Strategic Exchange - December 2010

By Kemp Harr

The year 2010 is almost a memory and while it appears that we had a few spurts of growth, when we tally up sales for the year we’ll discover that total flooring revenue slipped again—not by much in comparison to the rapid decline in 2008 and 2009 but most likely down a few percentage points. The residential tax credit gave the housing market hope in the late spring but then we hit an air pocket. Now most pundits agree that all the tax credit did was change the shape of the cycle but didn’t create new demand. Residential flooring sales are closely tied to home values and consumer sentiment, both of which have stabilized but haven’t yet started to climb.

The commercial flooring market, on the other hand, is starting to recover ahead of the larger residential sector, which is unprecedented if you study past economic recoveries. Most of the commercial flooring business is on the replacement/remodel side now, but according to McGraw Hill’s 2011 Construction Outlook, starts on commercial buildings will increase 16% next year, following a three year decline that dropped contracting 62% in dollars. Corporate earnings in recent quarters have been healthy, so this trend looks like it is sustainable.

From a global economic perspective, it appears that the European debt crisis that contributed to the U.S. stock market decline in May has now stabilized but won’t be resolved for several more months.

Election results
The mid-term elections are behind us now and the American people have spoken. According to the polls, the people are tired of big government and career politicians. They want a smaller government that will stop inserting itself into every aspect of their lives. They are angry about expensive government programs, unemployment, unprecedented national debt and a sluggish economy. They’ve seen that stimulus programs aren’t the answer and would rather put their trust in the free market economy. They want small businesses to be unencumbered with tax increases, climate regulations and government bureaucracy.

What happens next will be critical as to whether or not Barack Obama will serve a second term as president. The last time that Republicans swept to a mid-term majority in the house was 1994. Two year later, however, after Bill Clinton heeded the warning and moved closer to the center, he was re-elected. If President Obama is a student of history, he will back off his climate change agenda and extend the Bush era tax cuts at least until his second term.

Since the housing market is critical to the success of our industry, it will be interesting to watch the next couple of years unfold. Removing the tax write-off for mortgage interest would be devastating, and yet while that has been proposed it is unlikely to get very far. A positive and yet more indirect influence on the housing market is the political stalemate we are likely to see in the near future. Historically the stock market does well when politicians are in a stalemate. And a stronger stock market performance is good for job growth. Strong job growth helps in two areas. One, it has a positive effect on consumer sentiment, and when consumers feel good, they spend more money on things they don’t have to have. And more jobs will result in fewer mortgage foreclosures, reducing the number of empty homes on the market, which ultimately will result in higher property values.

Websites and social media
By now, most everybody in this business knows that websites play a valuable function in the business world and in many instances serve as a virtual front door to your business—regardless of what sector you play in. The debate has now moved to whether social media is an efficient way to bring the type of traffic to your website that will ultimately result in increased revenue. Those of us who like to compartmentalize business decisions are not going to like where this is all headed. It is true that social and professional used to be as easy to separate as leisure and work or relaxation and focus. But this next generation of thinkers is in the process of blurring the lines that delineated these compartments. One of the flooring industry’s web marketing experts, Damien Patton (founder of Findanyfloor.com), told me in a recent interview that a company’s organic recall in a search engine inquiry can be dramatically impacted by whether or not that company has a social media presence.

In other words, if somebody is using Bing or Google to find you, it takes a lot more than a professional looking website to show up in their search results. Just a few short years ago, you could insert key words into the code on your website that would tell the search engine “spiders” how you fit into the grand scheme of business options and, if done correctly, your business would pop up on page one of a search that was related to your business. How prominently your company performs in an Internet search engine inquiry is called SEO (search engine optimization).

According to Patton, who knows what he’s talking about, the spiders are now ranking your relevant position in a search engine query based on the activity they see with Twitter, Facebook, Youtube and LinkedIn. If you’d like to hear my audio interview with Patton on this topic, go to Google or Bing and search for “Damien on Floordaily.” I think you’ll find this eight-minute interview worth your time.

If you’re seeking a company that can help you navigate through this ever evolving dilemma of web-based marketing, I recommend you call Creating your Space—especially if you are a flooring dealer. As Patton puts it, your first priority is a clean and professional website, and beyond that you should focus on search engine optimization and social media. Michael Vogel and his group at Creating Your Space can help you with all of that.

If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.