Strategic Exchange - December 2009
By Kemp Harr
If the state of the housing market and the
performance of the stock market are key barometers in the overall health of the
economy, then perhaps we are indeed on the road to recovery. Sales of existing
homes in October rose 10.1% percent, the highest level in more than two years.
If we keep that pace, 6.1 million homes will change hands in the next year. And
to date, the S&P is 21% higher than it was at the beginning of the year. And
let’s not forget that third-quarter GDP was up 2.8%.
So what’s got
consumers in such a funk? Consumer confidence has been waffling below 50 for the
last three months. Is it because unemployment is high and isn’t showing signs of
recovery? Is it because the federal budget deficit is $12 trillion and the value
of the dollar has dropped 18% versus the euro in the last 12 months? Is it
because Washington wants to make sure that 30 million people are added to the
ranks of those with healthcare insurance?
It is difficult to make sense
out of all of this. You don’t know whether to laugh or cry. But just as it’s
important to remember your family roots, it is also important to remember a few
fundamentals about the USA. We are currently in a downturn that, albeit steep
this go-round, is part of a normal economic cycle. Our nation was founded by
some of the smartest minds in the world and our free market system is still the
best in the world. Even though we’re in an economic funk, we still produce more
goods and services by a factor of 2 to 1 than any other developed country. And
right now, a weak dollar makes our goods and services more competitive in a
global economy and puts our people to work faster than, say, Japan and
Germany.
Freedom is, and always will be, our trump card. But only if we
stay focused on the fundamentals of what makes us free and work hard to maintain
our competitive advantage.
Social Media
Since I own a media company, one might think that I fear this
budding phenomenon called social media because I see it as a threat to
traditional media. Do these new networking forums such as blogs, tweets or
Facebook newsfeeds allow anyone with a computer to be a publisher? The answer is
yes. Do search engines like Google treat this published work with the same level
of credibility when someone is looking for information? The answer is yes. So do
I feel threatened? The answer is no—not as long as thinking people remain at the
helm.
The fact remains that we all still only have two eyes and 24 hours
in a day. Time is precious, and media professionals who are classically trained
to vet out the truth to a defined audience with a common interest will always
prevail over gossip to a group of social friends. True journalists have been
trained to be unbiased, credible and responsible. As we are taught in journalism
school, objectivity must prevail regardless of the sponsor or personal
feelings.
So what is the role of social media in the flooring business
and should you make it part of your promotional mix? It’s indeed an inexpensive
way to talk to a group of followers, and if you can amass that group and
influence them for the benefit of your business, then you’d be making a mistake
not to do it. One of your goals should be to increase the visibility of your
brand, and on the Internet, most brand messages come in the form of a website.
It has been proven that you can improve the organic prominence of your website
by becoming more active with Twitter, Facebook, You Tube, LinkedIn or by
creating a blog. And while this technique will only cost you the time it takes
to set it up and do the posts, only you can determine if the results are worth
the effort. Some experts say that social media works better for B2C
relationships than it does for B2B promotion.
Starnet’s Fall
Meeting in Washington, D.C.
Most of you
know that Starnet is a co-op of commercial flooring contractors with roughly 170
members primarily in the U.S. and Canada. Last month Starnet held its fall
meeting in Washington, D.C. and member attendance was stronger than last year,
and despite the somber outlook for the commercial market for the near future,
the tone was upbeat and attentive. Most of Starnet’s members are seasoned
veterans and they’ve made the necessary cuts in overhead to match their current
level of business. Several of the members have built a strong maintenance
business, and others have added a business development position to strengthen
their visibility with A&D, building owners and facility
managers.
Over the course of the day we heard from a lawyer, a banker,
an accountant and an economist. While that does sound like a great setup for the
joke about a plane with not enough parachutes, the audience was given great
advice on subcontractor agreements, banking relationships and tax
planning.
Probably the most noteworthy presentation was from Bob Murray,
McGraw-Hill’s chief economist and the author of the Construction Outlook. Murray
predicts that single-family housing units will advance 30% to 560,000 units.
Granted this is still 65% below the peak activity of the mid-decade but it is
probably in balance with the existing home inventory that needs to be absorbed.
Multi-family housing will improve 14% in units to 160,000 units, which is about
even with the level of building we saw in this sector at the end of the 1990s
recession.
Unfortunately, commercial building activity will continue to
decline 4% in dollars next year, which will seem moderate compared to the 43%
drop in 2009. A few bright spots will be seen in institutional, government and
healthcare buildings, but most vertical segments will continue to decline.
Hospitality will be hit the hardest, followed by office, retail and education.
In closing, Murray remarked that this recovery would take a “U” shape with very
slow rate of growth in the near future. His GDP forecast for 2010 was
+1.8%.
LEED for HomeS
Last month, while attending Michael Vogel’s DCS Partnership
meeting in Sonoma, California, I ran into Nate Kredich, who is now leading the
U.S. Green Building Council’s LEED for Homes initiative. (Prior to joining
USGBC, Nate was with Creative Touch Interiors, and prior to that, with the
Bluebolt Network, along with Al Kabus). While green hardly registers among
residential flooring consumers when they are polled for their purchasing
criteria, the LEED for Homes movement does seem to be gathering steam. Since its
launch in early 2008, 3,600 new housing structures have been certified and
20,000 additional projects have registered to pursue certification. If you
measure that total against current housing starts, that’s a 1.5%
marketshare.
It is important to note that while flooring can contribute
up to 2.5 points of the 45 points required for certification, the wrong flooring
choice can completely derail the entire certification. If someone, for example,
installs non-FSC certified tropical wood in a home, it can never be LEED
certified.
Nate also pointed out in our conversation that the biggest
environmental gains to be made in the housing sector will come on the remodel
side. While there are roughly 400,000 new homes being built today, there are
over 120 million homes in the U.S. now—many of which were built prior to the
energy building codes that were established in 1979. The USGBC is working with
the current administration to address the proper way to retrofit these homes
efficiently..
If you have any comments about this month’s column, you
can email me at kemp@floorfocus.com.
Copyright 2009 Floor Focus
Related Topics:Starnet, Creating Your Space