Wood Cuts: Hardwood flooring is experiencing a retail renaissance – Jan 2022

By Michael Martin

If anything summarizes the hardwood flooring market today, it’s the famous misquote from Mark Twain, “The reports of my death are greatly exaggerated.” The wood flooring industry is strong and growing. For 2021, wood flooring is estimated to represent 13.5% of the floorcovering market, according to Market Insights, up from 11% in 2020.

Before the pandemic, busy consumers weren’t necessarily focused on their home environments. It was all they could do to take care of their families, get to work and tend to a household they spent only a few waking hours in most days. When these overworked and overwhelmed consumers needed new flooring, they often were seduced with words like waterproof and scratch-proof. Sure, they loved the look of wood, but with the allure of these perceived benefits from non-wood products, it was easy to accept the “look” of real wood as good enough.

The pandemic has changed some consumers’ thinking. With the advent of shutdowns, many consumers were spending tremendous amounts of time in their homes again. Suddenly, “good enough” just wasn’t anymore. As these consumers refocused their priorities, they developed a strong desire to have real, high-quality products in their homes. And real wood floors fit the bill.

These refocused priorities will have an enduring impact. Nature is in vogue and bringing it into the home is a major trend. Words like authentic, natural, sustainable, healthy and traditional are taking precedence over the quick and easy “good-enough” solution. In addition, hardwood flooring manufacturers have evolved finishes over the years to increase scratch resistance and water resistance in response to consumer demands, which brings wood flooring performance closer to that of many wood-look products.

According to an August 2021 report published by Statista, a provider of market and consumer data, more than three-fourths of consumers surveyed indicated that they had made at least one home improvement to their home during the pandemic. Further, a March 2021 study conducted by the Joint Center for Housing Studies of Harvard University noted that while the overall U.S. economy was down 3.5% in 2020, spending on home improvements was up more than 3%, weighing in at nearly $420 billion. The Harvard group also reported in an October 2021 study that remodeling is expected to remain robust, estimating year-over-year gains in annual improvement and repair spending will reach 9% in Q4 2021 and will continue to maintain that pace into 2022.

In recent conversations with a full-line, large manufacturer that produces multiple flooring types, the general consensus was that instead of loss of share, hardwood will see moderate growth because of both the robust renovation market and the increased costs of wood-look products, which often come from China.

These higher costs are, in part, the result of the continuing tariffs on Chinese products, with no indication that they will be lifted any time soon. Added to this is the fact that the raw materials for plastic cores are all being produced in China, which makes simply moving production to another country more costly because the raw materials would have to be imported from China. As a result, many retailers are returning their focus to wood with the margins on wood-look products decreasing.

While some LVT plants have opened in the U.S., the capacity is nowhere near what comes from China and would take years to get there. Even if capacity could be matched, labor costs could not, so the relative value between products has tightened.

Which brings me to another point: supply issues, tariffs on products from China and increasing transportation rates have all made the gap between the cost of wood looks and real wood much smaller. So, the delta between the cost of real hardwood and wood-look products is less, and those wood looks are much more expensive than they were pre-pandemic. Thus, at the point of sale, when a consumer can get the real thing for a slight increase versus doubling the cost, it’s a no-brainer to go with the product that increases the home’s value. And wood is the only residential flooring product that can produce a 10% or more increase in home value, providing a significant return on investment.

When the final results for 2021 come in, one multi-product manufacturer predicts that laminate will have eaten marketshare from LVT, and further predicts that the trend should continue. While LVT will still have double-digit growth, that growth will be a third of what it has been. These factors will open up space for hardwood, especially in the renovation market. And, if hardwood can maintain its low-price increases during the pandemic while wood-look products increase at a faster pace, we should see a return of more wood in the homebuilding market, as well.

THE ASPIRATIONAL FLOOR
As we’ve covered in this column before, in research the National Wood Flooring Association (NWFA) conducted with Public Opinion Strategies (POS), real wood flooring was revealed to be the aspirational flooring choice for U.S. consumers, with two-thirds of all respondents indicating that they wanted wood floors in their dream homes. In addition, when asked to quantify attributes of different flooring products (value, maintenance, durability and sustainability), 80% of respondents identified real wood floors as “more favorable” than other flooring options for all four attributes, while more than 50% of respondents identified real wood floors as “much more favorable” for three of the four attributes.

