July 21, 2014
In addition to writing witty personal essays and fun entertainment-based lists, I freelance for Floor Covering News (FCN), a monthly print publication that focuses on the flooring industry. You can read the full text of my article here, and below.
As 2014 hit the halfway mark, floor covering retailers, manufacturers and distributors looked back on the first six months as a relatively rocky beginning to the year. Challenges cited ranged from lack of consumer engagement due to bad weather to continued fallout from the economic downturn to difficulty hiring quality employees to raw material inflation.
Weather presented a huge challenge in just about all regions during the first three months of the year. Cathy Buchanan, co-owner of Independent Carpet One Floor and Home in Westland, Mich., said the cold temperatures and heavy snowfall prevented people from shopping in January and February. “You know how people always say, ‘Remember when we were little and used to get so much more snow?’ Well, be careful what you wish for.” Buchanan noted that while January and February are typically soft months anyway, this year the numbers dropped considerably compared to the first two months of 2013.
Elaine Carlson, vice president and general manager of Century Tile in Chicago, agreed, noting that the weather made it virtually impossible to get customers into stores. And Bob Weiss, president and CEO of distributor All Tile, also headquartered in Chicago, said while they don’t typically complain about the winter weather, this year was extreme. The harsh winter pushed interior projects back for months, and many consumers moved on to outdoor projects by the time the weather had cleared. However, Weiss expressed hope that retail remodeling would be strong in the fall due to a combination of typical demand with pent-up demand from the lost spring selling season.
While the difficulties presented by the elements were extreme, they were not the only challenges faced over the past six months. David Duncan, senior vice president of sales and marketing at Mohawk, spoke to FCNews about continued issues with consumer engagement, namely the fallout from the economic downturn still affecting business. “After nearly five years of expansion, consumer spending has increased only 2.2% per year, compared to an average gain of 3.9% in the four previous economic recoveries. Additionally, the time frame for purchasing flooring has significantly increased for in-market consumers. Industry sources show consumers now take an average of 100 days from the time they start considering a new floor for their homes to the actual purchase itself, compared to only 67 days five years ago.”
In addition, he noted that while housing economic indicators are moving in the right direction, first-time homeowners are still waiting longer to purchase. In 2005 the average first-time homebuyer was 28 years old; currently, that number has increased to 31 years old. All these factors are preventing consumers from completing a flooring purchase.
Not all challenges are related to a lack of business. Take Hawaii Flooring Solutions in Honolulu, for example. Daniel Arita, manager, said his biggest challenge has been staffing to meet demand. “Hawaii is flourishing with commercial and residential businesses,” he said, “and Hawaii Flooring Solutions is struggling to find enough people to service the growing number of customers.” This issue is also affecting installation: Without enough crews to satisfy the number of customers who want things installed right away, they are backed up for over a couple of months. With 30 installers currently on staff, they are still in need of more.
Arita said while he has been conducting interviews for positions in the store’s sales warehouse, installation, management and customer service departments, he is finding that many of the most qualified people are already employed. This could be an indication of a skills gap—while there are jobs to be filled, current job seekers lack the necessary skills. The skills gap issue has affected many industries this year, and what Arita describes suggests that the flooring industry is no exception.
Competition is also creating challenges for some retailers. Nick Cinquepalmi, president of Landmark Flooring in Tinley Park, Ill., said that his biggest problem has been competing with larger commercial flooring companies because these “lowballers” have created a cheaper alternative and are drawing customers with their discounted prices. Instead of focusing on quality, these companies are usually large and can focus on extreme discounts instead of quality flooring. “Many smaller or quality-focused companies cannot compete with these prices, even if they provide a superior product.”
Manufacturers reported a different setting of challenges, namely the seemingly endless rise of raw materials prices. This is particularly being felt at Armstrong, where Joe Bondi, vice president and general manager, North American Residential Flooring, talked specifically about the increasing prices of lumber. “For all manufacturers, the cost of raw materials continued to rise in the first half, and we see no substantial recovery in the second half.” In addition, Bondi spoke about the uncommonly harsh winter, disappointing economic factors, such as an increase in the consumer price index and a lag in housing starts, and the challenge of keeping consumers focused on value and not primarily price.
Kim Holm, president of Residential Business at Mannington, may have summed it up best: The biggest challenge the entire industry—manufacturers, distributors and retailers—is facing is “the lack of overall business. More new home construction, more sales of existing homes and more remodeling activity would certainly provide much-needed relief to our industry.”
With a positive outlook, Independent Carpet One’s Buchanan said despite the harsh winter, April, May and June have made up for the losses; pent-up demand and snow-tarnished floors brought the customers back to the store. Across the flooring industry, the second half of the year may very well trump the first.
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