Battling Amazon: Elevating brick-and-mortar to compete against online retailers - July 2018
By Beth Miller
Up until the past few years, flooring retailers had managed to get by with websites that simply display in-store products, contact information and store locations, but most experts agree that this is no longer enough. Increasingly, retailers are realizing that they have to either embrace the shift toward online retailing or come up with an exit strategy. Many of today’s retailers have started to actively chart their own course through the online marketplace, taking into account their specific regional market demographics, their own strengths as retailers and their understanding of the floorcovering sale, from decision-making to installation.
Jim Dion, founder and president of Dionco, Inc.-a training and consulting firm specializing in retail selling and consumer trends-explains that brick-and-mortar retailers have the upper hand, despite the fact that many of today’s shoppers prefer to shop online, because they have the ability to pull the customer in for an indepth look at products, which online retailers cannot do. But how do flooring retailers approach online competition? Dion advocates behaving like online retailers, essentially finding a way of selling both online and in the store.
Dion also cautions against reading too much into the trend toward younger generations buying online. For one thing, this is an overall statistical trend, representing a shift in shopping preferences, so lost in the mix is the sizeable minority that still favors in-store shopping, and also lost are the older generations, which hold the majority of the wealth. “Baby Boomers are discovering the convenience of shopping online,” Dion notes.
Also, the younger generation is a moving target. “Millennials are moving into their peak consuming years-buying homes and furnishing them,” Dion continues. “They are definitely the customer of the future. You would think they would be the prime online shopper, and for some products, they are. However, they are consumers of experiences. They really do like, in many cases, to be able to go into a store.”
Dion goes on to point out that by offering both an e-commerce store as well as a brick-and-mortar store, flooring retailers have the advantage. “They can literally say to the customer, ‘You want to shop online? Here’s our site. You want to come in and visit us, grab a cup of coffee, really look at the product? We’re here for you.’ The online people can’t do that. They can only do online.”
LEVERAGING THE ADVANTAGE
A major frustration flooring retailers have been facing is how to market these big-ticket items that call more for an in-person, tactile experience than for digital viewing. Dion says, “Having a brick-and-mortar store is absolutely a requirement for success, and at the same time, having a brick-and-mortar store with a robust web presence is the ultimate. If you view the online merchants as having an advantage over you, you’re missing the point.”
First and foremost, a strong web presence is key, and just as important is the ability to evolve as buying trends shift and younger generations get older. These days, a robust website fulfills a range of roles, providing not only product images and descriptions, but also a space to connect with potential customers through how-to videos, a blog, information on special sales and store events, services provided and design information-all working to draw the consumer to the store to see and touch products and interact with a professional staff who can answer questions and help with customization. Dion recommends that retailers set up their physical stores to be a haven for the design and architecture community so that they feel comfortable bringing in clients. He adds, “Create a meeting space where everyone feels comfortable gathering. Offer free coffee and a welcome atmosphere.” All of these are ways in which the online stores cannot compete.
Price and convenience are the two ways in which online retailers are competing, and the third, assortment, can be a double-edged sword, warns Dion. “Too many choices and customers can’t make a decision,” he adds.
“Brick-and-mortar retailers really do have the upper hand, but getting them to ‘behave’ like an online merchant is the key,” says Dion. “That’s the hard part. They have to realize that they have the ability to control both environments-by competing on price, convenience and assortment as well as providing an inviting space and professional staff and services-with the added bonus of actually having a physical location. It’s all about switching one’s mindset.”
After building a robust website that accurately displays the products and services offered, flooring retailers can then set out to ensure that the brick-and-mortar location is equally as inviting and informative. By providing competitive pricing, experienced and knowledgeable flooring sales associates, and professional design and installation services, flooring retailers can set themselves apart from online stores.
According to Jeff Macco, owner of Macco’s Floor Covering Center, the pricing between online stores and in-store is competitive. Taking into consideration the total sale and everything the customer would gain by purchasing their products in-store, including services, Macco notes, “The consumer thinks they are paying so much less, but that is not the case. And if we are unable to sell a customer on the value of a flooring guarantee, our salesperson value and installer value, we will price match, but we will not provide any services. The customer pays 100% upfront, has to get their own installer and must pick up their order at the store.”
“Offering design and installation services is absolutely critical for retailers who have the ability to offer one-stop-shopping with one solution,” says Dion. And just as important, according to Macco, is staff training in understanding what the customer wants. “It is critical that the salesperson sells themselves,” Macco adds.
Through this relationship, the customer can reach out for help, whether it is returning a product or seeking assistance with choosing flooring. That translates to value in choosing the right material for the right area, ensuring the product is stylish and the colors match (if pairing products), meeting the quality expectations of the customer, and showing the customer that the products will meet their needs whether it is pet protection or waterproofing they desire.
