NFA Spring Meeting: NFA members are optimistic about business conditions this year – May 2017
Business thus far is looking good, and WPC and rigid core products are dominating new introductions-those are key themes from the spring meeting of the National Floorcovering Alliance (NFA), held in Truckee, California, April 2 to 5.
During the event, members met with key vendors to see product and discuss new programs. They also spent quality time deepening relationships and debating industry issues.
The general consensus is that business in the first quarter was mostly positive, following a strong 2016, members say. There are areas where business is tougher for a host of reasons. But the overall outlook for 2017 is good.
The NFA currently has 42 members, with 40 of them making the trip to the Lake Tahoe area, notes Lisa Browning, NFA’s executive director. The group is made up of larger dealers-many make the Focus 100 Retail list-with volume being a criterion for membership, but not the only one.
As far as product is concerned, the overwhelming winners are new WPC offerings from most major vendors, with many venturing into the newer rigid core board category. “It’s LVT, LVT, LVT,” notes Sam Roberts, president of Houston, Texas-based Roberts Carpet and Fine Floors, following the first day of convention, which is when members make the rounds of the group’s 26 core vendors.
Mostly optimistic describes the attitude among members and vendors alike. Most retailers in the group are coming off a strong 2016 and believe 2017 will be good as well. The question for some is what happens beyond-and that, they say, depends on what happens in Washington.
“Next year, 2018, will be hard to forecast, if there can’t be tax reform of some sort,” notes Jim Walters, NFA treasurer and president of Macco’s Fine Flooring, based in Green Bay, Wisconsin. “If Washington sits in gridlock, it’s very hard for a business to plan.” Walters says Macco’s’ business for 2016 was strong. “So far in 2017 retail has trended up,” he adds.
Many members are reporting growth in the single or double digit range, Browning notes. Members and some vendors confirmed his observation. Where the growth is coming from is surprising some. WPC products continue to gain share, which is no surprise, but several members also report that carpet sales are strong again.
Dave Snedeker, division merchandise manager, for flooring for Omaha, Nebraska-based Nebraska Furniture Mart and NFA board president, reports increases in single digits for the year so far. Two years ago, the company opened its newest location in Texas, bringing total locations to four.
“A bright spot for the year for me is carpet,” Snedeker says. “Surprisingly, carpet is up double digits.” Volume is up, as well as dollars per yard. “We are selling better goods,” he notes, adding that wood sales are off, which is an anomaly as that category has been strong for so long. “The vinyl business is crazy good. Rugs are up,” Snedeker adds.
Ian Newton from Flooring 101 in Oxnard, California reports that carpet sales have stopped declining. “It’s still a very profitable part of our business,” he notes. Flooring 101 has five stores in the area, including one that just opened and is a strong contributor to the single-digit increases the company has seen so far this year. “We’ve had a lot of rain in California, which is going to help the economy. I’m optimistic,” he says.
Ryan Bechtold, co-president of Contract Furnishings Mart, which has 13 stores in Portland, Oregon and Seattle, Washington, says his company is up 15% so far this year, despite some weather issues. As far as what’s good, he says that hard surface continues to gain share, adding, “I don’t think that’s news to anybody. For a couple of years now, tile has been our biggest category. WPC has had a big impact on our business. It really resonates with the customers.”
Zac Akin, vice president, Akin Brothers Flooring in Oklahoma City, Oklahoma, says business at the company’s four locations is up single digits so far. Looking at 2017, Akin says, “I’m cautiously optimistic, which I’m tired of saying because it seems like I’ve been saying that for years, but it’s going in the right direction.” He reports that carpet is better than it has been, along with vinyl. In the WPC category, Akin said wood-look visuals are very strong.
In fact, many think that the WPC products are beginning to cut into the wood business. Jim Walters is one of them. He says “I think WPC has cut into other categories. I think it’s cut into wood. It’s evolving.” Walters reports that 2016 was a strong year for Macco’s and that 2017 sees retail trending up.
