Hardwood Flooring Report: The hardwood industry must learn to toot its own horn - Apr 2018
By Jessica Chevalier
The hardwood category has been under pressure for the past several years as wood-look flooring products made of vinyl, laminate and ceramic seek to pilfer its highly desired visuals while offering alluring performance enhancements at competitive price points. Wood has been stalwart in its positioning: emphasizing its standing as a natural product, the value it adds to a home, its ability to be sanded and refinished, and its long lifecycle. But with all the energy in the market being created by lookalike products, is it time that the hardwood industry take a more aggressive, consumer-facing stance?
Keep in mind, however, that the hardwood category is far from floundering. It accounts for around 15% of total industry marketshare and over $1.7 billion in annual sales at mill sell value (the exact figure will be honed in next month’s annual report). It’s simply a category in a transition, yet unsure of how to capitalize on its natural assets in a lookalike world.
While there has been some distinctly negative news from the category-most notably, plant closures by Armstrong, Mohawk and Shaw during the 2017 calendar year-there have been positive developments in the category as well. Shaw introduced its premium Anderson-Tuftex brand, which combines two long-standing industry names under one umbrella and will sell both engineered and solid hardwood products. American OEM launched its branded Hearthwood program and Emily Morrow Finkell launched the Emily Morrow Home hardwood collection, also made by American OEM. In addition, Dixie’s Fabrica, its higher-end brand, launched a hardwood collection of 70 SKUs (40 for floors, 30 for walls)-a first in the company’s history.
Public Opinion Strategies, the firm that completed research on behalf of the NWFA, tested four statements touting the benefits of hardwood flooring, focused on value, ease of cleaning/hypoallergenic qualities, durability and the products’ sustainable benefits. All four of the statements tested made at least 80% of homeowners “more favorable” toward hardwood floors, with three of them making at least 50% “much more favorable.” POS reports, “In our experience, messaging that hits the 40% to 45% ‘much more favorable’ level is potent and can be used in advertising campaigns.”
• 62% “much more favorable”: The lifespan of a hardwood floor can exceed 100 years, making it a tremendous value.
• 55% “much more favorable”: Hardwood floors are easy to clean and won’t trap dust and mites. They improve air quality.
• 50% “much more favorable”: Homeowners will need to replace less expensive flooring alternatives, such as carpeting, numerous times before a hardwood floor will need to be refinished.
• 41% “much more favorable”: Hardwood is the most environmentally friendly flooring material. The hardwood forests that provide flooring products are growing more than twice as fast as they are being harvested.
COURTING THE CONSUMER
The National Wood Flooring Association (NWFA) hired research firm Public Opinion Strategies to study consumer sentiments about hardwood flooring. According to lead researcher Neil Newhouse, “Americans love [hard]wood floors, and those who don’t have them want them.” The research reported that “just over half of homeowners (52%) say they have wood floors in their homes, compared to 75% who say they have carpeting and 58% who have tile. But, when homeowners are asked what kind of flooring they would have in their ‘dream home,’ two-thirds (66%) say wood floors, including 81% of those who already have them in their homes and half (50%) of those who don’t have wood floors.”
It’s a finding that raises some interesting questions. First and foremost, do consumers care if that wood floor is authentic hardwood or a lookalike, and do they even know the difference? Second, how does the aspiration for a hardwood floor in a hypothetical “dream home” translate to actual investment? To put it another way, what relationship does your “dream vacation” have to what you’re actually doing next summer? A mansion on the Oahu coast may be what you fantasize about, but a condo at Myrtle may be what’s within budget.
“Certainly, solid hardwood and the premium portion of the engineered category is aspirational for consumers,” says Don Maier, CEO of Armstrong Flooring. “So-price equal-aspiration is the driver. But when those products are out of reach financially, consumers ask themselves, ‘Is what looks like wood good enough?’ We still see many consumers who see hardwood as an investment. They know it adds value to the home, and they know that the ability to refinish the product is an advantage. We believe those elements drive consumer preference, but as the visuals on the wood looks have improved, those provide an alternative. The fact is, however, nothing looks like wood like wood.”
