Tuesday, December 29, 2009

Find Out What You Don't Know About Importing Before the Ship Sails

I love Yogi Berra-isms. If he didn't say this he should have: "You don’t know what you don’t know.” While this thought might seem deceptively obvious, it takes most of us decades of living before we realize the truth of this. When it comes to importing though, it's best to find out what you don't know before the ship sails.

Importing can be extremely profitable if you understand how to avoid the pitfalls and know how to structure the deal to your best advantage. It is definitely a tool to consider but not one to be used without preparation.

It sounds so easy to match up two parties when one is saying “I want to sell” and the other “I want to buy." But factor in a foreign laws, currency fluctuations, cultural, language and business differences, import regulations, ocean transports, product variances and dispute resolution then you see that entering those international waters can be risky.

I began importing floor covering in 1988 and over the years I’ve learned a lot…sometimes the hard way. Today some of the most common questions I am asked include:

What are the costs of importing?

• When does title pass and when does the risk of loss become mine?

• What are the best financing options and terms for importing?

• What recourse do I have with a supplier that is 8,000 miles away and has already exercised my Letter of Credit but his product does not meet my expectations?

To answer these questions and more in one venue the Floor Covering Institute put together a panel of trade experts to discuss the basics of importing at Surfaces 2010 in Las Vegas. I will moderate the panel as we present and discuss ways to avoid potential problems when importing. We'll cover requirements important to both American buyers wanting to procure product abroad and foreign manufacturers wishing to export to the U.S.

The panel of trade experts include Scott Kaiser, Vice President of Bank of America-Merrill Lynch’s Global Trade & Supply Chain Solutions; David R. Stepp, Esq., general partner of Bryan Cave LLP, and Craig Vigliotta, General Manager of BlueLinx Import Distribution. Together we will teach you ways to protect yourself, make the right financing choices, the process of gaining entry through customs, the costs and much more.

One of the most often asked questions is: “When does title and risk pass to me?" The short answer is it depends upon how you structure the deal, FAS, FOB, or CIF, for example. Those are common international terms for importing that define when title and risk pass to you. We’ll explain the differences.
Importing CIF slideIf importing is something you want to learn more about join us at Surfaces, Wednesday, February 3rd at noon for “Avoiding Landmines in Flooring Imports.” If you are interested, log on to the Surfaces Registration Page where you can register for the first time or edit your existing registration to add education seminars. I hope to see you there!

What’s so great about this blog site is that it provides a great venue for hearing your concerns and questions ahead of time. If you send me your comments and questions here I’ll address them and they will surely make the seminar even more valuable.



Tuesday, December 22, 2009

Holiday Reading: Flooring Data,Trends and Consumer Behavior

Susan NegleyFor those of you looking for some good flooring industry statistics and trends to curl up with by the holiday fire - and who wouldn't be? - here are a few of the latest options, plus some great reading on retail and consumer trends, and your core customer - women.

First, an update - Catalina's 2009 Report on Wood Flooring is now ready for release. Stuart Hirshhorn gave us a sneak peek into a couple of those wood statistics in his latest post "Better Picture of Wood Flooring Imports Results from HTS Changes", published here December 10th. At the time that post was published his latest research on wood flooring was not complete but it's ready now. Stuart says the 2009 wood report concludes that wood flooring sales are expected to recover in 2010 with gains primarily coming in the second half of the year led by the upturn in residential remodeling and replacements. In contrast, the nonresidential market is expected to continue to decline over the next year.

Catalina's latest quarterly update which includes the 2010 forecast will be ready in a week or so and Stuart's next post on the Floor Covering Institute blog site in early January will be based on that research.

Floor FFloor Focus Dec 2009ocus's December issue contains 2009: The Year in Review - a must read. If you haven't already read the review of the commercial market published in the June issue of Floor Focus Magazine you should pull it out of your "saving to read pile" or you can read it on line. (I know, I know, but sometimes we just don't have time to read everything; that's why I'm pointing it out now). Their review is clear, concise and covers a lot of territory including a good discussion of the health care segment and why it's changing.

For a sobering look at why the commercial market will have trouble recovering, and may have even darker days ahead, go back and read Jim Gould's blog post on this site published November 19, 2009, The Commercial Floor Covering Forecast - Another Storm is Brewing.

If you National Floor Trends Nov 2009are interested in reading about your core consumer - women - then check out the National Floor Trend's November issue and read "WFCA Consumer Study: Understanding the Female Floor Consumer."

Don't forget about our resident expert on the female consumer, Christine Whittemore, who is a noted author, lecturer and instructor on this topic. Her blog site, Flooring the Consumer, contains some great insight, in particular check out a recent post, Women Centric Retailing.
Floor Covering Weekly Dec 14 2009
Floor Covering Weekly's state of the industry issue was published last week. They report that according to the U.S. Department of Commerce, 2009 floor covering sales are projected to be $16.8 billion. They were $21.6 billion in 2007. When things contract this much we have to look outside of our industry at a bigger picture that includes consumer trends - not just in the floor covering industry - but in general....how consumers are shopping, where they are shopping and what they are thinking.

