Article Number : 4366 |
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| Date | 4/8/2009 9:46:33 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=4366 |
| Abstract | By Steven Feldman DALLAS—In an environment that is claiming the very existence of floor covering retailers almost daily, one well-respected national chain is seeing the long-term value of entering the industry... |
| Article | By Steven Feldman DALLAS—In an environment that is claiming the very existence of floor covering retailers almost daily, one well-respected national chain is seeing the long-term value of entering the industry. BrandSource, a 3,000-plus-store group of appliance, home electronics and home furnishings retailers representing $11billion in sales, late last month took the wraps off its Home Gallery concept, something the company believes is a natural extension for its members. Home Gallery includes not only flooring, but cabinetry, plumbing and bath, window treatments and lighting as well. According to Mark Baird, president of BrandSource marketing, the group decided to enter the flooring arena because it believes the customer who is building or remodeling and comes to BrandSource for appliances or electronics is also in the market for other products like flooring, lighting, cabinets, window treatments, etc. “So we are able to keep that consumer in a rich, service-oriented environment and provide a full range of products and services,” he said. “Our members are already involved in coordinating with consumers and contractors, matching up specs with appliances and cabinetry, so we are already in that loop. It’s an opportunity at which we started looking two years ago.” To begin, BrandSource is working with a limited number of flooring suppliers: Beaulieu, Royalty and Dixie for carpet; Mannington for wood, laminate, porcelain, LVT and sheet (Stainmaster brand); Wilsonart laminate, Emser tile and regional wood supplier Kentwood. The idea is to focus on a few core vendors whose quality and breadth of product are in alignment with BrandSource’s core business, which is premium goods. “We wanted to provide a set of products in which we could leverage that premium customer who we deal with right now,” Baird said, adding that the average upscale custom kitchen remodel runs about $130,000, of which appliances represent only $20,000. “This gives us entrée into additional profitable opportunities for our members and the ability to provide the same quality experience for all her needs.” That “experience” is the BrandSource hallmark in comparison to a Home Depot or Lowe’s. “It is very high touch,” Baird said. “Most members are still involved in the service business; they deliver their own product, install their own product and service their own product. The BrandSource commitment is to take that customer from the time she enters the marketplace, engage her in the experience through advertising or the Internet and then until the product is installed.” Another differentiator between Home Depot and Lowe’s is BrandSource’s significant investment in research and member training to assure they are relevant to the female consumer, the one who makes 85% of home purchasing decisions. Like a Carpet One, establishing national acquisition programs is at the core of the BrandSource model. Its value proposition for members include the establishing of pricing, rebates, advertising and training programs. But Baird drew stronger parallels to groups like Ace Hardware, and to a lesser degree, the arrangement the Do It Best chain has had with Floor to Ceiling. “We’re similar to Do It Best in that our members will be expanding into new categories, but the awareness of our national brand has been done at an accelerated rate.” He noted the dramatic difference is BrandSource has been a national advertiser for nine years on the major networks and cable TV, and it distributes about 1 billion circulars per year. He believes members will be able to leverage that brand awareness and existing advertising if they choose to take on the Home Gallery concept, which comes with a hefty price tag of just under $100,000. For that they receive help from corporate in re-doing the showroom, more than 42 merchandising units (the program is preformatted and turnkey, not piecemeal), 40,000 circulars per month for six months, one direct mail piece (to promote the new concept in the store), and all training and operations manuals. However, Baird believes the investment for a BrandSource member is minimized because they already have the display area in place. “They have model kitchens, which are used to sell other products like cabinetry, lighting, etc. So the cost of entry is very efficient. And in terms of print advertising, it’s a matter of adding a few pages to existing circulars.” So just how many BrandSource members are expected to sign on? Baird admitted economic conditions will dictate that horizon. But the goal is to have 300 Home Gallery locations within five years. “And we think we are being conservative there.” Despite being introduced