For Kelly Taylor, owner of St. Louis, Missouri-based Ambassador Floor Covering, business this year started off flat to slightly up-a situation he has observed for several years. “The St. Louis market has been slow to recover since the Great Recession,” he says. “We’re making the best of it.”
Other areas are struggling as well. Jay McDonnell, president of Custom Carpet Centers in Orchard Park, New York, describes business conditions as “spongy.” Talking to members from around the country, he says, “I didn’t get the vibe that everyone was doing great, but not awful either.” In his market, the first quarter was okay until March. “It almost mirrored what the stock market did,” McDonnell says. “The thing I’ve learned is don’t give yourself credit when things are great and don’t beat yourself up when they are not.”
During the spring meeting, Floor Focus editor Kim Gavin sat down with members of NFA’s board of directors for a general discussion, but also to hear in their own words why they belong to this group.
Contract Furnishings Mart, Tigard, Oregon
“There are two key components, and they all revolve around one concept: networking. We get to network with a bunch of peers. And we get to network with a lot of people [vendors] we wouldn’t get to interface with at our locations. It would be impossible for these guys to hit all of our locations. We really get a chance to spend time with industry executives that aren’t able to be in our stores twice a year. We have great networking opportunities here.”
Dave Snedeker, director of flooring
Nebraska Furniture Mart, Omaha, Nebraska
“The reason this has become one of the leading groups in the industry is absolutely what they just said. We have such a bond with the majority of our core vendors, and we have the ability to talk through any situation that comes at us. They are going to listen to us in a much different way than when we stand on our own. That is a huge thing that few groups actually have. The other thing is the camaraderie or the brotherhood and the groupthink and the sharing of ideas-that’s what makes us strong.
“We are looking at getting into a different category [cabinets]. I reached out to two members today and asked if I could come visit their stores and see how they do it, because they are already in this business. They are like, ‘Come. I’ll open the books. You’ll see everything you need to see.’ That’s the strength of this group.”
Macco’s Floor Covering Center, Green Bay, Wisconsin
“It’s the networking of like-minded people. The common thread-and it runs through every member of the NFA-is we are all passionately independent. At the same time, we come together as a group and meet common goals, share ideas and work together. Our size makes us more important to the vendors.”
Kelly Taylor, owner
Ambassador Flooring, Chesterfield, Missouri
“Those pain points-whatever you have in your own city-you think are so unique and no one else has them. Then an email comes out: Hey, I have this issue with X, Y and Z. It reassures you that you are on the right path and that you are not all alone.”
As the industry evolves, retailers are looking for ways to hold business and margins in flooring, as well as looking at new categories to boost their business. It’s getting tougher, they say, for a variety of reasons, including finding qualified labor.
For Ambassador Flooring, for example, WPC products have helped tremendously. “We supply material and installation,” Taylor says. “On the install side, it’s helped the bottom line tremendously.” WPC’s ease of installation is an advantage, and it’s driving change for the industry. “One of our focuses as a company is to look for products that are easier to install,” Taylor says. “We continue to go in that direction.”
Others echo his comments. One of the key problems retailers face today is labor-qualified labor. “Younger people don’t seem that interested in becoming installers,” Contract Furnishings Mart’s Bechtold says. Others agree and say that carpet installation faces an even greater challenge. “Hard surface is perceived more as a trade,” says Macco’s Walters, “so it will be easier to attract people.” He believes the answer will lie not in the traditional path of finding and training carpet installers but in technology.
Flooring 101’s Newton adds that an additional challenge lies in the fact that carpet installers today have much smaller jobs. As carpet has lost share to hard surface, installers make less money and have to do multiple jobs in a day. “You are looking at 50 to 60 yard jobs,” Newton says. “For an installer to make enough money, he has to do multiple jobs.” That doesn’t lend itself to great customer service.
