Retail Technology - December 2008

By Brian Hamilton

During a down economy, smart businesses will work to become as efficient as possible, and one of the best ways to improve efficiency is to upgrade business management systems, especially with software that has been developed specifically for floorcovering retailers from the likes of companies such as QFloors, Resource & Financial Management Systems (RFMS), and Dancik International.

Yes, it can be relatively expensive, especially for small operators who are used to working with off the shelf accounting products like QuickBooks. And it’s not necessarily easy to invest in streamlining an organization when revenues are falling and retailers are entirely focused on finding the next sale. But the return on investment can be substantial, and the systems can pay for themselves in a relatively short timeframe, probably less than two years for companies that dedicate themselves to taking full advantage of the software.

The software firms estimate that less than 25% of all floorcovering retailers are using software that has been designed for their industry. About half are using QuickBooks or a similar product, and the rest are using almost nothing at all and are performing many functions manually.

Business management systems dedicated to the flooring industry automate a wide variety of functions, from inventory control to banking, general ledger, receivables and payables, and job costing, but one system may be more suitable than another for any particular business because of various features or nuances. QFloors, on its website, has a feature, Top 10 Things To Consider when buying flooring software, which is a good place to start for basic information. Prices vary widely. Some software can be purchased outright, but much of it is sold in a licensing arrangement, and some of it is web based.

Probably the best time to install or upgrade one of these systems is during periods of slow sales, which most retailers find themselves in today. Retailers can take their time to make sure all information entered into the system is correct and everyone can spend more time learning how to use the system. When business is booming and everyone’s busy, it’s easy to put off the upgrades.

“The retailers that have already invested are the ones that are doing well now,” says QFloors CEO Chad Ogden, who emphasizes that retailers should view software as an investment rather than an expense. “Technology needs to be a big part of what retailers are doing.”

While many of these companies may think things are running smoothly, they might be surprised. “What I find is, people out there don’t know they have problems,” Ogden says. For example, he notes that many of the calculations that some off the shelf software perform, such sales tax calculations, are often wrong. That’s because a typical floorcovering business is both a contractor and a retailer, and the tax treatments are different. He says these programs often have no way of flipping back and forth. “People who are doing a million a year in business could be losing $10,000 or more in sales tax,” Ogden says. He also notes that business management systems let business owners make more informed decisions.

There are several other ways a company can easily lose money without automation. First, it can price jobs incorrectly by not having the most up to date catalog information. Second, it can lose money through inventory shrinkage—in other words, no one accounts for the extra three feet of carpet that was needed at the last minute to finish a job. And third is through installation overrun.

Most of the floorcovering specific software has been developed using the relatively new Floor Covering B2B standard, developed by the Floor Covering Business to Business Association. The technology gives retailers the ability to communicate electronically with manufacturers and distributors, and, for example, download and automatically update product catalogs and create invoices and purchase orders, among other functions. It’s a huge timesaving feature, providing the most up to date information and eliminating a host of potential mistakes. The electronic catalog and invoicing systems are probably the most widely used features, according to Ogden.

Many of the major manufacturers, such as Shaw, Mohawk and Armstrong, have adopted the standard, and overall the manufacturers using the standard account for the majority of total annual flooring sales.

Nevertheless, the B2B features are still evolving and the technology still doesn’t work well for every kind of order, but those are a minority. It’s very good for exact yardage orders but multiple piece orders are more difficult. It can also sometimes be difficult to find the right product in the catalogs, especially for hard surface products, because the descriptions aren’t comprehensive enough.

RFMS, the largest floorcovering software vendor, is working directly with CCA Global Partners to provide business management systems to its members. It has taken its core product and added features specifically for CCA Global, marketing the product under the name Revelation XE.

RFMS President Terry Wheat says that one of the major advantages of using specialized software is that it professionalizes a retail operation. Today’s customer, he says, expects to deal with a firm that is technologically savvy, and if a salesperson hauls out a piece of paper and a calculator to figure an estimate, it will turn off a lot of potential customers.

“That’s why this industry is losing consumers,” Wheat says. “They’ll go to Best Buy where the new GPS excites them. The floorcovering industry has lost marketshare to electronics, entertainment, and autos. A retailer is losing much more that way than to a direct competitor.”

There’s also a less obvious benefit—a tech savvy retailer can generally hire a higher caliber of employee. Most top notch employees want to feel like they are working for a progressive organization.

Most business management software allows salespeople to put together precise estimates at a terminal, linked electronically to a product catalog, with no guesswork. RFMS has recently taken it a step further and incorporated those features into its Measure product. A floorcovering professional can go to a customer’s home, electronically measure the site, and, by linking to the database, come up with a price on the spot. It can graphically show seam placement, diagonal placement of wood or tile, and even show a 3-D rendering.

“Their close rates are unbelievable,” Wheat says of salespeople using the system. “People who are not moving to that are at a disadvantage.”

The latest update to the RFMS software, called Measure Connect, enables the file to be posted to a password protected website, where the consumer can, for example, substitute different kinds of flooring to compare costs and looks. They can even submit the order electronically. This upgrade will be on display at Surfaces in February and other fall and winter shows.

Another interesting new feature of the RFMS Core product, its basic system for flooring dealers, allows the automatic computation of an unlimited number of commissions for any job, which can save an enormous amount of time on complex projects that might have commissions for designers, jobsite measurers, and others who might be involved.

QFloors has updated its basic software to include credit card processing, which eliminates the need for standalone credit card terminals. The software also has a “direct jumping” feature, which means a user can highlight any suspicious item in, for example, a profit and loss statement, to see all the different entries that make up the calculation. This makes it easier to figure out where a problem originates.

