Hardwood Update: Independent retailers find ways to thrive - Oct 2015
By Calista Sprague
Year after year, hardwood remains at the top of consumer preference surveys, and retailers report that sales continue to climb. However, selling hardwood, despite its popularity, is no easy task. While wood flooring is a desirable, natural product, it reacts to temperature and moisture and can easily sustain damage. In order to avoid product and installation claims, salespeople must understand the unique characteristics of wood and its proper applications, consumers need to be adequately versed in hardwood care and maintenance, and installers must be qualified and conscientious.
Notwithstanding the challenges, retailers have enjoyed prolonged growth in hardwood sales. “Wood sales are good in all of our locations, double digit increases for the year,” says David Snedeker, division merchandise manager at Nebraska Furniture Mart. “It’s one of the biggest categories for increased sales for the year.” Successful companies like Nebraska Furniture Mart are investing in regular sales and installation training and taking advantage of the expanding builder market.
SOURCING AND PRICING
Many dealers purchase hardwood both direct from manufacturers and through distribution. They shop for quality, style, freight costs and, of course, product price. Consistent availability of stock is also a key consideration, especially for retailers that sell to the builder market. Turnaround time is often short, so reliable availability can be crucial.
Service is another important concern for dealers. “Solid hardwood I only buy from domestic suppliers like a Shaw, Mohawk or Armstrong,” says Great Floors vice president of purchasing, Ken Chadderdon. He cites better claims service as the main reason. “We’ve done some calculations and we make more money buying solid wood from domestic suppliers than from the importers just because of the claims ratio.”
He is more comfortable purchasing engineered product from brokers and importers, though, because he encounters fewer claims issues than with imported solid, and the pricing is more competitive than from domestic suppliers. He estimates that about half of the engineered wood he buys comes from importers.
Because the manufacture of engineered hardwood carries with it less raw lumber and higher fixed production costs, engineered wood prices remain fairly steady, whereas prices for solid hardwood, which is cut straight from raw lumber, tend to fluctuate along with commodity lumber pricing. During the past several months, lumber prices have dropped significantly, but retailers report only spotty reductions from suppliers. Rick Murray, president of Rusmur Floors Carpet One, has noticed lower prices from suppliers that are “trying to be a little more competitive.” Also, he tends to see more price fluctuations with base grade products like 2-1/4” and 3-1/4” width planks.
Chadderdon says he occasionally gets a “better than normal buy” on red oak, but otherwise has not benefited from the softening of lumber prices. Snedeker points out that price volatility tends to occur between suppliers rather than across the industry. He says price reductions have more to do with a supplier’s individual inventory. “If one has an abundance of product, prices may go down, but another may have a low yield and prices will go up,” he adds.
All the retailers we spoke with sell hardwood from entry-level price points of around $2 to $3 per square foot up through high-end special order products topping out around $15. Entry-level hardwood often starts with basic 2-1/4” strips, while the higher end boards tend to be wider and longer with stylish finishes, such as handscraping.
Product averaging $5 per square foot is selling best, which has been true for some time, although Murray says that in the early to mid-2000s, average prices were a dollar or two higher—before dropping during the recession. “When the economy started to fall, people wanted hardwood, but they were staying more in their budgets,” Murray explains. “They weren’t upgrading as much. But we’re seeing that coming back more and more now.”
MASS RETAIL COMPETITION
At entry-level price points, retailers compete with Lumber Liquidators in many communities. A 60 Minutes news story in March raised concerns about formaldehyde levels in laminate flooring from Lumber Liquidators. Retailers fielded questions for a few weeks from concerned consumers, who also worried about the safety of engineered hardwood, especially from overseas. Anecdotally, retailers say they benefited from Lumber Liquidators’ difficulties, but they say that they have no concrete way to attribute the increased traffic or sales.
At low to mid-range price points, retailers also compete with hardwood sales at big box home centers and price clubs. Chadderdon says that the competition keeps salespeople at Great Floors sharp. “I think a lot of customers come in because they leave the big box a little frustrated. They don’t get the help that they need or the answers that they’re looking for.” In contrast, Great Floors’ sales team keeps up to date with the latest hardwood products and trends, and also offers expanded service.
Snedeker agrees, adding, “We compete with home centers, but it is not a major concern for us.” He says that customers come into the store more informed and ask more sophisticated questions than in the past. They want to discuss their options with a professional before they buy.
Murray believes that a full range of services gives Rusmur Floors an edge over the big box stores. “Price point comes into play, but if customers are looking for full service or something that needs to be done quickly, we’re very good at that.”
Many independent retailers do a significant amount of hardwood sales in the builder market. “New home construction is our biggest purchaser of hardwood, especially for higher end homes,” Chadderdon says. Hard surface flooring has been growing in popularity in new homes nationwide for several years, and hardwood is still the most common choice. Retailers say that builders often specify hardwood throughout the main living areas, reserving carpet for bedrooms.
