Tile Industry 2013: Primed for Recovery, Part 1
 
January 2nd, 2013

By Jeffrey Steele

The tile industry has been through a lot the past five years.  Just about anything that could go wrong did, from a mortgage meltdown to a horrific lending environment, from high jobless rates to depressed consumer confidence, from a decline in remodeling work to even bigger plunges in new home starts. But tile manufacturers, distributors and dealers that survived the tough times are now well positioned to benefit from the improving economic climate heralded by many observers.

According to Ceramic Tile and Stone Consultants Inc.‘s Donato Pompo, citing findings from Catalina Research, ceramic tile is leading the floor covering sales recovery, as tile  manufacturers leverage the rebound in existing home sales and housing starts.

In the third quarter of 2012, U.S. ceramic tile sales are estimated to have grown by 9% in dollars and 9.2% in square feet.  This increase reflects an 11% increase in U.S. housing demand during 2012, led by a 28% increase in housing starts in the third quarter. Concomitantly, private non-residential construction spending rose by about 19%.

Thanks largely to improving designs in wood-look planks, glass, and stone looks, ceramic tile sales have outpaced those of overall floor coverings.  Ceramic tile is also more price competitive.  In the third quarter of 2012, overall average floor covering selling prices increased by an estimated 2.9%, while average ceramic tile manufacturer selling prices were level with the previous year.  The result is that ceramic tile accounted for 13.1% of total U.S. floor coverings manufacturer dollar sales and 12.9% of total square foot sales, up from 11.4% and 10.6%respectively in 2009.

“Ceramic tile is expected to continue to gain share in the U.S. floor coverings market in 2013, since builder purchases and commercial sales are leading the recovery,” Catalina Research states.  “Ceramic tile manufacturers and marketers will benefit from these trends, since this sector is more reliant on the builder and commercial markets than other floor coverings industry leaders.”

(Note: Ceramic Tile and Stone Consultants, Inc. is releasing the new updated Catalina Report on Ceramic Tile in December.  It is available from the organization’s website at www.CTaSC.com.)

Hopeful harbingers

New home construction posted strong numbers for the entirety of 2012, says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University in Cambridge, Mass.

What’s more, it appears that 2013 will be a strong year for housing on a percentage basis.  Baker says 1 million housing starts could be registered in 2013.  Still, based on such factors as household formation, the potential is for 1.6 or 1.7 million new housing stars a year.  “So even with the strength of the housing in 2013, we’re still a few years away,” he says, suggesting it may be 2015 or 2016 before housing comes all the way back.

Baker predicts that based on the “good but not great” 2012 mid-single-digit growth, 2013 could see high-single-digit or low-double-digit growth in remodeling.  Commercial growth, which generally lags residential growth, will not be as robust.  “We’ve seen some softness in the commercial market over the fall,” he says.  “We foresee some growth in commercial, but not matching residential.  It will stay in the mid single digits.”

Tile should benefit from growth in all these areas, but Baker cautions that it is often viewed as an upper-end product.  “Now, with the crash we saw in house prices, we’re going to see a little less on the upper end of the market,” he adds.  “Most new homes built will pay a bit more attention to affordability.

“Design-build contractors are reporting they are not seeing the big projects they saw a few years ago.  Consumers are not doing the real major kitchen and bath remodels they did some years back.  They’re looking at [kitchen and bath remodeling] on a product-by-product basis, not a gut remodel basis.”

Overall, Baker says tile distributors should be guardedly optimistic.

“They should see a better year in 2013,” he predicts.  “But they need to track consumer needs a little better than they have in the past.”

Challenges and opportunities

For distributors, manufacturers and installers, the challenge is to manage their likely growth, even if it is slow growth, Pompo says. “Not having enough qualified employees can be worse than having too many, particularly if the quality of services, products or work suffers.”

Problems cost money, time and reputations.  The challenge is when to start hiring, and making sure time, money and effort is expended in training employees to be more effective.  The fastest way to increase sales, production and profit is through training employees so they will be more competent, productive and motivated, he asserts.  Today’s customers buy from providers they feel are the most knowledgeable, provide the most pertinent information, and demonstrate the greatest reliability.

“The opportunity today is the many online training resources such as CTDA Online that can provide instant 24-7 access to training to educate and help make salespeople more effective at their jobs, and to educate tile installers [in] the industry standards that will help them avoid costly failures,” he says.

Pompo stresses that a good, informative website is a necessity these days.  Well-designed websites that contain considerable information can generate significant numbers of leads and sales.  Today’s buyers are going to the Internet first to pre-qualify companies they want to visit, purchase from or call for a quote.  ”If the website isn’t informative or doesn’t show a wide variety of products, and if it isn’t easy to use, they will be gone in a flash,” he says.

“Remember that the website is a representation of your company, and you will be judged accordingly.  The Internet is a great tool for generating business, so the opportunity and challenge is for distributors, manufacturers and installers to utilize the Internet and make it the primary tool to generate business.”

 

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