Hardwood Update 2013 — October 2013
By Jessica Chevalier
The hardwood category offers interesting challenges for retailers. It’s a highly desirable flooring product that, for years, commanded a high price point. However, commoditization of the category by the big boxes and Lumber Liquidators has changed the customer’s perception of hardwood.
Today, customers have a more difficult time navigating the hardwood market: choosing between solid hardwood, engineered hardwood and wood look products; understanding what benefits a $7.99/square foot oak has over a $2.99/square foot oak; and, at the core, understanding value as it relates to hardwood, both with regard to product and installation.
THE CORRECT FLOOR FOR THE CORRECT LOCATION
While hardwood flooring has been used in the U.S. for quite a long time, there are still some misconceptions about the category. These can spell trouble for customers who don’t have a knowledgeable salesperson guiding them through the buying process.
One challenge relates to the very name of the category: hardwood. The word “hard” at the front leads less-knowledgeable consumers to believe that the product is indestructible.
Bob Buhl, co-owner of Phillips Floor to Ceiling with his wife Heidi, says that often customers will visit his store after shopping the big boxes and mention that they’ve selected, for instance, a birch for $2.99 a square foot. When Buhl asks about their lifestyle and explains the level of wear and tear that the hardwood can endure, they are taken aback. “Most customers don’t think about performance,” he says. “They assume that all hardwood will perform well. The competitors don’t bring it up because they think that discussing cons will result in them losing a sale.” Some species of hardwood flooring are better choices than others for active environments, and it falls on sales staff to steer the customer toward a floor that is right for their application and lifestyle.
While all quality hardwood floors, properly cared for, have the ability to last for decades, a harsh environment can cause scratching and denting. Both solid and engineered flooring can be refinished (though the number of times most engineered floor can be refinished is limited), but the process is inconvenient and—depending on whether the homeowner is doing the work themselves or paying someone else to do it—either time-consuming or costly, which makes the process of selecting the correct floor up front all the more important.
As their looks have improved, laminate and LVT have become a viable and durable option for customers seeking a hardwood look. Says Mike Kerr, a radio personality turned salesperson for Sutherlands in Fort Collins, Colorado, “A good salesperson steers an active family away from hardwood. I tell them, ‘Choose solid unfinished hardwood or spend half the money you would on hardwood and do laminate while your kids are young.’ LVT has really grown in the last two years, taking sales from engineered wood. It’s cheaper and easy to DIY.”
But some customers are seeking products that they view as more natural or authentic, which is where wood-look ceramic tile might have an advantage over laminate and LVT. This year, two of the retailers we spoke with reported that wood-look tile is making a big impression with customers. Like hardwood, it is a product that comes with a high price tag, especially with the price of installation factored in, but it requires almost no maintenance, is quite durable and has a long lifecycle. Says Jeff Jones, owner of American Flooring in Yulee, Florida, “Wood-look tile is getting so much better looking. We offer seven or eight wood-look tile planks. Mannington is taking its best selling hardwoods and mimicking them in tile.”
Richard Veilleux of Floor Systems, Inc. in Lisbon, Maine explains, “Wood-look tile is coming on too, but the price point is way up there, especially installed. People are willing to invest in it because it doesn’t require maintenance and is long term. Once prices come down, it will definitely steal business from hardwood.”
The fact remains, however, that many folks will select hardwood, regardless of its flaws, because it is a lovely, natural product and because it makes good financial sense, especially when it comes to resale value, “People consider it an upgrade,” says Buhl, who has been in the flooring industry since 1976 and spent his early career as a manufacturer rep, “a product that doesn’t depreciate. If people put hardwood in their home, it retains its value long term. People recognize that.” In addition, many species of hardwood flooring change as they age, developing a distinctive patina that, many feel, adds to the character and beauty.
Indeed, hardwood is high on the “want” list for many homebuyers. According to the National Wood Flooring Association, “Residential real estate agents say homes with wood floors sell faster and fetch higher prices, according to a nationwide survey commissioned by the National Wood Flooring Association. By a four-to-one margin, real estate agents said that a house with wood floors would sell faster than a house without wood floors. Some 90 percent said a house with wood floors would bring a higher price.”
The National Association of Realtors’ 2013 Profile of Buyers’ Home Feature Preferences revealed that hardwood was especially desired in the Northeast.
HARDWOOD AND SOFTWOOD NOMENCLATURE
Woods are characterized as hard or soft based on their reproductive strategy, not their density. How Stuff Works explains, "As it turns out, a hardwood is not necessarily a harder material (more dense) and a softwood is not necessarily a softer material (less dense). For example, balsa wood is one of the lightest, least dense woods there is, and it’s considered a hardwood."
EXPECTATIONS VERSUS REALITY
Then there’s the matter of understanding the different types of wood available, especially solid versus engineered and a $2.99 per square foot oak versus a $7.99 per square foot oak.
