By Steven Feldman
Cincinnati—The economy may be anything but stellar, but Flooring America/ Flooring Canada is not sitting on its heels. At the group’s recent convention here, members were introduced to a new shop-at-home initiative while getting a sneak peak at Vision 2008, the highly anticipated showroom of the future.

According to Vinnie Virga, president, Flooring America, extensive research revealed that customers who buy from shop-at-home retailers have a higher income and tend to be more educated. What they don’t have is a lot of time. “They are willing to pay more money, but they want convenience,” he said. In fact, based on a pilot with 10 stores in one market, the average gross margin on shop-at-home sales was a healthy 55%, and the average close ratio was 75%.

“The gross margin is high because you can charge significantly more for convenience,” Virga said. “The close ratio is high because when these customers call they are ready to buy. They are predisposed to making a buying decision. All you have to do is do a reasonably good job in the house.”

With that in mind, members were advised that shop-at-home should be set up as a separate business with a separate sales force and advertising. “It can’t be an add-on,” Virga said. In fact, a separate brand has been created for this business to eliminate cross-shopping. (Editor’s note: The brand’s name is withheld because it had not cleared legal by press time.)

A separate sales force is recommended because shop-at-home requires a different type of salesperson, Virga said. “The sales professional needs to be incredibly comfortable going into the home of a customer he has never met, measuring and closing the sale on the spot. This is a one-shot deal; we don’t go back. We are trying to be more aggressive without ever violating our brand promise of being the most trusted retailer.”

How it works: Members first set up a separate ad budget with ads solely dedicated to this business. Consumers are directed to call an 800 number, where a call center will refer the lead to the appropriate member.

Flooring America has created all the ad vehicles for TV, radio and print. Since the calls will be fielded by the call center, the group is encouraging members to execute together in their local markets. “A lot of our network neighborhoods will buy the ads together,” Virga said. “This reduces their overall cost and generates the highest response rate.”

He believes embracing this business is a no brainer. “All members have to do to get into this business is get educated and invest in the advertising. We have launched a kit that contains everything they need, all wrapped up in a neat bundle.” That includes a guide explaining how to execute the program, prepackaged advertising and financing, sample cases, and special education modules on how to effectively sell in the customer’s home.

Financing is especially critical for this business, Virga said. “You must run 18- to 24-month financing; it’s what works. It’s what drives the phone to ring.”

As for product, the assortment features 20 soft surface and 30 hard surface items. The soft surface selection runs the gamut of constructions and are mostly mid- to better-quality goods. “The average member will run and gun with 12 of the 20, allowing for regionality,” Virga said. Conversely, the hard surface offering of hardwood, laminate and ceramic is more meat and potatoes. “In our experience, that’s all you need.”

To avoid additional and what may be unnecessary cost, Flooring America is not going the van route. Rather, products are housed in a convenient carrying case designed to fit in an average car’s trunk. “In the pilot, we had both marked vans and unmarked cars, and there was no difference in sales,” Virga said. “However, we do recommend wrapped vehicles simply because it’s a great way to advertise.”

Lee Horwitz, owner of A&M Flooring America, is a big proponent of shop-at-home. In fact, he told FCNews, it is a major piece of his business. “More than half of our customers are closed in the home,” he said. “And 20% of our residential customers never set foot in our store.” A&M has been doing in-home shopping since 1940. “It was the way we started our business. My dad took samples door-to-door.”

Shop-at-home works, he said, because the customer has already shown trust in you since she let you in her home. “Plus, if she comes to the store, there is always the chance she will visit another on her way home.” In addition, Horwitz said once inside the home the salesperson no longer has to quote by the foot. Rather, he can quote the exact price for her needs.

Horwitz agrees that shop-at-home requires a dedicated staff to take the phone call and close the appointment. “We qualify them on the phone and try to narrow down the products we may take to their home.” However, all his salespeople are equipped to go in the house. “They spend four hours in the store and the rest of the time in the home.”

