Article Number : 1846 |
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| Date | 3/21/2007 9:35:30 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=1846 |
| Abstract | By Steven Feldman DALLAS—Acknowledging a challenging floor covering retail climate, Vinnie Virga, president of Flooring America, and Jim Duff, president of Flooring Canada, diagrammed a path to increased profitability for its 490 members, most of which attended the co-op’s winter convention here... |
| Article | By Steven Feldman DALLAS—Acknowledging a challenging floor covering retail climate, Vinnie Virga, president of Flooring America, and Jim Duff, president of Flooring Canada, diagrammed a path to increased profitability for its 490 members, most of which attended the co-op’s winter convention here. Key components of the plan are advertising—both on a local level and in conjunction with Flooring America’s first-ever national ad campaign—branding initiatives and exclusive member products. “The market is getting tough,” Virga said. “The pie is not going to grow. If we are going to win, we have to take business from other people. Research shows consumers love our message, we have what it takes, so let’s grab that share. The issue is consumers are not hearing our story consistently.” He noted that by not advertising, Flooring America members are leaving money on the table. “In the battle for customer awareness, we need to be top of mind,” he said, adding that when 500 consumers in the market for flooring were asked where they had shopped, 67% mentioned Home Depot and 55% said Lowe’s, but only 20% cited Flooring America. “They are doing all the talking. They spend a lot of money on advertising and have the largest share of voice in the market, both on TV and in print.” In the past, it was believed customers who shopped at home centers were not the same people who frequented flooring specialty stores. But research shows they are indeed the same customer, Virga said. Why? For starters, home centers have improved the service component. Flooring America surveyed 500 customers who purchased flooring from home centers. Surprisingly, 91% said they were satisfied and would likely go back. “That’s very different than a few years ago,” Virga said. That’s why advertising is critical. He said members who invest between 5% and 7% of sales in advertising experience double-digit growth year over year. Deb Binder, vice president of marketing, implored members to tell their story. “Many customers don’t know we are here,” she said. “They say they would rather shop at a Flooring America store than a home center. To be successful, all you have to do is dominate the five-mile radius around your store.” That is accomplished by priming an advertising plan with consistency and frequency, then layering in a promotion schedule, she said. Aside from advertising, retailers can do more to get more than their fair share of the pie. For example: 1. A balanced business consisting of retail, commercial, builder and national accounts. “Running on four tires will provide the best results,” Virga said. “These are the members who are most profitable, because it allows them to have a more stable platform.” 2. Proper merchandising. “Be strong and be smart,” Virga said. “Some retailers lower prices to gain volume. That doesn’t work. There is room to increase gross profit margin using our value pricing program. It works. Look at Empire. Its average gross profit margin is 62.5%.” 3. Educating and improving the people. “Are they as skilled as they can be?” Duff asked. “Are managers leading effectively? Online University is a good starting point. Get them involved; accelerate their success.” With this as a backdrop, Flooring America announced its first foray into national advertising. The campaign consists of three components: private sales, special buydowns and TV spots. The two private sales will be held in May and September. Virga said the average private sale last year brought in $106,000 of business for a minimal investment. Flooring America will be producing direct mail pieces and point-of-purchase kits to support sales. “At the end of the day, the goal is to create national awareness for Flooring America and drive traffic into member stores,” he said. “We know the key to doing it correctly is to do it nationally and locally. It’s a way to take back share from competitors.” Focus on brands Virga told members that Flooring America’s proprietary brands are critical to long-term success. “It allows us to differentiate from our competitors and protect our margins,” he said. To that end, he noted the importance of having the right brand strategy and right stable of products. For example, Flooring America learned some of its brands truly resonated with customers, and a few of its brands did not add value. It also learned customers want to see six or seven brands when they come into its stores. “If they see less, they feel they have to shop around,” Virga said. “They feel like they have not seen a breadth of product.” With the knowledge that consumers shop for value, performance and/or fashion, Flooring America’s strategy is based on signature brands that span every category. But customer research found a gaping hole, a style/fashion brand, so Flooring America developed Design Distinctions, which consists of cutting-edge styles, unique looks and fashion forward products, said Randy McHolm, director of merchandising. “The goal was to put together a soft surface collection of transitional and contemporary products.” The brand offers everything from patterns to LCLs to loops. Virga labeled the line as “chic.” Evan Hackel, senior vice president of groups, CCA Global Partners, also stressed the importance of brands. “The key to making money is differentiating yourself. When you sell the same products as the guy down the street, you can only sell on price. But when you differentiate, you can make the margin you need to run your business.” Aside from brands, Hackel stressed the importance of improving the in-store experience. Flooring America came to the conclusion that retail flooring stores do not understand point-of-purchase materials. “We know from research that customers love to buy things on sale,” he said. In illustration, 73% of auto sales are linked to some type of promotion—sales, rebates, cash discounts, finance offers, etc. “You want the environment of your store to look like you have a promotion going on all the time; you want to convey that this is the perfect time to buy floor covering. In tough times you need to close every customer who walks into the store.” Exclusive products Proprietary products are also a key to the group’s success. In illustration: • Flooring America/Flooring Canada entered into an agreement with Armstrong to launch the Hampton Hills laminate collection. The line offers two new products in nine colors. The five-inch planks are 12mm thick, come with a four-sided bevel and a high gloss furniture finish. “There is an opportunity to make a 50% gross margin on this product,” said Bill Snowden, director of hard surfaces. • Floorcraft Cork, supplied by Global Direct, offers three styles—block, random and linear— for a total of 15 SKUs. According to Jim Gould, chief product officer, the line can offer margins up to 60%. “We think cork is a growing category given the green movement.” • Anderson added six new products in 17 colors into the exclusive Biltmore Collection. All are available at middle to middle-high price points—lower than what they had been offered previously in the Biltmore Collection. Quick hits • A new self claims program was introduced for vinyl and laminate. Members will have the ability to inspect and resolve claims on products sold from Flooring Amercia’s core displays up to either $2,000 or $3,000. Retailers inspect, replace the floor, fill out a form, attach an itemized labor bill and sample, and receive a credit. • A new laminate strategy will be unveiled at summer convention in Cincinnati. According to Randy Gum, vice president of merchandising, CCA Global dilutes its buying power by purchasing from so many suppliers, currently 11 on the laminate side. The new strategy will feature fewer suppliers and two primary product lines, one being a value-oriented Global Direct assortment. “We have to do this so we are more important to the suppliers that remain, and they, in turn, offer value to members,” he said. |