When times get tough, the tough get creative

The high interest rates we’ve seen (prior to the most recent Fed rate reduction) have kept many homebuyers on the sidelines. At the same time, many homebuilders have had to rethink their strategies and adjust their plans in the face of a soft housing market. And in spite of the two consecutive interest rate reductions, no one is expecting the housing market to all of sudden go gangbusters and have things go back to the way they were overnight. It remained a tough environment.

All this has impacted the specialty retailers who have historically relied on a robust housing market to generate steady business. That’s no longer the case—the situation is a little less predictable now. However, it’s not all bad news. The smart retailers I’ve worked with are using this situation as an opportunity to reinvent themselves. In fact, many dealers are getting creative by exploring other market opportunities outside of new builds.

For instance, some retailers have decided to go after customers who have chosen to stay put in their present living quarters. With many consumers unwilling to trade a lower mortgage for a higher one, there’s an opportunity to target homeowners who are looking to do a re-do or renovation and then sell a few years down the road if/when the housing market heats up.

But it’s not just homeowners that are staying put. People who rent apartments are not moving as frequently, which means the facility managers are not turning over their units as quickly as before. This presents an opportunity for retailers to do smaller flooring jobs instead of the big home runs. For example, I have ceramic floor in my kitchen; I’ve been there 15 years. I covered it with a black-and-white vinyl floor, which used exactly three cartons of flooring. And then I put two small rugs in.

Another good idea is to expand your relationships with local realtors. A couple of carpet dealers I’ve spoken with have formed partnerships with real estate companies where they pay them for leads. In other words, if somebody buys the house, the real estate agent says, “Oh, by the way, ABC Carpet has a great deal if you want to change anything.” I know some retailers that have been doing this for five, six, seven years.

For example, let’s say a real estate agency—such as RE/MAX—has an open house event. As the rep is doing the walk-through, she might tell the prospective buyer: “If you need any help with new floor covering, a total redo or drapes, I know a company that can handle that for you.” For some it’s been very successful; but it only works if it’s a true partnership. Some dealers just wanted the referral and don’t want to give the real estate agency money. But most of it works out pretty good if you’re really into it. Lisbeth Calandrino writes about this often.

Required reading

There’s a lot of useful information to help retailers better compete when business is slow. The information is out there. For example, I saw Jim Augustus Armstrong’s series on “How to Bulletproof Your Business with a Robust System.” Lots of good tips in there.

But here’s the problem: Many retailers don’t take time to read. I’ve asked dealers that I call on if they do, and the typical response is: “When I get a chance.” I think it’s a missed opportunity.”