March 14/21, 2016; Volume 30, Number 19
New York—Consolidated Carpet is among the largest flooring contractors in the country. Now in its third generation, the company is approaching 75 years in business with a reputation that has allowed it to land some of the highest profile jobs in New York City. FCNews publisher Steven Feldman recently sat down with David Meberg, CEO, to discuss business today in general and how Consolidated has been impacted and evolved.
What do you think differentiates Consolidated from other flooring contractors? What do you think you do better than them?
First, we are a labor company that got into sales. Most of our competitors are sales companies that do labor. So we feel we bring a level of project management and expertise to jobsites that our competitors don’t. One of our core philosophies is the customer derives no satisfaction until the product is properly installed. That is where our customer—whether a general contractor or corporate end user—benefits. They feel a certain level of service that they don’t get from our competitors.
Next, when we got into sales we went all in. In the past five to six years, we have really developed our sales process to a point where we are a forward leaning, efficient sales organization. We are networked in and get as far ahead of projects as possible. We are embedded in the design community, the end user community and the builder community. I don’t think our competitors have the breadth that we do in sales.
What is the biggest challenge today for a flooring contractor, generally speaking, and specifically Consolidated?
The atmosphere is still tremendously competitive. There is still downward pressure on pricing, and that’s because our clients have become very sophisticated buyers. The global information technology age has affected the construction industry where our clients have cost bases all over the country. There are professional procurement groups. That’s what these people do for a living—they buy. So it has become challenging to make the proper gross margins. Mill-direct selling is a [by-product] of the buyers trying to negotiate large deals.
For us, locally, the price of labor is a huge challenge right now. Our area is shifting from a unionized market to an open shop market. We are a union shop, so we have a big challenge in adapting to that. The cost of construction has gotten so high, so we will have to adapt to compete in a non-union environment. The downside of a non-union environment is there is no bottom. Look at the retail marketplace, which is all non-union. It’s a matter of how low can you go. There is no value being placed on installation. In a unionized marketplace at least you have an even footing with the price of labor. We are a labor company at our core, so when that is devalued it’s obviously a big challenge for us.
How is Consolidated working to overcome these challenges?
In our market, some people will just sit and collect bids. The primary course of business is bidding work to GCs. However, we try to develop business. We work with architects and designers. We work with corporate end users, healthcare facilities, higher education associations. We try to get in front of the sale. We try to get engaged as early in the process as possible. If we know a project is coming up and we know the designer, we are soliciting that designer. We want to be in the best position when that job ultimately comes up to bid.
As for the labor challenge, we just keep working on our efficiencies and try to become a leaner organization so we can become as cost competitive as possible.
Talk about the challenges and advantages of doing business in a metropolis like New York vs., say, Omaha?
The business model does not change from city to city, so most of the challenges are the same. In the city, the biggest challenge is logistics—the deliveries, the vertical transportation, etc. You are moving [materials] up instead of out. And whatever you take up is going to be limited to the size of the elevator. It is obviously easier with carpet tile vs. bending and folding broadloom. That is labor-intensive work. We still do a lot of broadloom, and those deliveries are much more difficult. You are not just backing up a truck to a building. Other challenges include the traffic congestion, and the deliveries that have to be in by 5 a.m. where you have to start at midnight.
Where is the next generation of installers going to come from?
For the first time, this past summer, we had a capacity issue where we had more work than labor. Being a union shop, we used to be able to call the union and say, ‘we need more men.’ This summer there were none. It is a real problem, and I don’t know where they are going to come from. The union has changed their enrollment standards to get more people in the business. If we were not union we could recruit people and do our own training. So the challenge is on them to find the people.
Talk about your involvement with Starnet, INSTALL, Greater NY Promotional Fund, and how that has that worked to Consolidated’s benefit?
I got involved in those associations because it is one of the core values of this business. My grandfather, my uncles, my father all got involved in these organizations. It is part of who we are as a company. We have learned a lot, and we have given back. It is something that has been engrained in me to be active in the industry. It has helped us become more professional, gain exposure to more people and learn different ways of doing things.
