Strategic Exchange - May 2012

By Kemp Harr

As we brace ourselves for the political debates in this election year, we can only hope that the rhetoric will stay positive and the focus will be on how the two candidates plan to move this country forward rather than on the skeletons the candidates have hidden in their closets or the poor choices they’ve made in the past. The old adage—when you point a finger, three others are pointed back at you—has wisdom that the flooring industry could take a lesson from.

Our industry has six major categories and consumers have options when deciding what type of floor to choose for their home or office. There is carpet, rugs, ceramic tile, resilient, hardwood, and laminate and within those major categories there are even more choices. Each of these surface types provides the end user with a different set of performance characteristics and cost variables. As an advisor to your customers, and as someone perceived as an industry expert, many of you may be asked to compare one surface type to another.

You may not have realized it, but when I listed the flooring options in the paragraph above, I put them in marketshare order based on annual revenue for 2011. Each year, these numbers change a bit and sometimes their relative position changes. For instance, in 2009 the hardwood sector was larger than the resilient and ceramic sector. But in the past two years, hardwood has lost position and ceramic tile and resilient have moved slightly ahead. It’s important to remember that an analysis based on area (versus dollars) would paint a different picture, but my point here is that marketshare does change, not only between brands but also by category (surface type) and by type of dealer (channel).

As you are called on to express your opinion as to why an end user should select one surface type versus another, it’s important that you objectively help the customer make an informed decision based on honest facts and not revert to negative mudslinging—similar to what we often see in the political arena.

We’ve heard for many years the debate over whether carpet is helpful or harmful when it comes to airborne particulates, and that debate will continue. Some say carpet is good because it keeps dust out of the breathing zone and others say it’s bad because it can collect dirt, mold and dust mites. The latest round of mudslinging that reared its head at a recent wood flooring event was around the plasticizers that are used in the manufacturing of LVT, which someone said are known carcinogens. I had to wonder, when I heard this latest attack on LVT, if it was motivated by the share shift I mentioned earlier, which has put a few in the hardwood industry on the defensive. We’ve addressed this plasticizer issue here in Floor Focus in the past and determined that there is no merit to the assertion.

I challenge professionals in this industry to try and keep the battle lines between the surface categories clean and factual. There are clear and distinct differences between each type of flooring and it’s best to try and match the end-user’s specific set of circumstances with the right product. Many times the solution is a balance between cost and performance, and you have to factor in lifecycle costs on top of product and installation expenses.

HOW INFLUENTIAL CAN COMMERCIAL CONTRACTORS BE?
The leading flooring producers in the commercial arena often debate how to balance their attention and budgets within the core group of influencers in the specified market. Which is more important, the A&D community, the end users or the contract dealers? When you look at the leaders in this arena, it’s easy to come to the conclusion that some favor one group or another. All of the market leaders pay special attention to the specifiers but most of the disparity comes with how they balance their focus on the commercial contractors and the end users.

Having just made the rounds to attend the Fuse Alliance (formerly Resource) and Starnet annual meetings, I noted that some brands participated in these meetings and others chose not to.

A few years ago at a Starnet strategic board meeting, the organization decided that one of its biggest threats was producers going direct to end users. Consequently, it decided to build a financial reward system that would incentivize members to shift more business to their vendor partners, and the board wrote it into its bylaws. Now, a full year later, it’s interesting to hear that Starnet grew its business with its vendor partners nearly 20%, which far exceeds the growth of the market. Does this mean that the flooring contractor can influence which brand is chosen on a specified project? Apparently so.

RECESSION ELIMINATES COMPETITION IN TILE CHANNEL
Donato Grosser, an international consultant for the tile industry, gave a well-researched presentation at Coverings in mid-April on how the recession has impacted ceramic tile distribution here in the U.S. In it, he pointed out that the U.S. tile market peaked in 2006 and bottomed out in 2009, but even with modest growth in the past two years, it’s still down 39% today from its peak in 2006. This drop in volume has cut the number of dealers and contractors by 23.5 % and the number of distributors by 21% (comparing 2011 to 2008). Grosser pointed out that as the housing market starts to recover, business should be good for the distributors and dealers that have been able to stay afloat, since there are now fewer competitors in the market.

Grosser also pointed out that with the decline of new construction, the volume of tile sold for residential remodeling has shifted from 29% to 43%. We will have more indepth coverage of Coverings in the June issue.

NWFA PUTS NEW FOCUS ON A&D AUDIENCE
Last month, we attended the NWFA show—one of the more upbeat industry gatherings held so far this year. One of the many changes that contributed to growth of this meeting was a deliberate emphasis on the A&D sector, complete with an education track focused in that area. Allie Finkell, with Shaw Industries’ Commercial Hard Surface business, held one of the sessions and offered some great tips on how to sell to architects and designers. Here’s a quick summary of some of her key points.

1) Be emphatic. Designers are artists, not decorators. They’ve worked hard to obtain their degree—usually followed by a three year internship. They’re responsible for their clients and their compensation is based on billable hours. Designers prefer short meetings with meaningful information.

2) Talk their language. It’s best to refer to “the space,” not the home or the office. And it’s “the project,” not the job. VE stands for value engineering and deals with the relationship of cost to function. When designers choose words to describe the aesthetics of a “material,” they’ll use words like monolithic, striated, ceruse and linear. With wood, in particular, they will refer to the “grain” as the “pattern.”

3) Know what’s important to them. The design is their focus—if it’s not beautiful, nothing else matters. Designers are also focused on performance and environmental data. Be careful not to say anything that can’t be backed up in writing or substantiated by a third party. Price is important but it’s the last thing they are focused on. And never waste their time talking about how a product is installed.

4) Learn how to interact with them. The best time to influence them is lunch or after hours. Never drop in on them unexpectedly and always bring a treat to a meeting. Know who they are—know what their last project was and what the firm specializes in. When it comes to samples, they never expect to pay for them and they always want them sent overnight. Also, remember that once a project is designed, it’s a long time before the flooring is ordered, so be prepared for a long selling cycle.

COGNITIVE RETENTION—PRINT VS. INTERNET
Strategic thinking friends who like to keep their finger on the pulse of emerging trends will often ask me how print is doing compared to the Internet as a means of delivering content to the industry’s core decision makers.

We’ve seen what instant access to the news has done to the newspaper business and we’ve watched as the news magazines like Time and Newsweek have struggled to remain solvent. There’s no debating the benefits of instant access and searchable data in the online medium, but a recent study has revealed that there’s more at stake here when it comes to what we remember.

Last year, in a study at the University of Oregon, two groups were given 20 minutes to read the New York Times. One group read the online version and one group read the print version. Afterward, they were asked to complete a questionnaire.

The study revealed that the print folks “remember significantly more news stories than the online readers”; that print readers “remembered significantly more topics than online readers”; and that print readers remembered “more main points of news stories”. But when it came to headline retention, print and online readers finished in a draw.

This would seem to imply that we digest more of the material when we hold it and read it, as if the physical connection to the material has some effect on our cognitive recall. An online reader loses the spatial relationship of where a story falls within the paper, which could affect how it’s filed in our memory.

Granted, there are many variables that could influence these conclusions, but as someone who has a substantial investment in a print publication, I had to smile when I read this study. But wait, now I’m worried that our future students who are quickly switching to on-line text books won’t remember the material that earned them their degree. Good thing my doctor came along before we all went digital.

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

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