March 28/April 4, 2016; Volume 30, Number 20
By Ken Ryan
So what makes for a successful flooring retailer who prospers even when times are tough? Dealers say it can be many things—from taking calculated risks to maintaining advertising levels even when store traffic is down. In other cases, it is about doing a lot of little things better than the competition.
FCNews recently spoke to some of these prosperous retailers about their success.
Montgomery CarpetsPlus Colortile
Lakewood Ranch, Fla.
“If you build it, they will come” is viewed as a sometimes-risky business plan.
However, owner Mike Montgomery was willing to take that risk when he learned of a new development called Lakewood Ranch, a 17,500-acre master-planned community, starting up on Florida’s Gulf coast.
Friends of his said the area would grow fast; Montgomery wanted to stake his claim as the first flooring retailer to set up shop there. “We started with no advertising,” he said. Again, maybe not the soundest business strategy, but in this case he didn’t need it.
As the only flooring game in town, Montgomery said his business has grown exponentially every year since 2012. “People in Lakewood Ranch don’t want to drive 25 minutes to Sarasota to do their shopping. They want to stay inside the area. We also have a lot of young money, professional people who like to spend and share their experiences.”
That extends to flooring; Montgomery said he routinely does big jobs with high-end ticket items. “We have exceeded our forecasts every year. We are a destination for a lot of these people because they don’t want to leave the ranch.”
Five years ago Costen Floors was in trouble. The retailer was overexposed to the builder side of the business at a time when the segment was hurting. Moreover, the product mix was heavily skewed to hardwood. Owner Tripp Costen’s staff dwindled from a high of 150 to 57 in just 18 months. “We were in a lot of trouble,” he said. “We were about 85% builder and we knew we had to be more diversified. It was time to do something.”
The company ventured out in other segments of the market—first retail, then commercial and property management (it purchased a property management company) to help vary its product portfolio. Today, Costen’s mix is 46% hardwood, 17.5% carpet, 13.5% ceramic, 6% vinyl, 4.5% laminate and the rest sand finishing.
Costen Floors did $16 million in 2013, $18 million in 2014 (an increase of 12.5%) and $24 million in 2015 (up 33.3%) as the revenue from the property management company was fully realized. Costen’s is now 69% residential and 31% commercial.
“Getting diversified absolutely saved us,” Costen said. “The way I figure it, all the segments we are in today can’t all crash at once, so we’re in a good position.”
Martin’s Flooring may be one of the only retailers in America with a hitching post outside its store for horse and buggies. That speaks to the rural territory in which Martin’s Flooring operates, Denver, a small enclave in Pennsylvania between Reading and Lancaster. “When reps come to see us they ask, ‘Where the heck are we going?’” said Mike Martin, owner. “But out here, we are very much a destination and that speaks well to our conversion rate.” Martin said his RSAs convert about 40% of customers.
He has parlayed the far outpost location well in his 31 years. His regulars include local residents—a large percentage of which are Mennonites and Amish who travel via horse and buggy. “Customers don’t casually walk into our store. When you come here you are in the market for flooring.”
In 2014 Martin opened a second location in Wyomissing, Pa., 21 miles away. He has also added satellite locations inside furniture stores around the Harrisburg, Pa., area.
Through 31 years, Martin’s has never had a down year. “The key during bad times is to stay aggressive and be innovative. In 2007, we got into carpet cleaning because we figured with the recession people would rather clean their carpets than replace them. Our goal is to be aggressive and smart because failure is not an option.”
TriCounty Flooring America
Flooring retail success doesn’t always require out-of-the-box thinking; Sometimes just being good at a lot of basic things can make the difference. For Mike Toste, owner of TriCounty Flooring America, it was about expanding into a neighborhood market in Turlock, Calif., and driving sales through consistent marketing and advertising. “Our original location is up 5% from last year and our second location is up 88% from the year before. I credit the jump in the second location to marketing, customer referrals and simply getting known in the marketplace. Opening the second location has eased cash flow, and has allowed us to minimize fixed costs and increase revenue.”
Toste’s expansion coincides with a rise in new home construction and an overall improving real estate market in California. “People who purchased at the low in 2009 now find themselves with equity, which allows them to upgrade their home,” he noted.
