Distribution Evolution - November 2007

By Frank O'Neill

One of the more interesting observations I took away from last month’s Top 250 Design Survey: the dramatic increase in the number of hard surface manufacturers designers are specifying these days. They’re obviously looking for alternatives to traditional hard surface suppliers. Possibly even more important, a handful of players no longer dominate the list, which seems to imply that the competition is getting better and better all the time.

One particular trend we see is the continued increase in the use of porcelain in the commercial market, primarily at the expense of stone.

For the past six years or so, we’ve been touting the untapped possibilities for porcelain in the commercial market, but since much of the porcelain in this country comes from Europe, European producers were slow to recognize those possibilities, probably because the U.S. residential market was growing like gangbusters.

As soon as the residential market began to slow, however, more producers, particularly the Italians, began to notice the commercial market. For the past two years, Ceramic Tiles of Italy has had an exhibit at NeoCon, and more and more designers are seeing the fantastic stone look porcelain the best Italian producers are creating. Some of today’s stone look porcelains are so realistic it’s very difficult to distinguish them from the real thing.

There are definite signs that porcelain is replacing stone, not because it’s cheaper (which it is) or more durable (which it is), but primarily because there’s more consistency in the patterning. Of course, cost and durability are also factors.

I think this trend is going to continue for a long time, especially as more Europeans discover how to sell to the U.S. commercial market.

For a closer look at trends in ceramic and porcelain, see the Cersaie report on page 35. Cersaie is the world’s largest ceramic and porcelain tile exhibition.

CHANGES AT STARNET

StarNet just celebrated its 15th birthday back in April. The same month, it got a new bandleader when Jeanne Matson took over as president from Lori Dowling. Eight months later, StarNet has a new logo (you can see it in the ad on page 13) and a new market focus.

In the past five years or so, StarNet has concentrated on building a national presence, and that move has been wildly successful. Today, the commercial contract dealer co-op has 165 members throughout North America; it began adding members in Canada less than two years ago, and now has 13 north of the border. Total sales are now well above $2 billion.

In the coming year, StarNet will concentrate on helping those 165 members build their businesses profitably. That includes marketing support on a local level and helping them build stronger connections with facility managers at regional corporations, and with general contractors, and architects and designers in their market areas.

SHOP AT HOME

Empire Today’s enormous success at the shop-at-home flooring business has propelled Flooring America and Flooring Canada into that business. Unlike Empire, though, the new service will be run by the local retailers who belong to the two retail co-ops. A big advantage, I’d guess, over Empire, especially if there are service issues or call back problems.

Do brick and mortar retailers who don’t belong to Flooring America have to worry about the shop-at-home trend?

I doubt it. Empire Today has been around for years now, but until a decade ago, it stayed in the Chicago Metro Market. It began growing dramatically only when it expanded nationwide and began heavy TV advertising.

Today, Empire’s sales top $500 million, but shop-at-home is still very much a niche business. According to some recent surveys, most women still prefer to shop for floorcoverings, particularly carpet, in stores.

SEARS IS BACK?

History is apparently not a good teacher. We won’t get into all the failed ventures that history has taught us to avoid or we’d fill a dozen issues. But one dictum that seems to apply to all retail businesses—not just the floorcovering business—is that corporations shouldn’t get involved in service oriented businesses that compete with entrepreneurs. They just don’t seem to be able to compete very effectively.

But here we are, just six years after Sears stopped selling all floorcoverings except area rugs, and the company is dipping one toe in that arena once again. This month it will show a range of floorcovering products in three Cincinnati stores. A spokesperson called it a “pilot” project with no other expansions planned at this time, but...

Back in the 1980s, Sears was the nation’s largest floorcovering retailer, with sales as high as $400 million. But the floorcovering industry was very fragmented back then, and it didn’t take much to be the number one player. When Home Depot entered the business later in that decade, Sears’ star began to fade, along with all the other department store chains that were dabbling in the floorcovering business. Throughout the 1990s, it remained among the top five players as Home Depot quickly moved up in the rankings and replaced Color Tile, and for a brief time in 1996, the Shaw Carpet Network, as the number one floorcovering retailer in the U.S.

As anybody who’s been in the floorcovering industry for more than a week knows, Home Depot is still the largest flooring retailer in the business, but virtually all its profit comes from its huge cash-and-carry business. It does not come from installed products like broadloom carpet.

Eddie Lampert, the new owner of Sears, who combined that company with a bankrupt Kmart a few years back, is a very smart cookie. He’s been able to do something few businessmen have ever been able to do—cobble together two money losing enterprises into a retail giant with 3,200 stores and sales of more than $50 billion. (Sears had about 900 stores when it stopped selling floorcoverings in 2001.) Maybe he’ll figure out how a big corporate enterprise like Sears can make money selling installed floorcoverings.

But I doubt it.

THE BEST AND THE WORST gt;

As our industry gets more global all the time, it’s good to know who you can trust and who you can’t. So we checked Transparency International’s list of the least and the most corrupt countries in the world this year.

The best? Denmark is number one, followed by Finland, New Zealand and Singapore.

;The worst? Somalia at number 179. Myanmar, Iraq and Haiti rank just above Somalia.

The U.S., by the way, ranks 20th on this year’s list. Canada is number 9, while Mexico is tied at number 72 with Brazil, India and China

If you have any comments about this month’s column, you can email me at foneill898@aol.com.

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