That's why I recommend you put Retailing 2015: New Frontiers (Price Waterhouse Coopers and TNS Retail Forward) on your reading list. While this overview is two years old, it is relevant, not so long you'll fall asleep while reading it, and it will help you to think more broadly about what retailing in the future will look like and why changes to the conventional approach to retail have to take place. Changing demographics, stronger focus on lifestyles, and the recession -these are just a few factors affecting how consumers will shop. Some of these changes might be a bit surprising. Here are just a few things they suggest will happen:

  • The 80/20 rule will be broken; the "best selling" 20% will represent a decreasing share of sales.
  • Retailers will define themselves by the customers they serve rather than the products they sell.
  • Penetration of private brands and manufacturer exclusives will explode across virtually all categories as retailers require differentiation. Jim Gould wrote about the importance of differentiation in his post Branding to Create Profit Opportunity.
  • The Y generation will represent a challenge to traditional retailing as they are more likely to be multi-channel shoppers. Stuart Hirschhorn addressed this issue in his recent post Floor Covering Trends Target Generation Y.
  • For growth retailers will need to seek new opportunities in new consumer segments and new categories - perhaps expanding beyond flooring to include other products that compliment flooring. A good example of that is StarNet's new maintenance program that Jim Gould talks about on Talk Floor; you can listen here.
  • To satisfy customer needs, retailers will need to incorporate services and experience into their concepts. Christine Whittemore will be the first to point out the importance of the "shopping experience." Check out her post: Floor Retailers....Evolving Your Digital Retail Experience as well as her blog site Flooring the Consumer where the importance of creating a positive retail experience is a core topic.

Also on your reading list should be Floor Covering News' The Floor Covering News MastheadGreen Guide edition November 9/16 2009. This is a supplement to and separate publication from Floor Covering News magazine. You might also like reading their article, Carpet State of the Industry - Five Year History.

There is more to recommend but this ought to keep you statisfied between now and the new year! We are always on the lookout for a good read and I would be happy to receive your recommendations.

Thank you for reading here....


Wednesday, December 16, 2009

Domotex Offers Tours of German DIY Stores

Domotex Hannover LogoNorth American attendees at the Domotex Hannover tradeshow January 16-19, 2010 will have the opportunity to get a first-hand look at some of Europe’s largest DIY retailers such as OBI, Hornbach, and Toom during specially organized “field trips” to stores located near the fair. These giant retailers play a significant role in the floor covering distribution channel throughout much of Europe.

Susan NegleyTo take advantage of this unique opportunity you must be a member of the Domotex North American VIP Delegation. What’s a VIP delegation you ask? It’s basically a fancy name for a FREE package of perks available to any attendees coming from North America. It came about when Jim Gould became an advisor to Domotex. After attending for 20 years he knew he could improve the experience for North American visitors. OBI store exterior

In its second year, the delegation is a proven hit - and why wouldn't it be? - all you have to do is email us at info@floorcoveringinstitute.com - let us know you are going to Domotex and we'll make sure you are eligible for the perks at no charge. Why not make it easy on yourself?

Those VIP Perks include:
  • Pre-registration to the show - no standing in lines
  • Free Admission tickets to the show (value $33 per day)
  • Free Show Directory (value $25)
  • Assistance with air reservations
  • Negotiated hotel rates and room block
  • Free local van, tram or train from hotel to the fairgrounds
  • Free access to quiet VIP meeting area
  • Appointment with US Department of Commerce Trade Specialists
  • Help scheduling appointments with key potential vendors or customers
  • Answers to any questions you have about Domotex, Hannover or the European floor covering market, and
  • Visits to DIY stores in the Hannover area on specially organized trips.
After 20 years of attending Domotex, Jim first visited DIY stores on a fact finding mission with a manufacturer who had hired the Floor Covering Institute to study the European ceramic channel. He found the tour so helpful he wanted to share the experience with others.
Here's what he says about his first DIY tour....

Jim Gould, President Floor Covering Institute"In just a couple of hours I was able to see several European giants, some of which give Home Depot and Lowes a run for their money. The experience was eye opening. I could not believe that it had taken me so many years to take advantage of the my travels to Hannover to witness first-hand the German retail floor covering market...I thought this tour was so worthwhile that I asked Domotex to organize a similar opportunity for attendees of our North American VIP delegation."

You can read more about the Domotex Hannover fair, retail tours and the VIP delegation at the Domotex blog site where Jim posts regularly. These posts, Join DOMOTEX VIP North American Delegation & Make The Most of Your Visit, and German DIY Tour Available to north American VIP Delegation will answer most of your questions about the delegation and the tours.

A little more about those European DIY giants....
Europe's floor covering channel differs from the U.S. in several respects. Perhaps one of clearest differences is that ceramic tile is considered a building product and only about 12% of ceramic tile is sold through specialty stores. Roughly 77% of all ceramic sales flow through the wholesale (50%) and DIY(27%) channels. DIY stores play an important part in Europe's floor covering markets and if numbers mean anything, consider that there are more than 4,200 DIY centers in Germany alone. Here are three stores that could be on the Hannover tour.

Hornbach store exteriorHornbach operates 129 large DIY centers across Europe, 92 of which are in Germany. It posted a 5.1% increase in sales reaching € 2.75 billion in 2008/2009 in Europe with €1.507 billion coming from their German local market. The company is partially owned by Kingfisher, Europe’s largest DIY retailer. Hornbach caters to the professional and project customers. Average store size is more than 11, square meters.

OBI store interior
OBI is Germany’s number one DIY retailer operating more than 330 stores in Germany. OBI caters to DIY and semi-professional consumers in stores that are generally larger than 10,000 square meters. OBI's operates an additional 190 stores in Central and Eastern European countries. Total sales in FY 2007/2008 were € 5.8 billion.

Toom store exterior Toom is the third largest German DIY retail group with 325 stores that recorded € 1.8 billion in sales in 2008. Its concept combines classic DIY offerings with services and consulting expertise of trade contractors and interior designers. Sales areas on average are 6,000 square meters.

