Retail 2023: Flooring dealers remain resolute

HomeFeatured PostRetail 2023: Flooring dealers remain resolute
retail 2023
Phil Koufidakis of Baker Bros (inset) said he believes the economy is strong and people with money are spending it.

Is 2023 the year when retail finally faces the music—that the pandemic-led surge that enriched so many is over? Or will the entrepreneurial know-how of dealers once again prevail—inflation and labor shortages be damned?

If history is any lesson, don’t bet against the flooring industry. While most leaders acknowledge economic uncertainty will likely contribute to a soft Q1 (when compared to the previous year) not everyone agrees that 2023 will be a down year. “I’m completely not buying into the recession thing,” said Phil Koufidakis, president of Baker Bros, with six locations in the Phoenix market. “The economy is still good and while things will level appropriately, I just don’t see a tanking.”

His suggestion: “Stay lean, mean and aggressive.”

For some dealers, putting systems in place to maximize profits while limiting operating costs is a smart strategy to stay successful even in slower times. Having a good name in the market doesn’t hurt, either. “One of the benefits of being a well-established brand with roots in the community is there is a level of trust that our customers have in us,” saidSam Locher, vice president of business development & marketing for A.J. Rose Carpets & Flooring, with three Massachusetts locations. “We anticipate the first quarter will continue to be like what we have seen so far in the second half of 2022—people who have the means will continue to invest in their homes with higher-end goods and those who need to replace flooring will look for value.”

There is a consensus among retailers to suggest 2023 will suffer by comparison to 2021 and 2022 only because those were anomalously good years influenced by the pandemic. “We brought a lot of business forward in 2020 due to the home improvement boom caused byCOVID-19 and the government stimulus checks of early 2021, meaning there will be less opportunities in 2023 for sales,” said Eric Langan, president/owner of Carpetland USA (The Langan Group),with nine locations in Iowa and Illinois. Which is not to say Langan is throwing in the towel in 2023. As he put it, “We’ll continue to advertise and promote our business aggressively and continue to train our RSA’s how to sell during a difficult sales environment. Business is just going to be more difficult and competitive to get.”

In challenging times, it’s best to focus on the things you can control. That’s according to Sheldon Yoder, owner of Budget Carpet and Flooring in Columbus, Ohio. “I have always thought that if you do quality work with quality service you will always have customers. Even in a slow economy there is always customers that want great products and great service—you just have to work a little harder to find them.”

Based on how the fourth quarter ended, which was flat for many, several leaders don’t expect an immediate pickup once the calendar flips to 2023 as concerns about inflation and budgetary constraints take hold. “Unless people absolutely have to have new flooring, they are putting it off and using that money for Christmas,” said Jim Mudd, president, Sam Kinnaird’s Flooring, Louisville, Ky. “I don’t really expect January and February to get much better—partly because it’s that time of the year in Kentucky—but I believe March will take off. We will continue to aggressively advertise because there will be pent-up demand come March.”

Cold weather markets like Michigan tend to start the year slowly even in robust times. For Independent Carpet One Floor & Home, Westland, Mich., owner Cathy Buchanan said she isn’t worried about a slow start. “Here in Michigan, typically we don’t see a lot of activity until maybe end of February and forward into spring,” she said. “[In the meantime], we definitely need to regenerate excitement through direct mail, more social media and email contact to our customers.”

The outlier among retailers expecting a fast start is Typhannie Harker, owner of Carpeting by Mike in Somerset, Wis., who noted, “Our first quarter looks strong with the overflow from the holiday season. We already have a packed January for scheduling and are excited with the potential of the first quarter.”

Promising signs

retail 2023
While some retailers expect a slow start to 2023, Carpeting by Mike already has a packed January.

While there are certainly economic headwinds for retailers to contend with, there are also tailwinds to aid them. For starters, millions of homeowners are locked into fixed-rate mortgages and are not impacted by rate hikes. What’s more, scores of these same consumers have enjoyed tremendous appreciation in their home values over the years and many have disposable cash to spend. There are also millions of older homes (40 years or older) that are going to need work. Or as Baker Bros.’ Koufidakis said, “People who have money have money and are spending. Slowing home sales mean positive signs for more remodel in existing homes. Those homes are well above water and there is plenty of equity available—if not just straight cash for those remodels.”

His advice to consumers: “Invest your money in your home and not the [stock] market.”

Carpetland’s Langan said diversification in business—a solid mix of residential  replacement, new construction, multi-family and Main Street commercial—is key to navigating the ebbs and flows of business tides. “The good thing about flooring is if you see a new roof being built there are going to be floors needed under it,” he said. “Business is out there to be had; there are still a lot of consumers with a lot of saved money looking to update and upgrade their homes. The strong, well-equipped and well-funded retailers will be fine, while weaker retailers may struggle and/or fall by the wayside.”

History has shown that successful flooring retailers either stay the course during challenging times or step up their commitment by being proactive rather than pulling back. “The brands that continue or even increase their advertising spend see a rate of return higher than the ones that didn’t choose that route,” Carpet One by Mike’s Harker said. “People still have the need and desire to replace floors and update their homes, so we advertise when going through slow times to capture the fewer dollars available out there.”

Independent Carpet One’s Buchanan said she is grateful to be on the other side of COVID-19 restrictions and will gladly deal with a little economic uncertainty. “It’s way better than March 23, 2020, through May 31, 2020, when we were closed with no traffic, no calls, no business. Today we have people coming through the door, people calling, measures being scheduled and those that are shopping are serious buyers and are buying big-ticket items and quality-driven products. We just have to fine-tune our skills and don’t get too lazy when the next rush begins.”

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Dec. 19/26, 2022

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