How retailers are contending with price increases
huhhow crazy have there been price increases in the flooring industry? So crazy that earlier this year a flooring retailer placed an order with his distributor for SPC and by the time the dealer received the shipment, several months later, the product had gone through three price increases.
As crazy as that may sound, that’s how the flooring industry stands today. It’s a frustrating time for retailers, especially those with multiple stores and those who don’t have the ability to automate pricing. (Newsflash, suppliers — the vast majority of dealers don’t yet have the ability to automate their pricing.) As a result, the frequent price hikes have added work to the already crowded showrooms buzzing with business, but retailers warn that the rally could be as prices continue to rise could quickly fizzle out.
A saving grace for floor dealers is that most of their walk-in customers are unfamiliar with the price of carpeting as it is such a rare purchase and therefore less affected by the price increases. Still, there’s no denying that flooring retailers are at the very least suffering from the uncertainty in the market.
As Marjorie Benson, President of Friendly Floors, Port Charlotte, Florida, explained: “The price hikes are definitely causing quite a bit of annoyance. At one point I told the team to take all prices off of everything. We are very transparent to our customers Once we’re done re-pricing something, the price goes up again or the freight costs go up massively, so I just cut all the prices out.”
For multi-store dealers, such as John Taylor, who owns Carpet One Floor & Home stores in Florida and a Pro Source, the need to remove prices also comes into play as it is difficult and time consuming to constantly update prices. update throughout the system. “We had to remove a lot of the prices from our floors that were on individual samples and move more towards a price list on a display simply because it’s easier and faster to print,” explains Taylor. “We’re hopeful that because of the retirement market here, people will continue to buy our products.”
Several dealers said they want to automate the pricing feature, which will update prices in real time. CCA Global is encouraging its members to adopt the new program, which they say will pay for itself over time.
Eric Langan, president/owner of Carpetland USA, which has nine locations in eastern Iowa and western Illinois, agreed, adding that constant price increases also make it extremely difficult to margin/protect. “We’ve significantly increased our inventory in an effort to maintain the cost of some of our best-selling SKUs,” he said.
For Mike Foulk, president of Foulk’s Flooring America, Meadville, Pa., the growing possibility of product price increases in transit has eroded margins and become a hurdle to overcome. “Material, shipping, or both have gone up and customers want you to honor your quote,” he said. “It is a huge blow to our margin. We offer a cheaper item if the first choice exceeds the consumer’s budget and/or offer financing to save the sale.”
Adapt to the circumstances
Flooring retailers have a knack for adapting to business conditions and making the best of a bad situation. That applies to price increases; some retailers even say the price increases aren’t necessarily bad. Some dealers have used the raises to their advantage by instructing RSAs to persuade buyers to buy now so that they don’t pay more by waiting.
“My partners and I have completely changed our mindset around price increases,” said Matt Wein, sales manager for Marshall Carpet One Floor & Home and Rug Gallery in Mayfield Heights, Ohio. “We see them as positives and a way to generate more revenue. We adjust our prices on the floor, keep our margins the same and see the bottom line grow. We coached our sales team to use the increases as a sales tool to get customers faster Telling customers that their material costs can increase by 7%-12% if they don’t buy strongly influences their decision to buy.”
What to expect in 2022
Consumer spending, a key driver of the US economy, rose modestly in the fall (up 0.6% in September), although inflation remained at a 30-year high for the fourth straight month and labor costs in the third quarter rose to its highest level in 20 years. Many executives say inflationary pressures will hold up well into 2022, and some floor observers say it will slow the red-hot flooring market.
“Right now, unless freight costs and labor shortages improve, I expect more increases in the coming quarters,” said Jon Dauenhauer, co-owner of Carpet World in Bismarck, ND. I don’t see pricing stabilizing anytime soon. We believe that as inflationary conditions continue to grow, we will see some slowdown due to lower disposable income. Time will tell. At the moment, however, it is not a nice company.”