Trends in Residential LVT: Retailers weigh in on what’s driving residential LVT sales - Oct 2021
By Jessica Chevalier
As the floorcovering industry watched LVT flooring sweep through the residential market and stake its claim as a customer favorite for its affordable price, ease of installation and accuracy of mimicking wood visuals, many manufacturers of other flooring products believed that the category would stay in its lane: a good solution for starter homes, laundry rooms and basements but one lacking in sophistication and therefore destined for the low to middle range of the market.
Instead, residential LVT took the fast lane upward, growing 190% (in dollars) over the course of the last five years, according to Market Insights, propelled by the waterproof story-initiated by manufacturers and enthusiastically parroted by retail sales associates (RSAs)-and by the American consumer’s taste for change. “We see million-dollar-home customers putting in LVT because they don’t want the same floor in ten years and want that ease of replacement,” says Rodney DiFranco, general manager of Capitol Carpet, which has five locations in southern Florida.
The development of realistic visuals within the residential LVT industry is another key factor in its success. DiFranco reports that he sold LVT to a friend and challenged him to ask the next ten people who came into his home what material the flooring was. Ten out of ten believed the LVT to be hardwood.
RSAs play a significant role in determining what products “win” at retail and end up in customers’ homes. At this point in time, buzz around the LVT category has made it something of the “easy sale” on the retail floor. To be fair, it’s hard to create the same level of buzz around products like hardwood and porcelain that have been in the market for centuries. While they are great products-even, arguably, superior products, including when it comes to factors like resale value-they don’t carry the novelty of new and cutting-edge, and consumers often equate “new” with “better.” While LVT has been in the market since the 1950s, it has only entered the greater consumer consciousness within the last decade.
From the retailer’s perspective, LVT may also be seen as the “safer” choice. “It’s an easier sale with fewer moving parts,” explains Joel Schreier, president of Home Carpet One in Chicago. “There is less chance of a claim.” Schreier reports roughly three-quarters of customers who purchase LVT at Home Carpet One came in asking for it specifically, and a good portion of customers who come in asking for hardwood or porcelain are shown LVT by their RSA and end up opting for that. He notes that, aside from the fact that the material cost for ceramic is much higher than LVT, “the installation labor cost for ceramic is four times than what it is for vinyl.”
DiFranco notes that while some customers used to walk into the store asking to see, for example, laminate or hardwood products, only to be drawn to the LVT section when they see the word “waterproof” on the displays, today it’s the opposite. “They walk in asking to see ‘waterproof,’” says DiFranco. “They even say, ‘I want to see Coretec.’ Coretec has become what Pergo was to laminate, a generalized brand name. The customer who comes in asking for porcelain plank-another waterproof floor-is seeing the price difference and may move to LVT, which is a third or half the money.”
In addition, LVT offers margins that aren’t as good as carpet but are competitive with or better than other hard surface flooring products. Of course, that’s a better margin percentage on a lower-priced ticket, which means fewer gross margin dollars.
Surprisingly, Terry Walker, director of merchandising and inventory for Montana-based Pierce Flooring & Design, Pierce Carpet Mill Outlets and World Famous Carpet Barn, reports, “LVT margins have improved as new products have come in. Three years ago, margins were very thin because we all had basically the same products, and they were price-driven. Now, there are more products to choose from as well as manufacturers that offer exclusivity, and margins have gone up significantly.”
However, LVT is not the best solution for all customers and all installations, and some in the industry voice concern that following the path of least resistance could come back to bite sellers of the category and the category itself. “As an industry, we have driven everyone to LVT because it’s easy,” says Walker. “Many dealers and stores default to the product because it’s easy to sell, visually appealing and with good price points. There are lots of promises around durability and performance. Some of the better retailers and salespeople who are true advocates for their customers qualify the customer’s lifestyle rather than taking them straight to LVT. It doesn’t fit everyone. However, even if you qualify the customer and tell them why, for instance, water-resistant laminate is a better choice for them, they may go to three other retailers who all take them straight to LVT, and that undermines what you’ve said.”
ELEVATING THE CATEGORY
With LVT so readily available, DiFranco made the choice to differentiate his offering by carrying only better and best products. “What we have found is that the looks selling well for our company are those that you don’t see other places,” he says. “We let the mom-and-pops and big boxes fight for the low end of the market. We sell the stuff that looks really good.” Capitol caters to a higher-end clientele with homes in the $350,000 to $2 million range.
Walker notes that a few years ago, he began noticing a shift in the category from a focus on waterproof and price point stories to a focus on aesthetic and value-added features. “It’s no longer a race to the bottom,” he says. “We’re seeing thicker, double-embossed product with more texture and realism. The quality is going up. There is still commodity product, of course, but we see more sales in the higher end too.”
He continues, “High-end customers are accepting it, and that’s taking huge share from hardwood. Hardwood has been beat up significantly. We are seeing some shift back towards hardwood and water-resistant laminate, but, overall, high-end customers are accepting LVT as an option-even high-end builders-because of improved quality.”
Like Walker, Schreier sells a full gamut of price points but reports that sales in the $5 to $5.50 range per foot are “winning the game.”
DiFranco is a big fan of LVT for residential applications, and one of the things he loves about the category is that the product is not permanently adhered to the floor, a feature that he uses as a selling tool. “You know what’s nice about LVT? You can make the decision to install LVT for half the cost of porcelain, and if you don’t like it, you can sell it on Craigslist or give it to Habitat for Humanity or put it in another property or give to your kid to install in your grandkid’s nursery. If you don’t like it-which I don’t think will be the case-you can easily get five years out of it, take it out and use it somewhere else.” DiFranco reports that this is often the final nudge customers need to purchase LVT.
