By Steven Feldman
(First of two parts)
Desert Ridge, Ariz.—The relationship between Mohawk and its Floorscapes retailers is truly symbiotic: Dealers commit between 70% and 80% of their showroom to Mohawk products, and Mohawk provides a blueprint for profitability and, with it, the requisite tools and services, along with differentiation in product and merchandising.

That could not have been more evident at the recent Floorscapes convention here, where dealers gathered not only to see what’s new, but to also get better at what they do. The latter is an initiative that began in earnest at last year’s convention with mandatory sessions focused on growing profitability and sales. Topics dealt with financial and cash flow statements, and how to care for customers. Then Mohawk conducted field business initiatives throughout the year where retailers could look at their operations and compare to what other dealers were doing. These classes in financial improvement laid the groundwork for this year’s educational initiative: measuring and benchmarking.

According to Manny Llerena, vice president of retail sales, most dealers do not truly understand how well they are doing regarding any aspect of their business. “They have nothing to gauge that against,” he said. “So we felt the best way to provide them with a tool of measurement was to offer a Web-based system where they could input their financial information that is strictly confidential and do it in a ‘turbo tax’ type of format, so everyone is inputting the info the same way.”

In a session titled “Your Compass to Greater Profitability,” Mohawk requested all Floorscapes dealers input some important 2006 financial and operational metrics by Dec. 31. Mohawk will then provide them with a tangible report card on how they compare to their peers in terms of sales commissions, rent expense, advertising expenditures, gross margins, sales volume, net profit, etc. “Not only will they be able to compare to the masses, but they can compare to the 50 dealers that look most like them in terms of size, number of stores, average sales volume, size of community, product mix (hard vs. soft surface), segment (builder/residential/commercial), number of employees, etc.,” Llerena said. “We start siphoning all these dealers so we get a ‘50 closest to you’ fit.”

Why is this important? With the outlook for a challenging 2008, a retailer can look to reduce expenses and raise profits by making changes to the gaps between his financial results and those of his most profitable peers. Jeff Lorberbaum, chairman and CEO, noted that discretionary income is being squeezed and consumers are postponing remodeling projects. Therefore, it is imperative that retailers become operationally sound by controlling and maximizing their margins, offering exceptional customer service so people want to be in the store and maximizing strategic partnerships, such as those with Mohawk.

Tom Lape, president of Mohawk Residential, noted it is the company’s responsibility to work with Floorscapes retailers as a partner in profitability, especially given the importance of these retailers to Mohawk. “Floorscapes retailers are our most elite dealers,” he said. “This is the group that has tremendous loyalty to the Mohawk family and does an incredible job of bringing our products and programs to market. In fact, we are getting our highest growth rates in hard surface from our Floorscapes retailers. Part of it is our emphasis, but another part is they are taking it to their showrooms.”

Lape noted that it’s more than about a floor space commitment. “Commitment to the merchandising theme is step one. With that is display and fixturing, and if you have that much space, by default that much business is being committed to Mohawk.”

With that said, Lape acknowledged Mohawk is showing some of the most innovative products, styles and designs in virtually every floor covering surface. “But we also extend the relationship into training in best practices so dealers not only come away with terrific information on product but insightful and hard hitting information on the best practices of their peers in the retail trade. We really believe when we get to what Floorscapes is about, it’s about commitment from the retailer to Mohawk, but also learning how Mohawk can become better about helping the consumer and improving profitability.”

According to Llerena, Mohawk is approaching this profitability training as a long-term objective. “We are focused on the profitability of a dealer and the customer care parts of their businesses and continue to highlight training and services to improve those.”

It seems to be working. At this convention Mohawk saw 92% participation of its top 200 Floorscapes accounts.

“That’s slightly better than in years past,” Lape said, attributing the turnout to the fact they realize one of the fundamental tenants of success in Floorscapes is participation in member conventions.