The last couple of posts by the Floor Covering Institute have touched on the changing landscape that lies ahead. Jim Gould talked about how post-recession growth often claims more victims than the recession itself and how to make the most of your cash and assets in “Avoiding Cash Traps as the Recession Slows and Business Grows." Stuart Hirschhorn posed the question "Is Hard Surface Flooring Just a Click Away?" which speculated about post-recession consumer spending habits.
In today's post I want to explore if there is a new normal as it pertains to our home owning consumers and how they will treat, more specifically invest in, their largest asset now that the bubble has burst. The flooring industry depends upon the home building and remodeling industries so we need to be aware of how new attitudes might alter both the products and marketing that will appeal to our customers.
In preparing this post, I came across an excellent article I wanted to share with you - “5 Lessons From the Housing Bubble Bust” by Tamara Holmes of Bankrate.com, a leading source of information about mortgage rates and consumer trends.
Her article makes the point, among others, that the length of time our consumers will keep their homes is going to change. They will keep their homes longer. That point alone will surely influence the way consumers approach their floor covering purchases in the future. Here are three of the lessons she thinks consumers should take away from the bursting real estate bubble with my questions of how our industry should respond. What I hope this post will do is generate some thinking and conversation about whether and how we need to change up strategies to take these new goals into account.
Lesson 1: Consumers can no longer count on a home to be worth more than they paid for it when they are ready to sell. Buying and selling homes to trade up over the last decade or more was the old normal. The new normal means longer commitments to their home – and by extension the floor covering purchased for it.
Could this mean fewer turns in flooring or could it mean that homeowners will be more willing to invest in higher quality products?
Lesson 2: Timing the market to make quick equity gains will be impossible. When home prices were skyrocketing, many people bought homes they could barely afford thinking they’d ride the wave of rising equity since the market was on the upswing. Those days are gone. Instead, she says that our homeowners should be taking a long-term approach to real estate and looking for a home that will enhance their life.
Should “enhancing lifestyles” be a greater part of your marketing strategy?
Lesson 3: The days of treating a home like a piggy bank, that is refinancing to take out cash - even for home improvements - is gone.
Should our industry be focusing on new alternative financing opportunities for our consumers?
Post-recession consumers may have different goals when buying floor covering in the future. What I find exciting is that no matter which of these lessons homeowners take on board there is an opportunity for retailers to sell floor covering that meets their needs, and this applies to both new construction and remodeling.
Let me know what you think and as always, if you have, thanks for reading.
David Wootton is President of The Wootton Group, an independent flooring consultancy, and a member of the Floor Covering Institute. He is past CEO of both Columbia Flooring and Harris-Tarkett.