Dealers seek ways to lessen inflation burden

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inflation burdenBy Ken Ryan—How to manage a profitable business in an environment where costs are out of control? That is a question flooring retailers ponder as they deal with pricing pressures from many sides. The situation has grown more dire in 2022 with soaring fuel prices driving up the cost of goods and services for flooring dealers. Against that backdrop, retailers are looking for ways to lessen the inflation burden.

“We have always offered free estimates but are now looking at options to offset the increased cost of doing measures and site visits,” said Raffi Sarmazian, co-owner of Sarmazian Brothers Flooring, Guelph, Ontario, Canada.

Notice Sarmazian didn’t say he would “charge” for home estimates—a non-starter for many flooring retailers—but instead look for creative ways to pass on costs to the consumer. As it turns out, many specialty dealers are thinking along those same lines. Some didn’t wait for a crisis to occur, either.

For years, Craig Phillips, president of The Flooring Edge, with three stores in Ohio, has placed a line charge of $35 for the cost of the in-home measure on every retail job. As he explained, “The majority of our retail jobs are measured by a measure man; it is truly a cost of ours. We do not charge the customer directly on that expense, but the cost is factored into the job. So, when the job is figured at our target margin, it is factored into the total price we charge the customer.”

While estimates are still free at Foulk’s Flooring America, Meadville, Pa., owner Mike Foulk has instituted a 4% fuel surcharge on materials on top of his regular freight charge. “So far, we have had very little, if any, kick back from the consumers,” he said.

Fellow Flooring America dealer Casey Dillabaugh out of Boise, Idaho, said that while he has not considered major “consumer-experience” changes resulting from the continued and significant price increases. “We must be able to maintain margin so we can be financially secure. As such, all divisions in our business have raised their prices accordingly based on our cost of goods and labor increasing.”

Other retailers, such as Cathy Buchanan, owner of Independent Carpet One Floor & Home, Westland, Mich., are on the fence. “As for the future, we may have to increase our labor prices—as gasoline prices increase—due to the costs we bear of filling a carpet van and the demographics we cover,” she explained. “I have not done that yet but I’m sure it’s coming.”

John Taylor, president of Taylor Carpet One Floor & Home, Fort Myers, Fla., said he passes along price increases from suppliers to his customers, and he also tacks on percentage increases for overhead to offset some of his additional costs. “Nothing is easy today, and it’s hard to know what the right deci- sion is, and what direction to go,” he noted.

With each price increase and/or surcharge, retailers like Frazier Carpet One Floor & Home, Knoxville, Tenn., adjusts its prices accordingly to maintain its desired net gross profit. “Additionally, to help maintain our margins and seize upon the lucrative opportunities currently availing themselves in the marketplace, we recently added one full point [charged to the customer] to our cost-to-price formula,” said Kevin Frazier, president. “This formula already takes freight—including all surcharges—into account. Raising one basis point has increased our net gross profit on material by 10%. At least in our region, the market will absolutely bear it.”

Then there are those like Ted Gregerson, president of Abbey Carpet & Floor/Floors to Go, in Anniston, Ala. He is of the mind that charging for estimates can be a deal breaker. “We have always offered free in-home estimates, and I do not see us ever charging customers for an estimate no matter how high gas prices go, as that has always set us apart from the big-box stores. We believe something as small as charging for an estimate can quickly change how customers feel about you and your business.”

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April 11/18, 2022

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