Discussion: FLOORING: An Industry In Crisis, by Lea MacDonald

[Chuck]

The implied causality was specious at best. The article was well written, but deeply flawed.

Too many assumptions were asserted. Too many outcomes were treated as foregone conclusions. Lea described the world economy more than he described the flooring industry.

Other than that, it was top drawer.

It was a beuatiful read.

CHU

[skhardwoods]

I think there's room for more then one perspective here; Why not write an article from your point iof view... Anything that can be added to this topic is knowledge gained for us all. I think writing may be your forte.

[TFP Admin]

I had to move this thread in order to edit the title. This inadvertently removed all the rank points it had received. Please be sure to rate this thread according to your satisfaction with the article. If you rated it before, you will have to do it again. I am sorry.

[Lea MacDonald]

Originally Posted by Chuck The implied causality was specious at best. The article was well written, but deeply flawed. Too many assumptions were asserted. Too many outcomes were treated as foregone conclusions. Lea described the world economy more than he described the flooring industry. Other than that, it was top drawer. It was a beuatiful read. CHU

Hello Chuck, good to have you aboard and nice to see you posting.

As I do with installation, I am quick to point out incorrect assumptions. The assumption I am pointing out in your post is the one that the piece is "deeply flawed."

The data used was gained from information gleaned from the flooring industry through a poll conducted by the Gallop group which had a margin for error of +/- 3%. The data was then scrutinized and tested by a Chicago group called Industrial Performance Group headed by two gentlemen named Rob Nadeau and Ed Stecky. They held the data up against the findings of a questionnaire they developed to quantify the Gallop findings given to 500 Carpet One retailers at their national sales convention. The data was further confirmed.

The Chicago group (Industrial Performance Group) had met with the mills in one on one meetings for historical cause and affect information. All data was then finally collated in a final report, An Industry in Crisis.

The report was then sent back to the Gallop group for final corroboration as there are significant financial remedies attached to inaccurately conveying Gallop information publically. The Gallop group reviewed and permitted the final report. The information from that final report is accurately reflected in the piece.

If there is any "deeply flawed" information in the piece, we need to know what it is. Also, whatever points you consider assumption please point them out specifically and I'll tell you where that data was found.

The final report cost one quarter of a million dollars (in 1994/5 dollars) to produce, and despite some of the damning conclusions Shaw made it manditory reading for its executives.

Perhaps the above information should have been written into the piece, but I opted to leave it out and get to the heart of the history that has brought the industry to this point. I did however point to the report in the subsection: There IS a Crisis.

For your further edification please review this pdf file: http://www.orcon.com/FCISD/Document/analysis.pdf

As well, the information below was a result of the Gallop Poll and a review of that information and the industry as a whole.
http://www.orcon.com/fcisd/Document/vision.pdf

Finally, after reading the data-supported reports, please point directly to the areas of the piece which are "deeply flawed."

[Peter Kodner]

Lea, thank you for posting the additional info from Orcon. More than a few of the issues, as I see it are addressed in them. I do take small exception to the Vison for The Industry, in that flooring is, and I believe should remain viewed, as an installed product. This factors in the service aspect which is what differentiates one dealer from another. To compete with the very large "Box" retailers (think orange or blue signage) on a price basis is suicidal. The means to enticement to get buyers into a specialty store is the image as the experts in the field. Would you get price quotes from your doctor and go with the lowest one? When you will probably have a floor for ten+ years, why would price be the motivating factor there? The info you have posted confirms consumers are not buying based solely on price. If they were, EVERY sale would come from one of the boxes.

Regarding the move by manufactureres into retail and contract, I have some first hand experince there. Our contract firm, started by my grandfather in 1930, was aquired during that buying frenzy by the 2 mills and one fiber company. During the courtship, we were told our gross margin was the lowest of any firm they were considering, but our net was among the highest. Seems to confirm our business philospohy that project managmement of the work, not sale of work, is what dictated return on investment. The terrible irony of the aquisition was during the first 2 years, 3/4 of the management, both upper and mid level, left the company. The esprit d' corp was destroyed and numbers (meaning dollars) became the all ruling principle. The company was recently sold to one of our previous competitors at fire sale price. What a sad and ignominious end to a great company.