QFloors is also using the newer Flooring Software Data Exchange standard, which allows programs from different vendors to share data. For example, QFloors software can talk directly to cutting software. That way a customer order can be transferred directly from the business management software to a cutting machine, which would automatically select the right material and make the right cuts. That can eliminate a lot of errors. Also, estimators, or even virtualization systems, can transfer data directly into business management systems.

Dancik International has generally focused on software for flooring suppliers, distributors and fairly large retailers, but it’s about to come out with a product aimed at the small retailer doing less than $2 million in sales called Dancik Retail Advantage, a lite version of the Dancik Retail product aimed at large retailers.

Retail Advantage interfaces with QuickBooks but includes flooring specific features and is designed to be a very basic system that requires minimal training. Like other software, it is written using the B2B standard. Among other features, the retailer can figure out how much it wants to mark up a product and how much to add for labor, and those calculations will be done automatically using the up to date imported product information. This will be available as an off the shelf product.

“What we wanted was to have something for a retailer who is not equipped for running a full blown system,” says CEO Mitch Dancik. “We also wanted to do this to help our flooring supplier customers get their catalogs to small retailers.” Dancik’s customers include roughly 125 flooring suppliers and about a third of them are using the B2B standard.

“The danger is that retailers think they can put this off because not all suppliers are using the B2B standard,” Dancik says. “But the retailers who are using it are making money, and this is a perfect time to go to B2B.”

KIOSK SYSTEM GIVES QUICK, SECURE CREDIT APPROVAL

A new automated kiosk system for quick consumer credit approvals is giving some savvy flooring retailers a boost.

Versatile Systems, maker of the kiosk system, is working with Shaw flooring retailers and CitiFinancial on one kiosk project, and Mohawk retailers and GE Money on a similar system.

The kiosks, which can either be full floor models or desktop units, are designed to give floorcovering shoppers secure, instant credit approval without interacting with another person. Within seconds shoppers can know just how much money they have to spend on a flooring purchase through in-store private label credit.

Using a touch screen, customers simply enter their name, address, phone number, social security number and birth date. In the case of the Shaw kiosks, the information is sent directly to CitiFinancial. In the Mohawk system, which is still under development, the information is sent direct to GE Money.

The store then receives a fax confirmation, containing how much the consumer is authorized to finance.

"It's a very nice security feature in a time when everyone is worried about identity theft," says Michele Smith, controller for Larry Lint Floor and Wallcovering in Wendel, Pennsylvania. Her store has been using a Shaw tabletop kiosk since February. It's located at the front of the store behind a privacy panel.

"Before, customers had to fill out a paper form that had their whole life on it. People love it that they are in control of the information".

Nia Evans of GE Money says the kiosks don't retain any information which further increases security. Her company piloted the kiosks with several home furnishings retailers beginning in 2006.

Smith says her store is processing more credit applications than before and she believes the average sale is higher, although the unusual economic circumstances make it hard to tell for sure. She also noted that most customers seem pleasantly surprised by how much they're approved to spend and it's usually for more than they need.

Evans says that the average ticket in the Mohawk credit program is $2,800, compared to $1,200 with a typical credit card and $700 for a cash sale.

Customers can use the credit for any store purchase, including products other than Shaw or Mohawk. The kiosks also contain information about promotional offers through the store's credit program.

Smith says the system has more than paid for itself and she'd recommend it to any retailer. The customers end up with a store credit card, which can be used on future purchases.

Paul Hamilton of Versatile Systems says that some people who would have ordinarily used a home equity loan in the past for a flooring purchase no longer have that option, so in-store financing is attractive.

"Where we deploy these systems, there's usually a 90 day return on investment," Hamilton says. The systems can be purchased or leased.

SHOPPING FOR FLOORING BEGINS ON THE WEB

As many as 90% of shoppers for floorcovering begin their search on the web, according to Michael Vogel of website development firm Creating Your Space. And most of those shoppers go to several sites. So it pays to have a memorable and easy to use website.

The vast majority of web shoppers, between 70% and 90%, also use Google as the search engine of choice and don't even try another avenue, Vogel says. Most firms that specialize in search engine optimization focus only on Google.

Most of the shoppers for floorcovering are women, perhaps up to 90%. They're not only looking for basic product information, but want to get some idea of how products will look in their home before they ever visit a store. In essence, they want to try the product on in a virtual fitting room.

The most successful websites are interactive, Vogel says. In other words, they are more than an electronic brochure with basic information. They allow shoppers, for example, to see how flooring looks in different settings and in different colors. These kinds of sites tend to hold shoppers longer because they have more things to do, and they give the business the aura of being on the cutting edge. And that's a key to convincing a web shopper to visit the actual business.

However, most retail flooring websites are nothing more than catalogs. It's an effective way to present lots of information that can be updated quickly and inexpensively. It can incorporate plenty of photos, and links to other useful websites. But in this age of broadband ubiquity and web interactivity, it's clearly a second choice for engaging a serious shopper.

There are also hybrid sites, mostly corporate sites, such as those offered by Carpet One, which have interactivity but give those aligned retailers unique pages that they can control.

Smart retailers always incorporate their website address in all their advertising, to give shoppers another way to find it. They know that today's shopper will more than likely seek out the website before visiting the store, even if the ad has a very specific, call-to-action offer.

Another reason to have a quality website is that a small but growing portion of shoppers wants to do all their communication with a retailer electronically. "I've noted that there are many who prefer to go back and forth via email and in some cases make an appointment via the website without ever talking to the dealer," Vogel says.

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