Mainstreet Commercial Report: A focus on the mainstreet market should help buoy flooring retailers facing flagging residential sales - January 2023
By Darius Helm
With residential flooring sales already trending down, flooring retailers are looking at a subpar 2023. However, those that are actively engaged in the mainstreet commercial market, which is expected to post gains this year, may get a welcome boost from the additional revenue stream.
Mainstreet covers a lot of territory in terms of commercial segments-tenant improvement, education, retail, senior living, multifamily, doctor’s offices, restaurants-and is focused on renovation, rather than new construction. In the early stages of the pandemic, most mainstreet businesses were forced to shut their doors. To succeed, many had to find new approaches, like pick-up and delivery models for restaurants and retail. During those months, it was all about survival, hustling day in and day out to generate enough business to stay afloat. Deferrable spending, like floor renovation, wasn’t even on the radar, since no one was coming into their businesses.
This neglect has resulted in a healthy amount of pent-up demand. The local businesses that survived the pandemic now have a pressing need to refurbish, upgrade and, in many cases, redesign their spaces.
While commercial flooring is typically specified through A&D and contract dealers, mainstreet flooring is negotiated through residential flooring dealers, generally for smaller local projects, and with products priced more aggressively than on the contract/specified side. In 2021, the commercial market started regaining ground, with mainstreet ultimately posting a positive year, and in 2022, mainstreet surged with strong double-digit growth, as the residential market started to flag. In terms of this year, while residential flooring business will be down, specified commercial still has some wind in its sails from projects in the pipeline or already financed, and mainstreet commercial is still making up lost ground and should be up for at least the first half of the year.
In 2022, mainstreet flooring sales hit an estimated $1.2 billion, according to Market Insights, up by double digits from 2021’s revised numbers, with carpet making up about $400 million. The balance is hard surface flooring-LVT and VCT, with smaller volumes of sheet goods and rubber.
Nevertheless, there are still significant headwinds to growth. While supply chain issues have improved and port congestion has been resolved, material and labor costs are still up, and interest rates are high, so it’s a challenging time to have a small business-and small businesses have an outsized share of the mainstreet market.
TRENDS IN MAINSTREET FLOORING
Mainstreet flooring’s profile has transformed over the last couple of decades. At the turn of the century, it was dominated by broadloom, followed by VCT and sheet goods. LVT was in the mix and growing, while carpet tile barely registered at all. Broadloom was mostly made out of polypropylene, the cheapest and arguably poorest-performing synthetic carpet fiber. Back then, mainstreet was all about what was cheap and functional.
Fast forward to today, and hard surface is twice the size of carpet. Most of the hard surface is gluedown flex LVT, followed by VCT. Sheet goods make up 10% to 15% of hard surface, and there’s also rubber, ceramic tile, rigid LVT and laminate.
On the carpet side, the major trend has been the shift toward carpet tile, which now accounts for the bulk of soft surface mainstreet flooring. Mainstreet broadloom had maintained some share due to its cost advantage over carpet tile at entry level, largely thanks to polypropylene price points. However, in the last few years, all of the major mainstreet flooring suppliers-like Shaw, Mohawk and Engineered Floors-have moved away from polypropylene in favor of PET and nylon 6 carpet fibers. This, in turn, has narrowed the delta between broadloom and carpet tile.
On the face of it, this would seem to favor carpet tile and drive further share gains. But the better looking, higher-performing broadlooms replacing polypropylene-and even the narrowing delta-shifts the debate from a simple cost calculation to one about values like design and performance, and also sustainability.
Shaw Industries’ Philadelphia Commercial mainstreet division, for one, is optimistic about broadloom’s opportunities, according to Kurt Paulson, divisional vice president, and Quentin Quathamer, commercial brand manager. They’ve seen how raw material cost escalation has driven up carpet tile prices and have responded with lighter-weight broadlooms made of nylon 6 that still undercut carpet tile in price. It’s a great value proposition with a high-performing fiber, they contend, offering enhanced cleanability and durability, as well as better design capabilities.
The firm has also taken its ReWorx technology, introduced in Shaw Contract and Patcraft over the last couple of years, and put it into Philadelphia as Nuscape. ReWorx uses virgin and recycled PET-27 bottles per plank-to create hybrid carpet tile with a needlepunched face. It can’t delaminate or edge ravel, and as a 100% PET product, it’s fully and easily recyclable at the end of its life. The mid-priced product should find strong traction among businesses that put a high value on sustainability.