Jeff Meadows, senior vice president of residential sales for Mohawk, adds, “Many consumers today walk into a retail store and say that they want to buy hardwood flooring. Ultimately, three out of four of them end up buying a product that looks like hardwood. Often, the reason they want real hardwood is because they want longer and wider, which is very popular right now. And there is a consumer who will always demand real wood.”
It’s good news for the hardwood industry that consumers want the look of hardwood, of course; the crux hinges on convincing them-with the proliferation of often-cheaper wood-looks on the market-that the investment in real wood is worth their hard-earned dollar. As the hardwood industry frequently notes, hardwood adds more value to the home than any other type of flooring, but does the consumer know that? Getting that message, and others, out to the masses hinges on successfully educating a variety of communities-builders, retailers and their associates, not to mention A&D-about the value of true hardwood and how it differs from competing wood-look products. That is no easy task for a variety of reasons.
First and foremost, at the RSA level, Paul Stringer, vice president of sales and marketing for Somerset Flooring, believes that associates often sell down to a lower price point product because it makes for an easier sale. Selling a consumer on a higher price-point product-such as hardwood-requires knowledge, skill and, to some degree, confidence. In the absence of one or more of these, an RSA might opt to soft-ball the consumer with a lower price product or may simply make a sale riding the tailwinds of a wood-look competitor’s hype. Regardless, properly educating the RSA community is a challenge, considering the ever-flowing stream of individuals through these types of positions.
In addition, the fragmentation of the media market due to the Internet and social media has made reaching around the RSA to the consumer an ever more challenging and costly endeavor. Touching the customer via advertising is no longer as simple as putting an ad in a handful of home magazines or running a spot on the top networks. Today, half the battle is figuring out where to invest, and the other half is paying for it, especially for players in an industry that is struggling to regain its footing. The hardwood industry hit $2 billion in sales, mill sell value, in 2004, 2005 and 2006 but has yet to clear that watermark post-recession. Who will take the lead on consumer advertising may come down to who has the most to gain, and, most certainly, the wood-only manufacturers have a higher stake in the process.
Interestingly, NWFA research reveals that “59% of homeowners say that Internet research is one of their top two ‘go-tos’ for research” and that “older homeowners are just as likely to use the Internet as their younger cohorts.” This is fairly in line with research that Synchrony Financial, which provides consumer-financing to flooring and other retailers, recently completed, its Sixth Annual Major Purchase Consumer Survey, which included flooring as one of its 17 product categories. Synchrony found that, among the consumers studied, the path to a major purchase started with online research for 80% of consumers, then moves to in-store research for 68%; to social media & reviews (39% consult with friends, 24% check online reviews); to a second store visit for 21%; to researching financing options for 26%; and finally to an in-store purchase for 81%. Consumers reported spending an average of 110 days shopping for flooring, compared to an average of 81 for all categories. So in spite of whether consumer advertising-in particular online consumer advertising-is costly, it seems clear that it must be done.
But can a consumer differentiate between true hardwood and high quality wood looks? That million-dollar question is obviously a difficult one to answer. Some can. Some can’t. Some likely believe that they can-and may not ever come to know any different. On this front, again, the solution comes down to reaching the consumer with the right message. Gary Lanser, chief operating officer for Mohawk’s North American flooring operations, notes, “As we look at each product category, we need to make sure that we are innovative, offering a clear value proposition and communicating effectively through merchandising. If we provide the consumer some guidance in merchandising, yes, I believe that she can differentiate hardwood from wood looks.”
Years ago, it was easy to define hardwood flooring: a product made from a solid piece of felled lumber, milled into 21/4” strips and finished. Today, that task is a bit more challenging. No one disputes that engineered hardwood is true hardwood, but what about products with a wood face and vinyl or HDF core, or a printed face and a composite wood core?