Macco notes, “The vast majority of consumers will always say, ‘While price is very important, it’s not the most important.’ Consumers want the best value. They don’t necessarily insist on the lowest price because sometimes that’s not the best value, so we stress to our staff to tell the consumer, ‘We’ll give you the best value.’ Now, what does that mean? You’re going to get something if you buy from us that you don’t get if you buy online. You get me.”
Macco’s Floor Covering Center offers design services at no extra cost to its customers, and nearly every location has interior designers on staff to instruct customers how to match ornate patterns with other patterns in addition to matching color/texture, like in the case of floor tile patterns.
RC Willey also offers design services, according to Eric Mondragon, hard surface flooring buyer for the retailer-which has 12 stores in Utah, Nevada, Idaho and California-and that includes the option for customers to use augmented reality (AR) to help visualize flooring in a room.
Dion says of the use of AR, “You are already behind if you do not have this. For the average consumer, the ability to use AR to measure space and see what something is going to look like in their home before they make the purchase is far and away the most exciting technology that’s out there.” Stores like Home Depot, Lowe’s and Ikea have already implemented AR. According to Mondragon, the decision to use AR depends on the sales associate and the consumer, but it is an option.
Design services are just one piece of the puzzle. Having the ability to offer installation services, and quality installation at that, is important and certainly something online retailers cannot do at this point. Macco says, “Labor is at a premium. It is difficult to find someone who can do an installation.”
However, that isn’t stopping Amazon from offering flooring installation through its Amazon Home Service Provider program. Amazon Home Service Providers are essentially self-employed. They can choose what work they want and what work they don’t want, and make up their own hours. And this brings up another important point: how do flooring retailers keep their installers from working for customers who purchase their products online?
Macco’s has a policy that does not allow its installers to do side jobs for customers who purchase their products online. If an installer is caught, then, essentially, the employee is now the competitor and will no longer be able to install for Macco’s. Purchasing installation services from a flooring retailer like Macco’s ensures that a customer is getting a quality install and a guarantee on the product and the service.
Currently, Amazon offers services for everything from baby stroller assembly to sink and light fixture installation. However, the services are limited. They are limited to the availability of a home service provider based in the area as well as the legitimacy of service provider qualifications.
Amazon Services is where assemblers, installers, electricians and anyone selling a professional service can sign up to offer those services to Amazon customers. There are two requirements that must be met in order to be accepted as an Amazon Home Services provider. According to Amazon’s website, “All Amazon Home Services providers are required to carry General Liability insurance with a limit of $1,000,000 U.S. dollars per occurrence. You will be required to provide your insurance information upon registration.” The second requirement is, “If you select a trade profession (Electrician, Plumber, HVAC Specialist, General Contractor), you will be required to provide appropriate license/certification information required by applicable laws or regulations.”
Essentially, anyone with a business license and general liability insurance can hop on Amazon’s site and sign up free of charge to offer these services. The home service providers can sign up to offer any type of service. Macco points out that plumbers and electricians are required to be licensed in every state; however, in most states, flooring installers are not required to be licensed. This is somewhat problematic for consumers when determining the validity of an Amazon Home Services flooring installer.
Since flooring installation services are not yet available in the Chattanooga, Tennessee area, where Floor Focus is headquartered, we checked a neighboring zip code and selected hardwood flooring to see who would be listed as the area provider. A construction company located an hour away was the only choice. And though this particular construction company had good ratings, a close examination revealed that the ratings were for completely unrelated jobs like assembling trampolines and grills.
Amazon does have a rating system in place where consumers can provide feedback and rate the service they received. They are also allowed to leave comments. Since consumer ratings and reviews are the new word-of-mouth, it would be difficult for an unreliable provider to get away with poor service for long. However, this still begs the question: can anyone be a flooring installer?
According to Macco, right now skilled labor is at a premium, making it difficult to find someone who can do an installation. Ultimately, the issue then is, who is responsible if there is an issue? Amazon? The home service provider? Macco says, “I think folks at some point are going to realize, I’m making a big investment here online. If it turns out not to be what I had in mind, I’m stuck.”
As for the consumer choosing Amazon over a brick-and-mortar, Mondragon says, “I think it comes down to who you’re comfortable buying from. We install about 90% of what we sell-very little cash and carry.”
TWEAKING THE FORMULA
Retailers delving into online business are most effective when they customize their approach to account for both their clientele and their business model. For instance, Mondragon notes that his firm’s focus is on driving traffic-including online traffic-into its stores, as opposed to selling online. It’s a strategy that works for RC Willey because it also draws store traffic through sales of appliances, mattresses, electronics and furniture, so it’s already drawing from a larger pool-not unlike home centers. Its website is designed to bring customers to the store for the tactile experience and to provide them with a better idea of what the flooring will look like in their home. All of the different flooring products are displayed online, but pricing is not provided. Customers can request an estimate online, and someone from the store will contact them.
