In part I of this exclusive interview, Vance Bell and Tim Baucom discussed a host of issues, ranging from the timing of Bell’s retirement as CEO, the impact of COVID-19 on business as well as the plans Baucom has for the Shaw Floors family of brands moving forward. In the second installment, the executives share their outlook on the state of resilient and carpet; their thoughts about Surfaces 2022; and the health of the residential market. Steven Feldman, publisher of FCNews, moderated.
How did Shaw get to be the No. 1 LVT supplier so fast?
Bell: Well, it was nine or 10 years ago, and we were looking at different categories, looking to diversify. We had the opportunity to take over some assets in a small business that LG had trying to come into the North American market. And once we did that, we just got more intrigued. We started looking at other sources, and we started bringing product in. At some point, within two or three or four years after that, we said, ‘Look, we think this is going to be a good category. Let’s go all in.’ And we started bringing more product in, building our inventories. We’re able to service large orders more consistently than really anybody.
We had developed a significant position before we acquired USFloors. When we acquired USFloors, that really enlarged that position. And it was really just understanding, ‘Wow, this could be a major influencer. This could be a great product,’ and deciding to go all in on it. Acquiring USFloors and bringing Piet Dossche in was a home run. Piet is fantastic. People would be amazed how large USFloors is today. And certainly, I think that was a good decision for the company because it really put us as a clear No. 1 in the fastest growing category in the industry the last four or five years. Our growth and our overall market share have really increased because of that. Most of [the rigid core] is imported. But we have capacity that we’re building here. I think over time, domestic manufacturing is going to play a bigger and bigger role.
Will this be carpet’s biggest year in the last 15 years?
Bell: We’re very optimistic about carpet and we see carpet at least bottoming out and starting to grow, particularly if you’re talking about residential. In commercial, obviously it’s going to take a longer time. We’re very bullish [on the residential side], but I think we need to think about that question objectively and factually. If you just look at Q2 and Q3 2020, there was very good business, right? Residential was up 3.5% in units vs. the same period in 2019, and a little bit more than that in dollars. For residential to even hit 2016 levels, it would have to grow 12.5% in units from 2019 and a little bit less than that in dollars. We may have a chance to get there in dollars, but in units, can the industry grow 12.5% this year? I hope so. Maybe, maybe not. Then, when you start going back further toward 2006, you run into 2008. To get to 2008 levels, residential would have to grow 20% to 25% in units and 25% in dollars.
2016 was how many yards residentially?
Bell: 669 million yards and about $4.1-$4.2 billion.
Projection for residential dollars in 2021.
Bell: Residential dollars are growing faster for a couple of reasons. No. 1, mix. I mean better goods are moving faster than the middle to lower end of the market. And, of course, price increases. Like I said, we should hit 2016 in dollars because that would only require a 5%, 6% or 7% increase to do that. Units is a different question. And again, most people look at units because that’s how you balance capacity. And you look at ability to service around units. And I think it’s got a chance to get to 2016 in dollars.
What are you most excited about this year in terms of product?
Baucom: One of the things I am most excited about is carpet, ironically. I think, as people are thinking differently about their homes, they’ve rediscovered carpet. I think we’re seeing the higher end of carpet grow again. I think people are saying, ‘Wow, I can get patterns and variety.’ Our research would say the consumer has loved carpet all along. Homes got smaller and added more open floor plans. And you expanded out of the kitchen. It made sense to have the same surface that had to be waterproof—and had to have the performance to work in the kitchen—expanded out to other main areas. And then when you get to the private parts of your home, they love carpet. What has happened now is people are emphasizing the private parts of their home more and they’re willing to take more risks. So, I’m very excited about how people are using their homes.
I’m excited about this continuous rollout of new products so each product gets its time in the sun a little bit. I think when everything just hits all at once, there was so much excitement around getting repositioned around LVT and all the change. I think some of the excitement of carpet was getting lost in the undertow. I think it gives us time to explain all the variety of products so that we get more clarity. This hybridization of product, that’s one of the reasons that we are so bullish on LVT. There are so many ways you can bring in combinations of features and benefits and performance.
And I’m really excited about Floorigami. We’re really getting some traction in that. I think, to a certain extent, LVT had been in the commercial space 30 years. It was re-engineering it and reconceiving it for the residential market. I think there could be some opportunity for that in modular soft surface. So, I’m very excited about our category because the consumer is excited about the home, and we bring a lot of bang for the buck when they put emphasis on the home.
You’re going to be rolling out things every few months, correct? Easier for the retailer?
Bell: We will have markets again, we will have events and conventions again, but I think spreading out some of the introductions and not piling it all on the retailer at one time, not piling it on our facilities and sample capacity at one time and spreading that out allows a better acceptance and a better understanding, and a better sell all the way through the chain, even to the RSAs.
Baucom: I think part of this, doing it in waves, too, allows us to connect with the RSA. In a lot of cases, we are relying, in a high technology world, on the bucket brigade to sell the owner, the owner sells the store manager, store manager sells the RSA, and something gets lost in translation. We were trying to think more intentionally about community building and product launching.
