External competition and low demand have been putting pressure on growth
Los Angeles, CA (PRWEB) June 06, 2013
In late 2008, the Canadian economy fell into a recession, causing demand for many goods and services to decline. The relative strength of commercial banks kept the country from experiencing declines equal to those being felt in the United States; however, it did not shield the housing market from dipping. As a result, the Floor Covering Stores industry's revenue, which correlates strongly to the health of the housing market, declined at an average annual rate of 0.2% to $2.0 billion over the five years to 2013. “A large portion of industry revenue is tied to new home construction, which declined over the period due to a drop in housing starts. With the housing market floundering, home developers stalled projects, causing demand to drop. Furthermore, rising competition from large home improvement stores has forced the industry into a consolidation phase, hurting profit and limiting revenue,” says IBISWorld industry analyst Eben Jose. As a result, revenue is estimated to decline 6.8% in 2013.
The Floor Covering Stores industry has a low level of concentration. In 2013, the largest player is CCA Global Partners. In the five years to 2013, the industry has undergone some consolidation, as many of the industry's smaller players have been unable to keep their doors open when the country fell into a recession, continues Jose. According to Statistics Canada, the majority of enterprises are expected to be small, employing one to four people. The Home Depot and Lowe's entered the market over a decade ago and have slowly eaten away at this industry. These retailers use their size to command low prices from manufacturers and wholesalers, which they then pass on to consumers, who have not been able to resist a bargain with the unsteady economy. Furthermore, they often stock more products and offer an all-in-one shopping experience that this industry's operators have had trouble matching. Consequently, many independent floor covering stores have been forced to close or have been acquired by chain stores, causing the number of enterprises to decline at an annualized rate of 2.6% over the past five years.
Profit margins have also slumped over the period, caused by a combination of external competition and low demand. Industry operators have had to increase promotional events and discount floor covering products to draw customers into their stores, which have squeezed margins. In response, many operators have decreased wages and employment by taking advantage of technologies that automate inventory and payment functions.
In the five years to 2018, external competition will continue to rise; however, a healthier economy will drive revenue growth for this industry. Consolidation is forecast to continue, albeit at a slower rate, as operators try to maximize operating efficiency by using economies of scale to cut variable costs such as labour. For more information, visit IBISWorld’s Floor Covering Stores in Canada industry report page.
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IBISWorld industry Report Key Topics
Establishments in this industry retail carpets, rugs, tiles and vinyl flooring. Most operators handle sales and administrative activities, such as customer service, product merchandising, advertising, inventory control and cash handling. Some operators also offer installation or repair services in addition to their retailing activities.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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