Strategic Exchange: Make strategic adjustments during slack times for share growth on the uptick – Jan 2024

By Kemp Harr

January is the beginning of show season for many in the flooring business. We’re coming off a holiday break with family; the days are short; and the consumer is hunkered down in shock over how much they’ve spent on travel, meals and good times in the fourth quarter.

We warned you in this column a year ago that demand for flooring was going to be down in 2023, and early estimates are quantifying that decline at around 11%. That means the industry sold about $3 billion less in 2023 than it did the previous year. We plan to give you a more accurate read in our May Annual Report issue.

Those who follow the stock market and naively think that the surge we experienced in December, with the Dow Jones Industrial Average reaching a record high of 37,500 right before the holiday break, is an indication that we’re on the back side of the decline in demand for flooring products are going to be disappointed. Most economists are forecasting continued doldrums in residential remodel business until at least the second half of the year. Flooring is losing share of the wallet to kitchen upgrades, outdoor spaces and travel.

At this stage, it looks like the builder market is going to pick up around the same time that the commercial sector starts to taper off. Existing-home sales, which are a key driver for the remodel business, will start to increase once the builder market heats up.

For the retailers among us, the strategic decisions and investments made in 2024 will position you for growth when demand picks up in 2025. Changes you make in showroom design, personnel training and supplier partnerships will help you take marketshare from those who sit around for the next six months waiting for the business to show up. I urge you to start now by weeding out the products that aren’t earning the floorspace you’ve given them. See our article on page 21 for more on that.

DIGITALLY PRINTED LVT AT ENGINEERED FLOORS
I was recently given a sneak peek at the first of three Hymmen digital print lines that were developed in Germany and sold to three progressive LVT producers that recognized the benefit would be worth the investment. Now that I’ve seen factory samples right off the line, let me say, “Wow!”

The production line that I toured was sold to Engineered Floors (EF) and installed in the Seretean plant right across the street from EF’s headquarters in Dalton, Georgia. It’s only been running about a month, but the finished product looked amazingly real in comparison to the real wood flooring that it emulates.

Those of you who know the history of EF know that Bob Shaw started the company in 2009, focused on producing solution-dyed PET carpet using the latest extrusion, twisting/heat setting, tufting and coating technology in modern carpet mills, bringing chip in one side and finished packages/rolls of carpet out the other side. It wasn’t long before the firm’s carpet business exceeded $1 billion in annual sales. Please remember that EF is a privately held company, so these revenue numbers are our estimate.

A few years ago, the company recognized that it needed to offer its customers hard surface flooring, so it sourced and sold several collections of laminate and LVT flooring. EF’s hard surface business has been growing and is now roughly $150 million in annual revenue.

But as of last month, EF is now making its own LVT flooring, here in the U.S., using the latest technology on the market. Not only does this process eliminate the need for print films, but it also minimizes pattern repeats so that no two planks in a box have the same pattern. The biggest surprise, however, is the realism of the product. This realism is the result of print heads that can run six colors at a resolution of 2,200 dots per inch.

Another big surprise as I watched the line run was elevated throughput speed. Those of you who know the relationship between line speed and product cost know that output speed of first-quality goods is important for paying down your capital investment and making more money over the long run.

If you’re going to one of many winter markets, you will see this product, presented as DLE-Pure Grain. The DLE stands for Digital Lacquer Embossed, and it’s a critical contributor to the realism of the product. Up to this point, the top layer of LVT has been a clear sheet or wearlayer that protected the product from abrasion. With this new process, the print heads lay down a lacquer that not only enhances the three-dimensional graphic but also protects the finished product from wear.

CHANGES IN 2024
I’m predicting that 2024 is going to be a year of surprising change. Just make note of all the personnel changes announced in the last several weeks, marking exciting times with new energy as fresh talent steps into new roles and challenges the status quo. I haven’t met with all the brands yet, but those suppliers I have seen are making large strides to minimize the price discussion by offering products with features that consumers should be willing to pay for. See you on the road.

If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.

Copyright 2024 Floor Focus

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