While Empire Today is the shop-at-home industry leader with sales estimated in the $700 million range, Virga cited a few major competitive advantages for the group’s members:

• Each Flooring America business is individually owned and operated versus Empire, “a large corporate conglomerate once known as a boiler room.”

• Flooring America members are known for quality and service. “Empire’s reputation is less than favorable in that area.”

• The Flooring America “points of difference” guarantee. This guarantees if the customer is not completely satisfied, the group will change the product within 30 days. It also guarantees installation for life as well as the same price for 30 days after the purchase.

• Flooring America salespeople are certified professionals, “fully educated to ensure the customer gets the right floor to create the perfect room.”

Horwitz noted that Empire Today is just starting in his area, and he is welcoming it with open arms. “I love it. It will raise the customers’ expectations of what they will have to pay because they overcharge.”

Vision 2008

Industry research reveals that today’s flooring consumer is after more than product; it’s all about the shopping experience. To that end, Flooring America previewed Vision 2008, it’s showroom of the future. The first pilot launched in New Hampshire earlier this month with two more coming on board next month in Dallas and Winnipeg. Full-scale availability to members is planned for January 2008.

“The whole idea was, ‘Let’s forget everything we know that makes a store successful,’” Virga said. “We are challenging everything, designing a store from the ground up.” Flooring America went out and studied its most successful members as well as its competitors. Then it hired one of the top design firms in the world, FRCH. “We designed the most cutting edge store you’ve ever seen in your life.”

The showroom was designed expressly for the target customer: female, aged 35 to 65. “We think she will walk in and feel like she is in a comfortable environment,” said Deb Binder, vice president of marketing. “Think Restoration Hardware, Pottery Barn, Crate & Barrel. It will be immediately apparent that we offer good values and great selection.” At the same time, the idea was to not have the customer feel overwhelmed or that the store was too high-end. “I think we achieved the visual niche we were looking for: comfortable, visually interesting, open and very shopable.”

Binder is particularly enthused about the sight lines and graphics. “The customer can see the entire store the moment she sets foot in the showroom, and the signage sends a clear message based on hierarchy. First she gets an overall feel and ambiance, then she immediately sees where she wants to go (carpet, hardwood, etc.), then it’s all about product messaging (product specifics), and finally specials and promotions.”

Upon entering the showroom, the customer immediately views a 10-foot “welcome wall” containing products that are “inspirational and aspirational,” Virga said. These “visually stimulating” products could include a glass ceramic, a handscraped wood with coordinating border or a handwoven carpet with an edge that shows the underlying tufting.

“We are doing this to give our members a competitive advantage,” Virga said. “We believe they will experience a 20% to 30% lift in sales once they’ve executed the strategy of Vision 2008.” That projection is realistic given that sister group Carpet One Floor & Home has seen its members who convert to the Destination One retail concept increase sales nearly 50% after two years of implementation.

Vision 2008 was designed so members can re-do their entire store at once or convert in phases. The goal is 20% conversion over the first 18 months for the 500 members.

“The bottom line is that the store looks beautiful,” Binder said. “But it’s all about the results and driving sales and increased profit margins for our members. That will make it a true success.”

In other Flooring America news:

• The group is embarking on its first foray into national television advertising this September by leveraging the Stainmaster brand to build the Flooring America brand. “The goal is to make customers aware that Flooring America is the place to go to get the best selection of Stainmaster carpet,” Binder said. A national version was created as well as a local version that allows members to tag on their own. Ads will appear on the NBC’s “Today Show” and FOX News Channel.

• The group’s traveling university was upgraded. “We will visit more than 34 cities this year,” Virga said. “For an incredibly low investment, members gets world class training, brought to their local market, to make sure their people are as effective as possible and up to speed on the latest products and programs.”

• The number of SKUs in the proprietary Downs brand was doubled and will now be housed in its own display. As well, the warranty was enhanced with Confidence Plus, which allows the consumer to exchange her floor up to 60 days after installation for any reason. “For those customers who believe the overstated warranties of our competitors, this is the easiest way to combat them,” Virga said.