January 16/23, 2017: Volume 31, Number 16
By Ken Ryan
For many flooring retailers, comparing a cash and carry sale with a full-service installation transaction is like comparing oranges and apples. Both taste good but are not the same.
Depending on the customer, cash and carry can be very time consuming if product details and installation have to be explained. There are also more product returns, which can add to administrative costs. Conversely, cash and carry can be as easy as 1-2-3, without the labor a full installation requires.
Meanwhile, the plus for installation is dealers control the product through completion and the professional work can set you apart. The bottom line is retailers are able to write a larger ticket with an opportunity to generate greater profit.
Both methods have their advantages.
Installation is a profit center
It has been often said the customer derives no satisfaction from the flooring purchase until the product has been properly installed. Flooring retailers know this to be true. It is why many of them view full-service installation as their biggest competitive advantage over big box stores. As competition goes, it is their primary differentiator.
One plus for installation is flooring retailers control the product and can better manage consumer expectations by ensuring correct installation. “Labor is a profit center,” explained Darren Braunstein, vice president of Worldwide Wholesale, in Edison, N.J. “The higher percentage of installs versus cash and carry, the higher our average gross profit per job.”
Installation is both the last step of the transaction process and the most important. As such, dealers would prefer to control every aspect of the sale if they can. “That way we have a more satisfied customer,” said Kevin Murray, owner of Murray Floor & Window Coverings in Billings, Mont. “I prefer to sell the customer the complete package, including installation. Our business is mostly referral based, and I believe the complete package, including installation, will benefit our business with repeat business because of the turnkey experience.”
For some retailers, especially those located in more upscale markets, cash and carry equates to low end, which is not a reputation they want to promote. “Our clients are not DIYers; they want us to provide the full package,” said Elisabeth Stubbs, owner of Enhanced Floors & More, Marietta, Ga. “Our niche is very much professionally installed.”
Marjorie Benson, owner of Friendly Floors, Port Charlotte, Fla., went one step further, saying, “I believe the cash and carry business would be the end of us,” adding, “lower margins to compete with outlet/liquidation type showrooms and big box stores do not sound appealing to me.”
For more than 30 years, customers have relied on Friendly Floors because they specialize in installation. Benson wants to keep it that way. “Our customers want someone to take care of them and be responsible for the entire job, from design help to professional installations. It’s about leaving their homes beautiful and clean.”
Rob Elder, owner of Hiller’s Flooring America in Rochester, Minn., echoed the sentiments of many flooring retailers by saying a well-done installation is what distinguishes the specialty shop. “Quality product, quality installation, quality follow through—that’s the key. Cash and carry is price only, and I don’t care to be in that business. Full service has its pitfalls, but in the end it is very rewarding to see a job through to the end and make a customer happy and a customer for life.”
Other dealers noted a major benefit of installation is it allows them to become more intimate with their customers, thus creating lasting relationships.
Cash & Carry reduces headaches
Two of the biggest headaches for flooring retailers today is finding enough qualified installers for current and near-term projects as well as cultivating mechanics for the future. But there is a very easy answer to today’s installation crisis: offering a cash and carry business model.
Think about it—no worries that the Department of Labor will stop by your business and look into your books to see how you handle your subcontractors and possibly get hit with a misclassification lawsuit. No hassle from disgruntled consumers who find fault with the simplest seam in their carpets.
For the specialty retailer, cash and carry can appease those customers who like to do it themselves and shop in a store where they can find quality materials to work with. And despite talk that millennials don’t like working with their hands, there are plenty of consumers out there today who would prefer to do it themselves or who will hire a friend or two to do the installation. For scores of them, the ability to transform a house into a home proves appealing, and with every completed task comes a sense of accomplishment.
Mike Foulk, owner of Foulk’s Flooring America in Meadville, Pa., is a big fan of the cash and carry model. “Cash and carry transactions are the most beneficial. Cash and carry avoids a lot of further responsibility in the transaction and helps your immediate cash flow as most installs are not paid in full until they are completed. With the cash and carry model, if they get into trouble they still may have you finish the installation.”
There are some flooring outlets that do most or all of their business via cash and carry. However, the majority of them do installs. There are advantages to both. “It’s like an apple and an orange—I like them both and don’t prefer one over the other,” said Tim Schoolfield, owner of Countryside Flooring America, O’Fallon, Mo. “You know what you’re biting into with cash and carry; it’s easy, low risk and you get your money up front.”
Getting your money up front has a nice ring to it, most dealers would admit. At the very least, it offers a nice balance with full-service installation. “Cash and carry is quick and simple without any installation liability,” said Kevin Rose, owner of Carpetland USA, Rockford, Ill. “It is not financed so it is easy money in the bank, and we all know cash is king.”
Another potential revenue stream: DIY customers may lack the skills needed to master certain projects. They may be unfamiliar with the proper tools to use or what materials are needed, which means they will need help.
Who better to provide that help than a specialty dealer.