Today, more than ever, many in the industry believe that the hardwood category is in need of definition, especially because many feel that some flooring manufacturers aren’t simply enabling the confusion but purposefully deceiving consumers. “Calling something wood when it’s really paper borders on being shady,” says Martin. “We want the consumer to know what they are buying. They shouldn’t be fooled into thinking they are buying something that they aren’t.”
“The industry, as a whole, needs to define hardwood,” says Bondrowski. “We do believe that the powers that be-the NWFA or actual manufacturers-all need to get together to define hardwood because the public is being fooled.”
Michael Bell, senior vice president of hardwood for Armstrong, adds, “As an industry, we’re getting very liberal in terms of what we’re calling hardwood. We are most definitely in need of defining the term. Some of the things companies are calling hardwood today are beyond a stretch.”
“We are at the point where there need to be some industry standard classifications, much like the NOFMA (National Oak Flooring Manufacturers’ Association) standards for grading solid hardwood,” concludes Allie Finkell, executive vice president of American OEM. “There are a lot of hybrid products right now that are great, but to a consumer it can be challenging to really determine which have a real wood component/visual and which do not. There are benefits to all types of products, but its important to be clear about the distinctions so there is full transparency of the materials.” Many of the interviewees echoed Finkell’s sentiments: there is a time and a place for hardwood and a time and a place for wood-looks. Creating a fair playing field across the categories that allows customers to truly choose which product is best suited for their needs and applications should be the goal of the entire industry. After all, no one wins when a product fails.
BUILDING A NARRATIVE
Perhaps the greatest challenge hardwood faces is the razzle-dazzle of the marketing strategies of competitor products. LVT and ceramic are categories with energy behind them, whereas hardwood, quite frankly, has been unable to generate the same level of excitement. Sure, hardwood has a multitude of great features and beautiful new visuals and formats, but it’s not new-and new carries its own clout. Consider, for instance, how technology today is continually improving upon itself. The iPhone X isn’t viewed as a new but equal version of the product, but as an improved solution with flashy new features and benefits, which makes the consumer desire the new iteration, whether or not their trusty 6S is still in good working order. Today’s consumers are accustomed to seeing new products as must-have improvements on the old. Apply this thinking to hardwood, and one may infer that consumers see wood-look flooring like LVT simply as the “new and improved” hardwood-especially if it is marketed as such.
Of course, a new category often grows at a faster clip from a smaller base than its long-enduring companions. And many in the hardwood industry point out that flat or single-digit growth is what’s to be expected for a mature category. But with the continued proliferation of wood-looks, it’s difficult for hardwood to get a word in edgewise.
Take, for example, the hottest adjective in the industry right now: waterproof. Wood-look competitors are using the concept as a differentiator. To a large extent, the average consumer’s need for fully waterproof flooring is a manufactured one. Only a disaster situation requires a waterproof floor-events few and far between-and losses created by those events are typically covered by homeowner’s insurance. But due to the marketing efforts of rigid LVT manufacturers in particular, consumers may increasingly believe that they need a waterproof floor in their home-and they will likely continue believing this unless they are educated otherwise.
As a side note, it’s worth pointing out that hardwood flooring can survive water damage if it’s mitigated quickly enough, and modern equipment can more rapidly eliminate moisture. Though solid hardwood may cup, in some instances it can be sanded rather than replaced. Engineered hardwood can handle water better than solid, and those floors can often be saved. In addition, it’s important to note that some water-related dangers remain even with a waterproof floor. For instance, liquid trapped beneath a waterproof floor can produce molds that pose danger to human health. If consumers are to understand these realities, it is important that hardwood tell the story.
It’s also worth understanding that hardwood flooring that experiences standard wear and tear can be sanded and refinished to its former glory and go on to last decades-centuries even. Wood-look products, such as LVT and laminate, cannot. Once damaged, damaged they remain, and, ultimately, when they wear out or ugly out, they will likely end up in the landfill. Though the possibility of recycling the new phthalate-free versions of LVT exists, no one in the U.S. is yet doing so.
