Vance Bell, executive chairman, Shaw Industries, shares watershed moments that impacted the industry.
The introduction of Stainmaster
During the mid-1980s, the industry was very fragmented with several hundred manufacturers and processors that participated in various parts of the supply chain. Shaw had started growing rapidly and taking market share in the early to mid-1980s after going to one-step distribution, with an employed national sales force along with regional warehouses and local inventories and making three acquisitions. This changed the game for manufacturers.
DuPont, which was a major fiber supplier of nylon 6,6 at the time, saw this trend emerging and was probably threatened by it. They saw the big getting bigger from a manufacturing standpoint as we started to backward integrate into the supply chain. We began acquiring yarn mills, along with backing operations, giving us more scale and cost competitiveness. DuPont wanted to preserve their position in the industry, so they developed Stainmaster. The feature was stain and soil resistance, but the difference is they branded it and spent a lot of money on consumer advertising—$85 million between 1986 and 1989—which in today’s dollars is about $275 million.
DuPont defined what the Stainmaster products would be. They were basically the same specs, the same twists, the same weights for all manufacturers that commoditized the brand. Everyone started competing at the opening price point of Stainmaster and then the next upgrade, which was defined in their specifications. So, there were three or four critical weights, specs and price points, and all that did was give the advantage to the more cost-competitive manufacturers. DuPont held most of the profit at fiber level. So that actually precipitated more consolidation and more pressure on the weaker mills because of that commoditization.
Backward integration
There were three or four things happening concurrently, which were interconnected and responsible for the consolidation. Stainmaster was a big one. The other was our move into one-step distribution that led to our market share growth. And the more scale we got, the more backward integrated we became, which put other manufacturers on notice.
Stainmaster was not profitable for the carpet manufacturers, so we all started looking for alternatives. We, at the mill level, were being threatened by that model. We started looking at our own extrusion in the early ’90s. Stainmaster caused the manufacturers to look for different avenues and different products to go around the Stainmaster brand.
Everything was connected. As Shaw and others started getting bigger, it just made sense from an economic standpoint to backward integrate because there were profit margins all along the supply chain. We wanted to control our own destiny and that was a way to build competitiveness and flexibility.
Consolidation
Consolidation was going to happen one way or the other. It was a fast-growing and fragmented industry, and it was going to attract capital and consolidation. Entities began putting investments into the industry. The impact of manufacturing consolidation on this industry in the long run has been positive because the investment is coming from internal players.
Consolidation and scale allowed the manufacturers to produce their own fiber, build their own products and brands, and innovate in terms of design and diversity of product. We were no longer defined by specification of a fiber brand, which allowed us to make investments downstream, build inventories, provide cut order nationally, and invest in transportation and service systems and eventually our own dealer merchandising support. All of those are the benefits of consolidation. The major manufacturers become more sustainable, had a better economic footprint and could invest in the business, which meant we could invest in things that help support the product and our customers downstream.
The long-term secular decline in overall carpet demand
If you go back to the year 1986, carpet was two-thirds of the industry. Today, broadloom is probably a third. So, you’ve had that long-term secular decline of carpet, which is changing the way manufacturers operate, changing the type of products we produce, changing retailers’ assortment of products and services offered.
The reason the demand for carpet has waned over time can be attributed to several things. The industry did itself no favors in terms of product constructions for base grade and the specifications for the original fiber brands. Some of those products probably didn’t perform well to meet consumer expectations. I think there were periods of time when the industry oversold warranties, with consumers expecting more due to the warranties.
A big change came about with the advent of open floor plans in homes where you had the kitchen, dining areas and living areas basically all one big room. That was more conducive to a hard surface look expanding out of the kitchen area.
There were concerns around allergens and cleanliness along with the perceived amount of vacuuming and maintenance. I don’t think we’ve done a good job of conveying that carpet is actually a very clean, very friendly product from an indoor airspace standpoint.
Today, we are making the best carpet products we have ever made. From the innovations to the yarn systems to the quality and safest materials, we are developing desirable, beautiful, sophisticated products. And right now, that’s where the market is.
The introduction of LVT/WPC/SPC
Obviously, a big event that impacted carpet was the introduction of LVT, particularly WPC. The product is easy to install, waterproof and looks like wood or stone. That responded to a lot of consumer desires and needs and fits the open floor plan in terms of a hard surface look. The product took share from every other product category across all end-uses. It also changed and challenged the capabilities of manufacturers and distributors. Sourcing, supply chain and logistics are paramount. In addition to our domestic manufacturing, Shaw has built a world-class sourcing and logistics infrastructure to provide access and service in this category for our customers.
Catalyzed by the demand for the features and benefits of LVT, Shaw’s LifeGuard technology is another significant innovation that transformed the industry by introducing the first residential carpet with a built-in waterproof backing. By addressing one of consumers’ biggest concerns about carpet performance, LifeGuard redefined expectations for soft-surface flooring and helped shift the industry toward more durable, family-friendly and pet-friendly flooring solutions.
Bellwether economic drivers
The flooring industry saw lasting change from key economic milestones. First, we had the increasing, almost artificial housing boom that peaked in 2006, which was followed by the mortgage crisis and banking crisis. During that two-to-three-year period, carpet demand fell by 40% and frankly never recovered.
Then the COVID-19 pandemic impacted retailers and manufacturers alike and forever changed the way we live, work and shop. Trends like shop at home, remote work and the false demand signals that came out of this period accelerated the pace of change in consumer preferences, the implications of which are still playing out today.
Consumer shopping journey
Consumers began using the internet and social media to begin their shopping journey. They were more informed and educated. AI is going to accelerate the transparency and knowledge that the consumer has when they come into the process. So, I think the industry is going to have to find the right ways, both at the manufacturer level and the retail level, to connect with this transition so that we can create a positive shopping experience.
Looking ahead, in the next few years, I believe that AI could help develop new combinations of chemistries that create new materials with different features and characteristics that could potentially bring tremendous benefits and unique performance characteristics to our products, both soft and hard surface.
