Hardwood Update 2011 - October 2011

By Jessica Chevalier

When Murray Mansch, owner of two Flooring America by Carpet Smart stores in Arkansas, purchased his first store in 2000, he hired consultants from Chicago to evaluate the business. Mansch reports, with a laugh, that the consultants concluded that retail flooring was the last business they would advise that he enter because there are simply too many elements out of the owner’s control. But, like you hear so often from retailers, Mansch grew up in the flooring business and found that, after working several years for Walmart, flooring was calling him back.

If you’re a flooring retailer, you have a good idea of why Mansch’s consultants came to this conclusion: installation is a headache, margins are narrow, price has become the deciding factor for many customers, and the big boxes continue to steal business. 

But there are some retailers who have figured out how to sell hardwood flooring, one of the more expensive flooring options, even in this down market. Here, in addition to Murray, we talked to three retailers who move significant amounts of hardwood by understanding the customer’s wants, needs and preferences; by having a specific strategy regarding price and the big boxes; and by maintaining relationships with key manufacturers. 

WHY CONSUMERS CHOOSE HARDWOOD
Though tastes vary wildly among hardwoods buyers, one preference unites them: their appreciation for the unique, one-of-a-kind look that hardwood flooring provides. Pam Whittlesey, co-owner of J.B. Woodward Floors in Riverside, California, a third-generation family owned business, says, “A hardwood floor is like art. It is a completely unique floor. Hardwood flooring adds warmth to a home.” All the retailers that we spoke with agree wholeheartedly with Whittlesey’s observation: their customers choose hardwood for the aesthetic benefits that the flooring lends to a space. They love the one-of-a-kind quality of the flooring and they love the warmth.

On top of that, and just as importantly, many customers assume that a natural product is a quality product. Retailers report that consumers often prefer flooring that they view as “real,” as opposed to flooring that is heavily fabricated or synthesized. According to Whittlesey, hardwood, stone and wool carpet are popular choices with her customers because they communicate a feeling of authenticity. 

Though manufacturers are improving the realism of laminate and luxury vinyl products, in Whittlesey’s opinion the products are less appealing than real hardwood to many customers because they can see, for example, the same knot repeated periodically (not to mention, in the case of laminate, the clacking plastic sound of the flooring underfoot). Hardwood’s status as a natural product (and its solid sound) implies quality to many buyers. Whittlesey speculates that this trend may be at least partially inspired by the green movement, but it may also be credited to the current economic situation. In hard times, people often gravitate to materials that speak of longevity, strength and certainty. As a result, though dollars may be fewer, customers are more inclined to invest in a product that has a centuries-long track record, like hardwood flooring. In fact, Mansch estimates that 90% of customers who purchase carpet in his store would buy hardwood if they could afford it. Indeed, a flip through any shelter magazine reveals many room scenes featuring hardwood because it is truly the flooring of choice for many consumers.

As we stated in last month’s laminate report, while the cost of hardwood is generally higher than lookalike products, some higher end laminate and luxury vinyl product prices are now bumping into lower end engineered hardwood prices. Though laminate and luxury vinyl plank do have performance characteristics that are preferable to hardwood under certain circumstances, like in locations where contact with water is a likelihood, many buyers wouldn’t consider choosing a lookalike over real wood, especially if the price of the products is in the same ballpark. 

In addition, customers perceive hard surfaces in general to be a less friendly environment for allergens, since dust and dirt do not have any place to get trapped and can be easily removed (though the truth of this assertion is heavily debated by soft surface manufacturers). Whether or not this is the case, three of the four retailers that we consulted cited this as a significant reason that customers choose hardwood for their homes—and are now using it in more areas of the home. 

In spite of the fact that hardwood can scratch and dent and, therefore, may not be the best choice for families with large dogs or for buyers who spouses might wear their golf cleats in the house, David Schluter, owner of Bisbee’s Flooring Center, a Wisconsin retailer with two locations, estimates that 95% of the customers who enter his store to buy hardwood have done their research, know the product’s benefits and drawbacks, and are determined to install it in their home. Mansch agrees and points out that part of the beauty of today’s handscraped and chattered looks is that they don’t show the nicks that smooth finishes do. 

All the retailers in our study agree that the key to having a lifelong happy hardwood buyer is in conversation and education. “We do well at finding out how our customers live,” Mansch says. If hardwood is a really poor choice for a particular customer, the retailers that we talked to aren’t afraid to tell them so. 

Schluter explains, “Dogs damage the finish, not the floor, but I won’t sell hardwood to someone with three labs because I know they will be unhappy with it.”

