Wood Cuts - November 2009

By Ed Korczak

The face of retail sales has changed dramatically during the past few years. Retail giants like Macy’s, Target and even discount merchandisers like Costco are feeling the pinch as consumers continue to curtail their spending habits. The reasons are clear. Unemployment rates are up, personal incomes are down, and the housing market continues to lose value.

The bottom line is that consumers are worried and are spending at rates dramatically decreased from the “I want it and I want it now” years that kept retailers thriving. In fact, the National Retail Federation is predicting that retail sales fell 2.5% for the first half of 2009. It isn’t forecasting much improvement for the holiday shopping season, either. In other words, the economic roller coaster ride is far from over.

The flooring industry is not immune to this trend. In 2008, the entire industry, which includes carpet, ceramic, hardwood, laminate, rubber, stone and vinyl, was down 11.9% from 2007. Hardwood flooring dropped even more, 18.6%, during the same time period. Neither decline is surprising. The past few years have changed the way consumers think about, and, consequently, spend their money. In other words, there’s less business out there for flooring retailers, and more competition.

To get your share of the business, it’s important to know what’s selling, and who’s selling it. The key retail channels for hardwood include flooring stores, home centers, lumber yards, furniture stores, wood flooring contractors, building flooring contractors, commercial flooring contractors, and direct sales/OEM.

Flooring stores dominate the retail hardwood market, representing 34% of all sales at $640 million. Home centers are close behind, representing 30% of all sales at $564 million. All other retail outlets (lumber yards, furniture stores) represent 2% of all sales at $41 million. Wood flooring contractors represent 23% of the market at $434 million, while building flooring contractors represent 4% of the market at $67 million. Commercial flooring contractors represent 1% of the market at $21 million, while direct sales/OEM account for 6% of the market at $117 million.

The total market value—nearly $1.9 billion—is significant, and all indications are that there’s pent-up demand for wood flooring. In fact, market research indicates that in recent years, a group of consumers equivalent to one-fourth of the current market has put off a wood flooring purchase for economic reasons.

Knowing price points is important, too. Recent trends show that low-end and high-end wood flooring products are gaining marketshare, with marketshare loss occurring in the middle price ranges. Despite this trend, the middle price ranges remain strongest.

Consumer preferences on where their wood floors are being installed have evolved too. Kitchens now represent the largest percentage of wood flooring installations at 24%, followed by dining rooms at 22%, foyers and entryways at 21%, living rooms at 20%, bedrooms at 5%, bathrooms at 3%, and all other areas in the home at 5%.

With this data in hand, what can flooring retailers do to continue to make money in a down market?

First, you must differentiate yourself from your competitors. The easiest and most inexpensive way to do this is to offer superior customer service. Your salespeople should know everything there is to know about every product you carry. If they don’t, they won’t present themselves as flooring experts at a time when consumers are more reluctant to part with their money. If your customers don’t feel comfortable that your salespeople are flooring experts, chances are, they’ll take their business elsewhere.

Your salespeople also need to listen carefully. They should ask your customers about their lifestyle, their flooring preferences, and their budget. With this knowledge in hand, they should work to educate your customers about the flooring you carry, and steer them toward the products that will best meet their needs. Sometimes, this could actually involve talking a customer out of a more expensive product that will not work for them, but in the long run, will make them a more satisfied customer.

Second, you need to make sure that the products you sell offer your customers real value for their money. Wood floors offer the most long term value because they last for hundreds of years when properly maintained. Have examples prepared that show your customers the long-term costs associated with various flooring options for the life of their home. Give them ten, 25, 50, even 100 year scenarios, and it will become evident quickly that wood floors offer the most long-term value.

Third, because green building has become such a huge consumer trend, show your customers how wood floors are the most environmentally friendly flooring option available on the market today. A lifecycle analysis commissioned by the National Wood Flooring Association with the University of Wisconsin shows that solid wood flooring uses less water and energy to produce than other flooring options, and also relies on a renewable resource—trees—for its raw materials. Here in the U.S., the Department of Agriculture Forest Service verifies that hardwood growth in the U.S. is greater than hardwood harvesting and loss. In fact, for every cubic foot of hardwood harvested, on average, 1.66 cubic feet are planted in its place.

Fourth, help your customers think outside the box. Today’s consumers have so many options available to them they may not even be aware of all the possibilities wood offers. Oak remains the predominant player in the U.S. market, but other wood species have gained significant marketshare in recent years. Exotic species like Brazilian cherry from South America, Burmese teak from Asia, and wenge from Africa offer consumers a diverse color palette not available with domestic species, while “domestic exotic” species like ash, hickory/pecan, and mesquite offer unique options not available just a few short decades ago.

Next, don’t overlook the possibility of cross selling products. Offer a full line of professional cleaning products at the point of sale so that your customers can keep their floors looking beautiful for years to come. Sell your customers the floor protector pads they’ll need for their furniture, and the throw rugs, including the wood-safe pads for underneath, that they’ll need to keep dirt and debris from outside scratching their floors at entry points. In other words, make it as convenient for them as possible by offering everything they need in one place to keep their floors looking as beautiful as the day you installed them.

Also understand that if you aren’t offering routine maintenance plans or refinishing services, you are missing out on potentially significant business. In fact, recent data indicates that retailers who also sell wood flooring refinishing services can increase their revenues by up to 20%, which is one way to survive a down market when new home construction and remodeling spending is on the decline. There literally are hundreds of thousands of square feet of wood flooring already installed in the U.S. alone, and sooner or later, it will need to be refinished.

Know your market as well. Know what sells and what your area can tolerate. If you’re in a predominantly slab market in the Southeast or Southwest, be sure to carry a full line of engineered products that will meet the various looks that your customers desire. If you’re selling in the Northeast or Midwest, which is predominantly a wood subfloor market, chances are you will have more demand for solid wood products. Don’t guess. Do your research.

Finally, recognize that it’s the middle class that’s the most apprehensive right now about spending their hard-earned money. Those fortunate enough to be in high income brackets have money to spend and won’t hesitate to invest in items that increase the value of their home, while those with incomes that are more uncertain may need to be convinced. Be sure that you offer a full range of high-end flooring options, as well as more value-oriented options that will meet the needs of the cautious buyer.

The truth is, wood flooring has a lot going for it. It’s beautiful, it’s durable, it’s green, and it offers real value. It is an investment, which means that you should be investing in it as well, by educating yourself, your salespeople, and your customers about its many attributes.

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