On the hard surface side, Philadelphia Commercial, the largest mainstreet operation in the U.S. market, offers a comprehensive range of resilient products, including both gluedown flex LVT and rigid LVT with click systems. The rigid LVT products perform well for applications that don’t have massive foot traffic or rolling loads. And the firm also offers a 5mm flexible looselay product that does better with telegraphing than the thinner products.
Better performing products are increasingly specified. In fact, while most of Philadelphia Commercial goes to mainstreet through retailers, a growing piece of it is specified through A&D.
Philadelphia had a growth year in 2022, with a record start in the first quarter followed by a softening. This year, it anticipates moderate growth. With residential activity slowing, the firm is hopeful that retailers will focus more on mainstreet. Demand in the education and government sectors may help drive gains.
Mohawk Industries serves the mainstreet market through Aladdin Commercial, offering carpet tile and broadloom in EnviroStrand PET and Colorstrand nylon 6, and its hard surface offering includes flex and rigid LVT, RevWood laminate flooring, and, new this year, a composite engineered wood in the form of the Brierwood collection, featuring enhanced protection against moisture, scratches and dents. It comes in four styles.
On the carpet side, Aladdin, inspired by the growth of EverStrand, is expanding its Colorstrand solution-dyed nylon platform with new designs, and is coordinating carpet tile and broadloom to offer a more curated product platform, including hard surface.
The major markets for Aladdin are workplace, retail and property management-from small apartment complexes to business parks. And the business is driven by 16 Aladdin business development managers, who work closely with top dealers to identify their needs and how Aladdin can offer solutions, and also providing training and coaching.
For both 2021 and 2022, Aladdin saw double-digit growth across all platforms-carpet, hard surface and sundries-according to the firm, with 2022 growing faster than 2021. And for 2023, Aladdin vice president Robb Myer anticipates about 8% growth, with carpet tile and hard surface driving sales and broadloom flattening. Myer says, “There’s still money there, and there’s higher styling too.”
This year, the firm is coming out with several new solution-dyed PET and nylon carpets, as well as three new hard surface products. Myer reports that its affordable nylons have done particularly well.
Another big mainstreet player is Engineered Floors, which has served the market since 2017 through Pentz Commercial Flooring Solutions. Pentz dropped its last polypropylene line in 2021 and now all of its broadloom and carpet tile is made of either Apex PET or Encore nylon 6, with PET nearly twice the size of nylon. Both fiber systems are solution-dyed. According to the firm, it has, over the years, developed its Apex PET into a higher denier product with enhanced performance characteristics.
While carpet tile is bigger than broadloom in revenues, Pentz sells a large volume of 20-ounce, level-loop PET broadloom at the commodity end of the market. And it introduced nine new carpet styles over the course of last year, with more to be unveiled this year on a quarterly basis.
Pentz offers both gluedown LVT (2mm and 2.5mm) and 5mm looselay LVT that can be installed transition-less with carpet tile. At Surfaces later this month, the firm will show new gluedown LVT products.
Pentz grew by double digits in 2022 and anticipates similar growth this year. It attributes its success in part to the firm’s investment in inventory during Covid, which helped fuel Pentz’s three-year-old quick-ship program. Eric Ruppert, Engineered Floors’ residential brand manager, also feels that, as retail has flagged, it has forced retailers to focus on other revenue streams, and that has helped drive gains at Pentz.
Mannington’s mainstreet operation, Mannington on Main, offers a comprehensive hard surface flooring program that includes sheet goods, gluedown flex LVT, gluedown and floating SPC, laminate, rubber flooring, wallbase and sundries. For now, it is not offering mainstreet carpet. Mannington’s mainstreet business was up by mid to high single digits last year, as well as the year before. For 2023, the firm expects the growth rate to be sustained.
Late last year, the firm soft-launched some LVT visuals and a select laminate offering curated to suit mainstreet environments. And its new offerings for 2023 will include two new sheet visuals, Hex and Twill.
Its most popular mainstreet product is 2.5mm gluedown flex LVT, but it also has a strong sheet offering that has good traction in mainstreet applications like dental or medical settings. Its laminates, which are click products, should do well in lower traffic retail and office settings that will benefit from its scratch resistance and durability.