Hard surface is growing in the multi-family market as well, although LVT is taking the lion’s share of that segment. Hardwood is rarely used in multi-family projects except in urban high- and mid-priced apartments.
Homeowners who seek to upgrade their floors make up another large segment of retailers’ business, buying both solid hardwood and engineered wood, depending on the project and the area of the country. Consumers may redo an entire house, but more often upgrade to hardwood in a great room or in a kitchen and dining area. More than 90% of Nebraska Furniture Mart’s business is in remodeling. “It’s an assumption now that you are going to have hardwood in the kitchen and often throughout the first floor,” says Snedeker.
For some retail consumers, price is the main consideration when choosing hardwood, and engineered is often the best option. For other homeowners, style is paramount. Some looks, like the wider and longer boards, are available only in engineered, while certain species may only be available in solid hardwood. In some cases the climate or type of construction dictates the choice.
Snedeker says people who grew up in the Northeast and upper Midwest tend to prefer solid hardwood, but at the Dallas store, more engineered gets sold since there is so much more slab construction in that state.
HARDWOOD SALES TRAINING
An important aspect of sales training involves an understanding of proper hardwood application and care. Salespeople must prepare homeowners for natural expansion and contraction so they won’t be surprised by slight gapping, squeaks or cupping. “Making sure that customers have realistic expectations is a big part of the success of selling hardwood,” says Chadderdon. When salespeople fail to give homeowners a clear picture of normal changes in wood from one season to another, retailers get complaint calls.
Homeowners can also unwittingly cause significant damage to hardwood floors. Improper cleaning or spills left too long can cause water damage. Grit from dirty floors can cause premature wear. High heels can create pockmarks. Pets can cause scuffs, and furniture can create scratches and gouges. Even when salespeople work hard to inform consumers of the proper care for hardwood flooring, they don’t always listen or fully remember. Then, when a problem occurs, once again the retailer is called in to address the issue.
“There is nothing more challenging that we sell than hardwood,” Chadderdon says. Consumers’ unrealistic expectations and complex installation issues make thorough sales training crucial. All new hires at Great Floors go through extensive training with a corporate trainer, focusing more on installation and application of hardwood products than on style and design. Refresher courses are also offered regularly, and manufacturers’ representatives hold additional product knowledge seminars.
Rusmur Floors holds sales seminars once or twice a month, bringing all its stores together to meet with suppliers for training. In May, for example, hardwood specialists were brought in to discuss what consumers need to know about solid and engineered wood. And once a year all the salespeople gather for a two-day weekend training session.
A flooring sale does not end when the salesperson shakes hands with the homeowner. Installers can also make or break hardwood sales for retailers. As has widely been reported, there is a dearth of seasoned flooring installers nationwide. “The number one problem that we have in the industry is the lack of qualified professionals to install our products,” complains Snedeker.
Nebraska Furniture Mart hires subcontractors for its installations and requires them to carry insurance to cover installations from homeowner claims. “We hold them to a little higher standard, which makes it even a little more difficult to find installers,” Snedeker explains. Requiring insurance helps weed out less qualified installers and protects the store against installation problems. “The quality guys are going to have that coverage to protect themselves.”
Rusmur Floors does about 65% of its jobs with employee installers, while subcontractors do the other 35%. The seasoned employee installers are referred to as mechanics, acting as crew leaders on the job sites. Hiring employee installers helps Rusmur control quality and consistency of its installations. “We want to know who is going to be there five days a week,” Murray says.
For big jobs, especially in the builder market, Rusmur usually hires subcontractors. Murray estimates that about 80% of the stores’ wood installers are subcontractors. They often have larger crews—three or four workers rather than a mechanic and a helper—and can complete large jobs of 3,000 or 4,000 square feet in two to three days, which helps Rusmur’s reputation with builders on a deadline.
Employees do much of the remodel work, arriving at consumers’ homes in company shirts and company vans, which lend an air of professionalism to put homeowners at ease while also raising brand awareness in the community.
Rusmur holds seminars at its warehouse a couple of times a month to keep its installers abreast of new products and the most effective installation techniques. The seminars cover topics ranging from tools of the trade to proper use of adhesives, and this helps minimize installation mistakes. A troubleshooter also visits job sites whenever needed to problem solve and keep projects running smoothly.
After installation, retailers report that the majority of consumer complaints stem from squeaking and scratches. Hardwood naturally expands and contracts with fluctuating temperature and humidity. Contraction can cause slight gapping that may result in squeaks with footfalls, and expansion can sometimes cause cupping, even when installers leave room for expansion along the walls.
Retailers and installers are almost never at fault for scratched floors, but they often bear the brunt of complaints. In new home construction, scratches commonly happen after installation but before the new homeowners take possession. Flooring goes in toward the end of the construction process, but not the very end. Even when installers carefully cover the floors to protect them, other tradespeople do not always take as much care as they should and sometimes cause scratches or dents in newly laid hardwood. Appliance installation can cause serious issues if the floors are not protected, as well.
