Dave Elyachar: Competing Against the Big Boxes
Big Bob’s Flooring Outlet has been in existence for some 31 years, beginning as a single location in Kansas City and evolving into a unique operation perfectly poised for the retail floor covering industry’s next iteration. Serving the cash and carry segment of the industry, the firm has evolved into a franchise player with more than 50 locations throughout the country and three corporate locations in Kansas City. The brainchild of founder Dave Elyachar (then a mill rep, now the chairman) Big Bob’s originally focused on new and used carpet. It now offers a full array of flooring options including carpet, laminate, vinyl, tile and wood at what it calls outlet prices. And yes, it dropped the used carpet decades ago.
The unique niche the company has carved out for itself is with retailers who have found success, usually with full-service operations or with some other subset within their markets. These retailers are seeking to expand into areas that won’t dilute and doesn’t complement their prime operation. Most of Big Bob’s franchisees fit into this category—some with quite a number of stores, some with a single full-service location.
There has been much speculation as to how the retail floor covering business will evolve over the next decade, with the big-box home improvement competition expanding their proficiency to brick and mortar stores as well as plans to dramatically grow digital marketing efforts. Home Depot, for example, recently opened three fulfillment centers—each in a one million square foot range.
With the big boxes amassing retail market share every year and many seeing them increasing that rate exponentially over the next 10 years, the situation is poised to make life pretty challenging for independents in this business. Many independents set on safeguarding their longevity and looking to expand both within their current specialty and outside of it may choose to do so with a Big Bob’s cash and carry location or two in their trading areas.
This point was at the center of a conversation we had recently with Dave Elyachar to get his take on some of the turns this industry would likely take in the years to come and how this might play into Big Bob’s end of the court. Incidentally you can listen to this conversation in its entirety on the TalkFloor.com website. Just click on Floor Radio then on the archives. Here are some excerpts from that conversation.
TF: Give us an update on what’s been happening with the Big Bob’s organization over the last year or so.
Elyachar: Our stores that are open are doing exceedingly well. Nationwide our same store sales are up about 18% over last year. In the rest of the world, business is struggling. One of the reasons is the big boxes are taking gross revenue from the traditional mom-and-pop brick and mortar retailers. And I don’t think they are finished with their growth plans. I think they will expand into shop at home, and eventually they will do more commercial, more new construction and more multifamily. They will get into most of the different sectors of flooring before all is said and done.
People resources are the single and only advantage independents have versus the onslaught of the big box. And if we don’t learn how to recruit, train, manage and motivate better quality people, I believe the traditional mom-and-pop retailer will continue to go out of business.
One of the things they have not learned yet is that every model has a different motor. A traditional full-service medium to high-end, Abbey or CCA type of store has a different motor that runs the business than a shop at home, commercial, multifamily, new construction or cash and carry operation. Some operators who are dedicated within our business are able to operate two or three different motors under one roof. I’m not sure the big boxes will be able to be successful in all of the different channels of this business. But if they are, they are going to continue to take business away from the rest of us.
In Kansas City, we have three stores and are doing close to $10 million. The big box players have 40 stores doing close to $75 million, and they do it with better real estate, bigger advertising budgets, better displays and much better branding than any independent could possibly have.
TF: You talked about some of the advantages the big box players have. What advantages would you say the independent flooring retailer has?
Elyachar: We have only one advantage and it’s not branding, it’s not real estate and it’s not advertising. It’s people. People in management, sales, installation, even warehousing. People resources are the single and only advantage independents have versus the onslaught of the big box. And if we don’t learn how to recruit, train, manage and motivate better quality people, I believe the traditional mom-and-pop retailer will continue to go out of business.
These are our challenges as a traditional retail operation. It’s not your father’s floor covering store any more. It’s a very sophisticated business, and if retailers are not handling their businesses in a more sophisticated manner, it’s going to be harder and harder for them to stay in business.
TF: One of the features of the big box stores that often leaves a bad taste in a consumer’s mouth is customer service. The home improvement companies seem to be known for often ignoring customers or being full of workers who are uninformed in the particular departments where they work.
