Hicksville, N.Y.—How exactly do selling brands lead to higher margins? FCNews posed this question recently to several flooring executives who offered their views and thoughts on selling brands in today’s marketplace. “What we’ve found is,” said Mannington’s David Sheehan, director of marketing for resilient products, “if there is a price ceiling on the market, [selling a brand] helps us to sell north of that price ceiling. The reasons for that are as follows: the brand has to mean something to the consumer, it has to be relevant to her. She has to believe, ‘That’s a brand I know and trust and would like to buy. I see value in buying that brand because it’s a promise to me of good quality.’

“The upper end business in vinyl is in decline, and that’s not just happening with Mannington, that’s happening with all resilient manufacturers,” he explained. “You’ve got downward pressure coming from other categories like wood, laminate and ceramic. “And,” said Sheehan, “as the pricing for those products comes down, it pushes the price ceiling for resilient down because, all things being equal, if a consumer knows that she can buy an authentic material versus something that is trying to emulate wood, stone or slate, she will automatically trade herself to the authentic material.

Her number one driver overall is always going to be aesthetic and that feeling of wanting the best looking floor. That even breaks down in the resilient category into, ‘Well, if it’s not going to be real, do me one favor and make it look as real as possible, and we feel we’re doing a good job of that at Mannington. “But, what we’ve found is that as the market for upper end goods is shrinking, our Stainmaster business is growing,” he commented. “And, 90% of our sales is in trade-up business for Stainmaster, so it’s reversing the market trend. And there’s nothing different between the floor that has Mannington with Teflon versus the Stain-master resilient floor. They are identical in construction. The only difference is that brand means more to her.”

In terms of a licensed brand, such as Shaw Industries’ Kathy Ireland collection, “we feel like it helps the dealer improve their margins for a couple reasons,” said Scott Sandlin, Shaw’s vice president of marketing. “Number one, the brand is limited in distribution to Shaw Flooring Alliance dealers. We believe that helps. Also, we feel the recognition with the brand and the asso ciation the consumer has with her brand, style and color, allows a dealer to sell it for more, if he chooses to do so. That’s also a big part of brand selling; on the retail floor you really have to promote it and push it in a strong way or that added value won’t bring you anything.

“So it’s a combination of fashion and recognition,” he reiterated. “Both those together make the consumer feel more comfortable and have a higher level of trust. In all the research and everything we hear from consumers, the most important brand to her is the dealer. But, she also tells us she wants that dealer to be supported by a strong national brand. “And so, I believe that combination of the dealer’s brand and the national brand give credibility,” he explained, “and anytime the dealer has credibility they have the potential to gain in margin. They should go to sell it for a higher price if they have established that credibility with the consumer.

“With Kathy Ireland, what we at Shaw and our dealer partners have to do is, continue to isolate it in the store,” said Sandlin. “In other words, let’s not let it turn into the mass at retail and get lost on the floor. Let’s make sure we are boutiquing it on the floor, displaying it and merchandising it with all the tools that are available so when the consumer walks in, she’s not confused by it. She doesn’t go to one section of the floor and find a Kathy Ireland style and go to another section and find another Kathy Ireland style and try to figure out how they all work together. Let’s merchandise, display, and sell them in a fashion where they coordinate.

“For instance,” he explained, “with Kathy Ireland, we take soft surface, hard surface and rugs. We coordinate all of those surfaces for her to give her a package to help her feel more comfortable with the brand. We’re trying to do a better job of that and I think our customers are too. We’ve got to continue to push for that because I think it’s an important part of it. “What we all have to realize is,” he added, “we can have the finest brands in the world, but if we don’t deliver on them at retail, they don’t mean anything.”

On the commercial side, Alan Wolk, president of interiors for Invista’s Antron business, believes “when you sell brands you sell value. A brand is only as good as the features and benefits that are provided to the end user. The question is, how can selling brands, with added features and benefits, which provide value to the end user, give a higher margin? To that question I would answer, as we differentiate our products, and bring added benefits and features to the consumer, or to the facility manager and end user in the commercial sense, we are able to get paid a premium for those features and benefits because they are solving problems for the consumers and they are willing to pay for it.

“Both the architects and specifiers understand from the 25 years we’ve been in the Antron business that Antron has specific features and benefits,” he said. “It’s the longest wearing carpet fiber. It’s going to provide a carpet fabric in the contract end of the business that is going to look best longest. The brand then, becomes a trustmark. They know they are going to get certain features and benefits so they can just specify the brand and they know they are going to have a happy ending.”

Steve Griffiths, Invista’s vice president of residential flooring, agreed and said, “value and branding hold regardless of which segment you are in. The reason dealers make more money when they sell brands is, they end up being able to sell products at a higher net average price which means, even at the same gross margin, they are making more margin dollars. Then on top of that the value of the brand creates a premium that the dealer is able to charge the features and benefits of the product which increase the average gross margin, so you’ve got a higher gross margin and a higher net average selling price.

“Our experience is, when dealers commit themselves to selling brands, you can see between a 5% and 10% lift in both selling pricing and gross margin,” he explained. “And then on top of that, you have all the other support benefits—training for sales forces, product consultation, cooperative advertising support, merchandising support inside the dealer’s showroom. All these things not only lower their overall cost, but increase their ability to capture share and close the sale.” —Louis Iannaco