These results bode well for the category and have already positively impacted the businesses of NWFA members. NWFA contractor members across the country have shared that they are busier than they have ever been. Many of them have been booked for months in advance as consumers make the choice to improve their living spaces. And because large parts of the country considered construction work to be an essential service during the nationwide shutdowns during the pandemic, most wood flooring contractors did not miss a beat and were able to keep working as much of the rest of the country was shut down. In fact, many contractors shared that they had to turn down work because they were not able to meet customer timelines or did not have the skilled labor needed to meet demand. Turning down work is something that would have been unheard of prior to the pandemic.

The timing has never been better to build marketshare for real wood products. The demand is there, consumer spending is there, and the industry is poised and ready. Why, then, if real hardwood floors are what consumers want, are retailers steering them to faux products and leaving potential profits on the table?

Education is the key. Retail sales associates often do not have the product knowledge they need to sell real wood floors with confidence. The NWFA created tools to address this challenge with the development of its “Real Wood. Real Life.” campaign. Based on its research, the NWFA developed materials for RSAs to help educate consumers about the differences between real wood flooring products versus the wood-look products. To date, nearly 1,500 NWFA member companies have downloaded the Marketing Toolkit to receive and use the campaign elements, while the NWFA’s consumer website, woodfloors.org, has had nearly 600,000 page views. That’s good engagement but not nearly enough.

A CALL TO ACTION
This issue is not limited to just flooring either. We’re hearing similar stories from our friends in the furniture industry, the cabinet industry, the molding industry and even the lumber industry. Each is being affected by faux products that look like wood but have none of the benefits or the long-term value of real wood.

To address this dilemma, the NWFA partnered with 20-plus hardwood associations and organizations to form the Real American Hardwood Coalition (RAHC). The group, which launched in late 2019, was established with a mission to increase sales of American hardwood products through consumer outreach and marketing campaigns.

A lot has been accomplished already. A nationwide consumer research campaign was conducted to understand current consumer perceptions of real wood products. A Real American Hardwood logo was developed and trademarked. Brand messaging has been established. An industry-focused website has been built (realamericanhardwood.org). Social media accounts have been launched (Facebook, Instagram, Twitter). A video has been created to present the plan to the industry. And we’re only getting started.

The coalition currently is developing a consumer-focused website with a robust SEO presence that attracts and engages consumers and provides valuable information about the benefits and value of real wood products. Based on the findings of RAHC research, the campaign will focus on five pillars that consumers identified as key influencers when making purchasing decisions: appearance, durability, value, health and sustainability. We have already won the battle on appearance-everybody wants products that look like wood. We also know we offer the most durable flooring option, the best long-term value, the healthiest home environment and the most sustainable product. So now the task before us is to educate consumers so they know this, as well.

Long term, the intent is to deliver in-store signage and educational materials to big-box stores, where many consumers start their purchasing journey, and to introduce a comprehensive print and audio advertising campaign that produces an educated buyer for real wood products.

But, as we all know, a campaign of this magnitude takes money. The initial funding for the campaign was provided by the 20-plus hardwood associations-including the NWFA-that formed the Real American Hardwood Coalition, but for the campaign to be successful and to gain marketshare for real wood products, it will take the entire industry working together to secure the funds to make it happen. This issue has been discussed for years, and while there has been a lot of talk, there has not been a lot of action.

If you don’t think the need is great, just take a look at the numbers. According to the U.S. FlooReport 2020 produced by Market Insights, hardwood flooring represented 14% of the floorcovering market in 2014. By 2019, hardwood flooring dropped below 12%. Further, in 2016, the total U.S. marketshare for wood flooring was about $3.249 billion. In 2019, that figure dropped to about $2.933 billion. That represents a loss of about $316 million in just three years.

However, with the increased demand for real and authentic products, the increased levels of U.S. remodeling spending, and the increased focus on healthy and comfortable home environments, the time has never been better to grow marketshare for real wood flooring.

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