Focus on Leadership - March 2010

Interview by Kemp Harr

Tom Lape began his flooring career in 1986 after graduating from Duke University with a degree in economics and finance. He worked for Amoco in the late 80s and early 90s in the fiber business, when the firm developed the Marquesa Lana brand. In 1994 he became a partner in Sunrise Carpet Industries, which was later sold to World Carpets. In 1998, he joined Mohawk when it acquired World Carpets. He served as president of Mohawk’s commercial business until 2001, when he was named president of the residential business.

Q. What sets Mohawk apart from the other players in the flooring market?
A. I believe the most fundamental difference in Mohawk is the entrepreneurial spirit that exists inside our company. While we are a large, vertically integrated manufacturer, we are a nimble company that can maneuver quickly to meet the demands of retailers and consumers at a fairly rapid rate of change. We have the premier industry brands in Mohawk, Karastan and SmartStrand. We have an innovative array of retailer partner programs in Mohawk FloorScapes and Mohawk ColorCenter. And we have industry leading product technologies for our retail partners to leverage in DuPont Sorona, Wear-Dated and Scotchgard. These past few years have made us all focus on the most important aspects of our business and we have refined our efforts in areas that drive profitability for our retail partners. 

Q. Are there advantages to being the largest flooring producer in the world? Are there disadvantages?
A. There are some fairly obvious advantages to our business from a scale perspective, particularly when it comes to raw materials and logistics and distribution. We continue to manage our business with one eye down the road and one eye right in front of us. The carpet business is intensely competitive and while we need to be responsive to today’s market needs, we must have the vision to drive the market in a way that’s advantageous for both Mohawk and our customers for the future.

The carpet industry has historically been reactive to the trends and preferences of consumers. This, in my opinion, needs to change. Historically, the large integrated manufacturers have focused on cost as a singular approach to creating market advantage. With carpet demand at depressed levels for the industry overall, we have to emphasize innovation, product functionality, and design, where our size is an advantage as opposed to a disadvantage. We believe our recent success with SmartStrand Sorona really embodies this view. In short, we are bringing a better product to the consumer that really makes carpet ownership a more satisfying experience. In fact, our research suggests that consumers who have purchased any of our SmartStrand Sorona carpet styles have registered product satisfaction ratings far higher than any other product we have ever tested at Mohawk. We firmly believe that’s good for Mohawk and good for the carpet industry.

Q. Who are your mentors/role models and what did you learn from them?
A. Certainly my father has been the most significant role model in my life, but I have also been fortunate enough to have worked with some of the most successful entrepreneurs in the flooring industry. From my days at Sunrise, working closely with Johnny West and Clay Miller, to World Carpets, where I learned about retailing and merchandising from David Polley, I had no shortage of talented managers to emulate. At Mohawk I have worked with some of the industry’s best managers, from Jeff Lorberbaum to Monte Thornton to Frank Peters.

The flooring industry, and specifically the carpet industry, really has some of the most innovative and astute business managers in the U.S. Just look at the fact that carpet represents really the last major textile industry left in the U.S., where we are still the dominant world player. That didn’t happen by accident. 

Q. You have worked in both the residential sector and the commercial sector at Mohawk. Tell us your favorite parts of each sector.
A. Coming over to the residential side after spending almost 17 years on the commercial side is a lot like showing up at the same golf course you’ve always played, except when you step up to the first tee, the starter takes away your driver, gives you a new one and tells you to stand on the other side of the ball.

My view is that the commercial segment has matured as an industry a bit faster than the residential side in that the competitors really celebrated the differentiation among themselves and, in that process, created value for their customers, their supply chain partners and, most importantly, their own businesses.

I believe the residential side is getting closer to this model but still has some ground to cover. I believe we will achieve that when the consumer feels she has an array of choices and solutions for her project and doesn’t feel as though she’s selecting residential carpet out of a sea of sameness. 

Q. What initiatives have you implemented to ensure that your company will be stronger when the market recovers?
A. When you answer this question it’s generally more important in the downturn to stress what you haven’t done as opposed to what you have done. While we’ve made some substantial changes to our business because these times are, in fact, unprecedented, we haven’t sacrificed any of the business fundamentals—great service, great quality and terrific sales representation. We’ve made some changes to slim down our product line and field sales coverage, which is normal for the current depressed industry volumes.

