FLOORING: An Industry In Crisis
In The Beginning…
Throughout history various industries have encountered crisis for one reason or another. It is as inexorable as the sun rising in the east and setting in the west, and was generally considered a byproduct of business brought about by its cyclical nature. However, history provides no better example of self-inflicted crisis than the floor covering industry. The snake eats itself.
In order to understand how the flooring industry has arrived at its current state one must examine the cause and affect factors that brought it to this point, so let’s go back to the beginning relative to this point.
Then There Were The ’80s
It is the early eighties and the North American economy is pulling out of a recession. Never before had the oceans that separated the US from the rest of the economic world seemed so small. The US future was colored by third world immigrants who’d pushed salsa ahead of ketchup as the nation’s condiment of choice, and the free love of the sixties had given way to glutinous consumption of the me-too seventies only to have the fiddler come calling for his pay in the eighties.
The eighties heard Silicon Valley start to rumble, watched the birth of the Internet, and saw trade barriers erode to the tides of relaxed trade. Outsourcing and cheap labor became the battle cries for businesses trying to stem the flow of dollars from corporate coffers. If it wasn’t cheap, it couldn’t compete. Banks and Savings and Loans started to fail under the crushing weight of unpaid mortgages that were draining the lifeblood from homeowners succumbing to interest rates of twenty percent or better. If you couldn’t pay your mortgage, there was no sense installing new flooring.
As interest rates started to relax, carpet mills embarked on an enterprising mission to reduce their cost of production in a valiant effort to prop up dismal sales. They decided to do what Monsanto, BASF, and DuPont had been doing for them by incorporating extrusion tower technology into their manufacturing capabilities. In no time at all the ever-industrious mills were churning out carpet faster and cheaper than ever before. This, however, spawned another problem: over capacity.
In short order, mills were virtually bursting at the seams with profit-draining inventory that stuffed their warehouses. Cautious retailers wanted pricing that would coax recession weary consumers back to their stores. The mills responded with significant price slashing. A seemingly affordable cost was proposed by the mills and retailers started guaranteeing a percentage of their floor space to the mills that promised the best pricing. The birth of retailer programs designed to lock up channels of distribution was born. Once again a significant problem was created: predatory pricing.
Retailers sporting signs indicating they were Shaw TrustMark dealers started to sprout like spring dandelions not to mention Peerless Fashion Show Places among many others. The mills had successfully conducted one of the biggest inventory transfers the industry had ever witnessed. Retailers – now shouldered with comparably priced inventory from other mills found no competitive pricing advantage – started to sway under the crushing expense of carrying huge stocks. With no other viable option retailers started to dump carpet into the marketplace on thin margins. Everything associated with the value traditionally found in the purchase of flooring became free in the mind of consumers who played witness to sales tactics proclaiming free pad and free installation. Value had died at the hands of predatory pricing.
Time To Pay The Fiddler
The mid to late eighties saw a remarkable economic rebound. New housing soared, people were once again spending money on home renovations, installers were once again working and all seemed right with the world. The fiddler, however, was in the wings about to ask for his pay.
Installers who managed to weather the economic storm of the early eighties were soon being run off their feet. Wiley installers started putting financial pressure on retailers who’d forgotten how good installations protected their profits. After all, the retailers had become used to making their money on the buy end of the equation – “sell it to me cheap or I’ll not buy.” The installation community started to migrate toward retailers who paid the best. There was more work than installers. Although installers managed to see prices start to raise, they were not prepared for what was about to happen—anyone who showed signs of sentient life soon became an installer.
The building boon and a strong real-estate market required more flooring mechanics than at any other time in history. Hold-times of one to two hours were common for retailers trying to order from mills that simply could not keep up with the demand. Back orders were as commonplace as repairs for untrained installers. Mills and retailers alike discovered that poor installation was costing them millions upon millions of dollars. Something had to be done but it would be too late for many of the older installers whose bodies could no longer take the punishment of their vocation. Standards, mill install-techs, and inspectors were born. Retailers would suggest some of these entities were bastard children spawned of the flooring industry. I’ll not argue the point.
There IS a Crisis
As the eighties gave way to the nineties it became evident that consumer dissatisfaction with the purchase of carpet had taken its toll. Alternative floor coverings started to gain significant market-share against the traditionally sacred and stable carpet market. An examination of the industry came from the most unlikely of candidates, Orcon Corporation, an OEM flooring-sundries manufacturer in California. An industry report was generated from the data they collected titled, “An Industry in Crisis“. Here comes that fiddler again.
The data was cold and unwavering in its indictment of those who’d brought the flooring industry to its knees (pun intended.) The data showed that carpet was being shipped, without conscience, with more flaws than ever before. (During a 1990s mill tour I witnessed a QA person reading a book on a catwalk while the carpet he was to inspect raced below him.) Quality had suffered because of massive demand. Moreover, the mills had not come to the conclusion that they were manufacturing an installed product, that installation was critical to end user satisfaction. Mills were doing little to promote installation education.
The retailers did not escape without blame when it was discovered that eighty percent of customers who’d purchased carpet had been under sold. It was also discovered that many products were sold for functions they could not perform, thus unrealistic customer expectations had to be squarely shouldered by the retail community. Finally, this data gem was uncovered: Despite the fact retailers were not paying good installers accordingly, fifty percent of these retailers confessed to putting off difficult installations so that their good installers could install them. (In effect, poor installers were rewarded with glue-down while their exceptional counterparts were given open-end stairs in Berber for no better money.)
Greed Provides Hope
The report showed there had been a cleansing in the industry, a battle of attrition had been waged, and where there had once been more than one hundred mills, four or five super mills now existed. These remaining mills had purchased smaller mills that could not compete – the snake eats itself. The smaller mills that managed to stay afloat, settled on servicing niche markets. Gutting of the industry and its associated value was now complete. Mills, retailers, installers, and consumers alike had suffered tremendously. If one were to be politically correct, they might say that in their effort (mills and retailers) to remain financially viable (protect profits) there is hope for the installation community. Allow me to say it for you, “Greed provides hope.”
During the self-inflicted calamities of the eighties and nineties the flooring industry saw a massive exodus of installers who took their knowledge with them (at one point during the early nineties the mean age of ceramic installers in Michigan was 58-years of age). Manufacturers also suffered huge losses. Today the sophistication and skill required to install new flooring systems and products is increasing while the level of residual knowledge within the installation community decreases. Manufacturers know this, and at no time in the history of the flooring industry have more manufacturing dollars been given to help educate installers who in turn keep retail and manufacturer profits from being eaten by claims.
For now it looks as though the mills and retailers are working diligently to curb losses through education. Now, if we could just get the manufacturers to set standards for themselves regarding a minimum standard of quality.
99-cent laminates anyone?
This article was originally published July 2006. If you would like to discuss this article, or any of the others you have found here at The Floor Pro Community, please join us in the Articles Discussion Forum or comment below. If you are not yet a member, we invite you to register now, it’s free and gives you the opportunity to enjoy all the features of the site.