Whittlesey adds, “We tell people what to expect and try to determine their expectations. Solid can take a bit more of a beating than engineered. Water is the biggest enemy of hardwood, so for someone with a pool it might not be the best choice. If people know the facts and want to be careful, then they should choose hardwood. Ultimately, customers with very active lifestyles will often go with laminate or LVT.” 

As a retailer, knowing what a customer wants (via talented salespeople who can mine this information) is a key strategy in selling product and creating lifelong customers. 

PREFERENCES
Preferences for particular hardwood looks vary from region to region. Coastal communities generally enjoy whitewashed styles with a sun-bleached quality that complement a beach decor; while Texans often prefer darker, handscraped looks that suit rustic decorating styles. In Sunni Petty’s store, Petty Tile & Carpet in Round Rock, Texas (owned by her father), handscraped looks account for the bulk of sales, and wider width (5”) products are the most popular. Petty’s customers also like multiple width installations—combinations of 3”, 5” and 7” planks—and dark stains. “We do a fair amount in ebony colorations,” Petty notes. 

Hickory dominates Petty’s sales, though she sells a fair amount of oak as well. Petty and her team push American made woods, so those are big sellers in her store. She reports that customers are willing to pay a bit more for products with an American flag on the label.

Wide boards and combination installations are also popular in California, though some of Whittlesey’s customers, whom she describes as conservative style-wise, express reservation about choosing such a unique look, asking if the 5” boards will eventually look dated. “They don’t want someone to say, ‘Oh, that’s so 2011’,” she laughs. Whittlesey is selling either natural or medium-dark tones currently; she notes a trend towards colors getting a bit darker. Her market is favoring smoother finishes. 

Whittlesey sells a lot of maple and hickory. She has noticed that, because of the Lacey Act, distributors aren’t offering the variety of species that they once were. J.B. Woodward does still carry Brazilian cherry. 

Mansch’s fastest moving SKUs are hickories and maples. He also sells a good amount of Asian walnut and stocks Russian birch “for a price point.” Exotics and oaks aren’t especially popular with his customers. 

One-hundred percent of the product that Mansch stocks is textured; he keeps no smooth finish products in his warehouse. Medium and dark tones are popular in his area as well. In spite of the fact that natural tones hide wear and dirt better than dark tones, naturals don’t sell well in Mansch’s market. “Everyone wants dark wood until it’s installed in their home,” he laughs. Mansch reports that some of his customers are adamant about buying U.S. made hardwood, “But,” he notes, “sometimes when price and look become an issue, origin loses some of its importance.”

In Wisconsin, another conservative region in terms of style, it’s the natural tones that rule, and handscraped products sit on the shelf. Oak is the best seller in Schluter’s market. In addition to oak, Bisbee’s offers maple, hickory and some exotics. 

Petty, Mansch, and Schluter all report that a good portion of their customers are interested in sustainable products. Schluter judges that about 25% of his clientele wants something green. Ultimately, however, Mansch says, “Wood is wood. When you cut a tree, you plant a new one.” In his opinion, wood’s sustainable story may never be as compelling or eye-catching to customers as that of a carpet with fiber made of recycled water bottles or even of cork. 

Interestingly, Whittlesey hasn’t had many requests for sustainable products from her California customers (though her clientele is mature in age, which may account for this phenomenon). She reports that those who are interested in sustainable products generally come into the store asking about cork and bamboo, but often they don’t like the look of these flooring types and opt for hardwood instead. 

Most retailers report that they are seeing an increase in the use of hardwood in the home. In addition to the traditional applications, like living spaces, halls, entries and stairs, hardwood is being installed more frequently in bedrooms and kitchens. “People who have the money to do so use it everywhere,” Mansch says. Many buyers appreciate the feeling of continuity created by using a single flooring type throughout the main floor of a home. 

Schluter reports that nearly 100% of his current business is in replacement. Though he sold flooring for an average of 300 new homes annually before the recession, as of late August he had sold flooring for only three new builds this year. The other retailers report that the bulk of their sales are for renovation work as well.

Unlike the other retailers that we spoke with, Bisbee’s Wisconsin customers prefer solid hardwood to engineered. “Engineered hasn’t caught on well around here,” he says, “Customers confuse it with laminate.” Whittlesey, Mansch and Petty sell almost all engineered hardwood. In fact, Petty estimates that it accounts for 99% of her hardwood sales. 