to new categories in a difficult economic environment, member interest was strong, said Jamie Shrader, national director of market development, although it was not without concerns. The question that came up most frequently involved the logistics of installation. After all, the installation component in home electronics or appliances is nowhere near the level as in flooring. “We have handled that issue through our national installation partner, National Installation Network Enterprise,” he said, which works with third-party subcontractors throughout the country. Another member concern surrounded the reconfiguring of the showroom. But Shrader said he and Ken Krick, director of member services, will go on site to do every store design, training and set-up to accommodate the Flooring Gallery. “We say we can do it in 3,000 square feet. The average member right now runs anywhere between 5,000 and 100,000 square feet.” At least a few members questioned whether they could train their existing salespeople to sell flooring or have to add talent. Shrader responded by telling members that BrandSource would be “very hands on” and work with them to acquire any necessary personnel and the requisite training. “We will have BrandSource Home Gallery University as our education component.” What about the timing? “Yes, the economy is tough, but they see why we have to do this now,” Shrader said. “They’re ready to invest to be ready when things pick up. They see how they can capitalize on existing overhead. Because they are appliance dealers, they see how cabinets are a natural extension, which rolls into plumbing, which rolls into flooring.” Flooring supplier specifics Royalty: The California mill will supply the entire Royalty and Camelot lines to BrandSource branded under the Bervyn and Milan names, respectively. Bervyn offers faceweights between 25 and 52 ounces, while Milan products range from 50 to 90 ounces. “For us, the value in partnering with BrandSource is we are able to match up with retailers who understand how to sell better-end goods and how to sell service,” said Kent Elliott, vice president of sales. “Their members do a great job in aftersale service, warranties and helping the consumer understand the value of what they are purchasing. That dovetails into how we as a company manufacture and sell our products.” Elliott expects to do significant business with BrandSource over the next five years, possibly to the tune of $25 million. Beaulieu: Four Bliss collections are included in the package: RealLife, a solution-dyed nylon; Active Home, a polyester filament; Healthy Essence, a polyester filament with the benefit of Silver Release, and Stainmaster Classic. “This program is a new opportunity to align with a professional group of retailers that can bring new ideas of doing business to the flooring industry,” said Mike Kinker, vice president of national accounts. Dixie: According to Dave Ross, president of BrandSource Home Gallery, Dixie was approached for its vast selection of mid-level price points. “I want every customer who walks into a BrandSource store to know we can fulfill her needs. This industry evolves around ‘more is better.’ Plus, this could be a stepping stone to adding more branding from the Dixie family, like Masland and Farbrica.” Mannington: One of the country’s leading hard surface suppliers is on board with just about its entire product portfolio. According to Jay Koppelson, vice president of national accounts, the company was attracted to BrandSource because it is a group of independent retailers, which has always been its focus. “We see it as a good fit since they are also into furniture,” he said. “When a consumer purchases furniture, what’s the next thing they think of? Flooring. Plus, the entire product mix of these retailers is medium to high end, which is our strength. They care about brands, so it makes sense for them to have a well-respected brand like Mannington. Finally, the margins they seek, 40-plus, is important. They’re not giving anything away.” Kentwood by Metropolitan: This regional supplier (Northern California to Pacific Northwest and Canada) has been a global source of hardwood since the early 1990s. According to Ed Miller, national sales director, the company offers a wide variety of solid and engineered styles and looks, including handscraped, antique, even recycled whiskey barrel flooring. “I think we were chosen because of our history of good quality products, consistency, all at good value.” The company inventories its 100-plus SKUs in Kent, Wash. Emser: The company’s broad range of product was the lure for BrandSource. “Tile is so regionalized,” Ross said. “Emser’s local distribution showrooms are a big component for us so the line can be expanded.” Wilsonart: The high-pressure laminate manufacturer was showcasing its Synergy display. Russ Rogg, director of sales, believes Wilsonart’s premium product offering is a natural fit for BrandSource dealers. “I see no downside in participating,” he said. “It can only result in additional business.” |