CCA convention, Floors & More, Dallas installation summit: Strategic Exchange - Aug/Sep 2016

By Kemp Harr

How many of you were surprised to hear that U.S. productivity is experiencing the longest slide since the late ’70s when Jimmy Carter was president? Just in case you didn’t read the news, productivity—measured as the value of the goods and services produced each hour by American workers—decreased 0.5% in the second quarter. This is the third consecutive quarter of falling productivity, the longest streak since 1979. In fact, if you step back and look at the timeline starting in 2010, we’ve been on a downward trend over the last six years. 

So despite all the recent innovation in robotics, cloud computing and smartphone communications, the value of what we’re able to make in a given hour of work is on the decline. Of course, there are two factors at play, the numerator--the value of goods sold, and the denominator—man hours. The value per unit of the goods sold, which as we’ve seen with televisions, computers, cell phones and even residential carpet, has been on the decline. Certainly, one factor is the lower cost of raw materials like plastic, thanks to the lower cost of oil. But you also have the labor component or man-hour efficiency. 

So one has to ask, what’s distracting the American worker? Is it a work ethic or is it a change in the knowledge base as younger workers take the place of retiring seasoned professionals—which, we’ve mentioned before, is happening at an accelerated pace, with 10,000 workers turning 65 ever day for the next 19 years? Perhaps the cause is distractions in the form of texts and emails or possibly a giggle from a nearby worker in an open office environment. 

Another factor may be motivation. Many of you who travel overseas have probably noticed how much better the service levels are at U.S. restaurants, where tips can vary based on the quality of the service. Contrast that to the restaurant service in Europe, where tips are only loose change and a larger percentage of the compensation is fixed in the form of an hourly pay rate, much of which is mandated by the government. Carry that thinking forward now to the workers in cities like Seattle, Los Angeles and Chicago, where the minimum wage has been increased over the national rate by local governments. Given that scenario, why should a worker buckle down to become a manager if the manager’s pay is only a few cents per hour better? What effect will mandatory pay levels have on the free market system that has been built on the premise that passion and hard work is what it takes to get ahead?

CHANGES TO OVERTIME COMPENSATION OF SALARIED EMPLOYEES
While we’re talking compensation mandates, we should address the revised overtime laws as they relate to salaried employees. This recent revision to the Fair Labor Standards Act is the result of an executive order by President Obama and it goes into effect on December 1. One of the sectors most affected by this new regulation will be retailers—especially those in outlying markets who are attempting to stay open six days a week with a limited staff.

As a result of this change in the law, salaried employees must be paid time and a half for every hour per week that they work over 40 hours unless they make $47,476 a year or more. Prior to this action, the annual salary threshold for overtime pay was $23,360.

The ripple effect of this ruling is that some retailers will be forced to convert their store managers to hourly versus salaried pay or hire more part-time workers. This will most likely have a negative effect on morale and motivation within the organization. 

I encourage retailers who pay their employees a mix of salary and sales commission to take a look at the new thresholds to ensure you’re compliant with these new elevated mandatory pay levels.

CCA GLOBAL’S SUMMER CONVENTION
Back in mid July, CCA Global, the parent company for Flooring America and Carpet One, held its annual summer convention at the Gaylord Texan Resort in Dallas. Members were upbeat and almost all reported business results ranging from tepid to warm, due in part to an unexpected dip in consumer traffic in June. Common refrains about the installer shortage and the shift to hard surface rumbled underneath the retailers’ otherwise optimistic outlooks. 

Flooring America themed its convention Building Buzz and focused heavily on social media and digital marketing. Best-selling author and social media guru Brian Carter, who has developed programs for companies including the top 50 in the Fortune 500, gave the keynote speech.

President Keith Spano says that when the group first offered members social media support four years ago, many retailers were skeptical about the benefits. But this year Flooring America spent an entire day devoted to the topic, and retailers were engaged, hungry for ideas to help bolster their online presence and connections to consumers. 

In response to the accelerating share shift from soft to hard surface products, Flooring America offered a couple of soft surface solutions. U.S. households spent $60 billion on their pets last year, and that number is on the rise, so Flooring America’s H2O program offers soft surface products and marketing targeted to pet owners. And on the mainstreet commercial side, the Gibraltar carpet program, which was previously all broadloom, now offers modular carpet.

