E-Commerce: Hard Surface - July 2019

By Jessica Chevalier

It seems like only yesterday that the floorcovering industry was making its first foray into e-commerce via online sales of area rugs-deliberating about how to protect brick-and-mortar retailers, ensure color and pattern accuracy with online representation, and establish processes for shipping and returns of these large items. Today, these are the same issues being debated by manufacturers of hard surface flooring, who find their products increasingly sold online. Some hard surface manufacturers have embraced e-commerce as a new opportunity; others believe it is a poor path to market for product categories that require a good deal of consumer education and professional installation.

THE ONLINE LANDSCAPE
The big boxes own the e-commerce landscape for hard surface flooring; this includes companies such as Home Depot, Lowe’s and Menards, as well as flooring-specific retailers like Lumber Liquidators and Floor & Decor. These large retailers offer residential hard surface products of all types: hardwood, LVT and other resilients, laminate and porcelain.

There are also web-only retailers selling flooring online, Build.com and BuildDirect for instance, as well as specialty retailers like healthy-materials focused Green Building Supply, which sells products with a sustainable story, such as hardwood, bamboo, cork and linoleum. Home decor web-tailers, such as Wayfair, sell more types of flooring than just area rugs.

Sometimes manufacturers establish programs directly with these retailers and other times it’s their distributors that do.

While many traditional flooring retailers feature products that they sell on their website, fewer are actually selling online, though Tarkett’s Jeffrey Stefanov, segment manager for residential and e-commerce, notes that “we’re seeing more of our traditional dealers throwing their hats into the online ring. It’s a big opportunity for them to extend their brand and service the customers wherever they are looking for flooring inspiration.”

Right now, vinyl producer Armstrong estimates that about 5% of flooring sales are sold through online channels and believes that will rise to around 12%, all told.

THE BENEFITS OF SELLING ONLINE
Manufacturers have different motivations for selling their products online, but, in terms of Forbo’s drive, Denis Darragh, general manager of North America and Asia for Forbo, reports, “We made a decision from the brand point of view that there was no way to generate traffic online until we utilized successful online retailers, like the big boxes and several smaller customers that do a nice job online.” In other words, a big brand like Home Depot or Lowe’s can provide both the ethos and reach to get a manufacturer’s name and products out to new markets and customers.

Darragh notes that online business has been good for the firm. He adds, “We are selling through Homedepot.com into geographies that we never thought we would. They have a footprint that you can’t match.” Forbo focuses on selling its laminate products direct to retailers that have a defined Internet presence, drop shipping products as they are ordered or shipping them directly to the store for customer pick-up.

Travis Bass, executive vice president of sales and marketing for laminate manufacturer Swiss Krono, agrees, contending that online sales are a good strategy for his firm, which sells unbranded laminate, as well as for those like it, “Manufacturers [like us who] don’t have a consumer-facing brand depend on these branded outlets for our products that are sold online.”

Swiss Krono began selling laminate online in the early 2000s but reports that activity has ramped up steadily over the last five years. The company doesn’t have full visibility of its online sales but estimates that they account for about 10% of total business.

CONSUMER EDUCATION
Reaching consumers with good education is highly important in the online realm. Armstrong Flooring began selling products online about three years ago and feels it’s very important to get a step ahead on the online retail path and establish the digital assets to support the business. “As soon as a new product launches in the marketplace, we seek to become a trusted advisor,” says Meredith Hafer, residential channel marketing manager with Armstrong. “We educate consumers on the features and benefits, the installation information and instructions. We want to be a one-stop-shop for gathering information about our products because we know consumers are going online.” This includes providing the same information to brick-and-mortar retailers so that they can activate their website as well. However, Hafer notes that Armstrong offers the same SKUs and basic support in both brick-and-mortar and online retail locations, but the merchandising differs. Online purveyors require more digital assets and richer content to compensate for what the consumer is not getting from a well-informed retail sales associate.

Tarkett agrees that having consumers get their product information from the horse’s mouth, as it were, is key and also takes into consideration the nature of the exchange. “With e-commerce, our goal is to drive the same message, just through an online platform,” explains Stefanov. “This may result in some different marketing tools and assets, but, overall, it’s the same objective: drive a clear message, understand what is working and not working, then pivot to create the greatest customer experience.”

SERVICING ONLINE RETAILERS
Online retailers typically have specific packaging requirements that their manufacturer partners must adhere to-and timeliness is very important, with many e-tailers requiring same-day shipping. “It’s an easy business to do because the expectations are very clear,” says Darragh. Forbo formed a special processes group that handles all the packaging and shipping requirements for online business.

Swiss Krono has also formulated a special program for serving e-tailers. “The most significant change to our operations brought on by online sales has been handling more and smaller shipments,” says Bass. “We have established a pick-and-ship inventory, staging for LTL (less than truckload) shipments, and invested in packaging to accommodate the sometimes rough handling that these orders see.”

Typically, online consumers have the option of either home delivery or pick up at the store, so, in some cases, the manufacturer or distributor is not involved in the final transaction at all. Armstrong will sometimes leverage its distributors to assist with fulfillment, if they have warehousing closer than Armstrong does.

While one manufacturer reported that it has seen high returns due to consumers purchasing single boxes as an alternative way of sampling the product, Forbo hasn’t had that experience and attributes it to its robust sampling program-it provides big samples so consumers can get a real feel for the product, as well as to the fact that, “the people that want our product, want it,” as Darragh puts it.

