While competition from home improvement stores will persist, the upturn of the housing market will boost overall demand for floor coverings.
Los Angeles, CA (PRWEB) September 16, 2013
Sales hit the floor for operators in the Floor Covering Stores industry in the five years to 2013. Professional contractors and homeowners typically purchase industry goods during new residential construction and home renovation projects. Therefore, significant declines in housing starts and remodeling activity following the housing market collapse caused demand to plummet. Consequently, revenue is expected to decline at an annualized rate of 4.3% over the five years to 2013. Since 2010, however, demand conditions have slowly improved, with the economy gradually strengthening. According to the National Association of Home Builders, remodeling sentiment has steadily grown over the past two years. Additionally, housing starts increased 29.0% in 2012 and are anticipated to rise another 25.0% in 2013. As a result, IBISWorld projects revenue will increase 0.8% in 2013 to total $16.5 billion.
According to IBISWorld Industry Analyst Maksim Soshkin, "In the past five years competition from home improvement stores, such as The Home Depot and Lowe's, has held back the industry's growth." By leveraging their size, these national retailers have achieved significant cost savings on comparable products and passed them down to consumers in the form of lower prices. As such, home improvement stores have been increasingly attracting customers away from industry retailers, pressuring industry revenue. As operators reduced their price markups to remain competitive, the industry's average profitability declined. "Such poor industry performance and high competition has caused many underperforming firms to exit the industry," says Soshkin. The number of enterprises is expected to decline at an annualized rate of 3.2%, from 22,188 in 2008 to 18,903 in 2013.
On the heels of the economic recovery, IBISWorld forecasts steady growth for the industry in the five years to 2018. While competition from home improvement stores will persist, the upturn of the housing market will boost overall demand for floor coverings, thus benefiting the industry. Consumer confidence and disposable income are forecast to rise; consequently, revenue is projected to increase over the five years to 2018. Going forward, the industry will face higher material costs, which, when combined with rising competition, will force operators to consolidate to salvage profit margins.
The Floor Covering Stores industry exhibits a medium level of concentration, with major player CCA Global Partners dominating the industry. The remainder of the industry is made up of an overwhelmingly large number of small and privately owned companies.
In recent years, many of these small operators have merged with other players or exited the industry altogether, increasing concentration to some degree. To this end, the number of firms is expected to decrease in the five years to 2013. Low industry profitability has caused this drop in participation. Many stores found it difficult to sustain their businesses because the housing downturn significantly reduced sales, home improvement stores intensified competition and prices of inventory remained volatile. As such, many smaller players have consolidated to achieve the benefits of size (i.e. the ability to purchase more goods at a lower price per unit, more negotiating power with suppliers and enhanced brand recognition). IBISWorld projects that the industry's consolidation activity will continue through 2018, due to improving economic conditions.
For more information, visit IBISWorld’s Floor Covering Stores in the US industry report page.
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IBISWorld industry Report Key Topics
Establishments in the Floor Covering Stores industry retail carpets, rugs, tiles and vinyl flooring. Most operators manage sales and administrative activities, such as customer service, product merchandising, advertising, inventory control and cash handling. Some operators also offer installation or repair services.
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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