To mitigate hardwood installation issues, most retailers hire quality installers and acclimate the wood to the conditions of the house. Great Floors also encourages its installers to attend product knowledge meetings alongside the salespeople, and it assists with product delivery to the project site to ensure proper acclimation time.
Rusmur Floors moisture tests every home, whether new construction or remodel, before wood is delivered for acclimation. The firm also communicates regularly with builders to be sure dehumidifiers are put in place and HVAC is turned on early.
According to Snedeker, laminate has recently gained some ground in the builder market because builders are pushing to finish projects in less time, and laminate can be installed much more quickly than hardwood. For areas like the Midwest, where onsite finishing is common, hardwood installation time is increased by an additional two or three days, shutting down all other work in the house while the finish dries.
In the South and other areas where onsite finish is less common, hardwood still has the disadvantage of needing time to acclimate to the temperature and humidity of the house. The HVAC needs to be up and running, and installation can be more complex and time consuming.
Hardwood began growing in popularity back in the 1990s, so many of those floors are now showing their age. Some independent retailers are adding refinishing to their list of services to capitalize on the growing number of aging floors. Rusmur Floors, for example, invested in the Carpet One refinishing program. “We were getting a lot of calls,” says Murray. “Instead of recommending someone else to refinish these floors, we got into that business, and it’s been very successful for us.”
The longevity of a hardwood’s finish depends on a myriad of variables. An active household with children and pets may need to refinish floors within eight to ten years, whereas a hardwood floor in a low-traffic and low-abuse home may last 20 or 30 years or more before refinishing.
Changing design trends may also precipitate hardwood refinishing projects. Stains shift over the years from lighter to darker, warmer to cooler and from colors to neutrals. Preferences for finishes shift as well, from high sheen to matte and everything in between. Homeowners may choose to refinish a floor not because the finish is worn, but because it appears dated.
Many mid-century homes are still coming on the market with hardwood floors covered by wall-to-wall carpet. The new homeowners often rip up the carpet and call flooring retailers to rehabilitate the old floors, updating them with contemporary stains and low gloss finishes rather than replacing them with new hardwood.
EVOLUTION OF THE CATEGORY
Hardwood floors have been around for centuries, but early floors bore little resemblance to the floors of today. Unfinished hand-hewn planks were top nailed directly to joists with no subfloor in between. The Industrial Revolution brought about the technology to mill lumber in fixed dimensions, and in 1885, the side matcher revolutionized hardwood flooring, creating tongue and groove boards. By the early 20th century, subfloors covered by polished hardwood floors became popular, resembling more closely the hardwood floors of today.
In the 1960s, the development of engineered wood once again revolutionized hardwood flooring. The cross-grain plywood layers topped with a hardwood veneer lent greater dimensional stability for less cupping and gapping than solid hardwood, allowing wood to be laid below grade and on top of slabs. However, a carpet boom began in the mid-’60s, contributing to a crash in the hardwood market that lasted through the 1980s. Finally, during the past decade engineered wood flooring has found mass appeal, now accounting for around 50% of hardwood sales in the U.S.
Some retailers prefer to sell engineered product since it incurs fewer damage claims, and builders often prefer engineered for new construction due to its high-end looks at lower price points.
Oak and maple were the reigning wood floor species until globalization brought exotics from Brazil, Africa, the Pacific Rim, China and Australia into the American market. In the late 1990s through the early 2000s, solid and engineered exotic hardwoods, especially acacia and Brazilian cherry, became the most coveted of high-end flooring.
Chadderdon estimates that at the height of tropical hardwood popularity, Great Floors sold 50% to 60% in imported exotics. “We used to sell containers and containers of acacia and Brazilian cherry, but the problems were not worth carrying it any longer,” he says. Despite ample acclimation time and quality installations, Great Floors dealt with an exceptionally high rate of complaints due to shrinking and squeaking. Today the retailer sells “very, very little” non-domestic species.
Additionally, the Lacey Act, which was amended in 2008 to protect a greater number of trees and other plants, pushed prices higher and limited the availability of many imported exotic hardwoods for retailers, slowing sales. In the years since, domestic species such as walnut, hickory and cherry have been taking share.
According to Snedeker, sales of imported exotics have fallen, but they still represent 22.6% of Nebraska Furniture Mart’s hardwood sales, including kupay, Brazilian cherry, tigerwood, seringa, taun and the popular acacia. He says that domestic hickory is the best seller, however, at more than 50% of hardwood sales.
Great Floors began with carpet samples in the trunk of a car in the early 1970s and grew to 19 locations in Washington and Idaho. It ranked 21st on the 2014 Floor Focus Retail 100 list.
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