Flooring America is also encouraging its members to diversify beyond floorcovering. More than a quarter of the members are now offering kitchen and bath cabinets, countertops and fixtures. They can also sell closet products by Rubbermaid. And now, in a partnership with Kilz, which rolled out in April, members can adopt a no-inventory paint program. These offerings give members the ability to become a one-stop-shop design center to compete with home centers. And the numbers do add up. The average kitchen remodel runs around $42,000, 65% of which goes to cabinetry and only 7% to flooring. 

In the second half of the week, Carpet One’s meeting theme was Focus, and it revolved around ideas to help retailers focus more on their customers, employees and digital marketing. 

The keynote address was an entertaining session by international speaker Dr. Robert Rohm on how to quickly assess an employee’s or consumer’s personality type in order to connect more readily and effectively, improving relationships and thereby improving business. And at the end of the meeting, Scott McKain, the author of Create Distinction, gave the members more insight on how to give their customers the ultimate consumer experience.

To help its members connect better with consumers, Carpet One unveiled its new website. A survey of 2,600 consumers revealed that 28% to 30% of those shopping for flooring exit the market due to feeling overwhelmed and confused. The new CarpetOne.com site includes a simplified Select a Floor feature with a quiz that takes consumers through colors and styles to help make the process less intimidating. In beta testing on the new site, the time consumers spent on the site quadrupled.

Carpet One chose not to roll out any major new product displays for the summer, but it did convert its Laminate for Life displays by adding more Coretec WPC products under the Invincible H2O brand. 

In employee training, Carpet One launched an online education program featuring instructors and independent study that takes salespeople through a process to become Certified Floor & Home Consultants. The program is expected to incentivize additional training for salespeople while signaling to consumers that they’re dealing with an expert. 

FLOORS & MORE’S INAUGURAL MEETING
Two franchise buying groups, Big Bob’s Flooring Outlet and Floor To Ceiling, have come together under one ownership umbrella called Floors & More. In July, members from the two groups met for the first time for their inaugural convention in Minneapolis. While the two groups approach the market differently—one offering the consumer a value play and the other a full-service diversified mix of products—the two co-owners of the group, Vinnie Virga and Scott Appel, seem to have a vision for how the two brands can complement each other. In addition to leading this new group, both men have been very successful in creating healthy retail businesses. Appel’s Touch of Color chain of stores is listed at number 61 on Floor Focus’s Retail 100 list, while Virga operates five Floors and Kitchens Today stores in the greater Boston area.

INSTALLATION SUMMIT HELD IN DALLAS
In the last issue of Floor Focus, we wrote an in-depth article summarizing the key issues related to the lack of qualified floorcovering installers. And just a week after that issue was published, the World Floor Covering Association and Informa hosted a summit in Dallas to address the same issues. Their findings closely matched the conclusions we drew in our article. The three key issues are recruiting new talent into the career, getting them adequately trained, and retaining them by allowing them to earn fair compensation for the talent and skill sets that they bring to the mix. 

One of the core issues in recruitment is raising the visibility of this type of work so that high school graduates see this as an attractive alternative to seeking a college degree, which often comes with debt that can take years to pay off. A second hurdle is getting a would-be craftsman to pick this option over the many other building trades, which are experiencing the same lack of talent, like carpentry, plumbing, electrical and HVAC. 

The perennial problem in training is deciding who will pay, not only for the classes, but for the travel and for room and board. 

And what is fair compensation for professional installers? Management guru Peter Drucker would tell you that if you get that answer right, everything else will fall into place. Part of the problem has been created by the home centers and category killers who have advertised for years that installation is free, which creates the illusion that floorcovering installation doesn’t require special talent. 

I’m not sure what the action items were from the Dallas summit meeting and what the industry as a whole plans to do to remedy the situation. Each flooring type has its own set of required skills. And since most of the trade associations represent one type of flooring, which are in competition with the other surfaces, there may not be one entity that can drive the solution unless it’s the WFCA, which now owns the Certified Floorcovering Installers. This is the only group that attended the summit that reaches across all surface types and professes to represent the interests of retailers.

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

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