The same type of tour will be available at the Domotex asia CHINFLOORshow March 23-25, 2010.Domotex Asia Logo

The Chinese floor covering retail market is entirely different from Europe's - and North America's for that matter - but more about that another time.

If you want to know more about either the Domotex Asia show or Domotex Hannover just send us an email at info@floorcoveringinstitute.com.

Thanks for reading!


Tuesday, December 15, 2009

Sources of Flooring Inspiration & Innovation

Christine B. Whittemore

What are your sources of Flooring Inspiration & Innovation?

Are they local and global? Are they from within or beyond flooring?

In The US, The World & The Floor Covering Industry, Jim Gould explained why he considers it important to go to Domotex for product inspiration and to better understand global sourcing implications.

Flooring is global, although it executes at a local or regional level, as David Wootton reminded us in Flooring May be Global but the Markets are Local. We need awareness of both dimensions.

In my Wear-Dated upholstery fabric days, we successfully established businesses in Canada and Mexico - that despite our business being primarily US based. We ran a trial program in the UK and explored doing business in Germany, Scandinavia, and Brazil. We did so collaborating with customers. As locally focused as our business was, global mattered and we attended shows like Heimtextil and Decosit for inspiration. That in addition to High Point and Tuppelo.

I expected similar global/local dynamics when I entered the flooring world. Imagine my surprise discovering how local and US focused carpet was -- despite that a sophisticated, globally influenced consumer purchases carpet, flooring and other home related products. One who pays attention to fashion, design, and color trends. And, yet, I'm told repeatedly that she only wants to buy beige.

Are we underestimating the sophistication of the flooring consumer? Or, are other industries completely off-base?

Target successfully introduced design to the mass discount market.

Look at how paint companies have transformed the interior living experience through color. It positively affects our well being and productivity, too. I remember being astounded in the late 70s/early 80s when my French cousin Dominique invited me to help paint her Parisian apartement. She had chosen different colors for every room, including the WC. Unheard of in the US then. Not so outlandish today. By the way, are you aware of the Benjamin Moore iPhone app? It's great fun.

What about inspiration and innovation for the flooring retail experience? I love to consider ideas from outside the industry. For example, the Apple Retail Experience is now considered the new Nordstrom. And, what about looking to museums to connect with customers?

I recently uncovered an example of Flooring inspiration from the UK. I describe it in Celebrating Carpet: UK's Fun On the Floor With Style. Take a look at the innnovative uses for carpet. What do you think?

Finally, in doing research for the Social Flooring Index, I came across two non-US examples of flooring companies innovating in how they communicate with customers: BuildDirect from Canada and McKay Flooring in the UK. They both use social media marketing tools.

What about you? What are your sources of inspiration and innovation?

~ Christine


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Thursday, December 10, 2009

Better Picture of Wood Flooring Imports Results from HTS Changes

Stuart HirschhornThe 2008 wood flooring import statistics reported by U.S. Customs shows a more complete picture of foreign sourced wood flooring in the U.S. because codes under the Harmonized Tariff Schedule (HTS) have been expanded. The U.S. International Trade Commission (ITC) expanded the HTS codes in response to industry complaints and the data is now more specific with regard to engineered, solid and exotic species in flooring.

U.S. Customs reports that total U.S. wood flooring imports rose to $561 million and 258 million square feet in 2008. Without the new codes, reported imports would have been about 30% less, or $392 million and 184 million square feet.

However, we also know that the sales of these imported products dropped sharply during 2009 reflecting weak residential markets, the declining U.S. dollar, and the competitive advantage of U.S. suppliers offering timely shipments and products that are more likely to pass environmental requirements. This drop mirrors the weakness in the U.S. economy.

2009 Estimates for Wood Flooring Imports

Based on the first nine months of 2009, U.S. wood flooring imports are estimated to decline by 20.9% in dollars and 14.1% in square feet for the entire year. This is in line with the trend in overall U.S. wood flooring sales which is recounted in Catalina Floor Coverings Quarterly Update due out later this month.

On a dollar basis, the decline was sharpest among Brazilian producers. Dollar imports of Brazilian wood flooring dropped by 33.8% over the first nine months of 2009. Meanwhile, Chinese imports showed a decrease of 16.6% and Canadian shipments to the U.S. decreased by 9.2%.These declines are primarily due to the adverse affects of the U.S. economic environment and a weaker U.S. dollar.

Are Purchasers Turning To Domestic Products?

Although the weaker dollar makes foreign made wood flooring more expensive to U.S. purchasers, I also feel that the enactment of the Lacey Act and other environmental requirements have caused U.S. wood flooring purchasers to reconsider domestic suppliers.

I wonder how many of you in the industry are experiencing this and I would appreciate your feedback. If you feel like commenting please make a comment here or email me any time. Your opinion is valuable to me and this blog site is an easy way for us to connect on issues that are analyzed and reported by Catalina Reports.


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Tuesday, December 8, 2009

Branding to Create Profit Opportunity

Jim Gould, President Floor Covering InstituteIn the absence of information, floor covering consumers, and all consumers for that matter, have nothing to base their purchasing decisions on except price. The result is that price becomes the only differentiator.

On a recent trip I noticed a vending machine displaying two, apparently identical, bottles of water. One cost $1.25 and the other $1.50. The $1.25 item was sold out while the $1.50 inventory was still available. A commodity product, by definition, is one that has no differentiation from competitive products in the market place and therefore is sold on price alone.

Try to increase the price above market without differentiation and the result is what you see in this picture.

