Many flooring stores, in deep financial trouble, have closed their doors; others, though financially stable, have just given up and walked away. These are the signs of the frustrating times we are in. Everywhere I go, I hear that frustration: Complaints about government spending, the economy, the demanding and price conscious customer, and mass merchants.
As one retailer moaned to me, “It’s not enough that there are fewer customers, the economy is bad, and my competition will do anything to make a sale, but how do you deal with The Home Depot or Lowe’s offering whole house installation for $37 or $97?”
What makes the big boxes formidable foes is their number of locations. Home Depot has almost 2,000 stores and Lowe’s has over 800. Their numbers alone require that they operate efficiently. That efficiency allows their value proposition to be lower prices.
Many retailers say to me, “I can beat their prices.” I always ask, “Why would you brag about that? Anybody can lower the price.”
Operating expenses for a typical flooring retailer runs from 30% - 35% of sales. During my seminars I encourage the attendees to keep their operating expenses close to 30%. The only way they can do that is to have high sales volumes and be operationally excellent. Both Lowe’s and Home Depot’s costs of operation are from the high teens to 25% of sales before depreciation. That means that they have five to 10 additional margin points that would go directly to their bottom lines.
So if not by price, how else can a retailer compete? One way a one or two-store retailer can compete head to head with these home improvement giants and any other local competitor is by tapping into the power of size. He/she can join a group or a team of like retailers.
Also called marketing or buying groups, be they independent, manufacturer or distributor aligned, these organizations allow retailers to band together and, yes, secure access to better pricing. Even better, they offer their members an extensive menu of services, from private labels, to marketing services, education for their associates, and advanced technology. Discounts may lure retailers to join, but it’s the other perks that typically keep them around. Some even open doors to potential business that would not be available if the retailers were not part of that group.
There is strength in numbers and in size. If a small retailer wants to buy better, think better, organize better and have more opportunities, then he/she should consider joining a group that offers those advantages. These are programs he/she would never see as an independent in the marketplace. In addition, the services provided by the group can give retailers the ability to lower operating expenses by tapping into the power of size. In the flooring business, there are a myriad of groups to choose from.
Groups can also give the customer the feeling of a national chain with buying power, but with the customer-intimate strategy of being locally owned and operated, which provides the hands-on attention customers want.
With over 1,000 flooring stores worldwide, Carpet One, a member of CCA Global Partners, has enormous buying power and partners in all of the major flooring brands, mills, and manufacturers. Like other groups, Carpet One does the research for the independent specialty retailer, which saves time and money while reducing costs.
In addition, these types of groups provide selling systems to help customers navigate through the many flooring products, warranties, and colors. It would be difficult for an independent to create their own selling system.
Like other groups, Flooring America and Flooring Canada (also members of CCA Global Partner) offer exclusive brands, warranty programs, and comprehensive advertising programs for all media channels – including electronic media. Its many national programs include agreements with the nation’s top insurance companies to process their loss assignments.
Flooring America and other groups have systems for exchanging best practices with other members, and extensive management and sales training programs are available both online and in traditional classroom settings.
Abbey Carpet & Floor, the oldest franchised flooring group, is made up of 800 floor covering showrooms across the United States and Canada. Like Abbey, most groups offer unique showrooms that will give the customer a differentiated buying experience. A complete showroom merchandising package, which includes total design and complete store setup, is provided. These unique showrooms are expensive and difficult to create independently.
Many groups, like Floors to Go, create professional advertising media, radio and TV, that most retailers could not produce economically on their own. In addition, they offer national advertising in shelter magazines, that would beyond the ability of most independents.
Other groups include: Alliance Flooring, Inc., which represents more than 500 flooring locations across the United States. The Alliance Flooring retail group includes the CarpetsPlus division, Color Tile and Carpetland.
The smaller Illinois-based FCA Network offers many of the same benefits as the larger groups, but with the intimacy some independents may prefer.
Floor To Ceiling, which now has a membership base of over 200 retail interior products stores in the United States, offers a range of interiors and counter tops, cabinets and lighting programs.
The National Floorcovering Alliance is a group of major dealers sharing ideas and purchasing power to support one another and key vendors for mutual profitability.
Starnet Commercial Flooring Partnership for those selling and installing commercial flooring is comprised of over 170 locally owned full-service flooring contractors serving North America and the United Kingdom.
There are also manufacturer programs, like ColorCenter and Floorscapes from Mohawk, the Aligned Dealer Network from Shaw and Beaulieu’s Bliss aligned program. There is also a wide range of programs from distributors, including NRF, and Swiff-Train. In addition, there is the Flooring Plus/Brand Source program which is a partnership with independent retailers and various national distributors and manufacturers.
For independents with warehouse/diy operations, look into groups like Floor Trader, Stone Mountain Outlets, GCO Flooring Outlets and Color Tile Outlet. Included in that group is a 50 plus member franchise, Big Bob’s Flooring Outlets. For the trade, selling to designers, installers, contractors, etc., there is the Floor Club, ProSource or FloorCo. For those selling to contractors and multi-family, there is Floor Expo. As you can see, there is a group available for almost any flooring niche.
Clearly, the benefits of a buying group are the biggest deciding factor for any independent. If you want to tap into the power of size and ensure involvement in a group that is best for your business, do your research and consider the following issues:
Fees -- Every buying group has a different way of funding itself - some have annual or monthly membership fees while others require a lump-sum purchase - so be sure you are comfortable with the costs involved. Ask about waiting periods for receiving services and penalties for leaving the group. Also, ask what happens to the group’s income (re-invested in business tools and other services, refunded to members, etc.)
Exclusivity -- When interviewing buying groups, ask how many member retailers are allowed in any given market.
I learned a long time ago that it is difficult to go it alone. Joining a team of like-minded retailers may help give you some leverage to compete with the home improvement giants and help you lower your expenses. It’s certainly something to explore.
Considering a Marketing/Buying Group? Tap into the Power of Size
September 17, 2010