The economic trends and long-term outlook for the flooring industry tell us that if you want to grow your business your strategy must include growing market share.
The 2010 Catalina Report on Floor Coverings indicates that there is a recovery in U.S. floor coverings sales. However, the recovery will be sluggish. Dollar U.S. floor coverings sales are estimated to increase 3.0% during 2010. This growth is being driven by the double-digit increase in existing home sales over the past three quarters. Going forward, however, the gains in existing home sales could level off with the expiration of the homebuyers' tax credit. The builder market will also have a hard time showing significant gains due to the "overhang "of empty and foreclosures homes. Overhang is the term economists use to refer to the number of foreclosed properties that will wind up on the for sale market.
There are about 4.5 million distressed residences in the U.S. today, meaning they are either in foreclosure or owners are several months behind on payments and until that overhang is addressed the housing market won't see an environment that encourages much new home construction. In addition, commercial flooring purchases are still declining, as the adverse affects of the recession are still moving through nonresidential markets. These headwinds will keep the flooring industry growth below long-term industry rates for some time.
Any strategy to grow business must include a goal to increase market share in your target market, whether that be a zip code, a city, a state, a country, or the entire world; increasing your share of your target market will drive growth. These industry leaders increased their share of the US flooring market by developing strategies to outpace industry growth:
• Mohawk and Shaw increased share through acquisitions;
• Home Depot and Lowe’s built extensive retail chains targeting the DIY and BIY markets;
• Lumber Liquidators developed a low cost structure and offered value pricing in wood looks; and
• Interface made inroads in the carpet sector by meeting the needs of the commercial customer.
The most common inquiries made to the Floor Covering Institute come from companies seeking to save or grow their businesses, or to expand markets and market share and we have discussed ways to do this from a couple different perspectives right here on our blog site. Here are a just a few examples:
• Jim Gould has written about developing brands to drive growth in his post “Branding to Create Profit Opportunities”;
• Christine Whittemore discussed how the Internet and social networking could be used to extend your market reach in “Flooring Retailers, Are You Evolving Your Digital Retail Experience?”;
• David Wootton’s post explained how to take advantage of growing global markets in “Flooring May be Global but Markets are Local”.
Of course, there are many strategies; expanding into foreign markets is something that many US manufacturers are considering these days. Regardless of the ultimate path, the first step is to decide if growing your business is right for you now. The next step is to begin conversations with people who are knowledgeable about the options and can help you assess and explore them, and, always base your decisions on sound research and due diligence.
Stuart Hirschhorn is a member of the Floor Covering Institute and Director of Research of Catalina Research, Inc. which provides in-depth market research on the floor covering industry.