May 9/16, 2016; Volume 30, Number 23
By Jim Augustus Armstrong
(Second of three parts)
“I have to cut my margins to compete,” a flooring dealer recently told me. This is something I hear fairly often from retailers. So what’s the solution to preventing margin erosion in a market full of box stores, online discounters and other cheap price competitors? Differentiation. If you don’t create differentiation, you are forcing your customer to buy on price.
Let’s say you go into a grocery store and see two displays of oranges—one marked $0.50 and the other for $1. There is no explanation of the price difference, just two displays of identical-looking oranges. Which would you buy? Without any explanation, there’s a good chance you would buy the less expensive ones. Now imagine the $1 bin has a sign that reads, “Organic, locally grown, pesticide-free, double the vitamins, triple the flavor.” Odds are a lot better you would opt for the more expensive product.
Flooring is no different; that same process of elimination can be applied to similarly positioned brands on the retail show floor. I recently met with Michael Raskin, president of Raskin Gorilla Floors, to discuss the subject.
What are your thoughts on the importance of creating differentiation?
It’s huge. If you don’t differentiate, you wind up competing on price. Style and design is one way to stand out. If a retailer doesn’t know design and color, I recommend he find someone who does. It’s very important to bring style and design to the consumer. It’s easy to forget that we’re in the fashion industry.
What do you see top retailers doing to create differentiation?
One thing is moving quickly. We work hard to separate ourselves by doing what big boxes can’t, which is quickly moving trends. Home Depot is a slow-moving ship; specialty retailers need to move quickly and stay ahead of the box stores.
Creating a good first impression with the layout of your store is also important. I visited a retailer in Southern California and when you walked into the store it made a very good first impression. Looking at a floor in this showroom helped you understand it; you saw how it would look in your home.
How important is differentiation in getting referrals?
Well, my father was the first to bring imported resilient products into the U.S. back in the early 70’s. One of the things he said was only 11% of flooring consumers buy flooring on brand; the rest is word-of-mouth. If you get a happy customer who likes your floor, she is going to talk about it. If you want to get referrals it’s important to create differentiation by paying attention to details in customer service and installation because that’s what’s going to separate who is going to be around down the road and who won’t.
You don’t promote your business as being the “low-price leader,” and yet you’re successful.
Right; we don’t sell by promising to be the cheapest. We do have entry-level products, such as those for multi-family residences, but that’s different than promising to be the cheapest. We differentiate by design and through our marketing. This is something the dealer can duplicate at the retail level.
With that in mind, here are some more quick tips for creating differentiation:
- Wear shoe covers in the home during a site visit
- When a customer walks into your store, offer her something to drink
- After the installation, surprise your customer with a gift basket or some other memorable gift.