Retailer Panel: Top retailers weigh in on carpet's marketshare losses - July 2016

Interview by Kemp Harr

For a quarter century, hard surface flooring sales have been steadily taking marketshare from carpet, but in recent months this shift seems to have accelerated. Homeowners vote with their wallets every day, choosing to replace carpet with hardwood, ceramic tile, and now LVT. Floor Focus hosted a panel discussion to explore the nature of this shift and to find out how it is affecting independent retailers.

Three successful retailers joined the conversation. Patrick Molyneaux co-owns Molyneaux Tile Carpet Wood in Pittsburgh, Pennsylvania; Aaron Pirner is president of Cap Carpet based in Wichita, Kansas; and David Snedeker serves as the division merchandise manager for Nebraska Furniture Mart based in Omaha, Nebraska.

Q: What is driving the shift within the residential flooring sector from carpet to hard surface, and what are the long-term ramifications for independent retailers?
Snedeker: I think the biggest contributor to the movement toward hard surface products is fashion trends, whether it be through local designers, home fashion magazines or the HGTV type remodel shows that are so prevalent today. Most of the remodels are geared around hard surface products, and carpet is being relegated to smaller sections of today’s homes. I also believe that the number of homes that have pets has increased over the last several years, and hard surface products are the preferred choice for pet owners because of perceived ease of cleanability.

We have yet to experience the long-term effects of the movement toward hard surface products, but the expectation is that it will lengthen the average time between purchases. As we look more long term, flooring retailers may need to get into other facets of home improvement to maintain or increase sales.

Molyneaux: All change can be scary. However, change also creates opportunity for well managed firms that adapt and innovate. A dealer can choose to be either a player (innovate, adapt, take risks, etc.) or a victim (complain and long for the good old days). Dealers who innovate, step up their game and differentiate themselves will capitalize on this change.

Pirner: Consumers perceive hard surface as a lasting floor and a more fashionable choice. My dad shares the story that his generation’s most effective ad was “War on Wood Floors.” Maintenance of wax finish, pressure on knees and hips and loudness were reasons consumers wanted change. Today, the hard surface finishes and style elements are very effective. The aging population and comfort factor should be playing well for soft with consumers, but aren’t.

Longer replacement cycle and shrinking industry is most likely the result of the shift. Skilled labor will continue to be in demand for the industry. A larger percentage of industry consumer dollars will go toward labor. Expect fewer independent retailers (we rely too much on soft.) and more workrooms.

Q: In general, is carpet more profitable to retailers than hard surface flooring?
Pirner: As a short answer, carpet is a little more profitable. The broad diversity of the hard product segment and the ability to put together multiple supplier finishes into a single interior design element allow the retailer today to differentiate their brand, allowing for margin mix to rival carpet.

Selling hard surface is much more dependent upon great selling, support staff and skilled installation labor. It is definitely the hard way to succeed with the consumer and a challenge to the independent business owner today.

Snedeker: Carpet tends to be a product that is harder for consumers to compare one versus another and can be more of a blind item, which lends itself to a higher gross margin potential. Conversely, a lot of hard surface products carry similar specs and are more aggressively priced as a result.

Q: What can retailers do to make sure consumers end up with the right flooring solution, which in certain rooms might be carpet?
Molyneaux: The proliferation of product (hard and soft) makes the experience so confusing for consumers. Having top-notch salespeople has never been more important. We let the consumer tell us what she wants.

Pirner: Selling has and will always be an art. Consultative selling in the information age requires people who have a passion and love for our industry to succeed. We have to have people who have the same passion for interior spaces that the consumer has, to satisfy them and keep up with their ever changing moods.

Snedeker: It is about the qualification of the customer and then the education on features and benefits of the categories. Customers need to understand what they are buying and the positive features of each item, as well as the limitations. It is through the proper qualification that they will make informed decisions and will ultimately be a happier consumer.

Q: When your people position carpet to consumers, what do they claim are its key selling benefits?
Pirner: Consumers are diverse and their lives unique. For example, if I am the classic starter-home consumer, something soft and safe for the toddler that is infinitely cleanable is key. For the consumer who is an empty nester, quiet, restful and comfortable makes for key advantages for carpet. For those who are in last stages in life, safety is an important feature. We could write a book here. Professional consultative selling and practicing our trade drive success.

Snedeker: Soft, comfortable and luxurious feel underfoot. This product has stain durability and is typically a more affordable value when installed. With so many style options to choose from, we can make a customer’s home unique to their design preferences and their needs to make it a viable option.

Q: What are the risks in trying to switch the consumer away from a predetermined preference for a specific product?
Snedeker: The biggest hurdle for any salesperson to overcome is to first create a bond with the customer. The customer has to trust them, that what they are presenting is fair and accurate and ultimately in the customers’ best interest. Without this bond, trying to switch a customer to other options will likely fail and the sale will fail as well. Educating the customer on all their options and letting them buy what they think works best for their own needs seem to work most effectively.

