Survey 2008: What the Retailers Think - July 2008

By Darius Helm

The independent retailers we surveyed from across the country have a lot on their minds, as they face new challenges at every stage of their business. They’re trying to figure out how to wring profits at a time when prices are rising and consumer spending is down, how to retain good salespeople, how to boost traffic and get more for less.

Many retailers also do builder business, and they saw business start to slow in that sector nearly two years ago, while those who serve consumers in the remodel market took their first big hit in 2007. And while many originally anticipated a quick recovery, it’s becoming clear that effects like rising prices will likely forestall a rapid rebound. So plenty of retailers have only recently come to terms with the need to fine-tune all aspects of their operations.

Last year, for instance, retailers were most vocal about low margins and the state of the economy, and while this issue remains front and center this year, comments from retailers have become less abstract. They want to know how to deal with increasing competition, they’re concerned about losing sales to the Internet, and they want to ensure that the products in their showroom displays match what the consumer is looking for.

“We are reinventing ourselves after a decade of strong builder business,” said one West Coast dealer, opting for the glass-half-full approach. An idealistic retailer from the South went further, saying, “It’s a great time to be a professional in the flooring business. I believe that the present economic conditions will weed out opportunistic un-professionals who do not give the customers real value for their purchase dollar.”

However, many retailers believe that it’s not a level playing field, and they’re directing their venom largely at manufacturers for a number of transgressions. At the top of the list is Internet sales.

“Internet competition is the number one issue,” said one West Coast retailer, with others lamenting that it was impossible to compete on price against a channel that is essentially tax free.

“Internet sales have all but destroyed our special order laminate business,” said a dealer from the South. Another dealer from the same region said, “Manufacturers need to police the selling of products on the Internet that are in our showrooms by developing Internet agreements with minimum selling prices.”

A retailer from the Midwest expressed the frustration many dealers are feeling about flooring producers: “Stop selling direct. Yes, that means you, the manufacturer. You do your job and let us do ours.”

The tough business climate has made it hard to retain good salespeople. One West Coast retailer said, “If you have an employee who is willing to actually work for a living, pay them anything they ask for and give them a company car. It’ll be worth it in the long run.”

As defaults grow and banks tighten up their restrictions, credit is becoming another issue. One East Coast dealer directed his ire at his suppliers. “The biggest obstacle facing us today is the manufacturers and distributors balancing their bad credit decisions on the remaining customers who are paying on time by their refusal to increase credit lines and draining ever more precious working capital from those who can least afford it.”

A longer term trend impacting the flooring dealer is carpet losing share to hard surface flooring, and one dealer pointed out that “every time we sell a hard surface product, I believe we as an industry are shooting ourselves in the foot because we just increased the replacement cycle by five to ten years.” The sentiment, while hardly noble, is accurate. The good news is that carpet is still affordable compared to flooring like ceramic or hardwood, so carpet may be an attractive choice for many consumers out there right now. Moving more carpet now by pushing its affordability is a sound investment, since those consumers will be back for a new floor in just a few years.

The same East Coast retailer offered his opinion on the biggest challenge in the years ahead. “Can we scale fixed overhead costs to the correct product mix and make it profitable? Do we need to replace square feet committed to flooring products with other household products?”

Another dealer was more direct. “We need customers right now.”

For the complete survey results, see the July 2008 issue of Floor Focus Magazine.

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