What does Consolidated look for in a supplier?
Another of our core values is to have top-notch relationships with all our suppliers. We look for value, a great product at a great price point. But service is just as important. In all these projects, the product mix today is more comprehensive. We want to have suppliers that offer great service. Having control of the logistics is everything. One of the great benefits of being in these organizations is you meet with high-level executives at their events. So you know who to call when there is a problem. Product is great, price is great, but service trumps both of those.
Most often, are you involved in the specifications of a job or simply the labor?
Ultimately our goal is to spec the products. We can’t control the specifications on every job, but we are 75% involved in the sales process in one way or another in the jobs we are performing.
The specification process is a consulting service we provide to the architect and designer. We like the architect or designer to lay out a project, tell us what the space is going to be used for and then we can give our recommendations. We may recommend product lines or product styles. However, we don’t like to change specs; you can upset the architect as well as the manufacturer of the original specified product. You may get the job but it will hurt relationships. We would prefer to be involved in the specification process. If that process is completed, we will bid what is specified. We might make a notation to our bid where we believe the product is not appropriate. So we might exclude it from our bid and offer an alternative if we are asked.
How important is price today in terms of winning the job? Where does service, relationships, etc. fall in?
In our marketplace, price is still everything. It is unfortunate that other components aren’t factored in. Relationships and service help, but all it gets you is another at bat. They may say, “We want Consolidated, but your competition is 3% lower.” We may get a chance to match the bid, but we won’t get the job if we don’t match that number.
How important is sustainability to Consolidated and its clients?
Another of our core values is to operate an environmentally friendly organization. We invested $1 million to install solar panels in our warehouse in New Jersey. From a floor covering perspective, we look to recycle everything that comes through our doors. As for our clients, with respect to their projects it comes and goes in waves. I think it is almost second nature that projects are performed with an environmental foundation. It is just embedded in office design right now and in the products we install. It is hard to find something we install that doesn’t contain some recycled content. There may not be a spotlight on it like there was 10 years ago, but I think that’s because it has become a culture.
What are you seeing in terms of product mix these days?
Obviously more carpet tile than broadloom and certainly more LVT, but the biggest trend we are seeing is polished and refinished concrete. There are a lot of commercial spaces in New York City being designed with just the refurbishing of the existing concrete subfloor—polishing the concrete, sealing it up and leaving it exposed. It’s a minimalistic design look, almost industrial (unfinished ceilings, glass partitions, unfinished floors). We do so much of that now. Almost 50% of our projects have some type of exposed floor, whether it’s wood or concrete. This used to be a financial town; now it is a tech town. Google, Facebook and LinkedIn have projects, and they have a unique work environment and design that has taken over the marketplace. We didn’t know of it as a trend, but when the top architectural firms are doing their own spaces that way, we know this will be around for a while.
Talk about some of the higher profile projects you have been involved with recently.
We recently landed a bunch of jobs at Hudson Yards, the biggest commercial development project in the country right now and the biggest in New York City since Rockefeller Center. We have completed the renovation of the United Nations campus. We did the Ed Sullivan Theater where David Letterman did his show for 20 years and converted it for Stephen Colbert. We just finished the new Brooklyn Nets practice facility. We have been sprucing some things up at CitiField [home of the New York Mets]. And we did some work at the Whitney Museum in the Meatpacking District.
Any plans to get into the maintenance side of the business?
We offer maintenance to our clients but we subcontract it out. We always talk about it, but just haven’t done it yet. It would be a natural progression for us.
Any presidential candidate you believe would be better for the flooring industry?
I think the best candidate is not running. I saw what Michael Bloomberg did as the mayor of New York City. [In the years following 9/11], he led the growth of the economy in this marketplace. And through the recession, New York outperformed most of the nation despite the fact this was a banking town. I think he diversified the city’s marketplace. He helped create a strong and vibrant economy. He also maintained the standard of living from a security standpoint. Yes, he became a little polarizing toward the end of this time in office with his [large-cup] soda ban, but he was also the guy who first banned smoking in bars. Everyone forgets that.