Jan 4/11; Volume 30/Number 14
By Steven Feldman
Vance Bell and Randy Merritt, the respective CEO and president of Shaw Industries, have become synonymous with leadership. While Bell focuses on driving direction, Merritt spends much of his time interacting with customers as the face of the company. Under their auspices, Shaw continues to pile up accolades as a preferred full-line supplier. FCNews recently sat down with Bell and Merritt for a rare, wide-ranging interview.
If a year from now business has exceeded your expectations, what factors, external and internal, do you feel will have led to that?
Bell: I would have to start on a macro level with the economy and hoping it exceeds current trends. [2015 did] not live up to our expectations. So hopefully, the external drivers would be higher growth in the economy, increased consumer confidence and spending, and better housing and construction, which is a huge driver of the flooring business. If those things are moving on a better upward curve than we expect, overall business will be better. Internal factors surround the execution of our plans. We strive to bring out innovative products and raise the bar in service every year. If we execute those plans we will meet or exceed our expectations.
Merritt: We also work hard every year to improve the tools we deliver for our customers—better marketing, improved online/web assistance, promotions, etc.
What is the one thing you believe Shaw does better than any other flooring manufacturer?
Bell: I think it has been our day in, day out consistency in terms of a high level of service, great products and surrounding the customer with great people. Our customers expect that of us. So whether it be the people surrounding the account, products, service, marketing or merchandising, I think we bring more consistency in meeting customer needs than most companies out there.
Define the Shaw culture and core values in a few sentences.
Bell: First, value begets culture. If you look at our values, it begins with honesty, integrity and passion. And what we mean by passion is committed, dedicated engagement with your teammates, company and customer. That creates the culture. When we talk about culture internally, it starts with respect for the individual. It’s how we treat people. Even when we have to take actions or hold people accountable for their actions, we respect the individual. I think we have uncompromising ethics in how we conduct our business. We are focused outward on the customer. It’s about what’s best for the customer and the team. We have an expectation for excellence in trying to be the best at everything we do. And we have great community involvement. I think that helps build the passion and engagement in our organization.
What does St. Jude mean to Shaw and its customers? Why focus on that cause in particular and do your customers realize a marketing advantage in their St. Jude efforts?
Merritt: We are very passionate about St. Jude. We have always had a passion to create a better future for the communities in which we live. We have always been very active locally. St. Jude wasn’t purely a benevolent gesture. We do benefit, as do our customers, because consumers recognize the St. Jude brand. I can’t imagine hearing four worse words than “your child has cancer.” What St. Jude is trying to do resonates with everyone. Consumers relate to it, customers relate to it, our team relates to it. When you look at charitable organizations, what they do and how they go about it, there is no one better than St. Jude. Customers have engaged with the products that support St. Jude.
We started out by being the flooring provider for the St. Jude Dream Homes. But there was no way for our customers to get involved. That’s how we came up with St. Jude Cushion. St. Jude receives $0.18 per square yard sold—$0.09 from Shaw and $0.09 from the customer. It has been a phenomenal effort. It costs $2 million a day to operate St. Jude Children’s Hospital. We want to say we raised enough money to run St. Jude for a day. We will come close this year.
How is the LVT facility coming along? What is the startup date and what will that mean for Shaw customers?
Bell: It started up in early October. The facility is scaling up through startup operations over this quarter and will continue through the next year in terms of adding shifts and building volume. It will probably take six to eight months to get up to full output on the footprint we have. I think it’s going to be an important element for our customers in having product made in the U.S. Service levels and dependability will be improved, even from very good levels.
Will you still buy product from outside sources?
Bell: We will still source a large amount of LVT as we have a very large LVT business. The plant has a large footprint. We have the ability to increase manufacturing capacity within the facility and we have plans to do so over a period of time.
How do you see the future of carpet over the short and long term? Will hard surface continue to take share, or is everything cyclical and carpet will eventually come back?
Bell: Everything over long periods of time is cyclical. But there is no question hard surface is growing faster than soft surface. Residential carpet has been losing share to hard surface. That’s continuing as we speak. I’m sure it will hit an equilibrium point, but I can’t predict when that will be. From a soft surface standpoint, I think the industry has to approach the consumer in different ways. The commoditization of the category over the last few years has not helped the situation. It has probably contributed to the de-selection of carpet. End users are concerned about durability, ease of maintenance, cleanliness, and style and design. We will have to offer products that address the real needs of the consumer. Offering cheaper products with cheaper materials is not revitalizing carpet demand. We will have to figure out how we meet the needs of consumers and end users in a better way.
And what about fibers?
Bell: This is unfolding pretty much as expected. When you go back seven, eight, nine years, the industry had millions of pounds of staple as well as polypropylene in the product mix. Staple has performance issues around pill and fuzz. And with polypropylene, berbers fell out of favor from a style and design standpoint. As these fibers fell out of favor, something had to replace them. There was not enough nylon capacity, which is where polyester came in. Once polypropylene and staple have reached their bottom, it will generally be a 50/50 split or close to it between nylon filament and polyester filament across the entire industry.
Merritt: The key with either BCF nylon or PET is how you construct the product. This includes the fiber itself, the twist, how it is colored, how it is finished. The fiber is not what defines quality. As Vance pointed out, trading down consumers to lower-cost products with less performance has not been good for carpet.
With hard surface taking share from soft surface, the replacement cycle for flooring is extended. What does that mean for a company like Shaw?
Bell: It impacts everyone in the supply chain. It doesn’t matter whether you are a soft surface or hard surface manufacturer, a combination of both, or a retailer, contractor or installation house. Ten years from now it will feel a lot different because of the lengthening replacement cycle. I think it’s something everyone in the industry is concerned about. All we can do is offer the most innovative products we can in terms of performance, style, etc., to encourage and stimulate consumers and end users to replace their flooring. I think that’s what the industry has to work on.
Wherever you go, labor seems to be the biggest challenge for everyone. How do you see the manufacturer’s role in ensuring there is a qualified work force to install your products correctly?
Bell: I think there are some things the manufacturing community can do and some things we can’t do. For one, we have to continue to update installation standards so installers can be trained appropriately and certified. Manufacturers are integral in setting those standards. I think we can help with certifications, training and those kinds of things. But availability of labor has to be dealt with on a local level. That’s where the retailers, contractors and installation houses come in.
Merritt: I think there is so much emphasis in high school for seniors to go to college and get four-year degrees. Many finish with no clear idea of what they want to do and are burdened with debt. Some kids are more technically wired and do not necessarily need four-year schools. The answer may lie in local technical colleges and community colleges. They are training auto mechanics and placing them with jobs and benefits. Finding jobs, great paying jobs, for these certified graduates would be easy.
Laminate. Hardwood. Ceramic. Which category are you most excited about over the next 10 years?
Bell: We are excited about all of them because they are flooring, and flooring is a great industry. We are heavily invested in carpet, hardwood and LVT, but we think there are opportunities in the other categories as well. This is a good business over the long term.
What is the biggest initiative for Shaw in 2016?
Bell: We have plans in every one of our businesses to grow, introduce great products, and bring innovative solutions to our customers. Our biggest initiative in 2016 is just to successfully execute those plans.