Even with dealers in some markets experiencing relatively high sales volume, now is a very challenging time to be in flooring retail.
Box stores and online discounters continue to create downward price pressure, and many local retailers attempt to compete by cutting margins and using cheap-price advertising. However, by using the right strategies, getting margins of 45% – 50% or more is completely doable. I spoke with Danny Harrington, VP of Product Strategy for Galleher, about strategies to generate high margins and referrals.
I work with dealers every day helping them get high-margin customers, and a big key for doing that is creating differentiation. What advice do you have for retailers to create differentiation?
Retailers are getting squeezed by companies like liquidators and the big box stores. We encourage our retailers to learn how to sell high-end because that’s where they’re going to continue to have open space in the market. For example, special products with advanced finishing techniques and hand texturing… Products that previously were more exclusive to very high end are becoming more available at prices that are friendly to a local retailer. But it’s still in a realm of fashion and price that the big box stores are not occupying at all.
I teach dealers that if they don’t create differentiation they’re forcing their customer to buy on price. If she sees three wood floor options that look similar (in her mind they’re the same thing), why should she pay more?
That’s why education is key to whatever product you’re selling. We do our best to educate the retailers about product features so that they can sell against a lower priced item found at box stores and discounters. Take wood, for example. If they go online and educate themselves about oil finishes and sourcing oak in Europe and the differences between Russian oak and French oak and some of those finer points, they can use [that knowledge] to help upsell the products in their showroom.
What are your thoughts on the importance of referrals?
Flooring is now a referral business. It’s everything. That really speaks to the importance of service, which is where retailers have the ability to differentiate themselves. The retailer can sell the benefit of high-quality installation, and having that accountability under one roof. Plus there’s that extra level of wow factor if they follow up and visit the home later with the cleaning product that the customer is supposed to use. Those little touches with the customer that a retailer can do, that the big boxes don’t do, are what creates that referral business.
You and I think a lot alike. We train our dealers to bring a gift basket after the installation and include cleaning products.
While you’re in the middle of a project with a customer the little things, like calling them back quickly or answering your phone, are critical to getting that referral business. Unfortunately, a lot of dealers don’t have that serious of a commitment to customer service. As this industry evolves that’s the only thing they’re going to have to differentiate themselves.
The average level of service in flooring retail is mediocre at best. By following your suggestions retailers have a quick shortcut to creating huge differentiation.
Unfortunately, a lot of retailers are still of the opinion that if they don’t hear from someone after the job is done that’s a good thing. If they have no contact with the person after the floor is installed, they’re happy. I can understand that emotion, but that’s not good for long-term business.
I encourage you to pick at least one strategy from this interview and implement it right away so you can begin generating higher margins and referrals. I hope you found this helpful. If you have an idea for a future interview, drop me an email.
To Tons Of Customers!
Jim Augustus Armstrong is The “Coach”
Jim Augustus Armstrong is the President of Flooring Success Systems, a program that equips dealers to double their profits, cut their work hours in half and beat the boxes! Many dealers have totally transformed their businesses and their lives for the better after joining Flooring Success Systems.
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