Very simply, the goal of branding is to communicate product differentiation that creates profit opportunity. A classic example of successful branding is a non-descript solid color golf shirt that may cost $25 but with a little polo pony and rider on it the price jumps to $85. Higher prices can be justified when the consumer perceives that it comes with additional features or benefits they want.

The other morning I had breakfast with the international advertising director for a world renowned beer manufacturer. Off the record, he explained that beer is a commodity and that even the most dedicated brand beer drinker cannot consistently pick their favorite beer in blind taste tests. That is why most beer companies create “lifestyle” ads to differentiate their product in the consumer’s mind.

The flooring industry’s experience with brands has been mixed. Brands linked to well known designers or celebrities, without additional performance differentiation, have generally not fared well. Nylon carpet linked to performance advantages, such as Stainmaster™ and Wear-Dated™, have benefited from that differentiation and justified higher prices. An interesting development is taking place that hopes to differentiate wool carpet fiber in a similar way.

Although there are differences in wool fiber, the consumer today does not know this. They believe that the designation “wool carpet” tells the whole story. The Wool Marketing Enterprise has plans to change that. Through the Just Shorn™ brand they will differentiate and communicate the benefits of their fiber which is certified to contain only the best quality, ecologically grown, strong wool from New Zealand. The marketing program will contain a strong message to differentiate Just Shorn™ from the rest of the wool herd. I am currently advising Just Shorn™ to do that and I believe this branding opportunity is overdue.

Do I think the branding differentiation will help luxury and other discriminating buyers identify better quality carpets that meet their expectations? I think it will and so does CCA Global Partners as they plan to launch the
Just Shorn™ program through their International Design Guild ("IDG") members before Surfaces 2010 in Las Vegas.

Communicating additional benefits through strong brands creates profit opportunity while assuring the customer that they will receive what they want and expect. Good luck to
Just Shorn™ and its launch partners, IDG and the wool carpet manufacturers who are participating in this new branding opportunity.

A few years ago while discussing products and their difference with Carpet One retailers, Paul Johnson, who owns several Carpet One stores in Oklahoma, told me, "Give me a good product with a reasonable price and a great story and I can make a profit." He understood how important differentiating products can be for the retailer and it's more important now than ever. I'd love to receive your comments and hear about your experiences.


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Thursday, December 3, 2009

Flooring Manufacturers and Distributors: "Déjà Vu all over again"

David Wootton

David Wootton asks: Do flooring distributors have a viable future and how did the marriage between distributors and manufacturers get to this point?

Returning from Europe I was catching up with the flooring press when an article by Steve Feldman caught my eye. It was titled “Distributors weigh in on key issues” (FC News Oct12/19 and Oct 26/Nov2nd). Steve had attended the NAFCD annual meeting in Phoenix and his article summarized comments made during a breakout session discussing the manufacturer / distributor relationship. It was a very well written article and if you have not already done so please try and read it.

After I read it I was reminded of the classic Yogi Berra quote “it’s déjà vu all over again." I have been involved in the U.S. flooring industry for 20 years and the majority of issues reported in Steve’s article were issues then and appear still to be so now! Also interesting was 20 years ago the U.S., and California in particular, was in recession and had just launched Operation Desert Storm in the Middle-East.

To put it bluntly the manufacturer / distributor relationship was not always harmonious then and it is not today.

One distributor commented that the manufacturer / distributor relationship is like a marriage and I wholeheartedly agree. Given the fact that the current failure rate of marriages is more than 50% it is not a particularly rosy comparison but nonetheless realistic. Instead of children, money and being faithful think retailers, margins, dual distribution and duplicate product lines and you get the picture.

It seems to me the real question arising from the discussion is this, do flooring distributors have a viable future and how did “the marriage” get to this point?

One word has been very prevalent throughout our industry’s history and the word is LOYALTY. Michael Marks of Indian River Consulting speaking at an earlier NAFCD meeting said a mistake is made when any one party believes that “loyalty is anything more than the lack of a better alternative."

20 years ago the distributor landscape was very different form today. As a result of the trend by manufacturers to sell carpet directly to retailers, distributors were categorized by which brand of vinyl they carried and this was in most cases an exclusive arrangement. With the emergence of hardwood, ceramic and laminate as significant product categories quickly gaining market share we saw the advent of multi-line distributors. They often carried product lines that duplicated each other and created conflict with their manufacturing partners who questioned their LOYALTY.
Michael Marks says...
Over the past 20 years manufacturers have faced their own LOYALTY issues as first the big boxes and then the buying groups. As they began to grow in importance they wanted to negotiate directly with the manufacturers rather than through distributors. Other than some special order programs, distributors enjoy very little business with the big boxes. This leads to conflict with the perception that big boxes secure more favorable arrangements than the independent retailer segment. With buying groups, distributors invariably resent that their margins are determined by the manufacturer and they are faced with a “take it or leave it situation."

Other issues which remain a source of conflict relate fighting for distributor and manufacturer’ rep time, sample and display costs, inventory levels and replenishment, not to mention the increasing impact of the Internet.

I think you can see why Michael Marks statement has relevance to the manufacturer / distributor relationship.

So are the distributors’ issues valid and what does the future hold for them?

  • Distributors will continue to be concerned about large manufacturers bypassing distribution and selling their product and brands directly to retailers.
  • More dual distribution is also a possibility.
  • Others will consolidate through acquisition and some will close.
I believe there will always be opportunities for well run distributors to thrive provided they manage their finances in a professional manner; I also expect to see more distributors launching their own private label programs to protect their interests and reduce reliance on existing branded products.