Another reason that DiFranco embraces this idea is because he is worried about what will happen at the end of the product’s useful life when “our landfills are littered with vinyl flooring.”
Home Carpet One leans into the product’s value-added story. “The chief feature we discuss is the product’s waterproof nature with heavy emphasis on the fact that it is waterproof from the top down-not the bottom up,” says Schreier. “That is a big misconception that we try to right. In addition, we have a Coretec product in probably about 8,000 square feet of our showroom. We use that to show them how it holds up to foot traffic, given that we have more traffic in a week than their floor would have in a lifetime.”
DiFranco speculates that the greatest sales strategy for the category isn’t related to its features at all but to its popularity on home shows. “How many national TV commercials do we see pitching Coretec? None. The popularity is all driven by home shows. Consumers rarely see them use anything except LVT.”
Schreier reports that one of the biggest “surprises” customers face in an LVT purchase is the cost of installation. “The perception is that vinyl is cheap, so customers are surprised to find that it costs more to install than carpet,” he explains.
DiFranco concurs, also noting that some customers will assume that a cheaper LVT product will be less expensive to install than a more expensive LVT. DiFranco uses the fact that installation costs are static between products as a way to upsell customers to a better quality material, which offers them “the most bang for their buck,” he says.
THE FACTOR OF TIME
Walker reports that the nature of vinyl as a material is becoming more significant as the customer base moves into younger generations. As Millennials and Gen Zers-more cognizant of environmental issues than prior generations-work to reduce plastic usage in their daily lives, they may have second thoughts about installing a vinyl floor. “For current homeowners and buyers, this is less relevant,” says Walker, “but I see it increasing in importance over the next five to ten years.”
Schreier’s customers often express reservations about a different aspect of the category’s sustainable profile. “Folks are concerned about off-gassing,” he reports, “and about whether those gasses will harm their children or pets or themselves. This is a pretty frequent conversation that we have.”
There is also concern that customers who have, at any point in time, installed a poor-quality LVT floor only to have it perform badly or ugly out may be turned off from the category. Walker reports that he is hearing this from customers already and asks, “Will we see a time when potential homebuyers walk out of a home because it has plastic flooring?”
He also considers the positives and negatives of the readily available information online and how that impacts the category. “As the category has been around longer and people have more experience with it, they are better educated than they used to be,” says Walker. “The access to information online and the number of products in the market can be mind-numbing. But as fast as the consumer educates themselves, the market is changing even faster. There is still so much that they don’t understand. Top coats and wearlayers are different than they used to be, and we have 3D printing on cores now.” And oftentimes unraveling misconceptions can be more difficult than educating a consumer correctly from the ground up.
With such a large amount of U.S.-sold LVT coming from Asia, the category has been adversely impacted by the sourcing, shipping and port challenges. However, the broad range of other challenges in the market-from the dearth of installers to the chemical shortages resulting from the Texas freeze to the shift in ceramic import supply-have dulled the pain of the sourcing challenges on LVT to a degree.
“LVT has been the worst,” says Schreier. “Hardwood is also bad.” The company hasn’t shifted any of its sourcing as a result of the challenges, but Schreier does note that the product getting sold is the product in stock, so the pain travels up the supply chain.
Walker notes that the amount of pain retailers are suffering from the LVT supply challenges “depends on who you are aligned with.” Some manufacturers have handled their supply challenges much more expertly than others and having partnerships with the astute ones is immensely helpful. “Other things that have affected us are labor challenges with carpet installation and chemical issues. It’s been a perfect storm,” Walker notes.
A great deal of domestic LVT production has recently come online or is slated to do so shortly. Will that make a difference to the retailer struggling to get their products onto U.S. soil?
“I think it will make a difference if the U.S.-made products perform,” clarifies Schreier. “It will appeal to consumers to buy American-made, and it appeals to me because of the supply chain issues.”
“I think there will be some movement up in margins with U.S. production,” notes Walker, who adds that “so much of the customer base associates LVT with China,” its country of origin, that consumers may not have the same preference for choosing American that they do with furniture or other products that have been offshored.
As for concern over safety issues associated with China-made production-as the market experienced with the Lumber Liquidators laminate and Chinese drywall debacles-DiFranco notes, “Human beings are as fickle as their pocketbooks.”
Wood looks still dominate in LVT. “The plank continues to dominate the category. There are some improvements in tile looks, but the category is driven by plank looks heavily,” says Walker. The retailer reports that, in last two years, SPC has really taken over. “It offers more indentation resistance and lower price points,” he says.
DiFranco estimates that Capitol Carpet sells 60% to 70% SPC because Florida homes are generally built on slabs. “What makes LVT look most like wood? I want four-sided, painted bevels and embossing in register, so knot holes are enunciated properly. That’s all I stock. I truly believe that when we are doing fake, we do it as well as possible.”
SPC also dominates Home Carpet One’s sales. Tile looks and formats have made small gains, but wood-look planks continue to rule.
“Style wise, colors are warming again,” says Walker. “We see more warm tones, cleaner lines and less rustic looks.”
Schreier adds, “Grey is still probably 50% of sales, but it was more. The market is moving towards more realistic wood colors.”
• Capitol Carpet: Coretec, Karastan, Pergo Extreme, Masland TruCor, Mohawk SolidTech
• The Pierce family of brands: Cali, Republic Floors
“These companies offer exclusivity, a good product offering and good price points. Both did a great job with maintaining inventory,” says Walker, “and they take good care of their accounts.”
• Home Carpet One: Coretec, Stanton
“Coretec still dominates sales, but Stanton has been a very good supplier, and it has done better than most with supply chain issues, possibly because it is newer to the category,” says Schreier. “Its products don’t have as many issues as some others, and it has nice, clean looks, which is where the trends are going.”
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