It’s a jungle out there. The challenges that today’s retailers face are formidable. And only those with superior skills will be able to survive against local big boxes who leverage their national advertising and buying power to feed on consumers’ appetites for low-cost flooring.
“The home centers have a huge advantage when it comes to advertising and buying power,” Bill Zeigler, co-owner, Charles F. Zeigler Sons Floor Covering, Hanover, Pa., told Floor Covering News. “To try to take them head-on is a mistake.”
The mass merchant channel represents more than 25% of retail flooring sales, according to Floor Covering News research. What’s even more imposing is the nearly $17 billion in combined flooring sales of the “Big 3:” Home Depot, Lowe’s and Floor & Decor. And get this: the Big 3 generated double-digit sales growth and profit margins in the 35% range during a pandemic year. “The home centers, especially in our market, have really upped their game and made it very important for us to do the same,” Tom Gregory, retail sales manager, Home+Floor Show, Dubuque, Iowa, told Floor Covering News.
What’s more, retail store owners located only a stone’s throw from these big boxes compete for sales and foot traffic every day. But dealers contacted by Floor Covering News offered a different perspective.
Despite the scary numbers, many flooring dealers do not consider the big boxes direct competitors, citing significant differences in clientele, product selection, service and selling philosophy. “People who go to both stores will find it easier to shop at our location because there are fewer products to choose from,” Erik Kadlec, owner, Walgenmeyer’s Carpet & Tile, Stoughton, Wis., pointed out. “We tell them we shop from the best of the best.” Kadlec’s store is located about one mile from Menard’s and three miles from Floor & Decor.
There is no single strategy advocated by dealers to compete against the so-called category killers. Some operate diversified businesses, which service multiple channels, such as specialty retail, builder and Main Street commercial. Others play to their strengths to compete against the mass merchants’ perceived weaknesses.
“I think the best way to level the playing field is to excel at something the big box doesn’t,” Home+Floor Show’s Gregory said. “One way is to become more relationship focused and less transaction focused without losing sight of the fact that transactions drive the bus. It’s a fine line and it takes commitment.”
If history is any indication, store owners can dance between the feet of these elephants by providing styles and price points for every budget. “Our floor space dedicated to flooring products is larger than both home centers in our town,” Zeigler noted. “Over the last few years, we have begun to show brands not available to them in the home centers.”
Inviting product selection
One aspect of the shopping process that changed over time is consumers are more knowledgeable about their flooring choices. In fact, many shoppers spend several hours of research online prior to even entering a store, industry research shows.
“I find that a lot of consumers start their flooring search at a big box because they are shopping for other items anyway,” Home+Floor Show’s Gregory said. “A lot of them start their search online as well, and it’s forced us to stay sharp and on our game.”
While size and scale are competitive advantages for mass merchants, these can be overcome by savvy retailers. For instance, smart buying decisions allow dealers to compete on certain entry-level products. “We have some very aggressive price points and negotiate aggressive prices with our suppliers,” said Ray Daya, principal/general manager, The Westvalley Group of Companies, Calgary, AB. “We can offer better value for several off-the-shelf products.”
What’s more, big boxes do not carry large enough product assortments to satisfy all consumer flooring preferences and budgets. Retail salespeople are well positioned to show and explain to consumers the discernible differences between “good,” “better” and “best” qualities, the latter of which are typically not available in large quantities from mass merchants. “The people shopping for the Lexus or Mercedes of flooring are not buying from Home Depot,” said Lou Morano, owner, Capitol Carpet & Tile and Window Fashions, Boynton Beach, Fla.
Selling better quality goods also enables dealers to cater to an affluent clientele. “We don’t have $1.50 to $2 per-square-foot material,” Morano said. “It’s a different clientele. We don’t even mention prices in our ads. We talk about our incredible service.”
Playing in the mid- to high-end market, however, is easier said than done. It requires not only the right product assortment but a knowledgeable sales staff capable of offering top-notch service. “If you look at hard surfaces, there are many different products, overlays and features,” Westvalley Group’s Daya pointed out. “You have to be able to offer the brand and product quality they’re looking for.”
When products are bundled with the value-added service component of specialty retail, size and scale become far less of a barrier. “We have a knowledgeable sales staff who is educated on different products,” Walgenmeyer’s Kadlec said. “Some have interior design experience and can help the customer design a space.”
Then there are the little things dealers can do to spice up a retail environment and further distinguish it from a big box, such as offering food, beverages and other amenities. For example, “hand walk-ins a laminated beverage menu with drink options and ask them what they’d like to drink,” Jim Armstrong, president, Floor Success Systems, and author of “Beating the Big Boxes,” suggested. “Install a small oven and bake cookies or bread each day. The aroma will make your showroom smell like home and cover up the chemical odor you find in most showrooms.”
A major challenge competing for customers who consider buying from mass merchants is oftentimes never getting a chance to see them. That’s because big boxes are a destination for products other than flooring. By comparison, consumers may enter a specialty store once every few years.
Social media marketing has proven to effectively raise awareness of store brands, products and services. “The brands they’re looking at online are in the store,” Westvalley Group’s Daya said. “We’re not necessarily selling products but concurring with what they’ve seen online.”
Reconnecting with past customers and developing referral partnerships with local realtors, designers, remodelers and other businesses can help boost foot traffic. “There are many things retailers can do to beat the big boxes, but you can’t do it by trying to copy their advertising strategies,” Floor Success Systems’ Armstrong said. “You can’t win with that approach because they’ll outspend you. Instead, market in areas where they are weak.”
In a nutshell, dealers are advised to promote their commitment to ensuring customer satisfaction from start to finish. “A lot of the time, consumers don’t need more information from us, they just need us to show them we care about their project and appreciate the opportunity to do business with them,” Home+Floor Show’s Gregory said. “Then help them find what’s right for them and give them a smooth process to get it done.”
One area where dealers have a distinct advantage over mass merchants is how their products are presented to customers. Rather than showcasing floor coverings in a warehouse environment and on shelves, retailers show off the latest styles in various displays and merchandising systems in the comfort of their showrooms.
“Our remodeled showroom is inviting,” Gregory observed. “We often have refreshments and TV and/or music playing, and we’ve replaced a good number of displays with more seating.”
Merchandising programs are built on the advantages of exclusive brands and private-label products. This helps eliminate competition with home centers and makes comparison shopping more difficult. Creating and implementing a specific strategy for presenting products is important, experts say, as it enables retailers to achieve just the right look through displays and signage. “It’s hard to match the quantity of in-stock product selection at the big box, but we seem to have found that sweet spot,” Gregory said. “We stock mostly carpet and LVP because that’s what’s hot and we have some builders who’ve found some pet products that help us turn inventory.”