Laminate: State of the industry- Benefits outweigh rumored category pressures

Home Inside FCNews Laminate: State of the industry- Benefits outweigh rumored category pressures

March 16/23, 2015; Volume 28/Number 19

By Jenna Lippin

The recent Lumber Liquidators exposé on “60 Minutes” has created more buzz in the laminate category arguably since the mid-1990s when Pergo landed on these shores, which could potentially boost sales for specialty retailers over the long haul. The segment continues to parallel the residential remodel market, which has been slow to recover from the recent economic slump.

FCNews’ 2014 statistical issue reported that laminate sales in 2013 were $1.123 billion and 1.06 billion square feet. In review of 2014, flooring executives have stated that the category was mainly flat in the North American market, with some stating a slight decrease and others a minor increase. So, it’s safe to assume there was not much change in the category over the last year.

“There’s no question this sluggishness of recovery in the remodeling market post recession has had the biggest impact on laminate, as it is roughly 90% remodeling driven,” said Roger Farabee, senior vice president of marketing, Unilin/ Mohawk Hard Surfaces. “Consumers in general are delaying renovation projects longer than we thought they would.”

Brian Parker, laminate product manager for Armstrong, said there was no dramatic change in the laminate market last year, nor was one expected. “Most of the laminate market is the remodel segment, and there is further penetration into the builder segment. It has made a transition over recent years, and we certainly saw it last year where laminate isn’t the low-end, entry-level product it used to be.”

As the economy continues to bounce back, so too will laminate, experts predict, thanks to positive consumer sentiment restoring faith in both new homebuyers and remodelers. “Continued housing starts and positive consumer sentiment that has increased the activity of the repair and remodeling market has fueled demand for laminates,” said Derek Welbourn, CEO of Inahus, the North American sales and marketing arm of global manufacturer Classen. “Remodel is very important to laminate. Whether DIY or BIY [buy it yourself, where end users buy but contractors install], it’s easy to use and very mainstream in repair and remodeling. As people get more comfortable with jobs and the economy, we are seeing the segment continue to grow.”

Big box vs. specialty retail

The industry has been witnessing a shift in laminate sales toward big box stores, though specialty retailers continue to pick up share of higher-end products. With laminate being an easy DIY option and readily accessible for purchase by the BIY shopper, home centers are many times the go-to for value-priced laminate, though due to success in the category options are increasing.

“The BIY and DIY percentage picked up during the recession for people who decided they couldn’t delay projects any longer and took on labor themselves, which benefitted home centers,” Farabee said. “In general home centers are a more natural destination for consumers thinking about laminate [rather] than other categories. It’s a profitable category for home centers and as they’ve seen those results they’ve invested in more SKUs.”

But big box traffic should not discourage specialty retailers, the latter offering many products the former cannot, such as high fashion options and a variety of constructions and visuals.

“The differentiator with big box and specialty retail is the variety of choices,” Armstrong’s Parker said. “Big box in general is kind of a sea of oak. You can have 68 different shades of oak in multiple strips, and that’s very different than what you see at independent retailers, where [customers are] more design and fashion conscious, looking for floors that will make their homes look beautiful.”

According to Welbourn, big box continues to claim share with laminate, particularly with large volume orders, mainly at the lower end. Again, specialty retailers maintain an edge with being able to offer a higher-end, more refined product mix. “Big box is an extremely efficient channel that is hard to compete with on cost. However, specialty retailers do extremely well with mid- to upper-end products. On total dollars per channel, there was no change [from 2013 to 2014]. Box stores sell a ton of stuff…they buy hundreds of truckloads of one color and it sells, and it’s extremely efficient. If [the customer] wants a different higher-end or middle-end product, that opens up the entire gamut for specialty retailers. And major manufacturers are getting better at creating much more individual styles. Specialty retailers can offer a diversified product mix.”

Carr Newton, vice president of laminate and resilient, Shaw Floors, believes home centers are driving the laminate category with extensive advertising. While specialty retailers are certainly still participating in laminate sales, they are not doing as much to get the word out to consumers, particularly those in the DIY market. “[The category] is dominated by DIY and the end user installing it herself, in various types of applications. Home centers are advertising heavy on that sale.”

The rise of composites

Among the recent happenings affecting the laminate market include the onset of composite products, including Shaw’s Floorté, Inhaus’ Zig and USFloors’ COREtec Plus, with similar products coming out seemingly by the day. Some members of the industry believe these offerings will take share from laminate, particularly because of water-resistant properties. However, some executives believe composites will be more of a threat to LVT.