My biggest regret is I did not copyright my best practices manual. It was published by new owner and put into use in all of their locations. Lets see, 50 branches@ 50+ copies per branch; corporate- another 100+ copies; outside sales-??? ... probably wouldn't have to work so hard now. LOL

[Lea MacDonald]

Hello Peter, always great to read your well thought out comments.

You wrote:

The info you have posted confirms consumers are not buying based solely on price. If they were, EVERY sale would come from one of the boxes.

Of course your observation is correct. I put it this way: "If all consumers were to by on the lowest common denominator, price, we'd all be driving Yugos, wearing running shoes, and salespeople would be a thing of the past."

You wrote:

I do take small exception to the Vison for The Industry, in that flooring is, and I believe should remain viewed, as an installed product.

I'm not sure about your statement above. I know that in the vision for the industry release, the statement was a call to the carpet mills to support the installation community by understanding that carpet is considered by the general public to be an installed product as John-Q-Public gains no direct value from it until it is installed properly on their floor. Put another way, a pace-maker has no value to a patient until it is actually installed and working properly. Perhaps the pace-maker analogy is not the best, but I think you understand what's trying to be conveyed.

Your story around the sale and gutting of your former business is a sad indictment of some of the players participating in our industry. As you put it (in not so many words), "they just didn't get it . . . they never really knew where the real value was to be found in how we conducted our business."

Of course, the most hurtful thing they did was to eventually fire-sale your former business to your (once) competitor. I can only shake my head at this. I can't begin to understand how that must have felt.

Your copyright comment is a scream. Yes, I believe you would have made a few bucks there. And as far as having to work hard now, well, the fruits of your labor will likely move you into a position to start another family business . . . perhaps in the memory of your grandfather? It's a nice thought anyways.

[Chuck]

"Deeply flawed" was probably a bit of an overstatement on my part, but nevertheless, there are assertions and presumptions that I do not agree with. Hell, the title itself is chief among the presumptions I reject.

Crisis? That implies impending doom. Flooring, as a sector of the overall market, is hardly at the precipice of any particular calamity. It is in better shape than it was 30 years ago. It might suck when compared with some imaginary golden age of flooring, but crisis is not an accurate description. While there are portions of the greater flooring market that have been taking it in the pants of late, other sections of that market have taken up the slack. It is simple market evolution.

Another assertion I wholeheartedly disagree with is your claim that floor covering has become more and more difficult to install over the years. That is simply not the case. Consistency has improved over the years. I think a better way to describe the evolution of flooring would be to look at it in terms of polarization instead of a general degradation of product quality. There is no shortage of high end product for a consumer to choose. In fact, there are a heck of a lot more high end products out there now than there were 30 years ago. There is also a giant boom in mass produced crap going on. It is that middle portion that has been squeezed.
It is not my intention to tear apart anything you have written. I simply disagree with some of your assumptions. It would be my great honor to discuss this with you if you are willing.

CHU

[Lea MacDonald]

It would be my great honor to discuss this with you if you are willing.

This is a wonderful way to start a discussion. Thanks Chuck.

I'll try to review your points one by one, and where possible I will supply data. I'll start by asking you to forgive my long-winded response below. I'll go into great detail because you've got valid questions which deserve the best explaination I can offer.

. . . the title itself is chief among the presumptions I reject.

As sited in the article, and when we were looking at a cross section of data collected with regard to the installation community, we came across some disturbing numbers. One of those numbers was that in MI the mean-age of tile setters was 58-years of age in the mid-90s. That was close enough to 60 to send up flags which suggested that the introduction of new people into the trade was way down. As we looked further we found the same thing in carpet, hard surface and so on. Forgive me but I've lost the exact numbers for the mean-age in each of these groups. They did however confirm a trend - new guys coming into the trade had slowed to a crawl which alerted us to the fact (by logical extension) that the knowledge the older guys had was not being passed down.

