Laminate: Thicker products, stronger cores = high-margin opportunities for dealers

Home Inside FCNews Laminate: Thicker products, stronger cores = high-margin opportunities for dealers

January 16/23, 2017: Volume 31, Number 16

By Reginald Tucker

In the laminate price battle with the big boxes, specialty retailers may have another advantage: the willingness to promote thicker, beefier products that are not only designed to perform better over the long haul but also provide higher margin opportunities compared to base-grade, entry-level product.

While the home center channel is able to drive traffic pushing laminates in the $1.99-$2.99 range (in some markets, price points open at a margin-busting $0.79 per square foot), most specialty retailers choose to take a different approach. Instead of promoting the category as a loss leader, profit-minded dealers see the segment as a way to broaden their offerings to remain competitive while still providing the consumer upgrade opportunities.

The key, according to retailers like Sam Chesher, owner of Carpet Wise, a Flooring America dealer in Longmont, Colo., lies in explaining to consumers why the laminate products you’re selling are different and cost more money. “Make sure you have a story to tell,” he said. “You must train your staff because if you do not, you are going to get your lunch handed to you.”

Chesher is no stranger to competing with big boxes and discount outlets. A Lumber Liquidators sits a mere 200 feet from his store, and a Home Depot and a Lowe’s are one mile away. Interestingly, the proximity of the big
 boxes actually helps his business because it gives him the opportunity to differentiate his store through
 product knowledge and customer service that the box stores either cannot or won’t do.

The importance of proper and continuous training of your retail sales force cannot be overstated, experts say. Specifically, RSAs need to effectively communicate to their customers the difference between the 99-cent laminate flooring being pushed by the box stores vs. the 12mm-14mm laminate independent dealers stock at a significantly higher price point. Even in those cases where a retailer might advertise an entry-level laminate product just to get consumers into the store, the ultimate goal is to leverage that opportunity to present all options to the consumer—especially those that bring in higher profits.

This “loss leader” strategy, experts say, is fine—as long as that particular entry-level product does not make up more than 5% of your overall sales. So while a retailer might advertise a special at $2.49-$2.99 per square foot, the emphasis should be on trading up the customer to a product that retails for $3.99 and higher.

Then there are those experts who advise retailers not to “go there” at all. Elaine Carlson, vice president of Century Tile & Supply in Chicago, suggests specialty retailers avoid getting caught up in selling laminate flooring strictly based on price. Focusing on price over other attributes such as realistic visuals and exceptional durability, she said, will ultimately translate to reduced profits.

“While we do have a selection of lower-priced laminates, we try hard to feature and promote higher-end visuals. With the new technologies available today that create great surface textures and edge treatments, the quality of laminate being sold is traditionally medium high end to high end. If specialty retailers get caught up in the game of selling solely on price then profits suffer. Money is made by the consistent selling of the features and benefits found in a solid product line.”

From a sheer volume standpoint, it appears big boxes are winning the race. Research conducted by FCNews confirms that home centers and mass merchants still account for more than 70% of laminate flooring sales in the U.S. Experts point to, among other factors, the category’s entry-level price points, which make it an attractive option for the bargain-minded consumer who typically shops that channel.

“Home centers, by a wide measure, are driving the bulk of laminate flooring sales,” said Roger Farabee, senior vice president, laminate and hardwood, Mohawk. “Specialty retail, in terms of the independent dealer, is by far the smallest segment selling laminate today representing about 25% to 30%.”

The good news for specialty retailers, however, is there are still tremendous profit opportunities available through step-up products. What’s more, in many cases these upper-tier laminate options come with additional features and benefits (i.e., thicker cores, enhanced surface textures, etc.) that warrant higher prices at retail.

“Given the fact laminate was a remodel-focused category for so long—because it comes in a box and is so easy to install—it kind of gravitated toward the home center side,” said Dan Natkin, senior director of hard surface products, Mannington. “But now we’re seeing more growth on the other side, namely specialty retail, because of increased penetration into the new home construction sector.”

For sure, suppliers are doing their part to help specialty retailers differentiate themselves through product assortment. Laminate flooring manufacturers are counting on continued innovations in the way of performance and design to not only help the category keep pace with competing hard surfaces but also to give specialty retailers more products that can’t be shopped at the big boxes or discount merchants. Many of these offerings span new 12mm to 14mm boards featuring stronger cores.

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