Strategic Exchange: What will the second half of 2023 bring for the flooring industry? – May 2023
By Kemp Harr
If you are a retailer hoping to benchmark against the performance of the market on a national basis, we’re hearing sales were down roughly 10% in the first quarter of 2023. Looks like the Fed’s attempt to cool down the economy is working in the building products sector.
Naturally, some retailers are doing better and some worse. We’re hearing there is optimism for better conditions in the second half of the year. But that’s not necessarily because demand is actually going to pick up but because business owners are going to feel better as they comp against the softer second half of 2022. Another factor is that part of what we’ve been feeling in Q1 2023 is a return to seasonality that disappeared during the Covid era frenzy to remodel.
We were happy to see the Architecture Billings Index (ABI) rise above 50 in March after dipping down under 50 in October and staying below 50 for five months. Since commercial construction activity lags 12 to 14 months behind the ABI, look for an uptick in the commercial sector in the second half of 2024-especially if the index stays above 50 for an extended period.
Just prior to going to press with this issue, we attended a busy Coverings expo in Orlando. This show always cycles back to Orlando on the odd years, and, in 2023, attendance was tracking well above the 2019 show. Traffic for Coverings when it’s in Orlando always outperforms the even-year venues outside of Atlanta.
The per capita usage of tile in the U.S. is still way below all other developed nations, but this month’s Annual Report tells us that revenue growth in tile for 2022 outpaced all other flooring types at 14.2 % to $4.4 billion. Unit sales were actually down 1.3%, so much of that growth was due to inflated prices for shipping containers and the cost of natural gas in Europe, both of which are starting to stabilize, so expect tile prices to moderate a bit.
Another driver for growth within the tile sector is its expanded use in outdoor spaces and other surface areas beyond flooring.
At the Tile Council of North America’s (TCNA) press conference during Coverings, the trade association released its Life Cycle Cost Analysis industry report. This report compares the cost to purchase, maintain and dispose of 18 major floorcovering types over their life expectancy. I invite you click on the link for more details.
In May, Portobello, a Brazil-based tile company, will light the kiln and start production at its new $180 million tile factory near Nashville in Baxter, Tennessee. Slowly but surely, the area surrounding Nashville is becoming the Sassuolo of the USA. Here are the brands with modern tile factories in Tennessee: Crossville, Stonepeak, Florim, Dal-Tile, Atlas Concorde, Del Conca, Wonder Porcelain, and, now, Portobello.
NEWS FROM NFA MEETING IN ST. KITTS
While I didn’t attend the NFA meeting in St. Kitts because of the Coverings conflict, I heard it was well attended by members, but vendor partners pared down the number of reps who attended. Shipping samples was very difficult, and several companies’ samples never made it. That’s rough when you invest $20,000 to host a table during the speed dating event. To give you a feel for how remote this place is, Delta only flies there once a week.
While the NFA members are “America’s Finest Flooring Dealers,” as quoted from their website, many were not insulated from the dip in demand other retailers have felt during the first quarter of this year, but business conditions still remain well above pre-pandemic levels.
Two of Piet Dossche’s sons, Julian and William, used this event to debut their new International Flooring Company (IFC). The two young men came to St. Kitts to showcase 24 new rigid LVT products that will be offered exclusively to the membership. The NFA loves special programs, so we heard the buy-in/support was tremendous for IFC.
While we’re on the topic of NFA exclusivity, it’s no secret that this group offers special programs and extended discounts based on the buying clout of the whole group. The longstanding practice within the membership is for them to make a little better margin by selling them to the consumer at prices that are similar to competitive offerings. One member, however, who has been an NFA member since 1996, operates a nationwide direct Internet site called EFloors.com and has been selling exclusive NFA items on a national basis at prices far below market value. The membership discussed this practice during the meeting and voted to expel the member from the group with a two-thirds majority vote.
More big news from this meeting: For years, the NFA, as part of its bylaws, has lived by the provision that one member’s vote could stop another prospective member from joining the group. This has been discussed for years as being too limiting, but there have never been enough votes-again a two-thirds majority is needed-to get it changed. But at this meeting in St. Kitts, the law was changed from one vote to five.
I hope you read our Focus on Leadership article on Ian Newton, the new president of the NFA, in the April 2023 issue. He is one of the most likable, non-confrontational people I’ve ever met. Kudos to him for being able to manage through these issues at one of his first meetings.
If you have any comments about this month’s column, you can email me at email@example.com.
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