Armstrong also offers samples through its website and has no limitations on how many consumers can order.

FINDING SUCCESS
Ultimately, Darragh attributes the success Forbo has found in e-commerce to a decision his team made early on: products sold through e-tailers must be easy to install and DIYable. “Eighty-percent of our online presence is click products,” says Darragh.

Ultimately, Darragh thinks his Internet business is only increasing. “I see continued growth,” he says. “I think eventually 50% of our residential presence will probably be sold online. By the end of June, we will have done as much online this year as we did all of last year.”

Bass has a similarly rosy vision for the future, which he believes will evolve to serve the consumer better. “I think the ‘omni-channel’ purchase avenue for products that need assembly or installation-buy from a trusted brand retailer and have them deliver and install-will continue to grow,” he says. “If it is 10% today, I estimate it will double in two years. An expanded online offering will also allow us to test market new ideas/colors without the significant investment and risk required to launch new stock products in many stores.”

BRICK AND MORTAR LOYALTY
Somerset’s story is a bit different. The company does not prefer its products be sold via the online marketplace and does not sell its running line products direct to e-commerce retailers; however, some of its distributors do sell Somerset products to online retailers. “When a customer buys a product online, it seems more often than not, they have delivery problems, or they have an issue, and the Internet companies frequently won’t follow up-it’s not good for the consumer,” says Paul Stringer, vice president of sales and marketing for Somerset.

In addition, Stringer points out that “Internet companies sometimes sell at lower prices because they don’t provide full service.”

Whenever possible, Stringer recommends that customers buy the product through a brick-and-mortar retailer, and, in fact, the company states this recommendation on its website. The company also won’t ship a product outside a distributor’s territory, so it doesn’t assist in online sales in any way.

One of Stringer’s long-standing policies is that he will always take a call from any customer-retailer or consumer-who contacts Somerset with an inquiry. He also joins customer tours at Somerset’s manufacturing facilities, and these open-door policies give him unique insight into several aspects of this issue.

First, he reports that there is no question that online buyers are showrooming. Consumers frequently call to confirm that the product they are seeing online-often for a lower price-is identical to what they are seeing in a brick-and-mortar showroom. He tells them that, indeed, if the part numbers match, the product is the same. But he always advises that they buy from a reputable brick-and-mortar dealer and cautions, “If you buy from an online purveyor, always ask them what their policy is if you have an issue. More often than not, they are not coming to your home to inspect the floor.”

The company also encourages retailers to develop relationships with these customers to prevent them from going online. “A flooring sale is more than just delivering flooring,” he notes. “Installation, follow up, advice, floor care and other expertise is important to consumers. It’s important to make sure the consumer is educated that all this matters, and they won’t get all this from most Internet dealers.”

Secondly, Stringer reports that when he fields calls from brick-and-mortar retailers confronting him about why he is allowing Somerset products to be sold online, he explains the quandary Somerset faces. “We are a lean company with minimal staffing that works to produce value for our customers,” he says. “We don’t have the staff to chase every issue that the Internet can create. I perfectly understand a retailer’s frustration. We don’t sell our products direct, our distributors do. I have watched other [manufacturers’] programs, and I don’t see many programs stopping these sales. I see almost every other brand on websites. I try to be honest with customers. I can’t police it, and I’m not going to drop a multi-million dollar distributor over a $1,000 Internet sale. So, if we can’t be effective in enforcement, I’m not going to act like we are. I’m still trying to figure out the best approach, to be perfectly frank. It’s a discussion I often have with customers.”

TAKING RETAIL BACK TO BRICK-AND-MORTAR
Some common practices of the flooring industry have made it simpler for e-commerce to take hold.

The practice of utilizing subcontractor installers and, in some cases, having customers arrange their own installations is one that has, in a sense, bridged a gap between the installer and consumer. And the next time around, a consumer may be more comfortable bypassing the retailer completely and opting for an online purchase, as they have direct access to the installation professional. The fact that retailers have removed themselves from this process serves to make them dispensable.

In addition, retailers that have put their sales operations on autopilot have created an environment in which the consumer doesn’t understand their value. A brick-and-mortar retailer who listens to the customer’s needs has the opportunity to be an expert. When a customer experiences this, they are less willing to go online. As Stringer puts it, “Consumers should see the dollar value of doing business with you.”

In addition, some manufacturers’ strategies to bypass distribution and go direct, which have resulted in the weakening of distribution as a whole, have, in a sense, created an environment in which distributors must play ball with online retailers in order to remain viable.

MAP PRICING
MAP pricing is a great policy in theory, ensuring that all retailers, brick-and-mortar or online, sell at the same price.

The utility of the program, however, is contingent on follow up. Some flooring manufacturers employ individuals-either in- or out-of-house-to monitor that the policies are maintained. Others don’t have the staff or the resources to dedicate to that endeavor, so they simply don’t establish policies or fail to really monitor them.

There’s also the matter of following up when the policy has been violated. In this case, the power balance is often simply in favor of the e-tailer. Is a manufacturer really going to cut ties with a large online retailer that is bringing in millions for them annually? In any market where product is commoditized, as we see in some sectors of flooring, parting ties with a manufacturer has little to no discernable impact on the retailer. They can round up six more providing nearly the same thing tomorrow.

Forbo has shied away from MAP policies, which are illegal in many of the countries in which the company does business, and simply sells its products for the exact same price to every customer, with no exceptions.


Copyright 2019 Floor Focus