Shaw Residential talks multi-phase product rollout

Scott Sandlin: That’s part of it. The other part of it is just service. When you launch that much, it puts a lot of stress on the internal systems. Not only on capacities, but sampling, sales force and many other areas. We feel there’s enough stress on the system just to service the business that’s out there. So, while we didn’t pause, we adjusted our product introduction processes to alleviate stress on our customers—resulting in a more fluid approach to product launches throughout 2021.

Will it be every three months or so?

Herb Upton: The schedule is to show product in January, deliver February, March. Then show product in April, deliver in May, June, and show product in July, deliver in August.

Across all the brands?

Upton: Correct. All brands, all product categories. And with no emphasis on any particular one when it comes to product.

Tell me how this benefits the flooring retailer?

Sandlin: That’s exactly why we’re doing it. Take our soft polyesters, for example; if we had a major launch there, we would have put unnecessary stress on the system because the retailers are selling all they can sell of the products we have out there now. Now granted, there’s nothing I love more than showing new stuff. But, if you’re going to hurt the service on those [existing] products, you should pause. And when you launch a new product, you’re pulling a tremendous amount of capacity and pounds and attention away from existing product versus the new product. At any given point in time, new products represent about 15% of this industry’s business. So, we felt it was important to service the other 85%. And we’re doing that.

One of the most frustrating things to our customers is showing product and shipping samples eight months later. It just drives them crazy. And we all do it. The industry does it. This new approach alleviates the majority of that. Because you don’t stress the system. You can only drive so much through the system at once. Then we don’t find ourselves saying, “Well, let’s get these three products through first, and those two have to hold off.” And it may be in COREtec or Anderson Tuftex or whatever. You’re making all these decisions all the time. We’re doing it on a well thought out, planned approach, that the sample department and production planning have signed off on. You have to show it, and you have to deliver it. That’s what we’re doing. And we were on time pretty much with everything. We probably have a few things on the water that we’re a little behind on because of the container issue.

If you go into places like Long Beach, you’re waiting two weeks just to dock it.

Sandlin: Well, in places like Long Beach, it’s a real problem. We’ve got a little bit of a jewel down here in Savannah. We’re almost lucky because we have about 3 million feet. Who would ever have thought that would be where we have the most square footage? That’s again why we phased this thing out. So if it takes—let’s just pick a number—10 million feet to really launch a product the right way. Because you have to launch it, you have to have samples, you have to ship those samples, you have to have inventory once it hits. Are you better off putting that 10 million feet toward that new product or launching it in April and servicing in Q1 when business is so good? All that comes into play.

Upton: It’s nice to have options to pivot. It has been such a fluid situation for us. We’ve been able to move stuff purposely.

Sandlin: And that’s not to say there won’t be service issues. Because with this container thing, it’s going to be an interesting year. Not only for our industry but furniture and appliances and more.

How much of this decision was based on absenteeism at factories? Whether it be because of COVID-19 or people not wanting to go back to work?

Upton: This year-long approach was actually developed and agreed upon before COVID-19 hit.

Sandlin: When you have the markets and the shows, nobody wants to get left out. You don’t want to leave any product out, so you cram it all in. Everybody does it; it’s an industry thing. But no, really nothing to do with absenteeism. The service issues were COVID-19 related that got us in a little bit of a hole. But new product launch or not, we’ve got more associates in a lot of our factories today than pre-COVID-19. I just think it goes down to servicing our customer well. While the sun is shining, we have to make hay.

How did you determine what comes first?

Upton: It goes back to what Scott said about easing the capacities throughout the whole supply chain—all the way from the product genesis to sample execution—and then getting it into the field successfully at the retail level. We’ve really seen the benefit in our sample execution. That’s all part of the customer experience. It also gives us multiple innovation windows. If you can’t get it fully tested and vetted by January, February, when you’re going to the regional markets, Surfaces or the buying group shows, you could sit on an innovation for six or eight months. Now, we have multiple windows. When we’re ready to go with a new innovation, we’re going down the line.

Obviously, we work with timelines. So, when we look at our January launches at the beginning of the year, we try to introduce our more innovative products, both hard and soft, at those January markets. But that’s not to say if something comes along, we won’t do something in the second and third quarters. So, in that, a lot of what you’ll see in the summertime is more around updating collections. It may be meeting competitive products and being able to say, “Hey, there’s a void out there we believe our retailers need. And we can satisfy that need in the middle of the summer. And we try to use a lot of the sizzle again for innovation, new product attributes, new platforms, hard and soft, going into that January market.

Is that what you did this year?