There are other benefits that hardwood also offers that synthetic woods simply can’t touch: the beauty of its irregularity, the warmth and richness it adds to a space, its sound and feel underfoot, the sustainable story. The problem, however, is that telling these stories is costly and, considering the pressure that the category is under, shouldering the cost of consumer advertising has become an increasingly burdensome task.
Should the hardwood industry tout its sustainable factors more prominently? Raw materials for U.S.-made hardwood flooring are sourced from sustainably managed forests, and the lengthy lifecycle of hardwood floors makes them one of the greenest floors a consumer can buy. Consider as well that the byproducts from the manufacturing process to make hardwood flooring aren’t chemicals and pollutants but wood chips and dust. These can be burned for energy to power the plants or made into wood pellets and sold for use in wood pellet burning stoves and even cooking appliances such as grills and pizza ovens. Armstrong makes charcoal with a portion of its waste.
“The industry does a horrible job of promoting the natural product aspect of hardwood,” says Maier. “In fact, I believe many consumers think that hardwood flooring isn’t sustainable because we are cutting down trees. And they are surprised to hear that the percentage of standing timber actually increases annually. We haven’t educated the consumer enough.”
Shaw’s Natalie Cady believes that one of the keys to selling sustainability hinges on making it accessible for the consumer, adding, “If they have an option to buy green, they will take it, but we must market it in a friendly way, without getting lost in sustainability legalese. It’s challenging to make the verbiage consumer-friendly.”
But will promoting the sustainable aspects of the product actually sell more hardwood? Stringer believes that, with regard to hardwood flooring, “sustainable” makes people feel good about their decision but isn’t a factor in their decisions. On the other hand, he believes that “made in the U.S.” carries significant clout, reporting that Somerset gets a decent number of calls from consumers who want to verify that all its products are indeed U.S.-made.
NEED FOR LEADERSHIP
One of the central crises facing the hardwood industry at present is a lack of leadership at the manufacturer level. Armstrong Flooring remains the marketshare leader but at rapidly declining levels, and it’s no secret that the company has had its share of challenges prior to and since its IPO in April 2016. In August of last year, the company consolidated its hardwood operations into six plants, resulting in the closure of two-one that made solid and another that made plywood and veneer. While Armstrong’s hardwood revenues for all of 2017 were down 11%, fourth quarter hardwood revenues were down less than 8%.
In March, coinciding with its Q4 earnings report, Armstrong Flooring announced an increase in hardwood prices. Interestingly, one interviewee pointed out that there was a time when the entire industry would have followed Armstrong Flooring in that action due to its standing as the category leader, but that time has passed.
Behind Armstrong Flooring on the leaderboard are Shaw and Mohawk. All three of these companies offer a range of products from across the flooring categories, including wood-look products-Mohawk has the broadest range and Armstrong the narrowest-and therefore have strong incentive to support the concept of a multi-solution approach. These firms will take the hardwood business where they can get it but really have no incentive to steer consumers toward that particular solution, especially when wood-look resilient sales are on fire. Consider as well that hardwood is a natural product, and natural products can be difficult to manage in a manufacturing environment because of irregularities in the material, supply shortages, events that impact the source, and shortages in the raw material workforce. Hardwood has experienced all of these challenges over the course of the last decade, and, for that reason, it may seem not only sensible but smart business for these companies to push the market toward a more easily controlled product.
Mullican and Somerset round out the top five list of hardwood players in the U.S. Each of these wood-only manufacturers serves the mid- to higher range of the market and therefore has felt less pressure due to the incredible rise of wood-look LVT. Says Stringer, “Mullican and Somerset have the most to gain by being sure that real wood stays popular. The wood business will shrink, no doubt, and it will be interesting to see who is in it at the end. Regarding solid, I wouldn’t be surprised to see Shaw and Mohawk out of solid in five years. Armstrong doesn’t have a choice because its West Virginia solid hardwood plant is a real monster.”
