Contract Dealer Survey 2023: What They Really Think: Conditions have normalized since the 2021 survey, but challenges remain – Dec 2023

By Darius Helm

With the pandemic in the rearview mirror, contract dealers report that in many ways it’s back to business as usual, though cost, supply and transportation issues continue to be a challenge. But the normalizing of the market is revealing that the issues contract dealers have been struggling with for years-like building relationships based on mutual respect with general contractors and designers or being cut out of profit centers by manufacturers selling direct-have shown no signs of improving.

Arguably the most fundamental issue facing commercial dealers is being treated as simply the installer by the other stakeholders-mill reps, A&D (architects and designers), FMs (facility managers) and GCs (general contractors)-despite the fact that, as a group, contract dealers have a broader and deeper understanding of flooring products. And that understanding includes everything from the flooring’s performance, maintenance, construction and pricing to timelines, scheduling and the capability and reliability of flooring producers. Needless to say, they’re more neutral when it comes to products than are the product reps, more cognizant of scheduling needs than GCs, and have more knowledge of product nuances and the breadth of product out there than A&D. And yet, they are too often treated simply as installers

Today’s commercial market still faces many bottlenecks-one dealer noted that “freight costs have evened out compared to last year, but material costs have definitely increased,” and another said that “supply chain and product quality have been an issue”-making the removal of discount terms for carpet feel like the big mills are rubbing salt in the wound.

While it’s true that discount terms were unique to carpet and, in that sense, an anachronism of sorts, it was still embedded in the financial planning of contract dealers. “The fact that terms are now being taken away is an issue,” noted one contract dealer.

Though they have tapered off, price increases have been hard on contract dealers, some of whom expressed skepticism. “Costs, I believe, are ‘somewhat’ being raised when they really don’t need to be,” opined one respondent. Another said, “I think the mills used the initial issues to keep on driving up prices long after it was resolved.” While manufacturers would certainly dispute that, the bigger issue is that distrust is never good for relationships.

While the commercial market has strengthened, growth has been uneven. For instance, the corporate market, which makes up the biggest piece of the commercial pie, has been underperforming, both on the owner-occupied side and tenant improvement, while medical/acute care and multifamily have been showing the strongest growth among surveyed contract dealers-October’s Top 250 Design Survey also showed the strongest growth in medical/acute care and multifamily. (It’s worth noting that the multifamily new construction segment is slowing right now; for more on the topic, see page 41 of the Year in Review.)

Another outperforming commercial segment is government-this was also reflected in the October design survey, where votes for government as the fastest growing segment got more than double the votes of the previous year.

ON THE BUSINESS
Contract dealers are the central player in the flooring component of the commercial interiors landscape. As such, they work directly with the other professions in the mix-FM and end users, A&D, general contractors, manufacturers and their reps. They’re right in the middle of a very crowded and often antagonistic process. Together, they are bringing a vision into reality. Just about every beautiful commercial interior-harmonious, on-trend, functional, efficient, seamless-is the result of a difficult birth: loud, chaotic and distinctly unharmonious. And this is the territory contract dealers must navigate.

Most of the prominent commercial flooring dealers are part of a group. The two largest independent contract dealer groups are Starnet Worldwide Commercial Flooring Partnership, which just celebrated its 30th anniversary, and Fuse Commercial Flooring Alliance, which got its start around 2006 as Re:Source Commercial Flooring Network (which was originally part of Interface), renamed Fuse in 2012. This year, 88% of surveyed contract dealers report being part of a group, with about two thirds with Starnet and the other third with Fuse, compared to 84% in 2021.

In terms of the focus of their businesses, the average surveyed dealer generates 76% of its revenues from specified commercial work, with another 18% from mainstreet commercial and 6% from residential-virtually identical to the ratios from the last survey.

This year, 10% of respondents report annual revenues of less than $5 million, falling from 11% in 2021, 12% in 2019 and 2017, and 19% in 2015, so revenues have been growing for the average surveyed dealer over the last decade (either organically or through acquisition). Another 72% report revenues from $5 million to $30 million, and 19% cited sales over $30 million, up from 8% in 2021.

The average sales force for respondents is 6.9 people, exactly the same as in 2021, with 9% having only one or two salespeople and 20% with teams of ten or more. And on average 34% of dealers’ salesforces work directly with A&D.

For the complete Contract Dealer Survey results, see the December 2023 issue of Floor Focus Magazine.

Copyright 2023 Floor Focus 

Related Topics:Fuse Alliance, Interface, Starnet, Fuse