These differences aren’t based simply on preference. In the North, where Schluter has his store, basements are commonplace, so solid hardwood is nailed into the wood subfloor that exists over the basement. However, in areas where homes are more commonly built on cement slabs, such as California, Texas and most of the South, there is nothing to nail solid hardwood into, so engineered hardwood is the only way to go (unless a customer chooses to install a plywood subfloor as well). Though engineered hardwood can be used over either a basement or a slab, many customers will choose solid hardwood simply because it is what is commonly used—and has always been used—in their area. 

All the retailers sell mostly prefinished wood. Whittlesey says that, because of the environmental laws in California, the factory finishes are significantly better than the water-based finishes that customers are permitted to apply on site. Mansch reports that he has looked into stocking unfinished engineered hardwood flooring, but it isn’t a cost effective investment for his business. 

The retailers that we interviewed report that customers are doing a bit of research before coming into the store, but that doesn’t mean that they want to buy a specific brand when they get there. “Brand isn’t an important factor,” says Petty. “They are looking for cost, color and resilience.”

In part, Schluter chalks up the consumer’s indifference regarding brand to an overcrowded market, “There are too many choices now, I think.” But he has another theory as well, “Most people believe that all brands are equal. They all have the same technology these days. I choose manufacturers who will stand behind their product, and I communicate that to the customer.”

Whittlesey adds, “If customers know the brand, they assume it’s expensive.”

PRICE  & BEATING THE BIG BOXES
Price plays a significant role in the customer’s selection of hardwood flooring—three of the independent retailers that we spoke with ranked it as the most important factor, while the other said it was the biggest barrier to making a hardwood sale—but the customers’ relationship with hardwood’s price is more complicated than those facts may make it appear. 

To start, customers who choose hardwood have already committed to paying more for flooring than they would for a hardwood lookalike like laminate or LVT. In choosing hardwood, most of these customers are also committing to paying for installation. Very few opt for do-it-yourself (DIY) installation (retailers estimate between 5% and 10% of customers go the DIY route), and the cost of installation is an added 60% to 80% of the materials cost. In other words, customers who buy hardwood aren’t seeking the cheapest flooring solution.  

Petty says that her customers are looking at both price and quality when they buy hardwood. In selecting the store’s inventory, Petty chooses only well known distributors who can verify where their woods are grown, leaving the “cabin grade,” low end hardwoods for the big boxes and large retailers like Lumber Liquidators. The other retailers that we spoke with take the same approach. 

Whittlesey reports that, because of the choices she makes in purchasing, she has good products even at her lower price points, products that she feels confident selling. Customers who are shopping at independent retailers, then, are already making a choice up the quality ladder.

Of course, big boxes don’t only carry the cheapest hardwoods. In fact, on its website, Lowe’s offers a solid hickory SKU that clocks in at over $14 a square foot, but many customers have the perception that home centers sell only low end hardwoods, and that’s certainly a perception that independent retailers are happy to reinforce.

Regardless of their selection, big boxes generally can’t touch independent retailers when it comes to experience and expertise. Sales associates from the big boxes often send their customers with problems that they cannot handle into Mansch’s store, which allows Mansch a point of entry for future sales. “You have to have better educated salespeople,” he says. 

To compete on price point, Mansch has a warehouse at both of his stores. Because of this, he can offer aggressive pricing on certain products, which he prominently displays in his store. Mansch makes all the buying decisions for his stores, often asking local builders what products they would like him to stock, but he also analyzes his sales. “If, in a 90 day period, we see that we are cut ordering a product, then we look at turning that into a stock item to get a better price,” Mansch says. Of course, his salespeople first guide customers toward these in-stock items, if there is something in that line-up that fits their wants and needs. 

Besides price, there are other significant advantages to stocking product as well. If a salesperson underestimates a job and comes up short on materials, they can immediately pull product from the warehouse with no delay. Mansch points to a recent situation in which tongue and groove engineered wood was sold to a customer. When the customer opened the box, they found that the product had no tongue. The customers, who had already ripped out their old floor, were able to choose a new product from Mansch’s stocked inventory and get right back to work, rather than waiting days or weeks for another shipment to come in. 

Unlike the big boxes, Mansch’s stores are only open weekdays from 9:00 a.m. to 5:00 p.m. and from 10:00 a.m. to 2:00 p.m. on Saturdays, because Mansch believes that his employees need to have a quality of life outside of work. “It’s not uncommon that people can’t get to our store during those hours,” he admits. But he offers a unique proposition to these customers, “If they find a sample of a wood that they like in a big box, they can bring it into our store. We will reimburse for their time and the sample cost, then we will work to find a comparable or better product at a better price.”