The labor problem just isn’t an issue on the installation side. “It’s on the employee side, too,” Snedeker says. “Growing and grooming sales staff is a challenge.”
Even for large retailers, getting customers in the store is also an issue, as is fighting online shopping. As retailers mature in their businesses, they turn to other product categories to help grow sales and margins, and even to survive. “In my opinion, if you’re not looking for other opportunities, you’re in trouble,” Snedeker says. To that end, Nebraska Furniture Mart is looking at getting into a new category: cabinets.
“In the flooring department, we’re taking a product you used to trade out every seven to 12 years [carpet], and we’re converting a large percentage of our business to a product that trades out every 20 to 25 years [hard surface],” Snedeker says. “We’re putting ourselves out of business, and we don’t even know it. As an industry, we have to find some way to stay relevant ten years from now.”
He reached out to members who are already in that business to gain insight. One of those is Jon Pierce, general manager of Pierce Flooring and Design in Billings, Montana. Pierce got into the cabinet business about three years ago when a neighboring cabinet firm went out of business. The company was able to keep the sales staff, Pierce notes, which was an advantage because the cabinet business is more complex than flooring. Still, it’s a good complementary business.
“The margins are a little lower, but the jobs are high dollar,” says Pierce. Orders of $60,000 to $70,000 are not uncommon. “People who are getting cabinets often need flooring and vice versa.” What’s important is having the right lines, the right relationships and the talent. He adds, “We do not let our flooring staff sell cabinets or our cabinet staff sell flooring. They partner.”
Pierce expressed interest in Dal-Tile’s countertop division. The company has partnered with Sage Fabricating, to handle logistics. That dovetails nicely with Pierce’s cabinet business. “That perked our interest,” he notes.
Some groups seek to get as many members and vendors as possible. The NFA takes a different approach, limiting the size of the members and the vendors it allows to participate. The ability to get everyone around a table is one of the limiting factors in where the group chooses to meet, as well as the decision to add new members.
Membership in the NFA is not for everyone. The group looks at volume, relevance in a market and a lot of other attributes. And there is a strict policy that one no-vote means a potential does not get in. Membership has held right in the low 40s for some time.
The group lost one member in the past year, Fitz Flooring in Canada, which closed its doors. But beyond that, the number has stayed fairly steady. The newest members, according to Browning, are Sterling Carpet and Flooring in Anaheim, California and The Floor Store in Richmond, California.
“There is no advantage in the NFA adding a bunch of members,” Browning tells Floor Focus. “We pass 100% of our rebates back to the membership.” The administrative cost of adding members would cost the organization, she notes.
The NFA board agrees. “I think the general consensus is that we are probably about there as far as numbers of members go,” Snedeker says. “What it’s really about now is what the member can offer us,” he says.
“How much bigger can the table get, and how much more important are we going to become to the mills?” Bechtold asks. “It’s all about pulling your weight and contributing.” Close relationships with vendors is very important to the group, which has orchestrated some key programs with vendors like Armstrong, Shaw Industries, Invista, US Floors and many others. While not a typical buying group, the NFA nonetheless brings great volume to the table when establishing vendor programs.
Likewise, the board believes that the number of core vendors is just right at 26. “We will not be bigger than 26 tables,” Snedeker says. Member-vendor meeting day runs from 8:00 a.m. to 5:30 p.m., with each session lasting 18 minutes. There are two breaks and one lunch break.
However, the group entertains about 40 specialty vendors once a year at a meeting in Las Vegas around Surfaces. That’s the opportunity to vet new companies and product offerings. “It’s potentially an incubator for the next core vendor,” Walters says. Members say they find two to three new vendors a year from that group.
NFA MEETING NEWS
While the NFA membership meeting is closed to the media, members report that topics of note included presentations from Google and a discussion of Yelp.
