Consolidation
Shaw Industries was the biggest aggregator and consolidator of the industry, then Mohawk followed. The biggest trend is we both became multi-surface companies. We started as carpet companies and over time became highly effective consolidators and acquisitors of hard surface as well as carpet.
The fact that we consolidated the industry meant we were world class in the production of soft textiles, à la carpet. Had we not consolidated, had we not had the innovators like Bob Shaw and Allen Lorberbaum early in the industry, we probably would have been buying all our carpet from Asia.
The fact that the industry had made those investments early on essentially protected a multi-billion-dollar U.S. industry. Had it not been for them, we probably would be buying Turkish and Chinese carpet.
Consolidation made the manufacturers stronger, and a stronger manufacturer benefits the retailer because we went from two-step distribution to one step on a number of products.
Vertical integration
We vertically integrated and over time became so automated that we reduced the amount of variable labor that was going into the product. Even with a substantially lower wage rate amongst many countries around the globe, we were able to compete on a worldwide scale because we automated.
When we look at how vertical integration benefitted the manufacturer, the fact was that we were a net exporter of carpet. It was the biggest segment of the industry. And it was the only multi-billion-dollar textile product left back when the Far East literally ate up the entire U.S. textile industry.
If you look at every other industry from clothing to fabrics, that all became an Asian product. But the investments early on to vertically integrate protected the carpet industry as a U.S. industry.
Branding
Back in the 1980s, the industry farmed out most of the marketing to third parties like Stainmaster, Wear-Dated and Anso. One of the industry’s biggest achievements was competitors coming up with their own brands. As the manufacturers essentially backward integrated into the product side for efficiency and conversion, they also did a good job of forward integrating into not only display systems, but also brand and brand management, which created differentiation for the consumer. Mohawk in this case was SmartStrand and Revwood—brands that really connotated to those unique features and differences for the products we made. Keep in mind, we had 15,000 to 17,000 retailers. How do you provide something different and unique for them to sell? That’s not an easy task. I think once we got the marketing differentiated, we created avenues where more retailers could differentiate and make more money at point of sale.
Mills expanding into hard surface
This benefitted the retailer in several ways. First is the fact that you have some manufacturers with national distribution footprints. The fact we could essentially punch in the retailers nationally with a vertically integrated truck with multiple products on that truck was a true innovation for the industry to be able to satisfy the trends of that time because as carpet naturally went down and the other categories went up, the competitive advantage of the manufacturers was not just that we had the production capabilities, but we also had the distribution capabilities.
Solution-dyed polyester
The polyester being produced today is a better product than it was. I think it’s become the bellwether standard for consumers in their homes today. Solution-dyed polyester has been a natural evolution of the product.
As the carpet side has regressed a bit in demand, solution dyed has created both a good performing product and a highly efficient product to produce. At the same time, we’re using less water. We’re producing a product with larger run sizes with fewer dye lot issues. Before we looked at polyester for essentially the lower to mid end. Now you’re now seeing design and differentiation that polyester is ubiquitous in the residential market.
Hard surface taking a bite out of soft surface
At some point, we’ll see what that modulation level will be. But from a consumer standpoint, whether we like it or not, it’s more about the look than the product itself. For example, people don’t necessarily want to always have wood. They want a wood look. Some people want a truly natural wood, and some people will accept some form of a manufactured wood look. Same thing on the stone side. And with the innovations today, you could buy a wood look in LVT, WPC, laminate, wood, ceramic tile. In the wood business alone, you have solid wood, engineered wood and veneers. You’ve seen this homogenization where the products are tailored to those three looks. At the end of the day, there are really only three looks in the industry: the textile or a soft surface look, the wood look and the stone look. The difference is now we have multiple categories in each of those three looks.