One thing is for sure; they should not expect or rely on manufacturers to keep them viable. I think we are beginning to get a picture of what “the new normal” is in our industry and as in the jungle it will be the survival of the fittest. I do not foresee any significant improvement before mid 2011 at the earliest so every company should be continually reviewing their plans and cost structure.

Okay I am no longer involved in manufacturing or relationships with distributors, this makes it easier for me to be objective and if you would like to discuss any issues with me feel free to contact me at david@thewoottongroup.com. I would love to hear your views.

Finally and as always if you have, thanks for reading this.


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Tuesday, December 1, 2009

'Tis the Season.... for Floor Covering Shows

Jim Gould, President Floor Covering Institute"'Tis the season" as they say... but I'm talking about floor covering shows. The three largest floor covering trade shows in the world are coming up over the next three months.

Whether you are a seasoned attendee or you have never attended, I highly recommend that you consider going to at least one of these shows. I go to all of them every year. They play a key role in keeping abreast of product, trends and people and inevitably provide inspiration for a host of ideas, not to mention an important opportunity to discuss important issues from a global perspective.

Floor covering is a global industry and all of your local markets are influenced by what can be seen and shared at these shows.

The shows are not really interchangeable. In other words, even though they are all about flooring, Surfaces isn't like Domotex and Domotex Asia isn't like Domotex Europe. But each one provides a unique opportunity to improve your knowledge of product and trends as well as increase your network base, expand your perspectives and find new opportunities.

Here is a review of the top three.


Domotex Hannover logo

Domotex Hannover - January 16-19, 2010
Hannover, Germany

This is the largest floor covering show in the world with 1.400 exhibitors from around the world showing every conceivable type of product, many of which have never been seen in the U.S. before, mainly because there are many companies who do not know how or have not yet decided to enter the U.S. market. A good example is Pergo - this is where I first saw Pergo back in the early 1990s.

In addition to an indescribable amount of products, services and tools to check out there are many other opportunities available during the show. For example since I am an advisor to Domotex Hannover, this year I will organize local visits to retail stores around Hannover so you can better understand how flooring reaches consumers in this market. As David Wootton pointed out in his post Flooring May be Global but the Markets are Local, this is important information to know about international markets.

For people interested in expanding their business into Europe we've also arranged for Catherine Mayer of the U.S. Commercial Service to set up pre-arranged meetings with potential partners in Germany, or you can meet with Catherine herself to discuss your needs.

The size of the show is immense and covers 13 halls. Last year they had 1,400 exhibitors and 38,00o visitors. Domotex Hannover maintains an active blog site - to which I contribute - with a lot of very good information, even travel tips.


Surfaces logo

- February 2-4, 2010
Las Vegas, Nevada

Surfaces is of course the U.S. floor covering show and many of you attend this important event each year to see the latest products, services, tools and technologies. Primarily populated by U.S. flooring manufacturers there is still a good showing of foreign manufacturers who exhibit, along with a few distributors and associations. It is a very important way to see trends in the U.S. market and keep in touch with people in the industry. The show is attended by retailers, distributors, architects, designers, installers and manufacturers; it's a valuable networking tool.

Surfaces is well known for its quality education program and this year is no different. Whatever your topic of interest you'll probably find it available during the education seminars that run daily throughout the show. This year there are over 40 sessions. Four members of the Floor Covering Institute consulting team will be among those presenting. You can check out our schedule and topics here.

Surfaces show last year was about 370,000 square feet in physical size and was attended by approximately 24,000 visitors and 700 exhibitors. You can register here and discounted admission is available now.


Domotex asia/CHINAFLOOR - March 23-25, 2010

This event, the largest in Asia, is a sister even to Domotex Hannover, and is by far the best way to introduce yourself to the Asian market, source products and learn about the rapidly growing opportunities for export to China. Yes, I did say exports to China. You read more about why China may be a good export opportunity by reading China's Economy and Construction Boom Create Huge Floor Covering Potential

I go to this event every year and I always learn new things, see new products and meet new people that add immeasurably to my knowledge base. For the last three years Domotex Asia has held the Sino-US-Europe World Flooring Summit simultaneously with the exhibition where representatives of world-renowned flooring associations and companies hold in-depth discussions about critical topics of the day. Last year one of those hot topics was the Lacey Act which prompted me to write the research article Continuing Wood Trade Under the Lacey Act Amendments. This year the summit has been renamed to the World Flooring Forum which more aptly acknowledges the global complexities of the issues affecting every floor covering market and company today - topics such as sustainability and economics.

This is a very large show that will take some time to see. Last year Domotex asia/CHINAFLOOR covered 500,000 square feet, had nearly 1.000 exhibitors from 38 countries and was attended by approximately 37,000 visitors. The U.S. is the second largest non-Asian exhibiting country and I know Armstrong will be there this year.

Registration for visitors is free through December 31st and general registration runs through March 22nd. Exhibitors and visitors alike can find more information at the Domotex asia website but if you need more help shoot me an email and I'll direct you to the right person.

If you have trouble making a choice or just want to ask a few questions you can contact me and I'll be happy to answer your questions.



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Tuesday, November 24, 2009

Reality Rains on Optimism for Flooring and Carpet Industry

Chris RameyMy sense is that optimism is in the air for the floor covering industry. Many of my friends and colleagues are hopeful. You’ve read the good news too. The recession is over. More people are preferring carpet. Home sales are up. Life is good!

