Survey 2011: What the Retailers Think - July 2011

By Darius Helm

Despite signs of a strengthening residential flooring market, independent floorcovering retailers report that conditions are relatively unchanged from last year, with store traffic still slow, competition still fierce and margins tighter than ever.

It was 2006 when the housing market started its long decline, and retailers have been scrambling since day one to keep their heads above the water. Now, five years later, retailers have made all the adjustments they can, working out how to do more with less, diversifying product selection, finding new avenues for advertising and driving traffic to their stores, lowering operating costs, and simply working harder. But even though the market has flattened out—and is even edging up, depending on the region—margins have continued to shrink, driven by everything from competition to the inexorable rise of raw materials. 

A significant difference between the flooring retailers of 2006 and the flooring retailers of 2011 is that today’s retailers know their business inside out. They’re shrewder about product selections, marketing campaigns, showroom layouts, price points, the value of service and selling strategies, and they seek out new ways of driving business, like leveraging the power of the Internet and social media. During the boom years, demand for their products was driving their businesses, but now, more than ever, the success of retailers is the result of their own actions and efforts.

WHO THEY ARE
This year, 35% of the respondents to the survey come from the Midwest. Another 25% come from the South, 23% from the West and 17% from the East. Last year, the South and Midwest were around 30% each, and the other two regions were about the same as this year.

Revenues appear to still be shrinking among survey respondents. This year, 26% reported sales of less than $600,000, compared to 21% last year and 9% the year before. Expanding out to those with sales of $2 million or less, that’s 75% of this year’s respondents, 71% of last year’s, and 58% of the 2009 respondents. So it looks like average revenues are continuing to slide.

On the other side, those with sales of over $5 million represented 14% of respondents in both 2009 and 2010, and this year it’s down to 10%, with a 50% drop in those claiming sales of over $15 million.

In terms of how salespeople are compensated, 43% of this year’s retailers report paying straight salaries, compared to 45% last year, while 18% pay straight commission, down from 27% in 2010. The balance pay some sort of combination of salary and commission.

We asked retailers whether their installers are company employees or independent contractors. Last year, 80% reported that they worked with independent contractors (it was 79% in 2009), and that was consistent across all regions, ranging from 86% in the South to 72% in the East and West. This year, 77% reported that their installers are independent contractors, so it’s down a bit. Again, the rate was highest in the South, at 84%, with only 68% in the West and 71% in the East—so the ratios are about the same. Many retailers of a certain size have a core group of installers on staff and turn to independent contractors when additional work comes in. But if that work isn’t coming in, we’d expect it to be reflected in a shift in the survey away from contractors. So we’ll watch next year to see if those numbers continue to trend downward.

For the complete Survey results, see the July 2011 issue of Floor Focus Magazine.

Copyright 2011 Floor Focus