Offering a wide variety of home products certainly draws in more potential customers, and sales associates have more selling opportunities. But what keeps the customers coming back, according to Mondragon, is service. “I think if you give customers a reason to come in the store, and you provide that service, they’re going to be your ambassadors,” he says. “They’re going to be your biggest advocates.” This is where having a professional and knowledgeable staff is invaluable.
Mondragon reports that RC Willey is selling more rugs due to an increase in sales of hard surface flooring. He estimates that his store’s average price falls somewhere between $800 and $1,000 for a 5’x8’, compared to the $99 to $300 range reported by rug manufacturers last year for online area rug purchases. Currently, RC Willey sells area rugs in-store only. Mondragon says, “[Customers] have to come in. It is definitely more of an in-person experience. You have to look at the rug. You have to look at the size. You have to look at the fringe and pattern.” It’s the tactile experience coupled with the shopping experience provided by the knowledgeable staff that successful flooring retailers like RC Willey believe will keep consumers coming back.
However, in Macco’s Floor Covering Center’s Wisconsin locations, all area rug sales take place through the company’s new online area rug store and not in-store. According to Macco, a customer can order a rug online, and it will be sent directly to their home, rather than shipped to the store for pickup. However, Hadinger Flooring-Macco’s Fort Meyers, Florida location-has a large inventory of rugs in-store and sells more in-store rugs than online. Macco points out that the two markets are fairly distinct, with Wisconsin’s customers generally younger than those in Florida, who consequently tend to prefer to see the products in-person rather than shop online.
One of the biggest concerns with buying products online is the difficulty in exchanging or returning products. In the case of buying area rugs online, the consumer is required to repackage a large item and pay return shipping and wait for the new product to show up, rather than simply loading it up and returning it to a physical location where it is possible to have a replacement within the same day. Mondragon says, “Typically, the consumer is buying too small of a rug for its intended purpose. Because of that, the return ratios on rugs are rather high.” He continues, “In some cases, customers buy three rugs, take them home and bring two back; we average around 15% returns on rugs.”
The ways in which consumers shop for products is going to continue to evolve, and brick-and-mortar retailers who choose to support the evolution and remain watchful of the changes will ultimately succeed. “Going forward, we have to be very vigilant in how we market,” says Macco. “I think at some point we will see these younger consumers who are buying online change [their buying preference] as they age. If they do not change and are perfectly fine with buying anything and everything online, then we have only one choice as retailers-we have to adapt to that format, then take on an approach like Target where we have both, an online store and a brick-and-mortar store.”
Ultimately, how do brick-and-mortar flooring retailers reach consumers? As the buying demographic shifts as well as the products that each prefers to buy online, it only makes sense that the advertising also shifts. “Nobody buys the paper anymore,” says Mondragon. “People very seldom watch the news. Consumers get to pick and choose what type of advertisement they get to see, so it’s difficult to reach them.” A crucial point Mondragon feels most retailers are missing is that they are advertising using methods that are appealing to them rather than taking into consideration what would appeal to consumers and not using the review feature as a way to inform advertising decisions because reviews are seen as a negative rather than a positive.
Something Macco would like to see in the future is a synergy with stores across the U.S. where the consumer shops for a specific item online and is able to see whether the item is available at a retailer or multiple retailers in their area. Of course, this would have to be organized by a group like the National Flooring Association (NFA) where flooring retailers would be members and, therefore, some level of vetting would be involved.
For now, Macco advises flooring retailers to make absolutely certain they have the best trained staff around with an indepth knowledge of the flooring industry. He asserts that flooring retailers must provide quality labor and professional design assistance. Otherwise, he notes, “there really isn’t a whole lot of difference between you and Amazon.”
In addition to the people and services offered by brick-and-mortar flooring retailers, connecting with the local community is an important part of creating lasting relationships with current customers and reaching potential ones-something online retailers cannot do.
Each RC Willey location has a cafeteria that donates its profits to a charity of choice. Every promotional event offers customers free hot dogs and drinks, giving them the opportunity to relax and interact with staff. Mondragon says, “The biggest thing retailers forget is to simply say ‘thank you’ to customers.” The sales associates at RC Willey send out handwritten letters of thanks to each of their customers.
Macco’s Floor Covering Center sponsors local golf events and charity functions, and it recently sponsored a marketing department in a local high school where students generated a $1,500 profit in the three-week period. Macco’s loaned the money for the startup, but under the condition that the students turn a profit. Every Friday, the students held a meeting, with Macco’s associates present, where they discussed the results for the week and issues related to production, accounting and marketing. In addition, Macco’s offers scholarships to local trade schools as a way to get the younger generation interested in a skilled labor profession.
Copyright 2018 Floor Focus
Related Topics:National Flooring Alliance (NFA)