McDonnell tells Floor Focus he thought the member meeting offered a lot of good information. “There was a nice presentation from Google about how people are using the Internet and the future of Internet marketing. We had a really good group discussion about the pitfalls advantages and disadvantages of Yelp, which I enjoyed immensely.”
According to McDonnell, he and a lot of members feel that Yelp ratings are weighted towards those that advertise with them. In a show of hands, McDonnell said only about four members were pleased with their Yelp rankings. Those same four also advertise. “Unless someone is part of the Yelp community, their reviews don’t get the same weight. Even if a customer goes on and gives us a five out of five, the review won’t show up. The thing that makes it unfair is that it’s inaccurate.”
Roberts was impressed by best practices presentations. “That part of our meeting over the last few years has improved significantly,” he says. “People are driven to work hard at coming up with something worthwhile.”
In addition to the Google presentation, Snedeker said Jeff Fenwick, Tarkett North America’s president and COO, also spoke about the company’s global direction and opportunities for partnership. “We are trying to move the needle with Tarkett,” Snedeker says.
According to Snedeker, the group also extended a finance program with Shaw Industries that both he and Roberts report has grown tremendously in the past few years. “That remains a good thing for the group,” Roberts says. “And we are moving forward with that.” According to Snedeker, they added three to four new members in just the last week and now over half the group participates.
Over the course of three days, members met with the 26 core vendors. They viewed new products launched since Surfaces, reviewed products and discussed group-specific programs and deals created just for the membership.
Roberts notes that vendor relationships remain strong. “Armstrong has reengaged with us in a positive way,” he says, and has made some aggressive efforts to bring new products, like Woodland Relics, to the table. “That was good looking and interesting,” Roberts says. The Coretec product from US Floors, in a display system created exclusively for the NFA, is also a big deal, Roberts adds.
In general, WPC products are coming on strong, with almost every hard surface manufacturer, and even some soft surface manufacturers, in the fray. “WPC products are going bonkers in my market,” Akin says. McDonnell agreed, but hopes that the proliferation of products doesn’t start a drive to lower price and lower quality.
As noted by Macco’s Walters, WPC products are taking share from wood. Roberts believes they are taking share from tile, laminate and wood, adding, “Not at the high end, but at the midrange, there’s no question in my mind.”
One trend Roberts points out is a move back to producing products in the U.S. “A lot of manufacturing is coming back to the States,” he notes. “That’s interesting. It’s also important, because that’s where retail is going.”
Invista brought several incentive offers to NFA members, many of which are strong Stainmaster dealers. The spotlight was on the company’s new Living Well product. Living Well carpets feature a topical chemistry that helps fibers release allergens more easily than untreated carpet, and by vacuuming, which consumers are already doing. Product is currently available in sample sets from Shaw Industries and Dixie Home.
Mannington’s Adura Max is a WPC product that adds a closed-cell polyethylene foam pad and carries the highest ITC rating for sound so far. It comes in a 12”x24” format and 12 SKUs.
MS International grew its business 18% in 2016, according to Manny Llerena, director of retail sales. He expects the company to break the $1 billion sales mark in 2017. Wall tile is growing, Llerena told NFA members, and the coordination of floor and wall is becoming more important.
Armstrong is launching Rigid Core Elements, a rigid LVT with a more aggressive price point for the property management market. And Woodland Relics is a new hardwood product that features three widths, three species and multiple textures in the same box.
Shaw’s Hard Surface division is launching a new rigid core LVT product, All American. According to Drew Hash, vice president of hardwood, it’s a continued evolution for the vinyl category, which addresses subfloor and dimensional stability issues.
US Floors, originator of the WPC category, continues to add to the Coretec display developed exclusively for the NFA. “We want to protect the category from lower pricing. It’s better to give the consumer a premium product,” says Piet Dossche, CEO. US Floors, which was purchased last year by Shaw Industries, had the greatest growth in 2016 with the organization, according to the NFA’s executive director, Lisa Browning.