Upton: Definitely. Let’s start off with hard surfaces. We’re extremely excited about our Floorté Elite and COREtec Advanced+. These are our new mineral core products that have a super-scratch-resistant technology, backed by a 15-year residential scratch warranty. It’s a thick, very apparent value product that is beautiful, hyper realistic, multi-gloss texture, EIR—all the bells and whistles. It’s your higher-end price point for LVT in that rigid core market.

What’s the difference between Floorté Elite and the COREtec Advanced+?

Upton: The COREtec product does have the multilength from a visual perspective. I like to say that COREtec Advanced+ is true to the brand—the premium designs you would expect from COREtec. We have separate product design teams that work on [COREtec and Floorté]. Floorté is for all uses, all individuals, all walks of life.

Are the constructions the same?

Upton: They’re very similar constructions.

Suggested square foot price of Advanced+? Elite?

Upton: $6.49 to $7.49 for Advanced+, and Floorté Elite is in that $6.49 arena. And, of course, you’ve got cork on the back with COREtec, which is always our signature ingredient for the attached pad.

Sandlin: But the beauty of COREtec, and the curse of COREtec at the same time, is you can’t just put average products in COREtec. COREtec is THE brand. So, the styling is at a little different level. However, Floorté is in the meat of the market.

How would you sell me as a consumer on those two products?

Upton: The first thing is it’s a total mineral core, which has no plasticizers. So, it is super stiff, super strong. It will not move due to humidity, moisture, etc. So, it just is that worry-proof side that the mineral core gives. We have a thermal resin technology on the top, which is super scratch resistant. We get AC ratings of 4 and 5 on those products, which is a great advantage for any household that has pets or young kids that live an active lifestyle. They’re super realistic. It’s going to give our retailers something in that premium market to help boost their price points and give value to the customer. And by the way, I didn’t tell you about the additional warranty. You won’t need it, but we’re going to put our money where our mouth is. We’ve got an additional scratch warranty that’s better than any in the industry.

They can make a 40% margin?

Upton: Absolutely. LVT is growing, specifically SPC. And a lot of those are value-engineered products. But there is a market for higher-end premium products. And that’s what this product offers.

Is there a mindset to introduce a high-end product like this at this time?

Upton: Absolutely. The higher-end consumers have more discretionary income, they’re spending more time at home, they’re doing the remodeling. They’re looking at upgrading their home, their values of their homes keep getting higher. So, they want to put in nicer stuff.

Sandlin: And here’s the thing. The consumer is coming in to buy. For years, what we’ve heard from our specialty retail customers is, “We wish we had more traffic.” It’s the product you don’t need to be afraid to charge what you need to charge for it. And they’re willing to pay, so let’s not talk ourselves into a lower-end product.

The price is $6.59, $6.99. Consumers can get real hardwood for this price. Tell me why they should want this instead of real hardwood?

Upton: If you’re looking for something that is 100% waterproof, if you’re looking for something that will perform and looks super realistic, once this goes on the floor you will not be able to tell it’s not wood from a visual perspective. The EIR, the texture, the gloss levels are just impeccable. It’s low maintenance, it can withstand all the hectic things that happen in your life and your home. This is what you want.

Sandlin: And our hardwood products today are made as well as they’ve ever been made. And if the consumer wants hardwood, sell her hardwood. We love hardwood and there are a lot of consumers who want hardwood.

I can buy some Shaw hardwood for pretty much the same price as Floorté Elite.

Sandlin: So what? And the price of one of our Anderson Tuftex carpets is the same price as well. Give them what they want. They compartmentalize their homes; they’ve got wet areas. They want products like Floorté Elite and COREtec. But they also have areas of their home where they want wood, and they want a nice rug from A/T on top of the wood. I mean, more than at any time in my 34 years in this business, it’s the time to upsell the consumer. Let’s give them what they want and allow them to enjoy their homes.

Tell me what the big story was on the soft surface in the first half of the year.

Upton: We’ve been very happy with the premium side of our upper price points on all products, hard and soft. When I look at our A/T offerings, and we looked at some of those products right before Scott walked in, we’ve expanded our pet-friendly offerings. These are tailored-type woven looks with performance nylon fiber. It has all the promises that a premium nylon fiber would have as it performs for homeowners and pet owners and pets themselves. But their beautiful styles give that unique woven, tailored, cut-loop pattern, and whether they’re organics or geometrics or non-discreet, they’re great for wall-to-wall and it could be great for individual area rugs. We’re real bullish on the opportunity to expand our pet-performance products across our A/T portfolio. We’ve been very happy with the team’s ability to keep the high-end aesthetic A/T customers have come to know and love from the brand, while offering elevated performance many homeowners need.

What’s the consumer going to pay for that?

Upton: That’s going to be about seven bucks a foot.

How does Shaw replace the Stainmaster PetProtect program and displays?

