Is 2023 the year when retail finally faces the music – that the pandemic-induced wave that has enriched so many is over? Or will dealers’ entrepreneurial savvy prevail once again – inflation and labor shortages be damned?
If history is a lesson, don’t bet against the flooring industry. While most leaders recognize that economic uncertainty is likely to contribute to a weak first quarter (compared to the previous year), not everyone agrees that 2023 will be a bad year. “I don’t believe in the recession at all,” said Phil Koufidakis, president of Baker Bros., which has six locations in the Phoenix market. “The economy is still good and while things will stabilize appropriately, I just don’t see any tanking.”
His suggestion: “Stay lean, mean and aggressive.”
For some dealers, setting up systems to maximize profits while minimizing operating costs is a smart strategy to stay successful even in tough times. Having a good reputation in the market can’t hurt either. “One of the benefits of being a well-established brand with community roots is that our customers trust us,” said Sam Locher, vice president of business development and marketing for AJ Rose Carpets & Flooring, which has three locations in Massachusetts. “We expect the first quarter to continue as we have seen so far in the second half of 2022: people who have the resources will continue to invest in their homes with more expensive goods and those who need to replace floors will look for value. ”
There is consensus among retailers that 2023 will only suffer compared to 2021 and 2022 because they were abnormally good years impacted by the pandemic. “We brought a lot of business forward in 2020 thanks to the home improvement boom caused by COVID-19 and the government stimulus measures of early 2021, which means there will be fewer sales opportunities in 2023,” said Eric Langan, president / owner of Carpetland USA (The Langan Group), with nine locations in Iowa and Illinois. Which is not to say that Langan will throw in the towel in 2023. As he put it, “We will continue to advertise and aggressively promote our business and continue to train our RSAs on how to sell in a tough sales environment. It will only get harder and more competitive to do business.”
In difficult times, it’s best to focus on the things you can control. So says Sheldon Yoder, owner of Budget Carpet and Flooring in Columbus, Ohio. “I’ve always thought that if you deliver quality work with quality service, you’ll always have customers. Even in a slow economy, there are always customers who want great products and great service – you just have to work a little harder to find them.”
Based on how the fourth quarter ended, which was flat for many, several leaders don’t expect an immediate recovery once the calendar rolls to 2023 as concerns about inflation and budget constraints surface. “Unless people absolutely must have new floors, they put it off and use that money for Christmas,” says Jim Mudd, president of Sam Kinnaird’s Flooring, Louisville, Kentucky. better – partly because it’s that time of year in Kentucky – but I believe March will take off. We will continue to advertise aggressively as there will be pent up demand in March.”
Cold-weather markets like Michigan tend to start the year slowly, even when times are tough. For Independent Carpet One Floor & Home, Westland, Michigan, owner Cathy Buchanan said she’s not worried about a slow start. “Here in Michigan, we don’t normally see a lot of activity until late February and into the spring,” she said. “[In the meantime]we definitely need to generate new excitement through direct mail, more social media and email contact with our customers.”
The standout among retailers expecting a quick start is Typhannie Harker, owner of Carpeting by Mike in Somerset, Wisconsin, who commented, “Our first quarter is looking good with the holiday spill over. We already have a busy January ahead of schedule and are excited about the potential of the first quarter.”
Promising signs
While there are certainly economic headwinds for retailers, there are also headwinds to help them. For starters, millions of homeowners are locked into fixed-rate mortgages and unaffected by rate hikes. In addition, dozens of these same consumers have enjoyed huge increases in the value of their homes over the years, and many have cash to spend. There are also millions of older homes (40 years or older) that need work. Or like Baker Bros.’ Koufidakis said: “People who have money have money and spend. Slowing home sales mean positive signals for more renovations in existing homes. Those homes are well above water and plenty of equity is available – if not just cash for those remodels.
His advice to consumers: “Invest your money in your home and not in the [stock] market.”
Carpetland’s Langan said diversification in business — a solid mix of housing replacement, new construction, multifamily and Main Street commercial — is key to navigating the ebb and flow of business tides. “The good thing about flooring is that if you see a new roof being built, there will be a need for flooring underneath,” he said. “Business is there to be done; there are still many consumers with a lot of money saved who want to renew and upgrade their home. The strong, well-equipped and well-funded retailers will thrive, while weaker retailers will struggle and/or be left out.”
History has shown that successful flooring retailers stay on track or increase engagement in difficult times by being proactive rather than retreating. “The brands that continue or even increase their ad spend see higher returns than those that didn’t go that route,” said Mike’s Harker’s Carpet One. “People still have the need and desire to replace floors and modernize their homes, so we advertise when the going gets tough to capture the fewer dollars available.”
Buchanan of Independent Carpet One said she’s grateful to be on the other side of COVID-19 restrictions and will be happy to accommodate a bit of economic uncertainty. “It is much better than March 23, 2020 through May 31, 2020, when we were closed with no traffic, no calls, no business. Today, people are knocking on doors, people are calling, measures are being planned and those who are shopping are serious buyers and are buying expensive items and quality-driven products. We just need to refine our skills and not get too lazy when the next stampede starts.”
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