In effect, what we saw was the residual level of knowledge in the installation community slipping away, shrinking, *along with that old-time skill* you and I and our ilk possess. Further evidence of this was exposed when 50% (actually 51%) of the retailers at a Carpet One convention confessed they'd put off customer's installations in order to put their best installers on them. Remember, this was 1994/5, only 11 or 12 years ago. Another 25% of those who responded to that questionnaire said they had experienced some difficulty in finding good installers to perform their installations. The net result being that good installers were not as abundant as they once had been.

This then begged the question, that in the face of not being able to call up a good installer at will, who was installing the material they could not get to? Well, it was shown that the people installing the material they could not get to were poorer installers. Who showed us? The mill/manufacturers.

When asked, the mills/manufacturers, in quiet whispers, shared their installation related losses for the year 1995. It was staggering. Our consultants recieved a figure that hovered around 500 million dollars collectively. They later, after much sleuthing, revised that number to 750 million with a deep suspicion that the number was really closer to a billion dollars across the entire industry. The reason, they said, that the mills did not give hard numbers was because share holders would not be impressed by the losses. I can't argue that. (Remember, the mills were trying to lock up channels of distribution for their finely tuned plants that were churning out carpet and vinyl faster and cheaper than ever before - they took a lot on the chin in order to keep ownership of those hard-earned channels.)

So lets come full circle at least in 1995. The mills were bleeding to death, the installation community was significantly contributing to that blood letting, and good installers were getting harder to find. This was called a crisis.

Lets fast-foward 12 years and see if it still exists. Over the past 12 years or so we've seen a lot of innovative products come and go. Remember Mannington Gold, Silver, and Bronze interflex? . . . with that "for whatever reason" warranty? How about Pergo that required all joins to be glued? Bear with me, I'm going someplace with this. I'm trying to point to the fact (still to be determined in this War&Peace answer) that there are more problems in the field today. Here is one supporting fact, there are more inspectors in this industry than at any other time in its history. I don't make the following statement factiously: "They are not here today because flooring is going in without problems."

20 years ago how many welded products were there? (I remember when Corac <sp?>pretty much welded everything without problems). How many types of welding are done today? I can think of 3 off hand, chemical, heat, colored urethane. How many vinyls require different seaming methodologies?

So too have the standards changed. I've been left dizzy by the various requirements for setting ceramic tile. Remember some of those pics the guys posted of some of those horrific ceramic installs?(Perhaps you posted them? I can't remember.) Hard surface is coming back and the difficulty in finding good hard surface installers is evidenced in the price being paid per square yard for installation. Heck, there are at least 4 different ways to seam carpet together now. Remember the vinyl job pics an installer recently posted of a guy (who was alleged to have been in the buisness for years) installed - pieces, upon pieces? Heck, it looked like a tile job. Back to the point - there are more inspectors in this industry than at any time previous - they are here because of the high level of claims - claims generally resulting from installer error, lack of knowledge, skill and training.

This begs the question: "Why so many claims at this point in time?" (Thanks Chuck, if you managed to read this far without sliding into a coma, I owe you a beer.) The reason is because the number of products and the level of sophistication now required to install them has increased against the level of residual knowledge in the trade today.

Okay, that's question 1 answered to the best of my ability. I'll post this and move on.

[Lea MacDonald]

Crisis? That implies impending doom. Flooring, as a sector of the overall market, is hardly at the precipice of any particular calamity. It is in better shape than it was 30 years ago.

Let's take a look at your thought above. You're somewhat correct with your observation that crisis does imply impending doom. However, crisis does not guarantee doom. There is a significant difference. A crisis can be brought under control if appropriate steps are taken. For instance, if mills are trying to stem the flow of profit dollars into the damage control column (claims), they'll hire inspectors at a fraction of the cost it would take to replace jobs. So too will hardwood companies, ceramic companies and so on. The fact that inspectors now have very viable and relatively stable employment points to a symptom of an impending sickness or clamity or crisis if appropriate steps are not taken. It also points to the fact that less qualified installers are installing more material. We've all see many examples of extreme installation diasters. This, of course, begs the question: "Where the heck was the good installer when the disaster was happening?" Not enough to go around. Why? (Rhetorical.)

Flooring, as a sector of the overall market, is hardly at the precipice of any particular calamity.

Again, we need to differentiate. Flooring is the industry. The market is the place they conduct business.

