Contract Dealer Survey 2024: What they Really Think – December 2024

By Darius Helm

Contract dealers, also known as commercial flooring contractors, have a central role in the specified commercial market as the interface between A&D (architect and design firms), building owners and/or general contractors and flooring suppliers. Not only do they install the floorcoverings, but they also have the broadest perspective on commercial flooring specification, including knowledge of site preparation and products across the manufacturing landscape, from design to performance to maintenance protocols-a perspective they feel is chronically underutilized by their partners.

This year’s surveyed contract dealers report that, in part due to the slowdown in business, many of the challenges of the past few years have abated. For instance, as one contract dealer reported, “The supply chain has improved dramatically from last year and prices have remained consistent.”

While certain commercial market segments have been soft, other segments have been strong, with dealers reporting that medical/acute care, a segment that includes clinics and medical office buildings, and K-12 continue to drive demand. And although commercial flooring producers are frustrated at the underperforming market, many contract dealers are much more upbeat, in part because they’re operating off a backlog (which is starting to dry up), but also because many of them are involved in floor prep, repair work and concrete finishing.

Corporate jobs, including tenant improvement projects, have ticked up this year, as has hospitality, while the multifamily new construction market has slowed, along with senior living. However, both multifamily and senior living are strong sectors in the midst of long-term growth, and it’s likely that both will return to form in the next year or so. Government projects have also slowed, but if history is any guide, the new administration in Washington, D.C. will drive a wave of government specifications in the coming year.

The most recent AIA Architectural Billings Index score was 50.3, the first positive score in 20 months. Scores above 50 indicate an increase in billings at A&D firms, signaling commercial gains once those projects get underway-generally nine months or so down the road-so conditions in the commercial market could start to improve in the second half of next year.

ON THE BUSINESS
In the contract dealers’ circle of business are the upstream suppliers (manufacturers and their reps and distributors) and the facility owners and managers, along with their project partners, like general contractors (GCs) and A&D. Contract dealers interact with all these entities through relationships that can be cooperative or competitive, and sometimes both (we take a closer look at these dynamics deeper in this report under On Partnerships).

Many contract dealers are members of one of two prominent national groups: Fuse Commercial Flooring Alliance and Starnet Commercial Flooring. Starnet has been around for just over 30 years and Fuse for nearly 20 years, including 12 years under the Fuse name. In this survey, 86% of contract dealers are affiliated with groups, and of those in groups, 63% report being Starnet members, and another 36% are with Fuse, on par with recent surveys.

In terms of their business, the surveyed contract dealers, on average, generate about 76% of their revenues from specified commercial business, along with 19% from mainstreet commercial sales and the balance from residential. The last few surveys have yielded almost identical ratios.

In addition to the specification and installation process, many contract dealers also generate additional revenues, and sustain long-term relationships, by offering cleaning and maintenance services. This year, 36% of those surveyed report offering cleaning and maintenance, up from 25% last year but on par with 34% and 39% from the previous two surveys (2021 and 2019, respectively). On average, it accounts for 5.9% of total revenues, up from last year but down nearly a point from the Covid years.

In terms of annual revenues, this year only 3% report revenues of less than $5 million, compared to 10% last year, 11% in 2021, 12% in 2019 and 2017, and 19% in 2015, reflecting both the growth and consolidation within contract dealer operations, including through acquisition, over the last decade. Another 77% report revenues from $5 million to $30 million, compared to 72% last year, and 20% report revenues north of $30 million, up from 19% last year and 8% in 2021.

On average, the surveyed contract dealers have a salesforce of 7.4 people, unchanged over the last two surveys. Floor Focus also asked dealers about salesforce involvement with A&D, and the results suggest a long-term trend of reduced involvement. This year, only 11% of contract dealers report that over 75% of their salesforce works directly with A&D, down from 18% last year and 22% in 2021-and down from a high of 38% in 2009. It’s a constant source of frustration for contract dealers, who feel not just underutilized in the relationship but also stymied from adding value and efficiency to the projects, to the detriment of all stakeholders. (See “A&D: Working with Contract Dealers,” starting on page 77, for more on dealers’ relationships with A&D.)

For the complete Contract Dealer Survey results, see the December 2024 issue of Floor Focus Magazine.

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