Coretec patent, Mohawk retreat and UFloor's U.S. facility: Strategic Exchange - Nov 2015

By Kemp Harr

As our executive editor, Darius Helm, was conducting his Top 100 retail interviews last month, it became obvious that the hottest selling flooring category in the retail replacement sector is the new WPC product. WPC stands for wood polymer composite, but there are others in the market calling it a hybrid LVT. It’s basically a four-layered matrix. The top wearlayer is made out of PVC, the second layer is a waterproof adhesive, the third and thickest layer is a rigid wood polymer composite core that has a click profile cut into the edge, and on the bottom is a cork cushion. 

The original supplier of this product here in the U.S. is US Floors, and last month its owner, Piet Dossche, was awarded a U.S. patent on its design (patent no. 9,156,233). US Floors first introduced this product in the U.S. at the Surfaces expo in Las Vegas back in January 2013, but the patent was actually filed over three years ago on October 22, 2012. 

Most of the benefit of this product over regular LVT comes from its rigid WPC core. Not only does it keep subfloor imperfections from telegraphing up to the surface, but it also keeps the floor from contracting and expanding due to temperature and humidity fluctuations. And lastly the core makes the click profile stronger, so it holds together better as a floating floor.

In the end, you get the realistic visuals of LVT on the top surface, the strength of Trex outdoor decking and lastly a cork cushion underlayment, all in a DIY floating floor. 

Aside from its popularity, the biggest news item is this U.S. patent. When a product has patent protection, the owner, to a certain extent, can control the number of suppliers, the route to market, and the pricing and profitability to its customer base. In the numerous conversations I’ve had with Piet on this product, he has told me that he wants to protect this invention from getting into the hands of the type of suppliers who would try to cheapen the integrity of the product and offer it to the market at a lower price. His goal is to offer a product to his customers that they can sell at a profit.

US Floors’ business model is to sell its flooring directly to the retailers using a sales force comprised of its own employees. So this product is not available from distributors unless they pay a license to US Floors. That’s not to say that some distributors might not attempt to source a similar product overseas and offer it to the market. But in this case, the buyer should beware. Selling a product that knowingly violates a U.S. patent can make the retailer an infringer as well. 

One final comment before I leave this topic: Earning this patent protection was no easy feat. The examiner cites 36 other designs that were examined before the patent was issued. During the process, many other flooring producers from around the world challenged the design novelty, citing “prior art,” but in the end the patent was still issued.

HOME CENTER FLOORING GROWTH SKEWED TOWARD HARD SURFACE
Another trend unveiled from the research we conducted for this issue was the decline of carpet sales relative to hard surface sales in the home center channel. Both Home Depot and Lowe’s are seeing an increase in revenue from their flooring department of about 4% for the year, but we’ve learned that their carpet sales numbers are flat at best and could be slightly down versus last year. So for these mega-chains to be growing, their hard surface sales growth could be in the neighborhood of 6%. 

As we’ve mentioned before, with the exception of resilient sheet, most hard surface flooring comes in a cash and carry box. And based on the type of DIY consumer that shops at big boxes, the home centers have always done better in the hard surface category. But let’s not forget that carpet is still the largest flooring category in the U.S. market, so it’s noteworthy that carpet sales at the home center are on the decline. 

One factor in this equation is the continued shift at the low end of the market toward polyester carpet. Since the price per unit of PET carpet is lower, there has been some price erosion, so while units might be up, revenue is flat.

CARPET USAGE ON THE DECLINE IN HOTEL GUEST ROOMS
Almost three years ago we reported that several of the lower end hotel chains like Motel 6 were moving away from carpet and over to LVT as a flooring choice for their guest rooms. This decision wasn’t a huge surprise, especially in light of the more realistic wood looks that are now available. But the switch to hard surface has resulted in a considerable revenue hit to the carpet industry, since many hotels were routinely replacing their carpet every three to five years, and value properties are always looking for ways to cut expenses. The premise, which only time can validate, is that LVT—which costs almost twice as much as carpet on the front end—won’t need to be updated as frequently. 