The firm has also expanded its merchandising with a new display offering that includes large sample boards, a stair step display and architect folders. And as part of its focus on mainstreet this year, Mannington will work on developing quick-ship programs. To help spearhead the new initiatives, in November of last year, the firm hired Heidi McInnish, an industry veteran who has worked for Interface, Tarkett and, most recently, CFL.
The Dixie Group serves mainstreet through its Energy brand under the Masland division, targeting the upper end of the market, like doctor’s offices, lawyer’s offices, country clubs. On the carpet side, it’s currently all broadloom-the firm lost its carpet tile capacity when it sold off its commercial division, AtlasMasland, to Mannington in September 2021. Its broadloom carpet comes in 26 designs patterned specifically for mainstreet in multiple colorways using either nylon 6 or 6,6-now that the firm no longer has a specified commercial division to derive product from, its commercial product development is wholly focused on the mainstreet market.
The firm launched four carpet designs in the third quarter of last year and is adding another three later this quarter. In addition to its broadloom program, Energy also offers four SPC products. The products are merchandised together in a 30-product display unit.
Revenue from the Energy family of products was up in 2022. Going forward, the Energy business intends to focus on diversifying its portfolio. And it will continue to get more displays and architect folders out to its retail and commercial partners.
Dal-Tile also has a mainstreet operation selling ceramic tile for smaller commercial applications, mostly restaurants and hotels, as well as some corporate jobs. Ceramic tile is a popular solution for lobbies of a range of business types, as well. Dal-Tile’s mainstreet business was up last year, and more growth is expected for 2023.
The firm uses commercially developed products that it channels to the retail community, which includes authorized and unaffiliated dealers. It also sells its quartz countertops to the mainstreet market.
Dal-Tile offers the mainstreet market some unique products, including RevoTile, which replaces the complexity of traditional ceramic tile installation with a stripped-down floating floor technology. According to the firm, the product performs well in segments like multifamily and senior living. And it also offers floor and wall products with its StepWise treatment that makes the tiles easier to clean and makes the field tiles more slip resistant. The StepWise technology is incorporated into the product during the manufacturing process and is permanent.
A unique player in the mainstreet market is Flor, a division of Interface that largely serves the residential market. Flor products are designed to commercial specifications-in fact, a lot of Flor tiles are increasingly specified in the contract market-and go to the mainstreet market both direct to the end user and through flooring dealers. At its most structured, general contractors will work with flooring dealers that have a relationship with Flor.
In terms of how Flor gets the word out, it’s mostly through its catalogs-it circulates about 7.5 million catalogs a year-that in large part reach decision makers in the mainstreet market through residential outreach. Some catalogs go to key commercial segments, as well.
Because Flor products are stocked in distribution centers to readily serve the residential markets, most orders arrive in about a week, equivalent to a quick-ship program. The firm reports that mainstreet business was up last year.
Last year, Floor Focus included in its mainstreet report an update on one of the leading mainstreet hard surface specialists, Armstrong Flooring. This year, there is no Armstrong Flooring, but many of its assets and brands have gone to AHF Products, which also owns the former hardwood division of Armstrong. And with the acquisitions came Yon Hinkle as vice president of product management – resilient. According to Hinkle, AHF’s mainstreet offering includes VCT and gluedown LVT, which is where most of the revenues come from, along with SPC and sheet goods.
AHF has just launched Unify, a quick-ship program for gluedown LVT, with orders up to 2,500 square feet shipping within five business days and orders up to 20,000 square feet shipping within ten business days. The program is made up of 12 top-selling designs of 2.5mm LVT with a 20 mil wearlayer.
According to Hinkle, retailers looking to the mainstreet market for a commercial customer need to be confident that the producers they’re engaging with will be able to deliver, particularly with the overseas supply issues of the last couple of years. AHF has a lot of domestic assets, including a supply of SPC, that Hinkle feels gives the business an advantage over competitors.
Copyright 2023 Floor Focus
Related Topics:Interface, Mannington Mills, Masland Carpets & Rugs, AHF Products, The Dixie Group, Tarkett, Daltile, Armstrong Flooring, Mohawk Industries, Shaw Industries Group, Inc., Engineered Floors, LLC