Some customers view engineered as fake wood, akin to LVT or laminate, not understanding that both the core and veneer are wood products. Says Kerr, “If a person wants hardwood, and it fits in their budget, that’s what they’ll get. And old dogs will always do solid.” At Sutherlands, solid and engineered sales are about 50/50. “There are tons of basements in Fort Collins, so you use engineered in those locations. You have to make sure you’re getting the right product for the market,” he says, “Rotary peeled woods delaminate in our dry climate. This is a bad market for bamboo, and, if you’re installing exotics, you have to make sure to have a quality acclimation.”
In other locations, engineered is the best choice because of the climate. “We sell mostly engineered, very little solid, because engineered is the appropriate product for our climate,” says Buhl of his San Luis Obispo, California location.
On the opposite coast, 65% of Veilleux’s sales are solid.
In Florida, Jones sells both solid and engineered, though he quit selling solid bamboo due to problems with cupping. One hundred percent of his offering is pre-finished.
Helping customers understand the advantages of engineered isn’t especially difficult. The real challenges come from the Lumber Liquidators and the big boxes of the world, which the customer may see as offering the same flooring as the independent retailer but at a fraction of the price. This message goes a long way with tight-budgeted consumers who reason that maple is maple after all.
Says Jones, “People think wood is wood. They say, ‘I can get this at Lumber Liquidators for $3.00 a square foot. Yours is $7.00 a square foot, and they’re both hickory.’ Well, I ask, what’s the difference between a Kia and a Mercedes? They’re both cars.”
This is especially problematic in terms of prefinished hardwood, explains Veilleux, “The prefinished market doesn’t have a set grading structure like the unfinished market. The manufacturers call their products whatever they want. One company’s select could be another company’s middle grade. This makes it really hard to compete against big box stores or to compare products from company to company. Customers have to open the box to see what the actual product looks like.”
Cheap product will generally have more variation in color, board length and quality, so the floor that is ultimately installed may look little like the sample that they saw in the retailer’s showroom.
But Veilleux is seeing traction on this front. With regard to whether the big boxes and Lumber Liquidators are stealing hardwood business from independent retailers, he says, “A little bit, but not as much as they once were. People are seeing that if you pay $2.99 per square foot, you’re getting a $2.99 product. We have that price point, but ours is a better quality product. We can compete well.”
For Buhl, hardwood is a much more significant part of his product mix than it was 21 years ago when he entered the retail side of the flooring business. “In 1992, hardwood was maybe 10% or 15% of sales. Today’s it’s 30% of the business. We promote and push it a lot.” Regarding quality, he says, “I’m not saying that all big box and Lumber Liquidator products are poor quality, but they do sell ones that are. And when a customer has problems, hold onto your hat. I discuss that with the customer. They’ll say, ‘But I’m saving $2,000 and hoping it’s good quality.’ I say, ‘Bring the sample in. Let’s talk about it.’ ”
Buhl says that a great boon to the independent retailer would be if hardwood manufacturers would create a good, better, best hierarchy among their products. The good product would be comparable to the big boxes, perhaps, and from there, it would be easy to explain the advantages of a better product. “Good, better, best is a long time market strategy,” says Buhl. “It helps the customer feel that they have options. The salesperson can say, if you’re willing to step up, here’s what you get. Consumers think that way. The carpet guys do it all the time.” Buhl suggests that the good, better, best strategy rolled out in a few different woods—such as hickory, maple, oak, and acacia—would enable the independent retailer to better compete with the chain stores for hardwood sales.
There is also a misunderstanding about products purchased online, says Jones. “The Internet is buyer beware. With Mirage, for example, if you buy on the Internet, you are getting no warranty.” These facts would be a great boon for retailers, if consumers knew them, but the channel between flooring manufacturers and consumers isn’t an open line of communication. So, it falls on retailers to convey this information, which they will certainly do if given the option. Of course, if a customer buys online before a brick-and-mortar salesperson has the opportunity to discuss the matter with them, they may find themselves in a situation in which they have a flawed floor and no option for recourse. Jones believes that manufacturers need to get the word out about this subject.
Similarly, he believes they should take more initiative to educate consumers on value. “When manufacturers come out with a new scratch resistant finish, you see it in trade magazines but not on TV or in Better Home and Gardens. Mohawk’s Armor Max finish is awesome, but they don’t actively promote it to the public. I’ve never had a customer come in asking for a product with Armor Max or Scuff Guard.”
While, once again, Jones knows that he and his sales staff have an opportunity to educate the consumer about the benefits of these finishes, it would help to have the manufacturers actively working toward the same goals through their avenues. A logo at the bottom of a consumer ad with the name of the finish simply doesn’t do much to sell the customer on the product’s value.
Jones jokes that, up until ten years ago, “the choices were oak or oak.” Today, he says, 75% of customers who come in and say they are looking for hardwood “are like a deer in the headlights” when a salesperson asks whether they have a preference on species, character, grain or color.
While the majority of homeowners who purchase hardwood still have it professionally installed, click products have made DIY installation more accessible, which can be both a boon and a detriment.
