We often like to say that we furnish everything on a project, from the roof to the floor and everything in between. But how many of you furnish floor coverings? Perhaps more than you might think. I’ve been associated with a number of LBM dealers who are deeply involved in floor covering, from national players to independents. This is an often overlooked segment of our business that we as an industry let get away from us years ago.
There are three models for floor covering: new construction residential, residential replacement, and commercial. They all have distinct operational modes, from the type of salesperson needed to the operational and installation support required. This is a good business with high demand, low inventory requirements, and excellent margins. The other side of this is that it is a people-heavy business and carries with it the expectation that you will install everything you sell. Let’s look at those issues individually.
Low inventory demand: When I was a kid, my father owned a carpet business. I remember crawling over rolls of carpeting, never giving thought to the fact that dad “owned” all this stuff. On our side of the street, we typically don’t “own” large quantities of inventory; with distribution the way it is, there really isn’t any need to have a warehouse stocked with tons of material. But there are material requirements—padding, adhesives, installation materials, etc. Most product is ordered on a needed basis and is readily available from a vendor’s warehouse very quickly, typically within a matter of days.
People requirements: Not only do you need a cadre of sales professionals who are well-versed in flooring knowledge (and no, your OSRs can’t do this too), you will need a support staff to complete the job. Somebody has to be able to visit jobsites regularly, measure for flooring, and determine the best layout for that flooring product—seam placement, grain of the product, size requirements, etc.
In addition, you will need someone to coordinate with the installers on a daily basis. This person must be a master at logistics and scheduling. It doesn’t hurt if they are an expert at the product as well. You have to match the installer with the product being installed. In our case, it’s not unusual to have three or more install crews working on a larger project—hardwood, carpet, laminate, ceramic, etc.
Profit expectation: In an industry where we get excited over 23% to 25% gross margin on product, the flooring industry expectation is in the 38% to 45% range. While this seems like a fantasy, remember the people equation in this model. This is a service-heavy business and requires specialists at every turn—they don’t come cheap. While inventory, warehouse space, and equipment needs are low, they still exist. So that 38% to 45% is mandatory to maintain strong performance.
Cost to entry: It’s relatively low. You will need some specialized equipment to move and store large rolls of carpet and padding. In addition, you will need a large slug of open floor space for the installers to roll out carpet and pad to pre-cut for the installation. Other than that, not much outside of your current operations will be required. Most installers pick up material at the store and deliver it to the jobsite, with the possible exceptions of ceramic tile and hardwood flooring. So again, nothing outside the boundary of your day to day business.
Bottom line: Good business, significant profit potential, low cost of entry. Paramount to this is finding the right people and giving them the latitude and support to do the job.