Pirner: Lose a customer, gain a friend? A bit tongue in cheek, but Cap would rather lose a customer if the floor is not appropriate for the end use. It is our job to do the right thing for our customer; it is one of our core values. Most consumers today have a really good idea from the dreaming phase of what they want. Generally they don’t shift from hard to soft so much.

Molyneaux: We try to tell the customers the truth, the full truth and nothing but the truth in terms of product suitability. We honor our claims even beyond the manufacturer warranty terms, so we’d rather not sell a deal and then have to replace the floor a few years down the road. For example, we recently scaled back selling the cheaper pure vinyl LVT clicks and switched to selling only the more expensive WPC clicks. I’m sure that costs us sales, but that’s OK. Our Molyneaux brand is on the line if we sell the wrong products.

Q: What can manufacturers do to slow or reverse this trend away from carpet?
Snedeker: Innovation of new technology, on-trend design for fashionable colors and textures, and focused advertising campaigns around the positive choices of carpet for every room of your house. Help create marketing campaigns for retailers to use when they promote carpeting, new ways to engage consumers in multiple media sources, and for some of the companies that sell hard surfaces as well as carpet, some cross promotions.

Molyneaux: The trend is here to stay. Carpet manufacturers lack innovation on product and on marketing and messaging.

Pirner: We as dealers have to get closer to the consumer and work much more closely with the manufacturers to provide what the consumer wants, and reduce the amount of isolated channel strategy manufacturers do today. The closer we get to the consumer as an industry, the farther away from failure we will be.

Q: What are the key influences that determine a consumer’s flooring preference in the selection process?
Pirner: The early dreaming phase is impacted greatly by digital. Interior design omnimedia is perhaps the short answer. Consumers arrive at the stores and websites to purchase with a pretty fully formed perspective on the purchase decision. There are areas of the home that don’t matter as much, and they don’t research so much. But in today’s wireless world this is less and less.

Molyneaux: It’s all about the salespeople.

Snedeker: A tremendous amount of influences come into play when choosing the correct product. Social media, home design magazines, home improvement shows, DIY programs and seminars, word of mouth, research done online about flooring products, and expectations based on neighborhoods customers live in, to name but a few.

Q: What is the best way to help consumers think of flooring as a fashion item versus a utility component?
Molyneaux: Forgive me for giving such a simple answer, but hire the right salespeople and train them well.

Pirner: Companies must design their websites, hire the right people and train them properly, merchandise well and align with a supply chain that doesn’t see the industry as a commodity. There are no shortcuts here.

Snedeker: Presentation books with before and after pictures is a good example of how you can help the customers to visualize what can be accomplished. Some of the manufacturers have product visualizer technology that can be used to show customers potentially how their own home could be transformed. Then the educational information about carpet performance options and the style and fashion alternatives make carpet a great option for any area.

Q: Is there a role that branding plays or should play in all of this?
Molyneaux: Manufacturer brands are a liability, thanks to the Internet. At Molyneaux we have our own in-house brands on hard surface. We cherry pick the absolute cut order hard surface products, and then have suppliers fabricate samples to our specification. I’m shocked more dealers don’t do this.

Pirner: Branding will always play a role, but more at the store level than product level in my opinion. We aren’t selling iPhones. Consumers want what it is and what it does for them, and couldn’t care less about a logo on the box. We simply don’t apply a brand moniker to installed flooring. It is about FAB [features, advantages and benefits], what it is, what it does, what it does for me. This is how you move the consumer today.

Snedeker: We continue to use our vendor branding, including the fiber branding, when promoting our carpet in advertising, because we believe it has value. Ultimately our own brand is a very important part of the value stream. We are the connection between the other brands and the consumer, and it is essential that our brand creates value to the consumer. I think that is true of any company—sell yourself first.

Q: How would you have the carpet industry respond to the race toward the bottom?
Molyneaux: This happens in capitalism. Economists call it “creative destruction,” a process whereby new models replace old models. Who would have thought that Bob Shaw—in his late 70s—and other entrepreneurs would have catalyzed such an industry disruption?

Pirner: I think our manufacturers are so diverse in product today that they likely only care about carpet to the extent that they protect and utilize the capital assets they have worked so hard to pay for and build, and because the replacement cycle is shorter for carpet. They have to continue taking a more active role in investing in the consumer relationship through the resale community. This loyalty and team selling approach to market will continue to pay big dividends. The auto manufacturers did it because of state lemon laws driving them to align their value chain. It is only a matter of time until the state environmental laws and lack of recycling will force the same on the flooring industry.

Snedeker: I think the carpet industry needs to show consumers that carpet is still a great investment. Sure there are more long-term options than carpet being offered, but at what cost? Does the consumer really want to live on the same floor for 15 to 25 years? Show the value proposition for carpet installed versus wood, and then in seven to ten years they can afford to trade up to new carpet and still spend less money. Show rooms transformed by patterned carpet in before and after shots, and how much more fashionable an area can become.

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