Balterio is one of four private-label brands

By Steven Feldman
San Jose, Calif.—S&G Carpet & More, one of the 20 largest specialty flooring retailers in the U.S., is taking its business to the next level with the launch of a retail strategic alliance program. The initiative is designed to allow smaller independents to capitalize on S&G’s nearly 60 years of proven success.

According to Gary Miceli, president, the alignment concept is not only the next phase in S&G’s evolution but also a natural for his company. Here’s why: S&G imports about 70% of what it sells, which creates an opportunity to offer smaller retailers higher-margin, private-label products that will differentiate them from the competition. “About four years ago we set up a distribution center for our import buying to feed our seven stores, and when that was running the way we wanted it to, we needed to go to the next level, which was a group marketing concept where we would attract and help other specialty retailers make our profession better,” he said.

Similar in scope to what fellow $40 million retailer Floor Covering Associates in Shorewood, Ill., started a number of years ago with its successful FCA Network, S&G is targeting retailers with sales volumes between $1 million and $5 million. Prospective alliance members must also have been in business for a period time that would make them “credit worthy” and have a solid reputation within their communities. “They must also fit into our geographical plans,” said Steve Bicknell, national vice president, “in that they are not in close proximity to an existing S&G store where our business would be cannibalized.”

S&G, the largest specialty flooring dealer in California with the exception of Home Depot, Lowe’s and builder specialists, is seeking to parlay its experience and success into helping other retailers become more successful and professional. Thus, members can piggyback on S&G’s prowess in marketing, merchandising, advertising, exclusive products and more. According to Miceli, the key to the program is flexibility. For example, members will have the option of keeping their existing name, changing to S&G Carpets and More or incorporating S&G into their existing name. “We want them to remain independent and maintain an identity in the marketplace,” Miceli said.

At the same time, he noted advantages to using the S&G name and promoting the affiliation. “We spend more than $1.5 million a year in print, cable TV and radio advertising,” he said. “We have no problem if they want to ride our coattails.”

Bicknell highlighted a myriad of advantages to joining the S&G alliance:

Increased profitability and margins (S&G’s average margin is 44%). He noted S&G’s exclusive products will never be found on the Internet or on the shelves of the other store down the street. As well, private labeling prevents price-comparison shopping. Finally, retailers will have the benefit of capitalizing on purchasing power that is afforded only to retailers the size of an S&G.

• Advertising. Members can get ad slicks with the ability to customize. They can also take advantage of already produced TV commercials and radio scripts with personalized tag lines.
• Merchandising and store layout. S&G will come in and re-do and re-merchandise a showroom to maximize space and create a professional and inviting environment.
• Training. S&G provides a full training manual for selling and an installation training CD.
• Private label S&G credit card. Selling credit results in higher ticket prices offering consumer credit through Bank of America.
• Annual convention beginning in 2008.
• Customized web pages for a nominal charge.
• Dealer locator on the S&G website.
• Sales calendar with monthly promotions.

According to Bicknell, the goal is to have 50 members signed up by end of 2007. “Surfaces is the launch date, but we are kind of in a soft launch mode right now,” he said, adding that S&G had eight prospective members come in the week of Jan. 8 and he “expects to sign them all. They are waiting on us.”

While the eight members who visited were all from its Northern California backyard, Bicknell noted S&G is ramped up to go national. “We’ve already received interest from out of state, like Toledo and New York,” he said. “Those we will see during Surfaces.”

There are two tiers—at a cost of $30,000 and $60,000—for which retailers can join. The $60,000 level offers a complete showroom makeover option, more racks and displays and showroom carpet, among other things. There is also a quarterly maintenance fee of $300 that is waived in the first year of membership that covers updates on all imported samples, monthly promotions (like pricing changes), etc.

History

S&G’s roots trace back to 1948, when the original owner, an installer from New York, moved to the San Jose area and opened a store called S&G Discount Outlet that sold carpet, linoleum and vinyl tile. Miceli and Paul Ratajczak, who had both worked for the company for 15 years, bought the business in 1989 along with some minority shareholders. “We knew we had to expand,” Miceli said.

Over the last 17 years, the business grew from one to seven locations and sales jumped from $10 million to $41 million in 2006. He attributes the growth to hard work, servicing the customer, honesty and a medium-to-high-end product mix. Although S&G imports such a large portion of its wood, laminate and ceramic, its suppliers manufacture product to its specifications. “Led by our buyer Roger Ratajczaks, we design it, color it, pattern it and then private label,” Miceli said. “Trish Camara is our high-end brand, CasaBella is our handscraped hardwood, Lantern hardwood and laminate is our mid range.”

Now it’s time to take the business to the next level. According to Miceli, the target is for S&G to become a $100 million company by year-end 2008. “We need a program like this to accomplish our immediate goal,” he said. “Reaching that level increases our recognition with vendors, legitimizes our business concept and increases our buying power. At the same time, it also affords the company preferred rates in its cable TV spots. “The goal is simple: We want to increase S&G’s value while helping the membership.”

For more information, call Bicknell at 408.202.5177 or email stevebicknell@sgcarpet. com.