WHAT THE CUSTOMER WANTS
According to the retailers that we interviewed, price is the biggest barrier to hardwood sale. Buhl says that, while ten to 15 years ago it was common to sell $10.00 per square foot hardwood, today customers look at you like “you bumped your head” if you pull out price points that high. “Unfortunately, the big boxes have driven the price down to the point where perception is that you can get quality for less money. You have to address that issue.” The sweet spot for Buhl’s hardwood sales is $4.99 per square foot to $6.99 per square foot.
Buhl reports that, with the increase in choices today in the hardwood market, people are now buying wood like they buy carpet, “Color is very important. That is a change. Ten years ago, they didn’t walk in and look for color. If the color is right, but the species isn’t what they thought they wanted, they’ll still buy it.” Though the store used to do a lot of builder work, that is nonexistent how. Phillips serves the upper middle to higher end of the market and offers cabinetry, countertops, and window coverings in addition to flooring.
After price and color, Buhl says that his customer’s priorities are texture, species and construction. “Construction is at the bottom of the list. That’s where you have to be really savvy. You really have to explain the benefits and what makes one construction better than another.”
And while it’s true that customers want American made, they aren’t willing to pay for it in many cases. Says Buhl, “American made is becoming more of a factor slightly, but if customers see something cheap, they will buy an import. They buy with their pocketbook. That’s reality. Manufacturers insinuate it’s important, but the public hasn’t caught up. It may become more important as the economy strengthens. The same with green.”
Veilleux reports that his hardwood customers come into the store knowing that they want wood. But with regard to color, finishes and textures, they don’t have formed opinions. In fact, many of them have never seen handscraped hardwood before.
A few of Veilleux’s customers are knowledgeable about hardwood brands. But, more often, his customers are concerned about country of origin and, in this case, the desired country is Canada. “They have done some research and know that the Canadian manufacturers have great products and finishes. Mirage, Model and Preverco are all within a couple hundred miles. These firms produce products with excellent quality and the northern species have a different look, which many customers value.” According to Veilleux, the quality of U.S. made hardwood has come up, so some U.S. made products are now on par with Canadian quality. But with improved quality has come increased price. “The price of U.S. made wood products has really increased, especially so far this year, which makes a lot of Canadian manufacturers, whose prices haven’t come up, a better value.” Veilleux imports directly from Canada and does offer U.S. made products as well. Floor Systems carries hardwood ranging from $3.00 per square foot to $12.00 per square foot, but says that the sweet spot is $4.00 per square foot to $7.00 per square foot.
Veilleux, a chemical engineer by training who spent a couple of years as a rep for Shaw, says that overall business has picked up recently. And, over the last five or six years, the hardwood business has definitely increased. “People are running it through the entire first floor and into the kitchen as well.” Currently, business is all at the low or high end, with nothing is the middle. He’s starting to see more remodels, but, overall, the residential market in his area is still soft.
Jones has seen his hardwood sales increase over the years. His clientele includes many transplants from the North, many of whom had hardwood in their previous locations and, therefore, want it in Florida as well. The store says that U.S. made takes preference over brand among the wide range of clientele that his store serves. But, more than anything, American Flooring emphasizes quality and value. Since all it sells is flooring, it has to sell a product that will encourage customers to come back the next time around.
Sutherlands reports that its hardwood sales are “way up.” The store has hardwood ranging from $4.00 per square foot to $15.00 per square foot and sells Armstrong, Kent, Mulllican, Somerset and Shaw hardwood products.
A few years ago, to stay competitive, the store began stocking unfinished hardwood. It stocks a handful of its most popular prefinished SKUs as well. Sutherlands is a family business that was started in 1917. Nationwide, Sutherlands has 80 lumberyards. Around 15 years ago, it opened a design center in Fort Collins, and, four years ago, upgraded that design center to a new, larger location. The design center attracts a broad range of customers, ranging from those in $200,000 to multi-million dollar homes.
Kerr reports that, for every Sutherland’s customer, price is the overriding factor. “It has to fit in their budget.” But species is also playing a role, “Everyone has oak and is tired of it. There are so many colors and textures on the market today.”
Kerr reports that many of Sutherlands jobs involve ripping out a Lumber Liquidators product because it wasn’t what the customer thought they were getting. “If you have an educated consumer, you don’t have to worry about Lumber Liquidators,” says Kerr. “But when a customer comes in taking about Lumber Liquidators, I tell them to Google them and read all the complaints.”
TARIFF ON CHINESE WOOD DEBATED AGAIN
The Court of International Trade has remanded the antidumping case on Chinese engineered wood flooring back to the International Trade Commission (ITC).
FORMALDEHYDE: SHORT-SELLER VERSUS LUMBER LIQUIDATORS
In June of this year, Seeking Alpha, an online stock market news and financial analysis site, published a report by Xuhua Zhou, a private investor, that alleged that Lumber Liquidators’ Mayflower Bund Birch engineered hardwood, sold in at least one of the store’s California showrooms, contained three and a half times the legal level of formaldehyde.
Copyright 2013 Floor Focus