Tuesday, August 2, 2011

Flooring companies must stay aggressive to prosper in the second half

Stuart Hirschhorn
FLOOR COVERING STATISTICAL TRENDS AND OUTLOOK

Weak economic growth, declining consumer confidence, and the daily reports of a possible Federal government shutdown could cause any businessperson to become paralyzed when planning for the future.  However, companies are prospering and increasing their market share - by making acquisitions, offering new products, taking advantage of the growing US commercial market and of international selling opportunities. 

An article in the June 20-26, 2011 edition of Bloomberg Businessweek, “When Companies Buy, Investors Cheer” also made this point.  The article states that a company’s share price outperforms the overall stock market when an acquisition is announced, since shareholders see the purchase of a competitor as a way to boost growth and profits. 

Acquisitions have allowed the leading floor covering manufacturers to increase share.  Shaw-who acquired Anderson, Zickgraf, and Stuart Flooring, and Mohawk-who acquired Dal-tile, Unilin, and Columbia Flooring increased share and became major players in the growing hard surface product lines.  According to the 2011 Catalina Report on Floor Coverings, Shaw and Mohawk combined to capture 42.3% of the total U.S. floor coverings manufacturer supply (shipments plus imports) in 2010, up from 37.6% in 2002.  Mannington and Tarkett increased their share of the resilient flooring market by acquiring rubber flooring manufacturers.  Tarkett could make further inroads in 2011 due to the late 2010 acquisition of Centiva, a luxury resilient flooring manufacturer.

Aggressive companies also gained share by introducing new and innovative products.  Mannington, Tarkett, and other resilient flooring manufacturers stimulated consumer interest in resilient flooring by offering glueless click vinyl planks and fiberglass-backed sheet vinyl flooring.  These products make flooring replacement sales easier and less costly for value-conscious consumers.  These new products contributed to making resilient flooring the leading industry growth sector over the past year.  The June 2011 Catalina Floor Coverings Quarterly Update reports that resilient flooring represented 17.9% of total U.S. floor covering manufacturer square foot sales (shipments minus exports plus imports), up from 17.1% a year earlier.

Carpet manufacturers are expanding their carpet tile lines to take advantage of growing commercial selling opportunities.  Commercial sales are outpacing residential sales since corporate profits are growing at far higher rate than personal incomes.  The growth in carpet tile sales can be seen at Interface, the leading worldwide producer.  Interface dollar sales of carpet tile in the Americas increased by 11.0% in 2010 and by 8.0% in the first quarter of 2011.  The first quarter increase was led by a 24.0% rise in sales to the corporate office market.  Shaw responded to this growth by announcing an expansion their carpet tile plant in Cartersville, Georgia.  Shaw is also opening a carpet tile plant in China.

Companies, however, are also going direct by exporting flooring coverings to consumers in foreign markets.  The Catalina Report’s analysis of U.S. floor covering shipments uncovered an 18.7% increase in US floor coverings export shipments on a square foot basis in 2010.  At the same time, US manufacturer shipments to domestic customers, in square foot, declined by 3.1%.  Square foot US export shipment gains to China, India, Saudi Arabia, and Singapore rose by more than 50.0% in 2010.  Selling opportunities increased sharply in these countries since economic growth in these countries averaged over 8.0% in 2010. This was more than three times the rate of economic growth in the United States. Increased demand for floor covering in China and across Asia is a topic that my colleague Jim Gould has talked about for a long while, on this blog and in other publications.Read The Great Urbanization: Threats and Opportunities for Floor Covering in China and India.

These are just a few of the actions US floor coverings manufacturers, distributors, and retailers are making to survive and prosper.  I appreciate it when readers share what their companies are doing to increase market share in these uncertain times and would love to hear more from you.

Stuart

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.

3 comments:

  1. Hi, I own a Carpet Sunshine Coast business and I stumbled upon your blog while scouting the net for websites related to carpets. Anyway, for those who want to succeed in the commercial carpet business, they should give quality floor coverings at competitive prices, backed up with knowledgeable, helpful staff and great service.

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  2. Scarlet, the question is how do you increase market share from competitors offering competitive prices and providing great service? This requires stategic planning using knowledge about the market, customers, and competitors worldwide.

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  3. Sadly, "quality floor coverings at competitive prices, backed up with knowledgeable, helpful staff and great service" is only the platform for being in business.

    Success requires differentiation. How do you differentiate from your competition?

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