LAS VEGAS—They may not have a crystal ball but, because of their place in the supply chain, executives from the industry’s largest manufacturing suppliers see things from more of a bird’s eye view as their businesses deal with companies of all shapes and sizes and from numerous points around the world. So when the presidents and CEOs from the biggest flooring companies come together to discuss the economic turmoil everyone is facing, it is a pretty big deal. Throw in the fact this powerhouse panel was not only moderated by CNN’s Gerri Willis, it was the kickoff general session to Surfaces 2009, and it’s no wonder over 1,000 people showed up to listen.
“Prevailing Through the Current Crisis—An Industry Wake-Up Call” featured, Rainer Blair, CEO of Mapei of Americas; Ralph Boe, president and CEO of Beaulieu of America; Tom Davis, president and CEO of Mannington Mills; Tom Lape, president of Mohawk Residential; Randy Merritt, president of Shaw Industries, and Frank Ready, CEO of Armstrong’s North American flooring business.
Willis, anchor of CNN’s weekend business program, “Open House,” and personal finance editor for “CNN Business News,” jumped right into the thick of things by rattling off a list of headlines pointing to an economy continuing to slide down a slippery slope.
She then turned to the panel and asked the panelists what rays of sunshine they were looking at with regard to the future.
Merritt kicked it off, saying, “It’s tough to see any bright spots—even when it comes to pending home sales (Editor’s note: They were reported to be up in December), most will be foreclosures.”
He then rambled off a litany of negatives related to the housing market before joking, “I’m not trying to be pessimistic; that’s just reality and we need to know/see that and not wear rose-colored glasses.”
Boe noted that during the housing downturn in the mid-1970s, the government implemented a tax credit and it helped. “It gave us a boost.” He pointed to the Fix Housing First (FHF) initiative, which is a coalition of manufacturers and other parties interested in getting the government to do something similar, as a positive sign.
Blair agreed, adding that since the peak of 2006, housing is off 73%. “So the FHF is a key issue and can help get things going to stimulate the buyer.”
Davis said there is another group that is not as visible as FHF but working in a similar manner. The difference is the objective is aimed at home renovation.
With daily news reports of massive employee layoffs, company’s closing factories or going out of business, Willis asked what are these leading executives doing to keep themselves and their employees fired up.
Recalling they’ve been through downturns before, Boe said you need to “put on blinders and stay focused on what you can do. Make sure you have the best people in place.”
When it comes to keeping morale up in the face of layoffs, he said Beaulieu asked employees to give up a week’s worth of pay and implemented a rolling program throughout the company. “I didn’t like it, but at least they did not get laid off. This is something that can be done with any sized company.”
Ready said it is important for executives, owners and managers to “maintain a positive attitude around employees so they don’t lose hope.”
More importantly, he stressed, “You can’t compromise what’s important to your customer, such as top-notch service.”
Davis said he believes in taking the Texas Ranger mentality and look at all aspects of the company. Instead of laying people off, there are other measures, such as “freezing salaries, having fewer people travel, cut the company-matching 401(k) contributions. None of these have to be permanent, but they can be done for a period instead of having to cut jobs.”
Lape credited Mohawk’s employees and told the audience to let them help find solutions. “These are innovative people with ideas and they understand the situation. We see volunteerism from our people as they get together. They have done a number of team-based things.”
He added that in these troubled times, “we’re all trying to do the same thing. It’s should not all be about cutting costs, but increasing the closing ratio on those who are shopping as well as trying to get more customers.”
Cutting costs and keeping morale up is one thing, but as Willis pointed out, what everyone wants to know is how soon will the recovery start?
Blair said it is still too early to start projecting when things will turn for the better, “so let’s focus on getting through it. There is a silver lining as I think the [government] stimulus package will bail out some states.”
He also believes it offers opportunities in the commercial sector, namely schools, hospitals and senior living facilities. The investment in social infrastructure is a “great opportunity for floor covering if you shift away from just residential.”
On the residential front, Blair feels opportunity lies in the remodel sector because people “are not moving so they will want to fix up their homes.”
Ready pointed to the credit crisis as the “primary driver” for a recovery. “So depending on how quickly it gets resolved will be a major factor.”
When the recovery does eventually come, Ready warned the audience to be ready. “When there is an upturn following this type of downturn there is usually double- digit growth in the first year.”