However, when looking at the critical barometers for growth, we’ve really primed the pump. In 2009, we had a higher percentage of sales coming from new products than any time in our history. We’ve expanded our market reach with our Color-
Center and FloorScapes retail alignments as well as market expansions such as our successful Properties brand launch in 2008. These investments and the continued commitment to support the next generation of growth initiatives are critical to the long term success of our retail partners as well as our competitive business performance. 

Q. Explain the role of branding in the flooring industry.
A. Quite frankly, I believe this is one area that the industry could perform a little better. If we look at other mature industries, we’re still fairly low on the curve when it comes to sector brands. We have awareness numbers that are respectable, but the industry can and should do better here. Having said that, I believe there’s a shared responsibility with both manufacturers and retail partners to foster the growth of these brands if we’re going to create the differentiated value in the minds of the consumer.

The conventional wisdom is that advertising can drive anyone into my store and I can switch them to the product of my choice. That’s really not a healthy trend in residential retail, but it persists today. I’m also sensitive to many of our retail partners when they perhaps believe they would be more supportive if we didn’t have so many retail outlets selling essentially similar products. I do realize this is a two way street. But what has happened along this path is that we’ve deflated profit opportunities in the process. That just doesn’t make much sense.

The research consistently tells us that carpet is one of the largest consumer household purchases made, and that consumers consistently leave the buying process spending less money than they had expected to. In most instances they’re also less than overwhelmingly satisfied with their purchase experience. So, I believe we still have more work to do here. The brand is the one unifying aspect for a satisfying retail buying experience. Selfishly we’d like that brand to be Mohawk, but, quite candidly, I’d be happy to see any brand associated with a satisfied consumer because that’s actually good for all of us. 

Q. When DuPont built the Stainmaster brand, it advertised on network television and in consumer print “shelter” magazines. What’s the best way to build a brand now?
A. As the consumer has evolved in our business, so has our need to modify our advertising and brand development vehicles to connect with her. Undoubtedly, e-marketing has become the norm as opposed to the exception. Today your digital strategy is critical to the success of your brand and it must be executed from a holistic approach. Paid search and a flashy website are just table stakes today in your digital marketing strategy. If you had told me I would be 45 years old and sponsoring a 2,000 pound black African rhino to romp around on SmartStrand carpet in the Birmingham Zoo, while live webcams captured his every move, and his Twitter and Facebook pages were updated daily, I would have said you’re crazy. But our Ricko The Rhino promotion was among the most successful in our history.

The reason so many manufacturers and retailers have adopted aggressive digital marketing strategies is really quite simple—they work. Today’s retail leaders expect it of their retail partners. Today’s consumers are much more empowered and educated in products as they begin the shopping process. You need to position your brand in front of her early in her buying decision process. Shelter magazines and television advertising are still essential elements of a successful strategy, but you need to have an educational aspect to your marketing that addresses the consumer’s questions in a manner that’s simple and effortless.

While you need to be careful not to overweight your efforts on digital marketing, you need to remember that while a disgruntled consumer can be quite damning, a highly satisfied consumer can be truly priceless and she is our most powerful marketing weapon. She’s satisfied with the style and design of her new interior, satisfied with the performance and durability of her product, and satisfied with the installation and service she received from the retailer. A highly satisfied customer loves to brag, and the Internet is the perfect vehicle for her to hone that skill. Why not go overboard to create that highly satisfied customer and let her shout from the rooftops via chat boards and blogs just how much she loves your product or service?

Q. With major channel issues facing this industry, how do you, as an industry leader, make decisions around how to optimize your sales and yet support the channels that best serve the customer? 
A. Our selection process in distribution must be made with the consumer in mind. Where does she want to shop today and in the future? Where will she have the best shopping and installation experience? As such, with changes in consumer buying habits, we have experienced changes in the retail offerings to consumers. But while the satisfaction of the consumer is critically important to the decision criteria for us in distribution decisions, we must also take into account the integrity of the profit chain.