“[Composite products] were specifically designed to go after ordinary LVT,” Parker said. “They offer the same benefits that a standard LVT has, but the unique differentiator is that it has a click system and can be floated, which is an advantage over LVT products that do not have these installation options. Composite products can float and hide subfloor irregularities. Laminate already provides this benefit, but they will certainly go after the laminate market.”

Parker added that composite products come up short in design, in that because it is essentially vinyl it cannot be mistaken by end users for real wood. “You don’t have to touch it or walk on it—you see it and you know. With premium laminate, customers can’t believe that it’s not wood. Good laminate still has that advantage, as well as performance where it has extremely high scratch resistance. That has been one shortfall of LVT, and composite products are no different.”

Welbourn believes that despite the potential of composites taking share from laminate, the category will perform due to its historical success thanks to efficient manufacturers, benefitting both from low product costs along with increased focus on style and design.

“The ultimate success [of composites] will be dependent on how well they offer tangible benefits to the end users,” he said. “There has and continues to be success for these new composite products and they are claiming share in the flooring market against laminate and all flooring categories. Our experience has shown that although some of the market share that laminate would have claimed is going to new composite products, the overall laminate category continues to grow. The result is that laminate offers some great value that is hard to beat. The cost advantage of producing laminate relative to the new composite products often exceeds 50%.” Inhaus does, however, “believe in composite products,” investing heavily in its new Zig line that uses LP3 technology (luxury polypropylene plank) that is a combination of polypropylene and wood fiber, said to be a category of its own.

Farabee noted that composite products are mimicking the benefits of laminate but in a different way, with water resistance remaining an advantage of LVT and composites over laminate. This has “opened up that discussion more so than we’ve seen in the recent past, even though moisture is not a big issue with laminate. As long as you don’t saturate laminate or have liquid on it for a long time it is generally not an issue. There is still plenty of life in laminate. If the look is there and the price is there, it still gives people what they want, along with its benefits. There isn’t that same stigma of, ‘Oh, that’s laminate.’”

No real threats on the horizon

Laminate will continue to hold its place in the market, executives said, despite the recent developments affecting the category. Regarding Lumber Liquidators, Dan Natkin, Mannington’s senior director of residential products, said the harmful ramifications of some Chinese products can actually benefit the category, particularly laminate made in the U.S. “Products that are NALFA [North American Laminate Floor Association] certified are tested regularly for CARB compliance, and most manufacturers go an extra step in getting FloorScore or GreenGuard certifications as well. These certifications provide an extra assurance to the consumer that their flooring helps to promote good indoor air quality.”

Farabee also believes the added certifications by major manufacturers such as Mohawk/Unilin/Pergo will help them promote products as being safer options. He explained that the “60 Minutes” exposé “calls attention to consumers’ concerns about some laminate products produced in China potentially not meeting CARB 2 requirements. All of our laminate flooring products meet this standard. In addition, we have achieved FloorScore certification for all of our branded products, so consumers can rest easy that our products will not negatively impact indoor air quality.”

Retailers will likely find continued success with these “safe” products, as there are certain laminate options that are strong sellers, overpowering the historical stigma that once existed for the category. For example, John Marano, owner of We’ll Floor U in Hampton Bays, N.Y., said Quick-Step and Mohawk laminate are his “go-to” products. “We position laminate against hardwood floors. I’ll fake people out and put it next to Provenza or DuChateau products. I tell them it’s laminate and they say how beautiful it is and how much they love it. It looks good and it’s half the price [of real hardwood]. It’s also more durable and more stable. You can get a nice, wide-plank laminate for $4 per foot, while a wide-plank hardwood is $9 or $10.”

Mohawk has plans to continue to expand the category, looking for ways to improve the high performance of laminate that is already evident. “A lot of that will be around moisture, which is the next frontier. In the next 12 months we’ll be focusing a lot on it. We’re not convinced that at the end of the day most consumers will be impacted by it, but if the perception is that [water resistance] is a ‘weakener’ then we have to address it.”

Robin Osterhaus, co-owner of Flooring Frenzy & More in Owatonna, Minn., “sees the flooring industry heading back to laminate. The Mannington Restoration collection is beautiful. I also like Shaw’s Heron Bay product.”

Natkin noted the laminate story doesn’t get told as frequently as it should considering it’s still the “best performing category for active lifestyles. There is nothing more wear resistant, plus there are environmental benefits.”

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