It might suck when compared with some imaginary golden age of flooring, but crisis is not an accurate description.

I'd say crisis is a fair and honest interpretation of things if more installers leave the trade than come in, if products keep requiring more skills and training specific to their installation than installers have time to learn, if installers in small numbers take that training (how many times have you attended an instructional seminar only to have the facilitator say that typically the guys that attend the seminars are NOT the guys who need the training?), . . . if the responsibility of training-down falls to the shoulders of the installation community and mills shun responsibility for educating the very people they count on to install their products properly, if mills fail to understand they are manufacturing an installed good.

In the case of the flooring industry, it is defined as a mature industry. A mature industry is defined by a low but stable growth rate. Though one may see a new product within an industry serge forward, it does not mean that the entire industry serges - just that product. For instance, we'll not see the flooring industry grow by 50% next year, it's mature. We may see a new and novel product offering take a segment of the market by storm, but the industry will remain on track with low and stable growth.

Forgive me, I made the comment above to address one of your comments, but I'm tired as heck and can't seem to remember which one. I also have a column to write for a 10 o'clock deadline tomorrow. I'll hustle back tomorrow, err today, to answer your question and concerns.

Thanks again Chuck for asking the questions and sharing your thoughts, all valid, all well thought out and on point.

[Lea MacDonald]

I read your last para and decided sleep can wait for a bit. I'll get my sleep in a bit, you'll get yours trying to read these long-winded replies.

Another assertion I wholeheartedly disagree with is your claim that floor covering has become more and more difficult to install over the years. That is simply not the case. Consistency has improved over the years. I think a better way to describe the evolution of flooring would be to look at it in terms of polarization instead of a general degradation of product quality. There is no shortage of high end product for a consumer to choose. In fact, there are a heck of a lot more high end products out there now than there were 30 years ago. There is also a giant boom in mass produced crap going on. It is that middle portion that has been squeezed.

I believe the term used was 'sophistication and skill.' The point I was trying to make relative to the use of those two words today was one of alerting the reader to the fact that with each new product comes a learning curve. Some are small. Others can be large. In any event, something new has to be learned. The more products, the more that needs to be learned/taught. In the case of some hard surface floors, welding of those floors is no easy feat. In fact, as I stated before, I can think of at least 3 different ways to weld seams - therefore the level of sophistication regarding skill and product knowledge has increased. Today's installer has to have more skills because there is a broader range of products requiring product-specific training. This does not equate to difficulty, unless you are like me and have trouble remembering all these things.

It is not my intention to tear apart anything you have written.

I can see that in your thoughtful questions, thanks Chuck.

I simply disagree with some of your assumptions. It would be my great honor to discuss this with you if you are willing.

I hope I've helped better clarify the points the article was coveying, Chuck. I appreciate the time and effort you've put into reading it, and further appreciate the opportunity to discuss it with you.

[Chuck]

Lea,
Please forgive me for not engaging in the "quote-respond-quote-respond" type of writing. I just don't like it.

Many of these distinctions you have drawn are merely semantic. To say that the market is simply "where they do business" ignores basic economic truths. I maintain that the flooring industry is not in any sort of crisis precisely because there is nothing unique about what is going on. For me to entertain the idea that there is a crisis at hand, I would first have to be convinced that there was a time in the last half century when this industry was teeming with highly qualified mechanics. The problem the industry faces is the same one it has always faced; and it is not unique to our chosen field of endeavor.

With respect to the learning curve, it has become easier to adjust to, not harder. If your assertions were limited to heat welding vinyl, they would have been close to dead on. Problem is, your article was dedicated to the generic topic of "flooring" instead of the specific topic of "commercial resilient". As a whole, the flooring biz is in fine fettle. There are niches within it which are suffering, but the industry has always evolved to fill any vacuum. Consumers will be provided with that for which they are willing to pay. The decision made by many consumers to choose bargain basement junk over higher quality alternatives is not a failure of the flooring industry. It is a success. They are choosing to serve the entire market!

While the Ford Escort was a car you would never see me driving, I never blamed Ford for making it. They sold the hell out of them. It was the only car some people could afford. They did not quit making Mustangs while they made the Escort.

Does any of this make sense?

