By Reginald Tucker
The protracted U.S. trade war with China—and the subsequent reciprocal tariffs and duties on both sides—has had tangible ramifications on the flooring industry. This is particularly evident in segments such as LVT, SPC and WPC, but also engineered hardwood and laminate flooring. And while certain segments of the industry enjoyed a temporary tariff reprieve on select rigid core products, those exemptions have since expired.
Realizing the industry had already crossed the proverbial Rubicon in the war on trade, many U.S. companies—as well as those who were predominantly dependent on China for their flooring imports—made the tough decision to reduce that dependency. Strategies ranged from pursuing alternative sources outside of China (namely Cambodia, Taiwan and Malaysia) to establishing or significantly expanding existing manufacturing operations here in the U.S.
Several prominent examples include AHF Products, which shifted the portion of the products it sources from China to Cambodia, as well as recent announcements by the likes of CFL, Engineered Floors, Shaw Floors and Wellmade Performance Flooring to follow the example of domestic manufacturers such as Fibonacci LLC (the U.S.’ only producer of hemp flooring) and build flooring manufacturing plants in America.
Following are some examples of the steps several manufacturers are taking to offset the impact that Chinese tariffs have had on the U.S. market.
As the popularity of LVT continues to grow, Engineered Floors has made the decision to initiate domestic LVT production in the Seretean facility, located in Dalton, utilizing the latest and most innovative manufacturing equipment available. A complete revitalization of the 1.2 million-square-foot facility will not only drastically reduce lead times, the company said, but also allow for the necessary flexibility to expand in the future.
“Our carpet manufacturing model is to have a large operation that allows for efficient product flow and minimize work in process inventory in the facility,” said Bob Shaw, chairman and CEO. “The Seretean facility will certainly permit that model to be executed with our LVT production.”
The domestic production of LVT in north Georgia will provide unique opportunities for research and development, design and quality assurance bringing a new level of excellence to the hard surface arena, the company said. With this investment in American-made LVT, Engineered Floors said it continues to broaden its product assortment in order to meet the needs of its valued customers.
During the past recent years, there has been a general trend among consumers and countries to focus on domestically made products, observed Derek Welbourn, CEO of Inhaus. He cited a recent World Trade Organization report that estimates there have been more than 100 protectionist measures creating restrictions on trade.
“Of course, the most newsworthy has been the trade disputes between the U.S. and China,” he said. “Certainly, this makes sense that when the world’s largest economy (U.S. estimated at $20-plus trillion) puts restrictions on the world’s second-largest economy, China, it is a hot news topic. Escalate this even further for us folks in the flooring industry when the hottest category in our industry, rigid core vinyl, is manufactured almost exclusively in China.”
Watching this all unfold, Welbourn noted, one can overlook the fact that this is a much larger global trend. People worldwide have been focused more on domestically manufactured goods that support local economies and, second, goods that are readily available with shorter lead times.
“There is also a global trend toward high-quality goods,” he explained. “Here at Inhaus, where all of our products are exclusively made in our factories in Germany, we have focused on creating premium value and giving our customers reasons to select our products over our competitors. Our German facilities have unique production processes that have created opportunities to develop some interesting product features such as 100% recyclable resilient with our new Sono Eclipse collection. Further, we have significantly increased our domestically held inventory to assist with stable shipping times and immediate needs— which are always part of the business.”
While the U.S.-China trade war has directly impacted those companies who previously sourced materials from China (or continue to do so), the situation has also benefitted those who never had dealings with the country heretofore. Such is the case with Canada-based Mercier Wood Flooring, which is leveraging the opportunity to get retailers to refocus their attention and recommit to local sources.
“To be honest, some of the tariffs have actually helped our industry—at least the North American manufacturers,” said Wade Bondrowski, director of sales, U.S. “That traditional ‘middle-of-the-road’ offering from China now has a tariff on it, so, price-wise, we’re playing in the same field. A value-added product like Mercier’s is now not that far off in terms of cost from some of the middle range Asian wood that’s being tariffed. So, for us, it has worked out extremely well.”
The other thing the tariffs did, according to Bondrowski, is they made low-end hardwood from China a little bit more expensive. “The category of entry-level Asian product doesn’t exist anymore—all that has moved to plastic,” he explained. “For the people actually looking for quality wood today, companies like ours are sitting in a good spot.”
The key to consistent success, according to Mercier, lies in providing a steady stream of quality products. In the age of COVID-19, which has put a universal strain on factory output, that has never been more important. “As far as supply and demand are concerned, our business has been strong through the pandemic,” Bondrowski said. “We made some adjustments at our sawmill in Drummondville, and we added shifts at our Montmagny plant because of strong demand.”
MSI has long employed a sourcing strategy focused on bringing the most innovative and sought-after products to retailers at a value that could be passed on to the consumer. “Our sourcing team has always looked at the total value of product, including aesthetics, technical capabilities as well as price on a landed to retailer basis,” said Raj Shah, president. “In many cases, the first cost from China was not always the best value when you take the full distribution costs into account. MSI has partnered with factories in 36 different countries to continue to bring the best value to retailers and their consumers. Our sourcing, sales and operations teams have worked tirelessly to source products and then build systems that take out excess costs from the system. Today, our B2B ordering capabilities, website tools, augmented reality visualizer (AR), image search capabilities as well as our in-house trucking fleet all have helped produce the best value for our retail customers and their consumers.”
Sourcing is changing today and has become significantly weighted toward information that is the driving force of sales. To that end, MSI continues to work closely with hundreds of factories and quarries across the world to find the products the North American consumer is looking for.
“It is our goal to give the highest level and quickest service to our retailer customers as they look for answers for the ultimate consumers,” Shah added. “Our logistics and operations track inventory all the way back to its source. Our salespeople, customer service desk and even our retail customers have access to this information within a few clicks. MSI has invested significant resources and will continue to do so to get information to our retail customer base.”
Having a diverse portfolio of both domestically manufactured and sourced luxury vinyl products allows Shaw Floors to remain on the forefront of the latest performance innovations, leading style/design capabilities and competitive pricing. “If COVID-19 has taught our industry anything, it’s that being able to rapidly respond to shifts in market dynamics is critical to any modern business,” said Jeff Francis, director of category management, Shaw Industries. “This means investing in American-made products as well as continuing to build strong sourcing partnerships and robust distribution networks across the globe.”
Shaw Industries recently invested $20 million in its resilient facility in Ringgold, Ga. (phase two of a three-part project) in order to expand its domestic SPC production. Regardless of multiple geopolitical issues that can impact the resilient market, evaluating all viable sources of production for the industry’s fastest-growing category remains a strategic imperative for Shaw.
“Quality products and world-class service have become a staple of Shaw’s reputation in the industry, and we strive to remain a customer-centric, solutions-based manufacturing company devoted to helping our customers grow their businesses,” Francis said. “Our retail partners sell to a diverse demographic of consumers who require a resilient portfolio that reflects global innovations and trends while offering solutions unique to each local market or end-user. We’re proud to be the market leader with our innovative waterproof products from trusted brands like COREtec and our Floorté collection by Shaw Floors.”