Retailers navigate the tariff merry-go-round

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December 23/30, 2019: Volume 35, Issue 13

By Ken Ryan

The tariff has impacted flooring dealers in many ways, both good and bad.

The tariffs on Chinese imports have not been the onerous burden flooring dealers once feared, anecdotal research finds. In fact, many retailers have largely adopted a business-as-usual approach amidst the rounds of increases and continued bickering in the ongoing U.S.-China trade rift.

The majority of retailers reached by FCNews said despite tariff increases of up to 25%, segments like rigid core and WPC continue to generate double-digit sales increases. There are at least two factors at play here: No. 1, manufacturers have not passed on the entire cost to retailers; and No. 2, because flooring is an infrequent purchase, most consumers don’t know the price of these waterproof products and therefore would be less likely to balk at incremental increases. In cases where price is a concern, dealers have turned to water-resistant laminate floors as an alternative.

[On Dec. 13, U.S. and Chinese officials announced a limited agreement to halt the trade war between the countries, with President Trump removing the threat of new tariffs on China in exchange for the country agreeing to purchases of American farm goods and other products. With regard to flooring, products that have been tariffed at the 25% rate will continue to be taxed at that rate, except click LVT, which is under an exemption until Aug. 9, 2020.]

Tariffs have forced dealers to adjust their business strategies and, in some cases, recreate price sheets to reflect changes. Still, for the most part the impact has been negligible. “Probably the biggest impact is it has allowed prices to stay a little higher rather than the complete race to the bottom,” said Phil Koufidakis, president/owner of Baker Bros., with seven locations in the Phoenix market. “Unless a customer bought before, the increases are invisible to them.”

Some dealers have had success using reverse psychology ploys, persuading consumers that now is the time to buy lest prices go up in a week or so. “The tariffs have kept an energetic focus on both the LVT and hardwood categories, and that has absolutely created a sense of sales urgency, leading to more sales sooner rather than later,” said Kevin Frazier, owner of Frazier’s Carpet One Floor & Home, Knoxville, Tenn.

Some flooring retailers said margins have been under pressure during this period and caused some paperwork headaches along the way. “We’ve seen some margin erosion primarily in the new construction/contractor business,” said Casey Dillabaugh, owner of Dillabaugh’s Flooring America, Boise, Idaho. “As much as we can explain tariffs and the need for increases to these clients, it opens up opportunities for some lesser competition to attempt to ‘buy’ business by taking lesser margin, thus tightening our own.”

For Tulsa, Okla.-based Johnson Floor & Home, the ongoing tariffs have meant tweaking business practices. “For our business, which has historically sold a significant amount of in-stock inventory, the price fluctuations made it difficult to make reliable deals with suppliers that lasted much past the original order,” said Palmer Johnson, vice president. “As a result, we shifted gears and negotiated cut and carton pricing on key items and discontinued the vast majority of our stocking program.”

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