Survey 2024: What the Retailers Think: Independent retailers are increasingly concerned that manufacturer strategies aren’t focused on their success – July 2024

By Darius Helm

In the best of times, independent flooring retailers are vocal about the challenges they face against big boxes, home centers and the Internet, and they fault flooring producers for tilting away from traditional retailers to favor these volume sellers in the industry. And now, with residential sales flagging in the face of inflation and high interest rates, retailers are expressing more frustration than ever.

One Pennsylvania-based survey respondent, referencing how difficult it is to be a retailer these days, said, “All manufacturers’ products are in the big boxes, they undersell it and then customers beat us up for the best price. ‘Can you match Home Depot or Lowe’s?’ No, we can’t...we don’t have that kind of buying power or advertising budget.” Noting that she is glad to be on the cusp of retirement after 46 years in the business, she adds, “Small mom-and-pops made the manufacturers, and yet we are the ones paying the price now because in the end the manufacturer still gets the sale, whether the consumer buys it from me, another competitor or a big box store.”

Another retailer succinctly noted, “Manufactures and vendors need to spend more time helping retailers and less time trying to sell products without them.”

Meanwhile, retailers are looking for every possible tool to keep their heads above water. That includes digital tools to streamline the shopping experience and drive traffic to their brick-and-mortar stores, new marketing strategies, updated showrooms, a sharp focus on trending products, and diversifying in terms of products and services to both increase their revenue base and draw more customers into their stores.

Fortunately, there are new digital systems and technologies that are helping retailers compete effectively. Room visualizers, for instance, are a great differentiator, and they draw consumers in-and independent retailers are embracing this technology. Also, investments in sophisticated websites and social media campaigns are crucial to help channel consumers from online to brick-and-mortar. For many, alignment with buying groups, as well as with major flooring producers like Shaw and Mohawk, provides ready access to many of these tools, and helps differentiate their businesses from the likes of Home Depot and Lowe’s.

While home centers got a big boost to business during Covid by virtue of being “essential” businesses, they have fared poorly of late, leading one retailer to point out, “Manufacturers need to be more considerate of the independent retailer. Big box installation business continues to shrink and so do sales. Manufactures need to care more about the future of the business they don’t want to lose.”

Following a 2023 slump in the residential flooring market, 2024 is looking like another down year, though it may start to recover in the second half. In the meantime, flooring retailers are fighting for every sale. And it’s not just the economy, e-commerce and big box competition that are creating the headwinds. The lack of experienced installers makes business more challenging; customer expectations add many hurdles to closing deals; and demand for rigid LVT is driving down margins. “Being suffocated by LVP products” is how one retailer put it.

WHO THEY ARE
In this year’s survey, the 28th annual survey conducted by Floor Focus, the majority of respondents (34%) were from the South, followed by the Midwest at 26%, the West at 23% and the East at 17%. The survey does not include responses from retailers based in Canada.

This year’s surveyed retailers have annual revenues running from less than $600,000 to over $15 million, and what’s most notable is that 20% reported sales of over $15 million, well above the norm, and only 4% reported sales of less than $600,000-a sign that the bigger fish continue to eat up the smaller ones. However, nearly half of all respondents (46%) have sales from $600,000 to $3 million, about the same as last year (49%).

While average revenues in last year’s survey were up only 1.6% last year and earnings were up 0.9%, average revenues and earnings for this year’s surveyed retailers were up 4.0% and 4.3%, respectively-a somewhat incongruous result, considering that the residential market is still underperforming this year. However, some of these higher-than-expected results are likely due to the higher ratio of bigger companies this year; those reporting sales over $15 million said revenues were up 5.7%, and earnings were up 5.9%.

This year, 58% of respondents report being part of a retail group, the highest response rate since 2008. Among those surveyed, membership is highest in the South at 65% and the East at 63%, followed by the Midwest at 54%. Numbers are typically lowest in the West, and this year was no exception, coming in at only 46%. Of the 42% reporting that they’re not in groups, only 2% expressed any interest in joining one.

When it comes to how retailers work with installers, 80% report that they pay them as independent contractors, and 20% have them on their payroll, about on par with recent surveys. Retailers in the East and West typically lean more toward treating installers as company employees and those in the South lean more toward having them as contractors, and this year the trend continued. While 30% of retailers in the East and West have installers on their payroll, that’s only the case with 8% of retailers in the South and 23% of those in the Midwest. It’s mostly an economic choice, since independent contractors are not required by law to receive, for instance, company health benefits.

Retailers in the South also tend to lean more toward straight commissions for retail sales associates than straight salaries. Nationally, 37% of this year’s respondents pay straight salaries and 24% pay straight commissions (and 39% do a combo of both). In the South, 20% are paid straight salaries and 37% straight commissions, compared to, respectively, 57% and 21% in the Midwest, 53% and 10% in the East, and 31% and 15% in the West.

For the complete Retailer Survey Results, see the July 2024 issue of Floor Focus Magazine.

Print the Article