What’s more surprising is that this shift to hard surface is now moving up to the higher priced hotel chains, and even to the top of the market in the case of InterContinental Hotel Group, one of the largest hotel chains in the world. Its more popular brands here in the U.S. are Holiday Inn, Crowne Plaza and Staybridge, but one of its newest brands—positioned near the top of its branding hierarchy from a price point perspective—is Hotel Indigo. As of June, this new brand has opened 62 hotels, with 64 more in the pipeline. Granted, these aren’t huge properties, but since they are new, they’re being watched by the rest of the industry. 

Their choice for floorcovering for Hotel Indigo’s guest rooms is LVT with an area rug in front of the bed. The target demographic from this boutique brand is age 35 to 54 with a household income of between $70,000 and $200,000. So the brand is aimed below the Baby Boomers but in the upper-middle income range.

This hotel trend could ultimately have a far reaching effect on what happens with residential flooring in the future. Many of the finishes that are commonplace in the residential bedrooms and bathrooms today, like white duvet covers, accent throws and spa-like bathrooms, were made popular in hotel guests rooms first. 

Today, carpet is still king in the bedrooms here in the U.S. While we watch these trends play out in the hospitality sector, there are many factors that could force this hard surface movement to reverse itself. As I mentioned earlier, hard surface can be as much as two times the cost upfront. Plus, it is susceptible to scratches and scuffs, and it doesn’t absorb sound like carpet. Whether it’s to drown out the snoring of the person in the bed beside you or the kids in the room above you, sound absorption in the bedroom is an important performance feature.

THE MOHAWK GROUP’S DESIGNER RETREAT
For the second year in a row, I was invited by the Mohawk Group to attend a trend forecast presentation as part of its annual Future of Workplace Design (FWD) retreat. This is a well executed event, where Mohawk’s commercial division partners with Daltile and invites roughly 50 A&D guests to attend a two-day workshop where everyone benefits. Not only are the designers entertained and introduced to forward-looking trends on the horizon of the design business, but Mohawk is also able to gain valuable feedback on new products that are currently under development for launch at NeoCon 2016.

One highlight of the event is an intimate presentation by world-renowned forecaster Lidewij Edelkoort. Li created some controversy earlier this year by publishing a paper outlining why she believed the fashion industry “is going to implode” due in part to supply chain management—which is bottom line focused—and the decision by many universities to drop their textile engineering curriculum. In one of the ten points outlined in her paper, which particularly hit home with us here at Floor Focus, she said that “the standards of journalism are slipping as knowledgeable fashion editors are replaced by younger writers with no specialist knowledge or critical perspective.” In particular, Li was attacking the Internet bloggers who self publish and don’t have a basis of experience that qualifies them as experts—but I digress.

Li Edelkoort and her assistant Phil Fimmano addressed the group, explaining that trend forecasting is a process of collecting fragments of information about society that will impact fashion. Here are a few of those observations: Less office work—we must leave the desk to find our intuition. Millennials are more fluid with respect to time. They seek a brief reward time/holiday/pleasure moment—some on a daily basis. There is a new focus on landscaping, more people are camping out. Men are getting more involved in family roles, becoming more sensitive. In the urban space there are more vertical/rooftop farms. Food is inspiring, and people want to grow their own. They want to pay more attention to what goes into their bodies. More cast iron pots, and the revival of the fireplace. Continued focus on crafted/handmade/authentic. People raised in a period of war and economic crisis are more poetic, live for the moment, have no view of 20 years out. Woven materials like mats/basketweave/crochet. New awareness of ancestry, young and old family members seek playtime together. Borders/limits have been removed with respect to gender/sexuality/race. 

Taking this all into consideration, here are a few of the resulting fashion trends that Li outlined: simple white, back to basics, more work uniforms, more clothes/undergarments made out of blue jean denim, the return of grandmother’s styling, coarser fibers and textures, brown replacing black, and more handmade looks. 

UFLOOR OPENS ITS FIRST PRODUCTION FACILITY IN THE U.S.
Back in late September, Ufloor Systems cut the ribbon on a $13.5 million 64,000-square-foot mixed use facility in Dover, Delaware. In addition to office, training and warehousing space, one-fourth of the facility is devoted to producing leveling and patching compound as well as tile adhesive. The facility will employ 23 people working two shifts. Ufloor Systems is a subsidiary of Uzin Utz AG, a German based company that produces installation and maintenance products for the floorcovering industry. The company’s U.S. headquarters will continue to operate in Aurora, Colorado.

Related Topics:The International Surface Event (TISE), Mohawk Industries, Daltile