Mansch reports that his average cost of goods is falling—he estimates that it has dropped by as much as 25% in the last four years. At retail, the $4.50 to $5.50 price point is his best seller. 

Schluter reports that when a customer recently brought in a sample of prefinished oak sold by Home Depot that retailed at $2.50 a square foot, he asked, “If you are happy with the big box, why are you in my store?” Schluter reports that in 90% of these cases, he can convince a customer to buy a better hardwood product from his lineup, spending more money up front in exchange for long-term satisfaction. Bisbee’s carries a broad assortment of hardwoods from eight different companies.

In Petty’s market, the $6.89 to $8.00 (installed) price point is selling well right now. Petty reports that while the cost of products continues to rise for the retailers in her market, customers in her area are consistently choosing less expensive products. “People are surprised because they assume that the big box will be much cheaper, but they find that we can compete and that we have a big selection. The trick is catching the eye of those going to the big box as a one stop shop.”

At Bisbee’s, the $5.00 to $6.00 price point is the best seller; this has remained unchanged, shifting neither upward or downward. 

Whittlesey also believes that pricing has leveled off. The $5.00 price point is selling well in her market as well. She notes that prices on incoming Chinese hardwood have increased by about $0.50 since the beginning of the year. Her American manufacturer’s prices have stayed the same, somewhat leveling the playing field between imports and domestics.

RELATIONSHIPS WITH MANUFACTURERS
The retailers that we consulted offered some insight for hardwood manufacturers: what they value most from manufacturers is their willingness to provide personal attention and respond to a problem. 

Schluter reports that Bruce is the hardwood leader in his store—the line his team feels the most comfortable selling—because they have a long-term partnership that Bruce is willing to invest in. A few years ago, Schluter’s installers complained that they disliked working with Bruce products because they were difficult to install. Schluter and other retailers complained, and Bruce improved its tongue and groove. It is now Schluter’s installers’ product of choice. 

Whittlesey, too, appreciates manufacturers who are willing to work with the retailer. “A couple of the companies keep up more with the trends. If they are able to see what sells in an area and change the textures and colors in response to what’s working, it really makes a big difference in what sells.” In her experience, some of the smaller manufacturers have been the most flexible and responsive—Gemwoods, LM Flooring and The Garrison Collection. “You can’t introduce something to the whole country and expect it to sell everywhere.” 

Style-wise, Whittlesey likes Mohawk’s reclaimed Antique line. “Reclaimed is an exciting concept for engineered,” she says. She was, at first, skeptical about how long the lines would be available, since the woods come from specific sources, but she has since learned that the company uses such thin strips on the face that the sources will last for a long time. Whittlesey appreciates that the woods carry with them an interesting story, which she enjoys sharing with her customers. In fact, the Mohawk Antique hardwood that J.B. Woodward has on its showroom floor was reclaimed from a monastery. 

Along the same lines, Whittlesey is excited about Armstrong’s Barrel Creek line of solid hardwood that is made from wine barrel wood. The burned stamps (used by winemakers) ensure a one-of-a-kind installation (something that customers value).  

Petty has been impressed with recent style innovations as well. She appreciates the ever-expanding handscraped lines, since those sell well in her market. She also likes the new stains on bamboo, which has made the flooring type more attractive to her customers.

Petty cites Mohawk as a great manufacturer, since it has found a way to offer a good quality product at a great price point. She feels strongly that domestic manufacturers need to continue fighting Chinese dumping, believing it is a fight for the integrity of the industry. 

Mansch works with most of the major manufacturers and notes that he has great relationships with Shaw, Anderson and Mannington because they rarely have a product issue with these lines. “Their products are as advertised,” he says. Mansch has been particularly impressed with two of Shaw’s more recent innovations—its scuff resistant finish and its Epic core, which eliminates the need for acclimation before installation. 

When asked what impresses him currently, Schluter says, “Nothing has been too remarkable. New stains just aren’t impressive.” While hardwood may not be a category thick with innovation—particularly on the solid side—Schluter is looking for more from the PR-laden roll-outs than just a few new tones. 

He has another message for manufacturers as well, “Quit selling to big boxes. You will make more money and so will retailers.” 

Copyright 2011 Floor Focus  

Related Topics:Mohawk Industries, The International Surface Event (TISE), Mannington Mills, Armstrong Flooring, Schluter®-Systems, Fuse Alliance, Lumber Liquidators, Fuse, Shaw Industries Group, Inc.