Strategic Exchange: Planning for 2023 - October 2022
By Kemp Harr
In the month of October, many of us will be making plans for 2023 and setting budgets that correlate. While there continue to be bright spots in certain segments, like commercial and multifamily, planning for a flat year might be overly optimistic-especially if your mix is heavily weighted toward residential replacement.
That’s right. After two years of growth, there’s a good chance that sales of flooring products in 2023 will be flat to down due to actions by the Federal Reserve to increase borrowing costs to cool inflation. Fortunately, Connor Lokar, an economist with ITR Economics, is predicting this downturn will only last three or four quarters.
MOHAWK GROUP QUICK ON THE DRAW
We’ve known the outcome of Armstrong’s bankruptcy auction since the end of July. Three of Armstrong’s domestic factories were sold to AHF Products along with rights to use the Armstrong brand on flooring products. It goes without saying that the rest of Armstrong’s former assets, including its other factories and existing inventory, were not purchased by AHF, which means they are still in play in a competitive world market.
It didn’t take long for Mohawk to identify an unmet opportunity for Armstrong’s homogeneous sheet vinyl products, which historically were produced in Armstrong’s former Chinese factory and sold under the product names Medintech, Medintone and Medinpure. The Mohawk Group recently negotiated an exclusive supply agreement with the company that bought Armstrong’s Chinese factory (the Giant Group), and is now able to offer the exact formulations to the North American market under Mohawk’s Medella brand.
As a result, architects and commercial contractors who had grown accustomed to specifying these products in the healthcare market can offer Mohawk’s products immediately and into the future. I say immediately because Mohawk also purchased Armstrong’s domestic inventory from Gordon Brothers-the liquidator that bought Armstrong’s North American assets that AHF didn’t want.
When the news was released that Mohawk had struck this deal, there was a flurry of activity in A&D libraries across the country to either relabel or destroy the samples, depending on which firm the reps worked for.
CCA GLOBAL’S RETAIL 2.0
After more than three years of development and 18 months of pilot research, CCA Global is in the process of rolling out a new product display system that was designed to simplify the consumer’s shopping process by reducing the number of SKUs and offering the product in fewer groupings. Stores that participated in the pilot test saw sales increases that averaged 14.5% better than control stores.
There are several components of this program that are worth noting, First is the link with technology, enabling the consumer to pick up a sample, scan the QR code and get immediate pricing and performance information, as well as room scenes that can be tailored to the consumer’s specific setting using a visualization tool. Second are the product groupings. Carpet is grouped into four categories: patterns, multicolor, loops and solid/tonal, titled by lifestyle alignment-for example, classic, expressive or casual. Hard surface has two categories: wood (all engineered hardwood construction) and waterproof (for laminate and LVT constructions). Thirdly, all of the 268 carpet SKUs and 390 hard surface SKUs have been stripped of their supplier brand identity and are sold under the Room by Room private label brand in Carpet One stores and the Room to Explore brand in Flooring America and Flooring Canada stores.
The streamlined appearance of the large but uniform samples and large kiosk monitors is such a dramatic shift from the showroom interiors that we’ve grown accustomed to, driving many to refer to this transformation as “the Apple store look.” Members who choose to make the shift are charged a reset fee, which CCA management says can be offset in under six months with the incremental growth that was seen during the pilot testing of the program.
Retail 2.0 replaces the SelectAFloor merchandising program that CCA rolled out 21 years ago. Buy-in from the membership has been strong, and the plan is to have all stores converted by Q1 2024. One unforeseen benefit that revealed itself during the pilot testing was an increase in average ticket as consumers-who helped themselves-opted for higher priced products. One could infer from this data that RSAs have been leaving money on the table by not pitching higher-end goods to their customers.
This program is a solid differentiator for CCA Global retailers, and that’s a good thing. My only concern is that the program decouples the supplier’s identity from the consumer. If she came into the store looking for a Shaw product, for example, she’d be hard pressed to know who’s making what.
If you have any comments about this month’s column, you can email me at firstname.lastname@example.org.
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