Not so fast. The numbers don’t support the positive vibes. Perhaps you read that there are fewer houses in inventory to be sold and that home sales are up. But the worst has yet to come; there are still more than three times the current number of foreclosures still in pre-foreclosure. Furthermore, industry pundits tell us that 2010 and 2011 will see great numbers of foreclosures too. The impact on the housing market is immense. The flooring industry is unlikely to emerge from the protracted recession without an improved housing sector.

Then there is retail replacement and pent-up demand. Maybe, but maybe not. Watch the Consumer Confidence Index which continues to bump-along the bottom. Furthermore, the longer a customer keeps her carpet the more likely she is to be offended by it, and will choose a hard surface when she replaces it. Considering the slowdown, there are millions of customers with carpet that has outlived its useful life. And every day, they swear at it and tell themselves, “I can’t wait until I can replace this gross carpet with….” To all those naysayers, the customer does not believe it’s her fault that her carpet has worn out.

Then there’s that pesky research issue. Ed Kelly, president of American Express Publishing, recently distributed a letter quoting Harrison Group’s research on the affluent in which he says that holiday sales will be off 15% from last year’s very poor numbers. American Affluence Research Center recently published similarly almost as negative news. Clearly, the affluent consumer is still sitting on the sidelines in comparison to 2007.

New construction and housing (and all that manifests due to it) have an immense impact on the flooring industry. And possibly worse, affluent consumers who are responsible for 50% of the total retail dollars spent in America aren’t interested. My suggestion to those in the industry; enjoy your current customer and euphoria, but don’t advertise for new employees just yet.

Business is now evolving more slowly. The downward spiral may have ceased. However, that doesn’t mean we will see a spike in the near future. The new normal is not kind to businesses; particularly those connected to the home. You have to adapt in order to survive. Neither blind optimism nor capitulation is a good choice. As an expert in retail and service businesses I often consult with companies trying to survive the present even as they prepare for the future. While the recommendations I provide my clients may vary, one thing remains the same – they all benefit from a thorough examination of their business and input of new information and perspectives.

The floor covering industry will survive and the tempestuous times won’t last forever. But first, you need a plan to get through this mess. The good news: 2014 looks solid.

Chris Ramey

Send Chris a message: cpr@affluentinsights.com

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Friday, November 20, 2009

Lacey Act Illegal Wood Investigations Begin

Jim Gould, President Floor Covering Institute
According to news reports the U.S. government has executed its first warrant and seizure of property for illegally logged wood under the timber provisions of the U.S. Lacey Act Amendments. The story broke with this article, Gibson Guitar plant in Nashville raided by feds.

Federal agents served a subpoena on Gibson Guitars on the 18th and according to subsequent reports, they seized guitars, computers, files and wood. Apparently an investigation into trafficking in illegally harvested rosewood and ebony from Madagascar’s rain forests lead to Gibson who uses the wood to embellish their guitars.

Gibson’s CEO issued a press release saying that the company takes the issue of responsible wood sourcing very seriously and makes every effort to ensure that all of its wood comes from certified sources. He sits on the board of the Rain forest Alliance, an NGO that certifies products for their environmental credentials, but has now stepped down pending conclusion of the investigation.

This is the first such action under the new timber provisions of the Lacey Act that we have heard of and it should be a wake-up call for anyone in the timber products industry who may not take this seriously. Whether the company intentionally did anything wrong remains to be seen. But we can assume that business is has been disrupted and the publicity won't be helpful. Let’s hope that they have fully documented their “standard of due care”and can demonstrate the steps they took to comply with the Lacey Act. They could have unknowingly received illegally harvested wood, even if it was certified. If they are absolved of all wrong doing any illegal wood and products that contain it will still be seized.

This brings new urgency to all users of imported wood products – flooring covering, furniture, and a hundred other industries. It’s important that you make sure your company has procedures in place to avoid this kind of thing, or in the very least, that you can show that you took all reasonable steps one could expect of you to avoid illegal wood.

If you haven’t already done so, please go to our website and download our research article on the Lacey Act, Continuing Wood Trade Under the Lacey Act Amendments. The article was also published at this link by National Floor Trends. Many people in the industry have told us that it is essential reading for anyone in the wood flooring business.


Send Jim a message.

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Thursday, November 19, 2009

The Commercial Floor Covering Forecast-Another Storm is Brewing

Jim Gould, President Floor Covering InstituteConsensus is that the residential floor covering hurricane has passed and a slow recovery has started. Meanwhile, a tropical storm in the commercial real estate market is quickly brewing off shore and there is reason to believe it will grow into a storm larger than anyone expected. The floor covering industry needs to take note.

Last week I attended the Star Net Worldwide Fall Meeting where several excellent speakers reviewed the past and looked into the future. It was a mix of good, bad and ugly news and since then I've taken a closer look at what is going on in the commercial real estate market which is why I'm writing to you today.

But first, the good news....the newly released McGraw Hill 2010 Construction Outlook says that overall construction should increase 11% in 2010; a welcome change. They say the residential construction market is on its way back:
  • Single family constructions has already bottomed out. A projected 30% increase in units in 2010 will take us back roughly to the 2008 level. In 2009 new units fell below 600,000; the expected 780,000 units is still well below a sustainable building rate of 1.2 million units per year, but it's moving in the right direction.

  • The multi-family sector took a huge hit in 2009, down 55% in units. It is expected to slowly turn up next year with a 14% increase.
Unfortunately, that is where the good news ends. Here is where the picture can turn bad or even ugly, depending upon what happens with commercial lending and commercial default rates.

Outlook for the Commercial Real Estate Market

In 2009 commercial construction was down 43%. If everything stays on course we could see a 4-5% increase in 2010, according to McGraw Hill, although no substantial recovery is expected until 2011. Health care, military and federal buildings will be the bright spots largely due to the stimulus package. Retail and hospitality construction will continue to decline.