[Lea MacDonald]

Hello Chuck, thanks for responding. Fine points all of them, let's examine them partner.

With respect to the learning curve, it has become easier to adjust to, not harder.

The article did not suggest that anything was harder to do. It did, however, point to a required increase in skills and sophistication regarding new products and systems that require product-specific training.

Outside the welding examples discussed, there exists many other examples. Let's take a look at a few of those. Velcro carpet attachment&installation system (older, but if you've not installed it, you'll need training), various types of new engineered floors: wood, ceramic etc., still emerging laminate products, new rubberized floor systems, and new concrete surface finishes. There are plenty of new products and systems to keep an installer going to seminars for a while.

Problem is, your article was dedicated to the generic topic of "flooring" instead of the specific topic of "commercial resilient".

The previous example should address your above observation. Within the generaic flooring industry exists pockets of new products that require installation-specific skills developement.

There are niches within it which are suffering, but the industry has always evolved to fill any vacuum.

I utterly agree wholeheartedly with your observation above. Though, one must conceed that when the industry does not respond fast enough - for instance to a shortage of installers - a crisis occurs. Even if the industry does respond with numbers of installers but those installers are poorly trained, the same condition exists, a crisis. Simply put, material goes down that is not installed properly, customers start look for alternative floor coverings, mills start to bleed, good installers participating in the market segment that consummers are migrating away from either exit that segment or leave the trade all together - there are examples of this.

Consumers will be provided with that for which they are willing to pay.

I'm not so sure the above rings entirely true. For instance, there are many examples where customers have paid good money only to have their material totally destroyed. We've seen pleanty evidence of this in inspector reports. However, I will conceed that in general your statement should ring true despite evidence to the contrary.

The decision made by many consumers to choose bargain basement junk over higher quality alternatives is not a failure of the flooring industry.

According to the data the above statement is not valid. One of the most disturbing numbers uncovered in the Gallop study was that 80% of customers who went to purchase flooring were undersold. Retailers were directing customers toward higher margin specials and away from thinner margin materials of greater quality - customers were undersold.

At the end of the day it was the consummer who was relying on the salesperson for information regarding features, benefits, quality and value. Customers really don't know a whole lot about the products they wish to purchase. All most of them know is what the last salesperson they talked to told them.

I can't remember a time I talked with a customer who knew more about what I was trying to sell them than what I did. I'm sure there may be some out there, I've just not met one yet. The point is that they rely on the sales person to give them correct information and present a balanced value picture. The data said this was clearly not happening, that 80% of those folks were being undersold.

Again partner, thanks for taking the time and caring enough to discuss these points. You have a refreshingly inquisitive mind . . . aways a pleasure.

[Chuck]

Lea, with all due respect, most of these "new skills" you refer to consist of little more than reading the directions. The heavy lifting has been done by the people who have designed the installation systems. Were I not a skilled mechanic myself, I would be in no position to comment. However, things being as they are, I am squarely in that position. There are now more situation specific solutions to installation quandries available to the competent mechanic than at any time in the history of our profession.

As far as people being undersold, that is a matter of retail in general, not of flooring specifically. Attacking and vanquishing that lowball mindset is what I do for a living. It is a challenge. It is also an awesome opportunity. Some rise to the occasion. Some do not. Selling price alone is no new phenom. It is a tale as old as time.

I am eager to be shown a crisis. Nothing you have written has demonstrated (to me) that one exists.

Your affectionate servant,
Chuck.

[Chuck]

p.s. Problems that arise as a consequence of growth are the sort of problems for which we should all pray. They beat the hell out of the alternative.

In the midst of abundance, there are no problems. Only solutions.

[Lea MacDonald]

Hello Chuck, let's review your comments above. PS: great discussion.

Lea, with all due respect, most of these "new skills" you refer to consist of little more than reading the directions.

Allow me to site a simple example, one that I'm sure you'll agree would take more than reading the instructions. The example I'll use is a repair example for laminate. The laminate in this case is Torlys, and the tool used is one called the bulldog. With the use of this particular tool the installer can remove a board, mid-room, and replace it, then close the floor back up without any cutting or glue whatsoever.