His marketing and advertising efforts include new school methods like search engine optimization (SEO) as well as old school tactics—billboards on Hwy. 99 and direct mail.
“We don’t have a secret sauce. We are up a combined 45% because our second store is finally gaining traction. After a brutal first six months we started getting and completing jobs, and our name and reputation grew.”
Carpets of Dalton
Mike Cunningham knows there is a fear factor for consumers when purchasing flooring because it is a high-ticket item and an infrequent transaction. His job is to make the experience fun and unintimidating “This is a big purchase for a consumer,” he said. “We try to stay in the sweet spot between the big box and interior designer. A consumer’s home is centrally important to her and we very much want to help her get that interior designer look without the expense of the designer. We work very hard to do a nice job and to have what people want.”
In the last two years business has increased 40%—23.9% in 2014 and 16.1% in 2015.
Carpets of Dalton has operated out of the same Flagstaff location since 1978. Over the years, Cunningham has built up a sizable referral business on the strength of not just good customer service but a pleasant shopping experience.
“Treating a client the way she would like to be treated is the key to both closing the sale and filling the pipeline. We make it fun, and I think the consumer knows we plan to help her not close her. From this type of experience we develop referral relationships.”
Schnaitman’s Flooring America
There was a time when Monroe County was the fastest growing county in Pennsylvania. Then 2007 arrived and a number of flooring stores went belly-up; Schnaitman’s Flooring America was in a vulnerable position. “After 45 years in the floor covering business, we had to reinvent ourselves,” said John Schnaitman, owner.
That meant taking risks like expanding into kitchen and bath cabinetry to help expand market share. Prior to business changes, Schnaitman said he would refer his flooring customers to cabinet companies, plumbing suppliers, countertop fabricators and remodeling contractors for non-flooring projects. “We sometimes lost the flooring sale to the company or contractor who was installing the customer’s cabinets. We mistakenly thought we could not be competitive with the box stores or the established lumber companies.”
Schnaitman learned that he not only could compete but also had an advantage over other stores because he carried a far greater selection of flooring and had the staff expertise to provide a higher level of service. “As a result, we now sell and install cabinets, countertops, flooring, backsplash, shower doors, radiant heat, window coverings—we do whatever that needs to be done to give our customers a one-stop shopping experience. It’s paying off.”
Schnaitman’s sales in 2015 increased 30% over 2014.
Frazier’s Carpet One
Kevin Frazier’s great grandfather opened Frazier’s Carpet One in 1953. As the most recent owner, Kevin Frazier took over the business 12 years ago and soon encountered the worst recession since the Great Depression.
Frazier said he invested heavily in advertising and marketing prior to the economic downturn, and was rewarded with higher sales and healthy margins. When the recession hit, he did not blink. “We kept our foot on the advertising and marketing accelerator,” he said.
Still, it was tempting to pull back during the tough patches, especially when the company’s advertising was not paying off. “There was a stretch during the recession when it was over the tipping point for us, where we were spending too much and were not able to recoup that investment. I tried not to get too scared.”
Frazier has made decisions on product mix as well. While hard surface continues to take share away from soft surface, Frazier’s has held the line on carpet, which continues to account for 50% of the business. “While hard surface is growing, our ability to sell carpet has been impressive. We’ve been able to hang in there.”
To keep its name top of mind, Frazier’s run more than one promotion a month. “Gen X and gen Y have grown up with so many messages from Lowe’s and Home Depot; we need to keep our message out there so that we are the turnkey provider in our market.”
Gainesville Carpets Plus Colortile
The industry trend toward hard surface has been a boon for Josh Elder’s business—Gainesville Carpets Plus Colortile—in recent years. “The biggest change is that consumers want a product that is going to last for a long time and are willing to spend extra money for that,” he said. “Also with the cost of hard surface products coming down with the growth in LVT and similar offerings it has made it an easier decision for consumers that are worried about their budgets. It’s the classic cost/benefit economic analysis.”
Gainesville Carpets Plus Colortile has grown by double digits each of the last three years, led by enhanced vinyl plank, which continues to be the fastest growing product in his store. At the same time, he has increased inventory in carpet, laminate, wood and LVT, a strategy he suspects is keeping customers in his market from shopping at big box stores. “Our average ticket is higher due to the increased cost of the hard surface products. We are having the best first quarter since before the recession.”