The new and looming threat on the horizon just now being recognized is the growing commercial default rate. The "chatter" is saying "a crisis of unprecedented proportion is approaching" others that it is a "tsunami is unfolding." Here is why.

Currently there are $83 billion in commercial property defaults and that number is expected to double by the end of this year. So far, banks have only foreclosed on about 10% of these loans and are moving slowly to recognize further losses on their books. Commercial property prices have fallen 30-50% from their peak in 2005, wiping out the equity that owners had to finance in the first place.

Between $1.0 and $1.4 trillion in commercial property loans will need to be refinanced over the next few years and more than half of that is expected to be "under water." Zisler Capital Partners, who focus on real estate investments, estimate that building owners will default on more than half of these loans since much of the property will be worth about half of its originating value. If this happens, some banks could end up insolvent as they reduce their holdings.

The Federal Reserve Bank is apparently concerned as evidenced by their recent extension of the TALF (Term Asset-backed Loan Facility) program to the middle of 2010. TALF is designed to increase lending through asset-backed securities. Because of the tight restrictions on this program however, it may not benefit small developers or local commercial property owners with heavy debt loads - the primary customers for most commercial floor covering businesses.

Not trying to scare anyone but it may be time to pull out the commercial grade rain gear and prepare, just in case, for Round Two of a very stormy season.

I am very interested know what others are thinking about this, especially leaders in our industry such as Mohawk, Shaw, Armstrong and Interface, and anyone who is watching this development.


Send Jim a message.

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Tuesday, November 17, 2009

Flooring Retailers, Are You Evolving Your Digital Retail Experience?

Christine B. Whittemore

Flooring Retailers: Take Note! Are You Evolving Your Digital Retail Experience To Take Into Account Gen Y Women Consumers' Greater Use of the Internet?

It's a question that comes out of Stuart Hirschhorn's post about Flooring Trends Target Generation Y and his statement that the generation born between 1974 and 1993 [aged approx. 35 to 16 in 2009] and known as "Generation Y will cause changes on where and how floor coverings are sold."

More specifically, "Generation Y looks to the Internet to retrieve product information, get opinions from social networks, and use electronic connections to communicate .. and make purchases."

Do you agree with Stuart?

I do, and eMarketer does per Younger Women Step to Social Beat, but I think the statement goes beyond just Gen Y.

And, I would hate for you to dismiss it by thinking that Gen Y isn't your customer, or that what you're doing now works just fine. As important as demographics are, here are two reasons for not relying solely on age when you consider your customers:

1. Our core consumer, who makes or influences over 80% of the purchase decisions for the home [and that includes flooring], is a woman. Women tend to follow lifestage behavior patterns more closely than they do demographic patterns. Plenty of Boomer and Gen X women behave Gen Y-like as a result of where they are in life and their technology adoption level.

2. Age cohorts or generations do not exist in a vacuum. What one group does influences the others. Boomers are probably the best example of this; they reinvented the meaning of every lifestage they have gone through so far...

That means that the relevant flooring customer group is larger than Gen Y.

Women consumers matter to the floor covering industry, and Gen Y consumers are particularly Internet savvy.

So, if you meet or exceed the requirements, demands or needs of your most demanding customer group - in this case Gen Y and women - you will also benefit your other customers who may not have articulated the same needs, but have them nonetheless. As it relates to women customers, this is something that American Express discovered while researching business travelers.

Across the board, customers start the shopping process online at a search window. The numbers vary -- from 93% who research product online according to Accenture and 68% who search for information online before visiting a store according to Deloitte [see Ignite Your Consumer-Dealer Sales... where I reference these stats]. If they aren't doing so themselves, they do what my 82 mother does: ask me or my sister to do the search for her.

The truth is that customers are finding out about you elsewhere that via your brick-and-mortar store.

That's not to say that your store isn't important. Quite the opposite as I explain in Higher Calling For Retail Brick-and-Mortar Stores! But, stores - and flooring stores in particular - need to evolve.

They need to evolve to take into account that consumers in general and women consumers in particular are time starved, do not want to be taken advantage of, and want to be educated consumers.

Are you surprised then that consumers are turning to the Internet for product information, to social networks for opinions, perspectives and advice, or to electronic tools to communicate more efficiently?

And, it's not just Gen Y who relies on Amazon-like product reviews or Twitter exchanges or Facebook advice.

So, are you evolving your digital retail experience? And, how are you doing so?

~ Christine

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Thursday, November 12, 2009

Flooring May be Global but the Markets are Local

David WoottonDeclining domestic sales and a weak dollar have some flooring manufacturers considering exporting as a way to take advantage of the global market place. I whole heartedly support this concept but it’s not as simple as shipping a great widget to a new widget market. Although flooring may be global, significant differences in language, consumer preferences, channels, manufacturing standards – just to name a few considerations to avoid costly and time consuming mistakes - make flooring markets very local.

Vive la différence! – Just make sure you understand what la différence is!

Consider the case of a U.S. hardwood flooring manufacturer who decides to pursue new business in Europe:

Language. Whilst the U.S. is a huge geographic area pretty much all of the customers speak the same language. On the European Continent there are around 50 different countries each with its own language or dialect, culture, food, market conditions and preferences in color, design and wood species. The U.S. wood manufacturer will need to find a local partner or hire local employees or agencies to produce appropriate marketing collateral and prepare installation instructions for each carton printed in more than 30 languages.