Elyachar: You go into one of the big box stores and it’s often hard to get someone to pay attention to you. That’s not what you see in the TV commercials. Expectations there are not being fulfilled. If a consumer wants professional help, they have to go to a mom-and-pop retailer. It’s sad that we have to survive on the big box’s ineptness. A scary thing, however, is that, if big boxes ever get their closing ratio up to 40%, they will crush us.
TF: They tell me the number of independent floor covering retailers currently stands at somewhere around 11,000 to 12,000. What do you feel that number will be in five to 10 years?
Elyachar: There have not been many new floor covering stores that have opened from scratch. Yes, there have been retailers who have opened second or third stores. If someone does open a new store, what does their model look like? It’s unlikely it will be the traditional big showroom, cut order business. The big showroom, cut order operation is catering to the top 6% to 10% of consumers. If a retailer’s average ticket is $2,000 and $4 or $5 a foot installed, then only the top 10% of Americans will be in a position to afford that. Who is going after the rest of the market?
That’s why we’re successful, because few have invested in the outlet concept that offers consumers a great deal because we have buy-by-the-trailer and sell-by-the-room inventory.
TF: The customer who typically bought floor covering from a big box store was a cash and carry customer. How would you describe the typical big box customer of today?
Elyachar: Probably most everybody but the billionaires. If you own a $500,000 house, a $225,000 house or a $50,000 house I think you’re going into the big box. If you own a $1,000,000 house, maybe you’re not. The people who own $500,000 houses are still shopping at the big box.
TF: Do you feel the prime reason the big box players have done so well is because they’re everywhere and because customers visit frequently? They go to buy a lightbulb, a wrench or an extension, realize they need floor covering for a certain room and decide to see what the big box offers because they’re in the store anyway. Is that how it usually happens?
Elyachar: Probably. I don’t think there is a retailer in America who feels, if they are given the opportunity to have a consumer shop in their store and then shop the big box, they will lose more than 50% of those sales. Every retailer feels that if they have the opportunity, they’ll do what it takes either through salesmanship, professionalism or whatever they have to do. We don’t lose those customers; we just don’t have an opportunity to speak with them.
TF: Most Big Bob’s owners currently have non-Big Bob’s stores, usually full-service operations in their markets. They seem to want to expand without ‘contaminating’ their existing brand. Is that the case?
Elyachar: For the sake of argument, say a retailer has a two-store chain. It could be affiliated with a group or not, and say they’re doing $5 million. They understand floor covering, they understand service and they understand inventory control. But their operation is not getting a sufficient share of consumers in their area who own homes under $150,000. Most of their customers own homes in excess of that. The biggest slice in America is the consumers who own homes over $50,000 and under $200,000.
The Big Bob’s concept allows a retailer with a successful operation to launch a line extension in a business they already understand and be attractive to a totally different customer base who will not walk into that retailer’s existing store. Most value proposition consumers are not going to walk into a beautiful showroom and ask for a deal, but they will go into Big Bob’s because they are looking for value.
TF: Many retailers who are currently in business will most likely not be in business in the long-term, due to the growth of the big box players. I suspect that most retailers who feel very strongly they would like to be among the 8,000 independents in existence in 10 years are willing to do what it takes, whether expanding or taking other actions, and they will pretty much have to do it on their own.
Elyachar: The easy answer is shop at home, multifamily, new construction or commercial, but understanding that each one of those business models has a different motor. A motor that has been successful in a high end, full service store will not be successful in a commercial operation.
It’s easy for someone who has been in the floor covering business to adapt to the motor that’s required to be successful in a Big Bob’s. It’s a much easier transition than the other options—multifamily, new construction or commercial. The commercial market, for example, is I think the most difficult motor to develop. If a retailer is already in that end of the business it’s easy. If you’re not, and want to get into that end of the business, it will be extremely difficult.
To be successful within the Big Bob’s concept requires the least amount of expertise and what expertise that is needed, we have. We are well-suited to someone who desires to be successful in the value proposition sector, to be profitable and gain more market share for the long ride over the next 20 years.
Editor’s Note: To hear the full three-part interview with Dave Elyachar, visit www.talkfloor.com, click on the Floor Radio tab and click back in the archives to the audio files posted between Sept. 21 and Sept 24. The three parts of the interview can be found under the title “Big Bob’s Chairman Dave Elyachar – Threats to the Independent.”
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