For example, Internet retailing in and of itself isn’t necessarily bad for a business. But when you have a consumer who might routinely shop in a retail outlet for selection and advice, then shop for price and nothing more on the Internet, that retail outlet is not creating any value for the retail buying experience. In essence, if your only competitive advantage is price, you’re not making your company a valuable retail partner in the distribution chain. We, as manufacturers, have to vigilantly monitor our business to make sure that every retail partner has a similar view toward a positive consumer experience.

Q. This industry has seen tremendous change in the last 20 years. What will this business look like in 20 years?
A. Unquestionably, the carpet segment has undergone the most seismic changes in the past 20 years compared to other product categories. I believe one trend that has occurred in retailing recently, and I would presume will continue, is the increased specialization and focus that has evolved within the retail channel. Whether that’s product types, such as ceramic or stone specialists and wood specialists, channel focus, such as shop-at-home, Internet, builder, or multi-family, or retail format like cash and carry, the most successful players in the distribution channel pursued a laser like focus on a particular area and became recognized for this specialty.

As many generalist retailers have discovered, most of these specialized companies are very good at what they do and are not to be taken lightly from a competitive viewpoint. For this reason, I believe you’ll see this specialty trend continue because the consumer values this degree of focus and the new information economy makes it possible to target a marketing message to a very specific audience in a cost effective manner.

Prior to the advent of e-commerce and digital marketing, pursuing these strategies to a specific audience was either not feasible or the cost was just too high for a small company to absorb. As manufacturers, we need to be aware of this and evolve with our customers to make sure we are creating products, services and sales strategies to reach each of these channels of distribution.

Q. As the market recovers, what has changed about the American consumer?
A. There is little doubt the American consumer has changed as a result of recent economic conditions. Most noteworthy will be the impact at the higher end of the marketplace. With real estate values expected to recover and eventually climb moderately compared to prior years, today’s consumer cannot depend on their home to provide the wealth effect as it has done in the past. The days of consumers spending other people’s money are over and that will have a dampening impact on some of the easier trade-up opportunities compared to times past. Keep in mind, the opportunities will still exist, but the retailer, and for that matter, the manufacturer, will need to work harder than ever to justify the cost of trade-up opportunities. 

Q. How has this recession affected environmental priorities?
A. I believe we will see this issue continue to evolve in the minds of consumers. An interesting tidbit about environmental buying habits of consumers—more and more of the recent research about consumer buying habits now seems to confirm that more and more of the prior research conducted to assess consumer buying habits in the environmental arena was wrong. How a consumer answers a survey and how a consumer votes with their pocketbook are two distinctly different scenarios. This was recently confirmed by the city of Boulder, Colorado. Boulder, one of the most environmentally conscious communities in the U.S. according to conventional household research, has been a near failure in even the most simplistic of environmental sacrifices—the conversion to fluorescent bulbs in residences.

As an industry we’ve probably gotten out in front of our headlights with our marketing of this issue and we need to watch consumers’ footsteps as opposed to listening to their opinions. If the city of Boulder is frustrated that they can’t even get their citizens to change their light bulbs, even when the bulbs were free, then we have to make sure that anything we do for our customers essentially rides free in their eyes as well. We all know that this issue isn’t going to go away and is important for each of us long term, but the solutions we pursue need to be more real solutions and less of a marketing campaign. The true solutions are the ones that you develop and nurture with your customers; those that you continue to do even after your customer no longer cares, and even when they’re not looking.

Q. What’s the most significant business challenge you face today and how are you approaching it?
A. Downturns force the entire industry to take the long term view and this recent one is no different. It’s essential for management teams to keep their entire team motivated and enthusiastic about the future because recoveries have followed every major recession in our country’s history and this one will be no different. It’s too easy to get bogged down in the challenges of daily business and miss the tell-tale signs of a recovery when it does finally occur. Those that are most prepared for the recovery will reap the most substantial rewards in the profit potential they create for the entire distribution chain.

Copyright 2010 Floor Focus 

Related Topics:Karastan, Mohawk Industries