Despite the fact this is a repair, it really is something one needs to see done unless they possess exceptional skills for intuitively understanding a new tool by looking at it - I'm not one of those guys. Laminates are still relatively new and I'm not so sure we've seen the last innovation in this arena.

Were I not a skilled mechanic myself, I would be in no position to comment.

I'm grateful you made this comment because if you hadn't I was about to. You are indeed skilled at your trade and have put in years developing your skills and knowledge and this is at the very heart of the topic at hand. When those less skilled, or in many instances significantly less skilled, are set lose in an industry to service customer expectations, the possibility of failure increases as skills decrease. This is where the industry finds itself every time it views installation as a cost of doing business rather than a value added service. This is where the industry finds itself every time it treats installation as a common commodity. This is where the industry finds itself everytime a customer sees advertising verbage stating: "Free installation, free pad!" Can any value be associated with something that is free? If so, where did the axiom, "you only get what you pay for," come from? This industry has done significant damage to itself and those who participate in it on many fronts.

Installers themselves don't treat installation as a common commodity, each installer has something more or less to bring to the party than the next guy. Some installers are exceptional, some are middle of the road, and of course we have the bottom feeders who, for whatever reason, move from one calamity to the next.

In a nutshell, the closer this industry moves to viewing installation as a cost to be avoided, controlled, negotiated downward, the closer they move toward a crisis. Chuck, if I were to say to you (as a retailer) I have 200 sq-feet of ceramic to go down and I'm paying you a buck a foot, you'd likely have two words for me, and I'm betting they would not be: "Hi there." Yet, I get reports of retailers, who've already bid and gotten the jobs, standing on their loading docks getting installers to bid down the installation price in order to get the install.

Here is an example of self inflicted damage done by Dupont. Remember Certified Dupont Stainmaster? When that program was rolled out there were 3 things that were required for a carpet to be sold under the Stainmaster banner. Do you know what they were without doing a search? I do.

The yarn had to be a 3rd generation Nylon. The face weight of the carpet had to be 32 oz. and it had to be a BCF - 3 simple things. In no time at all we started seeing 28 oz. or less staple yarn carpet carrying the Stainmaster banner.

After that program flew into the side of a mountain Dupont regained control by introducing their Master Life program. To the best of my knowledge Dupont has maintained control of this program.

As far as people being undersold, that is a matter of retail in general, not of flooring specifically.

I'm not sure what to make of your statement above. Wether or not underselling exists in other retail segments, the reality is that the flooring industry was underselling their customers en mass - 80%. In fact they were underselling their customers hard at a time they could little afford to do so.

In the mid 90s I was to train a pilot program for Orcon called the TQM (Total Quality Management) program. If all we had learned was to have any use it would have to be reduced to practice, in real time, in the field, in the market place. It would have to make retailers and installers money, period. This is coming full circle to customers being undersold.

A retailer who was opening in a nearby town of 29-thousand people asked if we could help them make a mark in a marketplace that already had 4 mature businesses in it. This was one heck of a tall order to fill. Stainmaster was being flooged daily for $12.95. One of the retailers paid their installers $10.00 an hour, $15.00 for a real good installer. Another retailer was the oldest fooring store for that town, and they were all simply punishing each other on price.

We trained 5 of the retailer's installers over a week. These guys all had a minimum of 10 years as installers, not helpers. Then we trained the sales staff over another week. We finally helped with the advertising for the store owners, not allowing anything to be put out over the air, written or said to the public without a thumbs-up from us.

Here's what happened. While the competition was killing each other on price, this retailer was inviting people to come view their Crossely E-MarkIV collection starting at $54.95 a square yard. They also informed the listening public that they had Certified installers who had just graduated the Orcon TQM training program. The sales staff, understanding that 80% of the folks that went to purchase carpet were being undersold, educated their potential purchasers about the features, benefits, quality and value of the products they we viewing.

Here is the net result of that program. This retailer, in a mature market, in their first year of buisness, against 4 other retailers servicing a population of 29-thousand customers, and paying their installers far more than anyone else, did 1.2 million in sales coming out of the blocks. Their sales doubled the next year. Installers from the other stores started to look for work with this retailer. This is the very formula I will use to open my retail establishment in 2 months.