Sandlin: We’re working with our internal teams and customers on updating existing signage, sample labels and any other merchandising materials. All digital assets are being updated as well. We’ve already begun testing new pet collection names and messaging with consumers and will be unveiling a new program in the coming days, along with a plan outlining replacement timelines. The new branding will be intentional and eye-catching with tested and proven messaging to appeal to today’s homeowners with pets. All existing products will continue to use both Anso nylon 6 and nylon 6,6, and all performance guarantees and warranties will remain intact. The silver lining here is this gives Shaw the opportunity to build a pet-friendly collection specifically for our specialty retail partners.

We talked about the A/T proposition. Are you beefing up the high end of Shaw carpet as well?

Sandlin: Well, it depends on how you define high end. We have A/T as our premium offering. You’ll have some Shaw styles that will creep up into that, but for the most part, I would say the Shaw offering is in that mid-tier of the market. We do well in the lower end of the market as well. But we really are focused in that $3 to $5 per foot range at retail.

Phase two is going to be more filling in some collections, more so than the innovation?

Upton: It really depends. For the most part, it’s going to be adding on to collections that may have different attributes within that collection.

Sandlin: Some of these products are some of the best products I’ve seen in my career. So, it’s not just filling in slots.

Upton: It’s not just re-colors of existing platforms, either new yarn systems, new tufting constructions, new color combinations.

Tell me what you’re doing on the wood side first half of 2021.

Upton: When we are looking to A/T, the hard surface, look at wood. We’ve expanded last year, we launched Imperial Pecan, which was a great visual. It was a new add for us, hits a price point of about $5.59 at retail, so it is considered entry level for A/T. If it was a Shaw Floors product, it would be a higher end. But we’ve had really good sales rates, and we’ve expanded that. As we go into phase two, we’re going to look at some ash products that have some unique topcoat finishes that really replicated an oil-type finish without all the repair and maintenance that you would require from an oil finish.

And then, of course, when you look at the Shaw Floors side, we launched a product called Castlewood Prime. Castlewood has been a style within our Gallery collection. And in that, this is a 3mm veneer, 7 ½-inch-wide planks up to 86.6 inches long. So, it’s the higher-end kind of a black label for The Gallery collection. Again, not near what you’d find in that A/T premium hardwood, but for Shaw Floors it is an upper price point.

The A/T wood is traditional construction as opposed to Epic?

Upton: That’s correct. Even this Castlewood has traditional ply cores. But as you get into the Gallery and other portions of Shaw Floors, you will see our HDF Epic program in there.

So one of the values you provide to the specialty retailer is to get the consumer into a really nice high-end wood through A/T at a $5.59 price point?

Upton: That’s correct. They go to Shaw Floors and it’s more around the performance. Great value is still the visuals and the hardwood that everyone aspires to. But it is going to beat the demands of life.

Sandlin: The great thing about our hardwood business this year is we’re going to service it really well. We had some issues during COVID-19, but this is going to be the year where if you’ve got it, you’re going to sell it, more so than any year we’ve seen in our history. That could be really good for hardwood this year, because our inventory levels in hardwood will be good.

Upton: We’re the largest domestic producer of engineered hardwood when you combine our South Carolina operations along with South Pittsburg.

Where do you stand with domestic SPC production?

Upton: We’re really excited about our first SPC products that are being produced in Ringgold, a facility we’ve expanded many times and recently invested $20 million in expanding SPC production.

These are your first SPCs that you’re making?

Upton: Yes, and expanding—putting in more equipment, going through the fourth expansion. We have LVT, WPC and SPC. We’ve got two products coming out, made in the USA. They’re going to perform well; we’re going to be able to service them just like our customer deserves right out of Ringgold. We’ll be pushing those through our Fifth & Main and Philadelphia Commercial brands.

When does the Shaw brand or the COREtec brand get domestic SPC?

Upton: We actually have WPC today. We have SPC in the plan. We’ll do that as it comes online with more capacity.

Will you be sourcing from Huali here?

Sandlin: Absolutely. They’re a close partner.

What would be the advantage of making it yourself when you have one of your trusted partners already here?

Sandlin: It’s very similar to whether we made it in Ringgold or made it in Chatsworth with Huali. It’s lead time. It’s inventory. We have over a half billion feet on order. This resilient game we’re playing is major league from a strategy and investment perspective. Half a billion feet, you could probably figure out how much money that is. It’s a lot of dollars and a lot of logistics. We have a very talented supply chain team with sophisticated systems, and it is still very complex. So, if you can simplify that with domestic production and augment our supply for our customers then we should do it. You don’t have to look at a product just whether we source it here or there. You can start to do different things to be more strategic.