third of the retailers described either area as very important.

Searching for answers, dealers look to new categories

About half of the dealers in our survey said they added a new product category to their selection in the previous year. The top choices were products seen as environmentally friendly including cork and bamboo flooring. Also popular were window coverings, granite countertops, lighting and cabinets. One respondent said he was adding more hardwood lines because “our sand and finish wood has been off the charts.”

Other items elbowing their way onto the showroom were less traditional for floor covering dealers. The responses included plumbing fixtures, vanities, roofing, and solar systems. Some said they have shifted gears altogether. Wrote one respondent: “We have moved into more of the design area, selling lighting and furniture.”

While issues are many, economy is No. 1

When the 310 retailers participating in our survey were asked to identify the “single most important issue (challenge) facing floor covering dealer/contractors today,” they provided nearly two hundred unique responses. The dominant theme, however, could be summed up in two words: The Economy.

The answers provided included these: “Lack of consumer spending,” “consumer confidence,” “cost increases,” “availability of consumer credit” “market finance” “overhead costs,” “tight credit” and “customers with money.” While “economy” was the most frequent one-word answer, others included: “value,” “preparation,” “collecting,” “sales,” “mold” and “employees.”

In other, more elaborate answers, the frustration many dealers are feeling is readily apparent. “Instead of working together as an industry, keeping the pricing up, there are businesses and installers out there doing jobs for almost no profits and in turn hurting the entire industry,” said one respondent.      

EDITOR’S NOTE:This is a snapshot of a new comprehensive study examining the retail market for flooring. The conclusions are based on the opinions, preferences and purchasing behavior of U.S. flooring retailers/dealers and have been compiled from an in-depth study conducted by Clear Seas Research, a division of BNP Media.

The study targeted 5,239 U.S. flooring retailers/dealers who are also active, qualified subscribersNational Floor Trends (NFT)magazine. A total of 310 survey questionnaires were completed by retailer respondents.