Yes, the recovery is weak…Catalina Research estimates that first half 2011 square foot floor covering sales (shipments minus exports plus imports) could increase less than 1.0% over the first half of 2010. The March 2011 issue of the Catalina Floor Coverings Quarterly Update indicates that U.S. housing demand and nonresidential construction spending is expected to continue to decline in the first half of 2011.
To outpace this sluggish market environment, the flooring industry - manufacturers, distributors, retailers, and installation contractors alike - must work to uncover growing selling opportunities in local markets. Here are three you should examine.
Three Opportunities in Local Flooring Markets
Three bright spots in the U.S. market include the recovery in high-income household spending, and stronger income gains in energy and agricultural producing areas of the country.
The Luxury Market and High End Households
In 2010, homes selling for $1 million or more increased by 18.6% according to DataQuick Information Systems. At the same time, sales of homes priced under $1 million declined by 2.8%. The gain in high-end home sales was sharpest in Los Angeles and San Jose, New York City and Washington, DC. Markets benefited from the surge in Internet social media and entertainment markets, recovery in the financial service industry, and rising Federal government spending. The consumer confidence index for households making more than $50,000 a year hit a nearly three-year high in January 2011, while the index for households earning under $50,000 remains below their spring 2010 highs.
Energy Producing States Show Above Average Income Gains
Energy producing states, such as North Dakota, Oklahoma, Texas, and Wyoming, are another key target. Rising energy costs have resulted in below average unemployment rates and above average income gains in these states.
North Dakota’s economy, for example, is booming due to the discovery and production of the Bakken oil reserve. In contrast to the rest of the country, it is facing a housing shortage and considering no interest housing loans to spur home building there.
A recent analysis of U.S. ceramic tile demand indicates that per capita sales in Texas are 65% above the national average. Above average consumption in Texas is due in part to stronger state income gains, a healthier Texas home building market, and above average performance for the state’s nonresidential construction spending.
Farming States Show Huge Increases in Income
In contrast to rising food costs that may be adversely impacting flooring demand in the Atlantic and Pacific regions, soaring farm incomes in states like Iowa, Kansas, Nebraska, indicate that flooring distributors should strengthen their sales effort in those areas. In fact, U.S. farm proprietor income rose by 53.3% in Q4 2010 over the previous year, while total U.S. personal income rose by only 4.0% in Q4. Your goal should be to get farm area households to use more high-end flooring in remodeling projects as their incomes rise.
Focusing on Local Markets and Local Opportunities
You can access and track all of these trends at the state, city or even the county level by analyzing data on housing permits, housing inventory and existing home sales, nonresidential construction spending, and personal income. Local sales opportunities can also be evaluated by analyzing the number and sales of floor coverings retailers and number of flooring contractors for local markets. Using this data a floor covering manufacturer, distributor, or retailer can estimate sales potential for the new housing, residential remodeling, and commercial markets by type of flooring or by local market area.
Remember, while the national market may be recovering slowly, local markets can be mined for growing sales and profit opportunities. With good data and analysis, you can drill down into local markets to benefit even a single retail location.
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.