Consumer preferences. In the U.S. wood flooring is either solid or engineered dictated mainly by the construction of the houses (slab or basement.) Throughout Europe the product of choice is almost entirely engineered longstrip - 3 layers approximately 8 ft long, 5-7” wide, 9/16” thick and installed using the floating method. The only U.S. manufacturers who offer this product are Mohawk (as a result of its acquisition of Columbia Flooring’s Malaysian operation) and Award who produces only small volume for the U.S. domestic market).

Random length is not a concept that European customers understand. They expect every piece in the carton to be the same length. Given the configuration of most U.S. flooring plants this would create a lot of waste and add to the manufacturing cost therefore offsetting some of the exchange rate advantages.

Installation style also differs. In Europe, end joints are in line in every alternate row of flooring laid….a practice frowned upon by U.S. installers and consumers.

Species and face preferences. Whilst Red Oak still accounts for well over half of all domestically manufactured products in the U.S., it is virtually unseen in the European market as consumers do not like the variations in color. They prefer European White Oak which gives a cleaner more uniform face. In the U.S. the majority of face veneers are still rotary peeled Red Oak Rotary Peelwhich gives a somewhat wilder “plywood” grain appearance. Whilst this is very well accepted in the U.S. marketplace, it is disliked in Europe where consumers prefer the sliced veneers Red Oak Slicedthat replicate the look of solid flooring. Ash is preferred to maple, and so on. Exotic species are growing in popularity but environmental concerns and raw material supplies mean these products are largely the domain of Chinese manufacturers today who need to show environmental compliance.

Finish preference. Over 95% of products are finished as natural in Europe; stained products are virtually nonexistent.

First rate quality is a must in the European market and all products are expected to carry the CE mark confirming that the manufacturers and their products conform with mandatory consumer safety, health and environmental requirements.

Taking products to the consumer. Assuming the wood manufacturer is able to produce a product that satisfies new, local markets, the next step is to find a channel to get the product to the consumer. Channels are also different in Europe. There, manufacturers have sophisticated logistics systems and centralized warehouses and deliver directly to and service retailers making the function of traditional distributors largely redundant.

So there we have it and hopefully I have highlighted some types of issues U.S. manufacturers need to consider before “diving” into the global marketplace. My intention is not to scare anyone away, far from it; I believe strongly in global opportunities and I am a champion for those companies pursuing it.

Vive la différence! – Just make sure you understand what la différence is! Look to becoming involved globally but remember the global market is made up of a number of local markets and it is important to know and understand these differences. Identify your target markets and thoroughly research them. The Floor Covering Institute has consultants who can help you and if you want an overview of the European market at close quarters my colleague Jim Gould (jgould@floorcoveringinstitute.com) leads a U.S. delegation in January each year to the Domotex Fair in Germany (DOMOTEX HANNOVER) which gives an insight into all flooring products offered in the European market.

Like it or not we are all part of a global market and no matter how we become involved we need to get involved to survive. Acquisitions, mergers, strategic alliances, private labels, and exporting - all offer opportunities.

I would love to hear your ideas or questions and as always if you have…… thanks for reading this.


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Tuesday, November 10, 2009

Floor Covering Trends Target Generation Y

Stuart HirschhornThe following is based upon Catalina Research's statistical trends and outlook for floor covering which indicate that Generation Y is floor covering's next target.

If your business is to survive the current recession and thrive during the next economic recovery, it's time to set your sites on the Generation Y - those born between 1974 and 1993. Catalina's research shows that as we entered the recession in 2007, it was the younger demographic that was increasing its floor covering spending while their Baby Boomer parents were cutting back on floor covering purchases.

These trends reflect what is considered the lifecycle of purchases. The Baby Boomers (ages 45 to 64 years), numbering 38.0 million strong in 2008, have cut their floor covering spending as their concern about saving for retirement increases or they retire. On the other hand, the 42.7 million members of Generation Y are focusing on forming households, starting families, and purchasing homes and home furnishings. It is Generation Y that is taking advantage of the first time home tax credit and putting a floor under the prices of homes in the lower end of the housing market.

Despite their greater numbers, Generation Y represented only 16.9% of total U.S. household floor covering spending, while Baby Boomers accounted for 40.1%. However, the Boomer’s share is declining, while Generation Y’s share is on the rise. This trend will accelerate over the next decade as the leading edge of Generation Y enters their peak floor covering purchasing years (35 to 44 years) and Boomers begin to enter a period of their lifestyle when household floor covering purchases decline sharply.

The changing of the generations could also contribute to a continuing shift to hard surface flooring. In 2007, Generation Y was more likely to purchase hard surface flooring and area rugs, while Baby Boomers and older generations are more likely to purchase wall-to-wall carpet. This trend indicates that the flooring market could increase its dependence on wood and laminate flooring, vinyl sheet and floor tile, and ceramic tile over the next decade. Currently however, Generation Y may prefer the lower-end lines of these markets, since their incomes are probably lower than their older cohorts.

Generation Y will impact where and how floor covering is sold. This is the first generation to be highly dependent on the Internet as a medium, just as their Baby Boomer parents were the first to experience the impact of television. Generation Y looks to the Internet to retrieve product information, get opinions from social networks, and use electronic connections to communicate with suppliers and make purchases. Manufacturers, distributors, retailers, and installers must utilize the online medium to reach Generation Y as they increase their share of household floor covering purchases. The successful players in the floor covering market will be able to take advantage of these trends and meet the needs of the growing Generation Y, the younger demographic.

If you have a question or observation about Generation Y shoppers buying floor covering please comment here. I'd love to discuss it!