Merritt said even though the official stance is the recession started in December 2007, “the flooring industry has been in this for two-and-a-half years. We’re usually the first in and I believe we will be the ones to help lead us out.”
Boe agreed with Ready in the sense that when things turn up it will happen fast. “There is a short pipeline in floor covering and will get filled very quickly once people start buying.”
So, what are some of the key factors with which to look for a recovery? Willis asked, followed by asking the panelists to provide some tips for weathering the storm and increasing customer traffic.
Ready replied the housing inventory is a key to recovery. “As the number goes down we’ll get more people into the marketplace.” He said the current cycle for homes is 10 to 12 months when historically it has been five to six.
Lape noted, “We’ve never been through a recovery without employee growth. So we need to get through all the layoffs first.”
Because there is not much demand, Ready said the key “is to differentiate and make yourself stand out to the consumer. This includes having qualified, professional salespeople and installers and the breadth of product” to capture her attention.
He added the Internet is still an attractive way to drive traffic. “No one owns it. In today’s world you must have a Web site and one that sets you apart as a brand consumers want.”
Boe interjected, “Now is not the time to hide and go underground. You need to be aggressive.” He suggested retailers hold different types of events in their stores to attract people. “Even if they don’t buy anything, they will be aware of you and your products so you will be the one they think of when they are ready to make a purchase.”
Lape reminded the audience little things can add up to make a difference. With that he suggested a goal of closing one extra sale a week, not through having additional people come in but by finding out and correcting mistakes made in presentations that didn’t end in a sale. “This is a tremendous opportunity to add to the bottom line without spending anything to increase traffic.”
Ready noted, “You can’t just advertise and hope they come in. You have to go out and get it, not wait for it to come to your door. Be aggressive and focus on what you can control.”
Blair said one of the goals of Mapei is to be the best. “I want my company to be known for quality and reliability and these are things for which dealers can strive.”
Another opportunity, he suggested, was to “broaden your base,” such as expanding into green products because “all government projects will be this way. Plus, some cities are already requiring the use of these types of materials. These are system-based projects so there is a broad amount of product— quality goods—so there is more profit.”
Lape did offer a note of caution in trying to expand to new avenues. “Don’t spread yourself too thin. Make sure you can execute what your are doing before venturing to a new area. And when you do get into something new, go all the way—commit to it fully.”
Ready added that dealers can use this down time to better themselves to make sure they are ready for when consumers start buying again. One way to do this is “take advantage of your mill and distributor reps. They are trained to help you so let them hold a training class. Use what is at your disposal to improve yourself.”
Lape added, “We all take different paths and methods—in person, Web, installation, etc.— but we can always do more as it’s a never-ending process. So you can’t let your training get stale; make sure it is up-to-date.
Willis gave each of the panelists a chance for some final thoughts.
Ready acknowledged, “It is hard to see anything good, but it will get better. I don’t know when but until it does, be obsessed with getting better.”
Merritt agreed and added, “You have to concentrate on service first.” Beyond that, he said to recognize that “flooring is a great industry and will always be around. I’d hate to be the guy who sells fax machines.”
Lape turned philosophical by noting the word “crisis” in Chinese has a dual meaning— danger and opportunity. He suggested concentrating on the later meaning. “There is a building pent-up demand so be ready for it for it will happen.”
Davis also cautioned not to “confuse brains for a bull market. We all think we’re smart when things are good, but as we found out, we aren’t. You can make money during bad times. There are common threads among better dealers: passion for customer, confidence to always be the best you can be, know your competition better than ever because customers are visiting three to four stores to compare and you need to know what our competitors are doing. It’s not all about price. Finally, choose the right attitude because your employees are watching you. People are dependent on how you see the world during tough times.”
Boe reminded the audience that people are still coming into stores and most of the time it will be a female. “So it may be a longer process to sell, but you have to maintain your focus and professionalism.”
Blair concluded by noting the message to his employees is to stay focused on what they can control. “Turn off the TV once in a while and contemplate your situation and where your business is going. Concentrate on products that move.”
He suggested reducing the number of suppliers a store uses to make better use of delivery trucks by ensuring they are full. “There are lots of trucks out there that are not mine and need to be mine. I hope you are thinking the same way.”