Best Practices - July 2011
By Brian Hamilton
The owners of My Flooring America, a six store retail chain based in Webster, Texas doubled the size of their overall business by adding four ProSource Wholesale Floorcoverings stores in March. Overall, the company is likely to do about $35 million in sales this year at its ten locations, with about half coming from the ProSource acquisition. ProSource is a members-only business serving trade professionals.
Size brings both advantages and disadvantages. Advantages include increased buying power, better market penetration and economies of scale. Many of the challenges revolve around management issues. It’s just not possible for owners Kelby Frederick and Scott Steel to be as directly involved as they were before they merged their family businesses early last year.
“It’s all about the people in our world, and all about the ability to execute,” Frederick says. “It’s about recruiting the right people. We’re always recruiting, and looking for good people. We bring in most from outside the industry. We primarily look for attitude and aptitude—are they going to be willing to learn our way and execute our way.”
Frederick talks a lot about the importance of “execution of the business plan,” and to that end the firm evaluates the plan at least quarterly and isn’t afraid to make changes if needed. It also doesn’t leave much to chance and makes sure everyone knows what they’re supposed to do.
“We have well defined processes for everything we do and we hold our executive and management team accountable to those processes,” Frederick says. For example, the firm uses a two-pronged approach toward ensuring quality installation. It has a field inspector who does nothing but check jobs and is available to help out with problems on site immediately. At the same time, inside customer service reps stay in contact with customers about ongoing jobs.
“They work together to make sure we take care of our customers,” Frederick says.
Training is a huge part of keeping those processes flowing smoothly. For example, sales people go through four weeks of classroom training at the outset, often with the help of a corporate trainer from CCA Global Partners, the parent company of Flooring America. The training program also includes mystery shopping at competing stores, as well as examining results from mystery shoppers at their own stores. Installers, who are all subcontractors, also receive regular training and all use only premium products in
Selling Trust Rather Than Flooring
While many flooring stores try to sell fashion, Frederick says his stores are selling “trust.”
“If we can get a consumer to trust us, that is going to result in a great experience,” Frederick says. “Everything we do is about cultivating trust; from advertising, to facilities, to merchandising, to the training of our people. It’s about getting the customer into the right product.”
Nevertheless, being in a large market, the main competition comes from several sources, including the home centers, independent retailers, and outlet stores, and they all require a little different approach. However, Frederick says that “at our core, we’re a traditional mom and pop store and we try to maintain that culture and mentality.”
For instance, against the home centers, My Flooring America emphasizes its local roots and ownership, along with customer service. To take on the independents, it points to its size and strength, which partly comes from being affiliated with a large organization. “We play both sides of that coin,” Frederick says. And against the specialty outlets, My Flooring America points to the quality of its products, and “the difference between a real warranty and a marketing warranty.”
The chain always has a strong advertising budget, most of which is spent on direct mail and newspaper inserts. Radio and television advertising are simply too expensive. The stores have informational websites—which are generally all the same except the contact information—through Flooring America that promote current deals, special financing, and specific CCA Global programs, such as “Move or Improve,” which gives a customer up to 50% off if they update or move within ten years of their purchase. Slowly, Frederick says, the firm is building a database in its customer relationship management system so it can make greater use of email and other electronic advertising and marketing. It also has a Facebook page, with posts about sales, how-to information and links to useful information, among other items.
Quarterly special events, such as a two-day private sale, are a promotional mainstay. The events will often be around a specific brand, carpet or fiber brand.
Each store also has a strong push in its local community. Employees are involved in organizations like the Chamber of Commerce and Rotary Club and support local charitable organizations. When one local chamber had to refurbish its building, the local My Flooring America store funded the boardroom finish-out, not just the flooring. Now the boardroom is officially known as the My Flooring America Boardroom.
While aggressive promotions and community activity are important, what sets My Flooring America apart from other businesses, Frederick believes, is his company’s commitment to the fundamentals of the business—building processes and procedures, regularly reviewing the business plan, holding events like offsite management retreats, maintaining easy to navigate stores.
“Some other businesses are like firefighters and are always putting out fires,” Frederick says. He wants to avoid the fires altogether.
MERGING TWO FAMILY BUSINESSES
Owners Kelby Frederick and Scott Steel are both second generation business owners. The My Flooring America operation resulted when Frederick merged his two Dallas, Texas area stores with Steel's three Houston area stores in January of 2010. Frederick is a current World Floor Covering Association (WFCA) board member, and Steel is a former WFCA president. The two had become friends over the years as they both bought out their parents in the early 2000s. Before merging, they opened a store in east Texas as a side project, mostly to see if they could work together. Frederick has a sales and marketing background, while Steel has an accounting background, so their areas of expertise were a natural complement for each other and made the combined company stronger. They bought the ProSource stores (all in the Houston market), which went bankrupt in 2009, from CCA Global. "For us, the purchase was a matter of good timing," Frederick says. "We were past the merger growing pains, and once we got to a certain comfort level, the ProSource stores were a natural fit." Frederick says the affiliation with CCA Global gives My Flooring America and ProSource tools and resources it could never develop on its own, such as a merchandising plan, and Frederick says he takes advantage of many of them. He also says the networking with other Flooring America owners is especially valuable. "We bounce ideas off them. There aren't any new ideas, just ideas that fit. The candor and the openness is miles ahead of being an independent dealer." On the Flooring America side of the business, about 60% of the firm's sales are hard surface, with the majority hardwood, which recently has been taking share from carpet. It has a small mainstreet commercial business, but about 70% of sales is residential replacement, with most of the rest builder business.
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