The National Wood Flooring Association (NWFA) convention was held last week in San Diego. The U.S. government made decisions about the imposition of anti-dumping duties on Chinese flooring. The business climate is... improving? I'll have more to say on all these subjects today.
The NWFA meeting was in one of America's most beautiful cities, San Diego. The weather was extraordinarily nice - warm sun in cool air, my favorite. I know this city well, since both my sons graduated from college here. We have visited many times, waving goodbye to all that tuition money. Plus, one of boys still works occasionally in San Diego, for the San Diego Padres baseball team.
So, I need very little encouragement to head off to San Diego! But, interestingly, judging from the apparent attendance, my enthusism was not shared by many others. The convention itself was held in the SD Convention Center, a huge complex; and being there was like being "a BB in a boxcar." The steady NWFA stalwarts had their exhibit booths, but there were precious few of them. The entire show floor could be easily traversed in a half day - no need for a three day hotel room unless you were tied to the organizer's schedule of events on various different days.
Even worse, the show attendee ranks were very thin! The numbers reported from the floor were all over the map. Officially, according to the NWFA, attendance was 1900. Boothed vendors I talked with had heard numbers from 700 to 7000, but many concluded that however many there were, they were all somewhere else!
But, wait, it's not all bad. As an attendee myself (one of the official 1900), I enjoyed the show a lot. There were so few attendees in the aisles, I got to chat with virtually everyone, for extended periods if I wanted. I ran across friends in the aisles that hailed me, or me them, for catchup conversations. This never happens at bigger shows, where the aisles are stuffed, and you never see anyone you know without an appointment.
I have learned in the past several years how to decode the official and unofficial commentary on tradeshows, depending on who's talking. My favorite is the comment that, "while attendance was low, enthusiastic vendors exclaimed that the attendees were serious about business!" I have learned this is code for "how do I explain to my boss that we spent all this money, only to generate this lousy number of business leads?"
I also heard the opinion that the sturdy exhibitors must be the long-suffering survivors of the last several years of lousy business, and therefore they must be the most important companies. There's probably truth there, but not necessarily the obvious truth. More than one long-term "survivor" vendor told me they were there as a last-ditch effort to wring some value from the trade show strategy; and if it didn't work again this time, they were signing off of trade shows forever.
That attitude doesn't sound much like the execution of a clever long-term marketing strategy, but rather marketing exhaustion at the end of the game. I have a hunch the trade show industry at large is in for tough times ahead.
Unlike at the Surfaces show in February, the Chinese contingent at NWFA was largely gone. They appear to have awakened to the fact that their business model of cheap imported flooring in massive volume is under severe attack, and the expense of the NFWA trade show was good money after bad. Several American friends exhibiting Chinese product allowed as how they were all set up now in other, non-Chinese production venues, and ready to fill the supply vacuum created by the U.S. government. Furthermore, many have now confirmed to me that the government action left the window of opportunity open for them and everyone like them (see my previous blog on this very subject) to "beat the tax," and that the stateside inventory of Chinese-produced flooring is now absolutely huge. I'm told literally thousands of containers of flooring have been imported in the past couple of months, and the coastal storage facilities are so full of Chinese flooring that stocks are being temporarily stored in the Midwest!
So, perhaps the backers of the duty action will have a new, different, and maybe worse problem - an anticipated disappearance of cheap Chinese flooring may become a deluge of even cheaper Chinese flooring, as massive inventories in all the wrong storage places get liquidated. The best laid plans...
Still, one has to shake his head at the unintended consequences of virtually any action with scale. The looming prohibition of Chinese flooring production for the U.S. begs the question of where to find equivalent production capability, both in required quantity, quality, and low cost? These are not easy tasks, or they would have already been accomplished. The leading candidates are Vietnam, Malaysia, Taiwan, and Indonesia. Each has its own problems, ranging from cultural mindsets that misunderstand quality issues, to lack of proper infrastructure, to "official" preferences for higher levels of product manufacturing like semi-conductors, to significantly higher costs of labor.
The odds-on favorite would appear to be Indonesia, where the drawbacks are fewer and less severe, and where a wood-based economy has thrived for years as the foremost world producer of hardwood plywood. Ironically, the Japanese earthquake has pressured the world production capacity for plywood to the extent that excess capacity to make wood flooring may be unavailable for many months or perhaps years to come.
If Indonesia is realistically out of the picture, then the second or third choices will either raise costs considerably, or lower quality considerably, or both. Yes, Anderson Flooring and the gang may get some more business, and I hope so, because that will favorably impact our company Plantation too. But I suspect the importers, overseas producers, and mostly consumers are unlikely to roll over quite so quickly. They will continue to buy low price - and be unaware of the tsunami of bad quality flooring likely to soon be coming ashore.
My final topic today is business conditions...improving? It seems so - the inquiry rate has been prodigious, and the closing rate is on a steep vertical climb. I assume others in our industry are like us - we've been working six days/week, and ten hours/day, just to get the orders out. We're the guys frustrating President Obama - we have the work, but we refuse to hire new people for fear we'll have to lay them off suddenly. We, like others, simply don't trust our eyes and ears. We can remember very well when we thought things were running along great, and then they weren't!
But we're getting close to hiring again. All I need is for the order book to lengthen a bit more, and we'll be forced to get more production capacity. Interestingly, the growth is not residential, where I thought it would be. It's commercial. Our line of boutique commercial wood flooring we introduced last year is getting legs. The product is unique in that we'll design and make it to the project spec, rather than throw out numerous SKU's hoping to hit a market. Our biggest challenge is informing the A&D community that this customization can be reliably done at all, and at a cost their projects can afford!
So, as we sit today, business has been improving for several months. At least in our industry, we seem to be at the tipping point, where further improvement will create conditions that must be addressed for expanding through hiring and additional investment. Is it real? Will it hold up?
Sure hope so!
No comments:
Post a Comment