Strategic Exchange - November 2011

By Kemp Harr

With the recent news that Shaw and Beaulieu are closing carpet mills in Dalton, Georgia, one has to wonder if this is an indication of more than just a decline in overall demand due to these prolonged recessionary times. Won’t the carpet capacity represented by these two Dalton based plants be needed, especially when the housing market stabilizes and consumers decide they’re feeling good enough about the economy to replace those worn out floors? Or are we seeing a movement away from carpet, now that the size of new homes is shrinking and consumers decide that bedrooms are really the only place where they want to use soft surface flooring?

In 1975, carpet represented 64.5% of the value of all floorcovering sold in the U.S. By 2005, that number had dropped to 51%, and, according to our calculation, for 2010 carpet was down to 46.3% of the market. By 2015, Santo Torcivia’s US FLOOReport has projected carpet’s share to drop to 42.4%.

So if carpet represents the best value versus other flooring surfaces, why is its marketshare falling—especially in light of its positive attributes such as acoustics, warmth underfoot, slip and fall safety and color and texture? And let’s not forget that most flooring retailers make more money selling carpet than any other surface, so the motivation is certainly there to promote it to consumers. We should also remember that in comparison to most hard surface products—especially hardwood and ceramic—carpet will eventually wear out, so the prospects of getting another sale ten years from now is greatly enhanced when a consumer chooses carpet.

In our article on residential builder flooring trends in this issue, Jessica Chevalier discovered that builders are being asked by their customers to use more hard-surface flooring because customers fear carpet traps allergens and is harder to clean. Jessica’s story also points out that the wood look of the latest generation of luxury vinyl products has gotten so close to the real thing that many builders have switched to luxury vinyl, which doesn’t turn out to be more expensive than carpet when lifecycle and maintenance are factored in.

For years, the Carpet and Rug Institute has been focused on dispelling the myths of trapped allergens, addressing cleaning and maintenance issues and even promoting carpet as the surface that “just feels better.” But in the last several years, the carpet manufacturers who serve on the board of directors for the CRI have voted to cut its budgets—rendering it voiceless in the fight to stop this share erosion.

Back in the mid-eighties, carpet’s share loss was reversed when DuPont introduced Stainmaster and spent tens of millions of dollars promoting the brand on the three major network television stations. But now that the big three carpet mills produce their own nylon carpet fiber, Stainmaster has lost marketshare and can no longer afford to spend big dollars on consumer advertising.

It’s anyone’s guess whether this share loss will continue or where it will start to taper off. It’s safe to assume, however, that if someone doesn’t work to differentiate carpet and promote its positive attributes, this negative trend will continue. In addition, if consumers buy the carpet that’s being produced today and it doesn’t hold up to their expectations, the share erosion could accelerate.

Someone in the carpet industry needs to step up and take a leadership role with this issue. Is it plausible to think that one or both of the two giants in this industry—who now stand to benefit as much from a hard surface sale as they do a carpet sale—will come to the rescue of this eroding sector?

Starnet and NFA Update
Last month, I had the pleasure of attending the fall meetings for both Starnet and the National Floorcovering Alliance. The members in both of these groups represent some of the most professional businesses in the flooring industry and when these two groups have their meetings, the top brass from many of the leading flooring producers are in attendance.

As most of you know, Starnet is a membership co-op of 160 commercial flooring contractors. It was good to hear—especially given the current economic situation—that flooring purchases from Starnet’s vendor-partners are tracking a 20% increase versus last year. While many of the members say that business is still tough, it is encouraging to hear about that kind of growth. You may remember that last year Starnet passed a new bylaw designed to penalize members that don’t grow their business with the vender-partners and reward those members that do. It looks like the new rule is working as intended.

The theme of the meeting, which was held in Chicago, was concrete moisture; which continues to be a major cause for flooring failures in the commercial arena. The members that I spoke to at the meeting are getting most of their business doing renovation work, and many of the new construction projects are still having bank funding issues. Those members that are closer to the major cities (especially in the Northeast) are busier than the members in the more rural areas. Tenant improvement has heated up and healthcare projects continue to be steady. Next year, Starnet will celebrate its 20th anniversary and the spring meeting will be held in Puerto Rico. We will be doing an in-depth article on the commercial contractor sector in our December issue.

Even though the residential replacement market is still very soft, NFA members are continuing to tough it out and the membership count in this exclusive group is holding strong at 39 members, representing about 200 storefronts. The NFA also celebrated its 20th anniversary this year. To be a member of the NFA, revenue generated from flooring sales must exceed $10 million a year.

These retailers all recognize that advertising is what builds store traffic and most of them invest 5% or more of their top-line revenue on promotion. Several of the members have just run very successful private sales that beat out last year’s numbers by double digits. Many of the NFA members are also Stainmaster Flooring Centers, so much of their carpet sales are in the upper end and branded nylon is a core part of their business.

A few of them even told me that they think carpet is making a comeback so we’ll just have to wait and see what the year-end numbers tell us.

Farewell to Steve Jobs
There is no denying that in the days before Steve Jobs died, he could look back and be certain that he had made a significant difference in the lives of many people on this planet. Jobs was a truly gifted creator who had the ability to develop simple solutions for complex issues.

Early in his life, Jobs points to a calligraphy class that he attended after dropping out of Reed College as one of the critical influences in his ability to incorporate design (in the form of graphic arts) as a component in some of the first computers he created. Design was an attribute that gave Apple its early edge versus the other computers that were being developed at the time. In this class, Jobs learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, and about what makes great typography great. It was this realm of experience—what he learned in the calligraphy class and his fascination in the artistically subtle nuances of how words appear on a page—that motivated him to blend art with computer science. As a result, the Mac, which was Jobs’ first big hit, was designed to offer multiple typefaces with programming that allowed the user to be creative with letter spacing.

It is this blending of art and function that has separated most of the hugely successful products that Jobs led Apple to develop. After this early first success with the Mac, Jobs (and the Apple team) continued to think outside the box when it came to blending design with function. From the iPod, to the iPhone to the iPad, much of the mystique about the product extends beyond its basic function. It’s not as much about what the device does, as it is how it does it. One of the distinctive characteristics of all of Apples products is the user interface. Jobs never saw the need for a row of function keys on the keyboard or a mouse with multiple buttons.

If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.

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