There is a sense-or perhaps a hope-that early adopters to the current generation of LVT products may soon experience failures and a resulting discontentment with their choices, and that may push them back toward hardwood. If that’s the case, we have yet to see real evidence of it. Regardless, for Wade Bondrowski, director of sales for Mercier, the reasons that the flooring industry is pushing lookalikes at all is a bit of a head-scratcher, “There is no value in plastic. We see all these competitive products like LVT and WPC taking a bite out of hardwood, and it’s almost a double negative because it’s pushing the industry as a whole towards lower-priced goods. Why we’re doing this I have no idea.”
For certain, a portion of hardwood’s current plight lands squarely on the shoulders of the industry itself. Hand-sculpted products and the subsequent textured products that followed, which first appeared around the turn of the century, cannot be sanded and refinished without the loss of these distinct textural elements. Pair that with the fact that, over the course of the last decade, the industry has seen low-quality engineered hardwood flooring with razor thin veneers, which, similarly, could not be refinished, and one can see how the industry positioned itself, to some degree, to dilute one of its major selling points.
FLOORING AS FASHION
The timing of these changes aligns with that of wood transitioning from a foundational finish to a fashion item. The flooring market today is style-driven, and that is fine positioning for a five-year floor but not for a lifelong one. Consumers may rightly ask, why sink a bundle into a style-forward look that will be out of fashion long before it is out of service? In a sense, jumping onto the fast-fashion bandwagon has positioned hardwood as a me-too category, downgrading rather than elevating its status.
At the same time, hardwood really can’t be blamed for jumping on the fashion bandwagon either. Had it stuck to 2-1/4” widths in orangey finishes, it would be criticizing it for being static and stodgy. After all, the vast majority of the American middle class doesn’t consider true long-term value as it once did. We are a society that doesn’t mend but replaces our clothing, that leases our vehicles. We are driven by fashion, the idea of timelessness and classic style largely eschewed in favor of the hip and fresh. Fashion builds demand. And in this case, hardwood must ensure that the demand isn’t satiated by other categories.
Interestingly, Surfaces 2018 saw some manufacturers designing hardwood products that could not be confused with wood-looks, capitalizing on the beautiful imperfections that only a natural material can offer, such as cracking and crisp, wood-unique texture. Dan Natkin, vice president of hardwood and laminate for Mannington, believes capitalizing on wood’s inherent wood-ness is key to its ultimate success. “The most effective means of standing out from the lookalikes is through visual differentiation,” says Natkin. “The best printed products have repeats of ten or 15, but the differentiation between planks of hardwood is truly infinite.”
Natalie Cady, hardwood category manager for Shaw, adds, “Consumers want something unique, something different from what everyone else has. The only way to attain that is by working with a natural medium.”
All this is to say that hardwood’s current quandary is complicated and won’t be solved by a single manufacturer or consumer campaign, but by a united effort that positions hardwood as a fashionable product without undermining its greatest attributes. It’s also about bridging that chasm between the dream and the dollar without compromising hardwood flooring’s value proposition.
The NWFA, of course, is the obvious choice to lead this charge, and commissioning the consumer research was a piece of that endeavor. What it does with the information will determine its value. Michael Martin, president of the NWFA, reports that the group is currently working on its next three-year strategic plan. He adds, “There are things we can do from a PR and branding standpoint in the marketplace, several ways of providing members with branding a ‘real wood’-type campaign, defining what hardwood is and making that clear in the trades and to the consumer. We would rather take it slow and have the right moving parts than move quickly, engage the wrong parts and spend more money than we have.”
Just last fall, Armstrong Flooring jumped back into consumer advertising with a powerful commercial for its hardwood flooring, featuring world champion wood chopper Martha King. The spot makes a great statement regarding the durability of the company’s product. Unfortunately, however, it aired on home improvement channels for only about a month. The piece is still available on Armstrong’s YouTube channel.