Has it been a challenge to get the message across to retailers and RSAs without the trade shows in the first quarter?
Bell: You might give the example of the SFN convention that we did as a virtual convention and the response from retailers was really positive, because it was easy to bring their RSAs into those presentations and product trainings where they couldn’t have brought everybody in the store to a real convention. They had their RSAs and staff watching all of those. From our standpoint and the feedback we had from a lot of them, this was really value added because more people in the store could see the actual presentations and training and product and everything else.
Do you foresee maybe doing a kind of hybrid live/virtual for salespeople?
Baucom: I think we’re starting to think about everything in a hybridized way. How do we take the best of each and combine it? There’s one of the things that, in addition to SFN, we had all those educational seminars that people had to pick and choose. We’re seeing owners saying, ‘Boy, this was great. I’m going to make sure my key people see this session.’
Bell: I think everybody’s gotten more comfortable with that kind of virtual presentation. And it does allow more direct training and information of more people in the store. So, I think that’s going to continue.
Do you foresee Shaw returning to trade shows in 2022?
Baucom: We’re going to do trade shows. We’re going to evaluate each particular show and each particular time. But we do know we love continuous roll out and we love being with customers. So, we’re going to figure out the best way to do all of those things.
Many of your employees are still working from home. Is there a set date when they return? What are some positives to come out of this?
Bell: A lot of people obviously went home in the second and third quarter, but we’ve had people transitioning back in since the fall, and even more so in the last few weeks and months. And we’d given guidelines to our departmental business leaders, and they are managing that. I think what we’re going to do is a hybrid. Every company’s moving to a more hybrid [approach]. I think the positives are that people got more comfortable with technology, more comfortable with the virtual piece. So, it gives us and our employees more flexibility to where they may work here for three days and maybe at home for two days. The bad thing is it allows you to work from anywhere, so you’re never off, but I think we’ll get to that hybrid space. So, who knows exactly what that’s going to look like? But our bias is we want people here. We think we’re better together. And then how do you maintain what we’re really good at, our culture? That’s why we’re better together. You innovate better, you collaborate better, you build community, you build a culture.
So, we’re bringing more and more people in every day. By late second quarter, a large percentage will be here.
What makes Shaw the best partner for floor covering retailers?
Baucom: I joined Shaw from DuPont after having touched every mill in the industry because I really recognized it as a special culture. It’s a culture that really respects the individual and really passionately cares about servicing that customer and every level wants to have the best people. Also, it wants to be very approachable. It wants to have that covenant relationship with our customers and to be connected. I feel the passion and commitment to ensure that we stay the best in the industry. It starts with people. It starts with that Shaw way of making sure they feel included, engaged, empowered, accountable. Take reasonable risk through the lens of the customer, and then take vulnerable feedback on the backside to make sure we’re getting that to the customer.
Bell: I think we’ve always had a special relationship with our customers, and we’ve had the best people calling on them. I think that’s going to remain. As Tim said, there’s been that access to management. We’re available and we’re open for customers to call and to talk to. We all have our relationships out there in the field. I think it’s that access to leadership, the best people, the most consistent service over time, and the best partner and we want to help our independent retailers be successful. We want to take the hassles off. We want to take some of the risk off and allow them to grow because they are the backbone of our business. The independent retailer is the backbone of our business.
Baucom: Really the emphasis is the personal commitment I feel to make sure we have the best people at the point of engagement with our suppliers and with our partners like you in the industry and with our customers.
Shaw has always had the reputation of being the best at customer service. What do you do differently than everyone else out there?
Bell: Well, part of our culture is we are externally focused. We are focused on what is best for the customer. The good thing that that does is it eliminates interdepartmental and intercompany conflict and competition. It’s what’s best for the customer. We’ve just always had that approach, and we stay externally focused to understand the consumer, but to service that dealer because they are the backbone of the business.
How does Shaw help retailers make money?
Bell: No. 1, I think when we service, we take a lot of transactional headaches off of that customer. We provide more training. We provide more product information. We provide more insight and knowledge, I think, on the consumers and the markets that they’re serving. All of that is around partnership. We want to be the best, not just supplier, but partner in helping them be successful.
Baucom: I think it is understanding them, empathizing with them and then leading. I think that I’m passionate about servant leadership. I think both of those words are important. First, you have to serve sincerely and humbly, vulnerably, but you also have to lead because sometimes we see patterns and perspectives that they just don’t see because they’re so busy. We empathize with the pressures. That’s one of the reasons we do a lot with dealer councils and other things to try to understand a day in the life. I’ll tell you, sometimes when you’re in the middle of fighting the fire, you have a hard time seeing what caused the fire. Where’s the fire spreading to? We can have that dialog.
Bell: We’re good listeners. And we take their input, their constructive criticism or their need or whatever their requirements are to heart and we do something about it. Our entire organization is built that way; we listen to requirements and we figure out how to meet the needs and the requirements.