At a GlanceName: Touch of Color & Big Bob's Flooring Outlet |
WFB's Andrew Averill spoke with Scott Appel. Appel is co-CEO of Floors and More, a buying group that owns nationwide brands Big Bob's Flooring Outlet, Floor to Ceiling and Floors and Kitchen Today. He is also co-founder and co-CEO of Touch of Color Flooring and Touch of Color Design Group, which provide floor coverings to industry professionals, as well as the consumer-focused Big Bob's Flooring Outlet of Central Pennsylvania.
How important is hardwood to your businesses?
It has taken over first place over time. Carpet used to be first. We're mostly a builder business now. Sixty-five percent of our business is with builders. Post-recession, builders are building bigger houses and are putting more hardwood in instead of vinyl, so hardwood is by far our No. 1 product category in total dollars.
Scott Appel, co-CEO of Floors and More
What trends are you seeing?
The Northeast used to be a huge solid market. It has slowly but surely turned into an engineered market here in Pennsylvania. People used to buy hardwood by the pound and now, slowly, they've started to realize if you want something wider, you really need to go with an engineered product because there's a big change in humidity and temperature between the seasons.
What mistakes are retailers making?
The box stores are getting really good at floor covering as a category. It's not accurate anymore for a dealer to say, "Well, the box stores don't service," because they're actually getting better at service, too. Dealers need to look in the mirror and see how they can be better. If you're not going forward, you're going backward. It's a zero-sum game in terms of market share. The box stores are taking an increasing piece of that pie, especially with this new wave of buyers coming through—the millennials. Their buying habits and preferences are aligned with how the box stores like to sell.
How's that?
Millennials go online, educate themselves, watch YouTube videos, go on social media and get recommendations from friends and family and coworkers, then go to the box store with a general idea of what they want. The box stores have started to make it very easy for millennials to hunt down the salesperson to say, "I want to order this." The box stores are not good at selling, but they're good at making it easy for people to buy.
How do millennials compare with other generations?
The Boomers loved going into a traditional floor covering retailer for a full-service experience—being educated by the sales associate. Those days are gone to a certain degree. We have a savvy, educated buyer now. Millennials have more spending power or are at least on par with the Boomers. They're the generation to watch.
How do retailers attract millennial money?
You need to have a good website; it can't be one from 1997 that looks like a bunch of business card screenshots. You have to advertise digitally, whether it be search engine optimization or pay-per-click marketing. We also started to do some retargeting, and that has worked pretty well.
What's retargeting?
If you go on a certain website, the internet remembers you were there. All of a sudden you'll see that website in a banner ad on another website. For example, you come to our website and an ad of ours will follow you for the next 30 days. When customers are ready, they come back. I might pay $1 per click in a pay-per-click campaign, but I pay pennies for the retargeting ads and they're very effective. If you're not doing that, do it.
What else can you do?
You have to be active on social media. Hiring younger folks to work in your store who can relate to millennials is real important. Have a multigenerational sales force. Millennials typically, and people in general, know about new product trends from seeing them on home shows on TV. You need to continue to stay active with your suppliers to make sure you're on the cutting edge.
What's the most efficient marketing product?
Other than word of mouth, online marketing is the best. You get the best return on investment from a combination of pay-per-click advertising, SEO and retargeting.
What's your upselling approach?
It's asking the right questions. How long do you want to be in the house? What's going to help you sell the house when you do sell it? Not 2¼-inch commodity oak strip. With hardwood, it's really easy to get people to upgrade because width, species, thickness, warranty, visual and grading are all things you can use to create a "good, better, best" scenario with a consumer. When you look at it as a fully installed product, the cost difference as a percentage of the whole total is not that much.
Can you give an example?
Imagine this, somebody comes in and they want the cheapest stuff, the 21/4 solid strip oak, right? If that's $2.99 and right next to it is the 31/4-inch and it's 20 cents more a square foot? Well, you know, maybe my cost is 10 cents more per square foot, but with an an extra 20 cents, I make a 50 percent margin. Then they have to install it and fasten it to the floor, they have to use underlayment or glue it, you have transitions, etc., and they're buying it all from you.
How do you price in your stores?
Whatever Home Depot, the box stores or the cheapest guy in the area is priced, at least for the 2¼-inch oak in gunstock and natural, if they're $2.99, then we're going to be $2.89. But in everything else, we're going to be priced the same, if not more expensive. The consumer isn't necessarily shopping you on everything. They're not shopping you on shoe molding, so for shoe molding we pay 10 cents but we're charging a $1 a foot. The consumer doesn't have the time to look at the little things. If you go into Home Depot, you see the 59-cent tile. Home Depot doesn't make a huge profit margin on it, and neither do we. When you load up your cart, what are you putting in it? Grout, moldings, etc. Home Depot makes a killer margin on those.
Have you gotten grief for that? I always hear retailers say not to compete on price.
I disagree. We were up 38 percent in 2015 and 30 percent the year before, and we compete on price. I will take any profit, even a 1 percent margin, but those deals are few and far between. That deal at 1 percent profit margin—what is that person going to do when they leave my store? They're going to tell their friends to go to Big Bob's; they're cheaper than Home Depot. The next couple people that come in, I'm going to have an opportunity to sell them something and make more. What matters is the blended average of your store.
Are those really the customers you want?
Some customers are not good customers. And if someone is a pain the butt, even if I'm getting a 50 percent margin, I won't take them. I don't want to do business with a jerk, but I don't mind if they're tough.
