By Jamie Jones
Dalton (Georgia) Daily Citizen
The United States will continue to be the dominant player in the broadloom carpet market, but domestic manufacturers must keep an eye to the Far East as China’s burgeoning economy continues to expand, a veteran floorcovering executive said Tuesday.“If China decides they want to enter the (broadloom carpet) market, watch out,” said Dan Frierson, chief executive officer and chairman of the board/director of Chattanooga-based carpet manufacturer The Dixie Group. “It doesn’t have to make economic sense. I think we have to be ever vigilant in watching that and seeing what they’re doing, but based purely on what is most likely to happen, I don’t think we’ll be sitting here in two or three years worrying about broadloom carpet imports.”
Frierson and Joe Williams, who has been Beaulieu of America’s director of international sales for the past two years, spoke about “The Challenges of Globalization” during a panel discussion at the opening of the FloorTek trade show at the Northwest Georgia Trade and Convention Center. The show continues through Thursday.
Williams said Beaulieu of America has been successful in exporting its floorcovering products, particularly to Australia and Europe. The main reason? Knowing the markets, he said.
“A product that works in the U.K. isn’t going to work in Germany,” Williams said. “It’s just that simple. You must have people in those countries that understand the market.”
Business is currently “soft” in the floorcovering industry due to a slowdown in the housing market, both in new construction and existing sales, and because of the escalating cost of raw materials. The third quarter of 2005 was the recent high point for the floorcovering industry, Frierson said. Since, the hardwood market is down 25 percent, the carpet segment is down 20 percent and the laminate market is down 15 percent.
“That’s a huge decline,” Frierson said. “We haven’t seen anything like that in our industry probably since the early ‘80s.”
Carpet and rugs are currently 12 percent of the U.S. floorcovering import market, but Frierson said carpet is only a small part of that after rugs, woven and wool products are taken out of the equation. Products such as tile and laminate are much larger components of U.S. imports. Low labor costs make China an attractive manufacturing location, but high costs of shipping and inferior infrastructure are detriments.
“I don’t think you have a critical mass (in broadloom) to build on as you do in the other markets (such as hardwood and tile),” Frierson said. “I still think you have a competitive advantage in the manufacturing of carpet in this country. Half of the broadloom carpet manufactured in the world is done here. No other country has the kind of scale it takes to be highly competitive.”
When asked if a foreign manufacturer could provide a low style product, such as beige broadloom carpet, to one of the large home improvement chains, Frierson said it could be a possibility.
“The good thing about the carpet industry is although Lowe’s and Home Depot are large sellers, they aren’t dominant like Wal-Mart of Target is with apparel,” Frierson said. “There are 20,000 retailers out there that you have to get placement on their floor, you have to service them once you get your product there. It’s a very different kind of business.”
The panel was moderated by Kemp Harr, editor of the monthly trade magazine Floor Focus. Two panel members were unable to attend: Michael Harris, chief executive officer and president of Minnesota-based Faribault Mills, and Richard Williams Sr., president and chief executive officer of Williams Companies.