Strategic Exchange: The new FlooReport shows light at the end of the reset tunnel – July 2023
By Kemp Harr
The flooring industry has now cycled through the Independence Day break, all the shows are behind us and the daylight hours are starting to get shorter. Santo Torcivia, our resident economist, has published his 2024 U.S. FlooReport, and he’s telling us that we can expect an upturn in the U.S. economy about this time next year.
At least we know what to expect, right? The good news is that we’ve avoided a serious recession, and the next upturn will bring moderate growth from 2025 to 2028. Yes, for those of you who eat the icing first, that means we’ve got another year left of this current reset. While flooring is a functional necessity, it is also a deferrable purchase. People can live on worn-out floors.
Fortunately, different sectors cycle at different speeds. The new housing/builder market, for example, is showing early signs of recovery, and the lagging commercial market is still working through a healthy backlog. Flooring dealers that play in all three markets-remodel, builder and commercial-are faring better than those focused on only one area.
DECLINE IN FLOORING BRANDS AT NEOCON
Attendance at last month’s NeoCon show in Chicago was up to pre-pandemic levels, attracting more than 50,000 design industry professionals. I invite you to read our coverage of this event, starting on page 25, for more details.
One concerning fact is the dwindling participation of floorcovering brands at this A&D-focused event. Ten years ago, Floor Focus covered 37 flooring brands exhibiting inside The Mart. This year, there were 11. Granted, the primary focus for this show is corporate interiors, which, thanks to the work-from-home phenomenon, is in a bit of flux, but that is a drastic shift in participation.
One key factor to the declining participation of flooring brands inside The Mart is the decision to move to adjacent spaces nearby. Some brands-like Interface and Bentley-have showrooms right across the street. But others-like J+J Flooring and Tarkett-have moved to an area called Fulton Market, which is 1.2 miles west of The Mart.
New for this year was an attempt by the tenants in the Fulton Market area to brand the three-day period of NeoCon as “DesignDays” and run a shuttle back and forth from The Mart to bring designers up to their area. This year’s inaugural effort created long shuttle lines, especially when the rain started on Tuesday.
As you can see by our coverage, Floor Focus does not have a dog in this fight, but we are concerned that a divided house could eventually lose energy and relevance.
Granted, NeoCon is a three-day event and where a company chooses to establish its permanent Chicago showroom has to do with how the space works for the company the other 362 days. I’d love to see someone come up with a solution that will build a strong NeoCon for years to come and encourage the flooring brands to reengage with the show.
As consumers, we have all been on a wild ride since the onset of the pandemic. In June 2022, the University of Michigan’s Survey of Consumers index-a monthly survey of how consumers feel about the economy, personal finances, business conditions and buying conditions-hit 50.2, the lowest score since the University of Michigan began recording the data in November 1952. At that low point, Covid was waning but the economic fallout of the virus was squeezing Americans, and it wasn’t yet clear which end was up. Contrasting that, this June’s index score was 64.4, a 28.8% year-over-year increase. And while that might not be the 80s and 90s we were used to prior to the pandemic, it indicates that consumers feel that the economy is moving in the right direction.
One factor that pulled June 2022’s sentiment low was elevated gas prices, which hit an average of $4.99/gallon the week of June 16, whereas in June 2023, the national average for gas prices was in the $3.60/gallon range. Gas prices play an outsized role in Americans’ minds as an indicator of economic health, so this year’s reprieve as we head into summer traveling is especially fortunate.
Joanne Hsu, director of the survey, notes, “The year-ahead economic outlook soared 28% over last month, and long-run expectations rose 11%, as well. Overall, this striking upswing reflects a recovery in attitudes generated by the early-month resolution of the debt ceiling crisis, along with more positive feelings over softening inflation. Views of their own personal financial situation were unchanged, however, as persistent high prices and expenses continued to weigh on consumers.”
With inflation still a drag on Americans, it is even more critical that flooring retailers offer financing options for consumers, as we dig into in our Consumer Financing story, which starts on page 78. Offering your customers the ability to pay over the long term can be a critical differentiator that sets your business apart from the competition.
One last note: Make sure to read this month’s People Power, beginning on page 83, which explores the importance of deep, meaningful connections in our lives. It’s an important reminder, and summer is a great time to sit around on hot evenings, spending quality time with the people in our lives who encourage us and make us better people.
If you have any comments about this month’s column, you can email me at email@example.com.
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