Summarizing the category’s plight, Neil Poland, president of Mullican Flooring, says, “There is too much hype in the market right now regarding artificial wood. LVT manufacturers want to claim that their floors are indestructible, that you can crash a plane into them. But that’s not true; LVT comes apart easily and is not as waterproof as they claim. Claims about LVT are overstated, over-marketed and over-hyped. But we, as an industry, have not done a good job telling our story. We need to focus on the idea that hardwood adds 3% to 5% value to the home, as confirmed by Consumer Reports in 2016. We add more value than any other floorcovering. And hardwood is naturally renewable and recyclable, and it contains no plasticizers or harmful ingredients. Hardwood floors are truly an investment, and they are less expensive in the long term. The story needs to be told to builders, to consumers, to designers, to RSAs.”
Brad Williams, vice president of sales and marketing for Mirage, agrees. “The biggest threat to the hardwood category right now is how the product is being portrayed and what message is being conveyed to the consumer,” says Williams. “The reality is that everybody wants the look of wood. That’s why we see so many copies today. But it’s a dangerous marketplace, where the consumer can be fooled into thinking they are buying a hardwood product when they are not. The industry needs to better support retailers and make sure they understand the realities of both hardwood and wood-look products. We need to give them the tools so that they pass the message along properly to the consumer. At Surfaces, Mohawk launched Revwood. Revwood is laminate. This is very confusing. What messages are we, as an industry, sending to consumers today?”
Williams points out that the NWFA is trying to make inroads, but reaching a consensus can be difficult, especially when the suppliers with the loudest voices are also investing millions in new LVT plants. “Advertising at the consumer level is extremely costly,” he points out. “If we are going to make a splash, it will take millions, and where is the money coming from? The giants in the industry have the budget, but if they are making good money in carpet and LVT and not as much in hardwood, why would they push an initiative to sell more hardwood? I have a hard time seeing how an industry-wide initiative will happen, so the onus falls on individual manufacturers, and we have to hope that when the consumer walks into the retail store that the RSA is portraying our products accurately to the consumer.”
Though there are quite a few wood-look options in the market today suited for commercial use, including ceramic and LVT, authentic hardwood is desired for some specifications, especially in luxury environments. Many manufacturers offer hardwood products rated for light to medium foot traffic, enhancing the surface durability of the products through the application of finishes. Often, products that feature a wirebrushed or hand-sculpted texture are more aptly suited for commercial application because the texture helps to hide wear.
There are a handful of companies in the industry, however, that sell commercial-grade acrylic impregnated hardwood flooring. Armstrong’s Performance Plus line of acrylic impregnated hardwood offers twice the protection against scratches, dents and gouges when compared to the natural wood. The product-made in its Somerset, Kentucky plant-is frequently specified on jobs that walk the residential-commercial line, such as condominium developments in metropolitan areas. Of the business, Maier says, “This is an area that we haven’t penetrated to the extent that we can, and we are putting attention on it moving forward.”
Virginia-based Nydree also offers commercial grade hardwood flooring that is acrylic impregnated, which the company claims makes it three- to four-times more dent resistant than the natural material. The company-with manufacturing operations in Pennsylvania-injects liquid acrylic through the top layer of the wood and tops it with a proprietary finish to increase scratch-resistance that works in conjunction with the dent-resistant wood. Nydree reports that some woods are better suited for the process than others. Soft woods like cherry and walnut will benefit from the process but will not achieve the same level of durability as a wood that is naturally harder.
According to Jason Brubaker, Nydree’s co-owner and vice president of sales and marketing, the company’s hardwood typically does need to be refinished, even in high traffic environments.
Retail was Nydree’s largest market until the sector’s recent downturn; hospitality is the most significant sector for the firm today, while corporate and higher education are also strong.
Regarding specifier skepticism on whether wood can actually withstand commercial foot traffic, Brubaker reports that he and his team work closely with A&D who are unfamiliar with the product. “We try to hand-hold the first time a designer specifies the product, making sure that they are installing the right species in the right place,” he says. “Typically, a designer who is skeptical up front becomes very loyal after their experience.” Brubaker points to the International Civil Rights Center and Museum in Memphis and the Mercedes Benz Atlanta Falcons Stadium as recent high-profile jobs on which Nydree Flooring was used.
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