Sears covers the marketplace with floor store format

Home Channel News, Oct 23, 2000 by Anita Stackhouse-Hite

Expansion beyond the test stage will place more specialty outlets in areas outside of cities

HOFFMAN ESTATES, ILL. -- Following a successful early run, Sears is expanding its test of a free-standing floor-covering store format.

The year-old test, which began last November in Klamath Falls, Ore., has now grown to 13 stores, with 12 more slated to open by December. Once all are open, Sears will have units in Oregon, Texas, Virginia, Missouri and Minnesota.

The 5,000-square-foot stores offer brand-name flooring and carpeting from Wilsonart, Armstrong and Congoleum. Take-with-you blinds by Hunter-Douglas and Levelor, as well as vacuum cleaners and accessories, will be available in some markets.

Unlike Sears Hardware stores, which are company-owned, Sears' marketing strategy for the floor-covering business is to expand through an independent dealer format that offers entrepreneurs the opportunity to own and operate their commission-driven stores without having to pay franchise fees or royalties to Sears.

Owner/operators are becoming part of Sears' 750-dealer network of store operators in small communities around the country, an approach that gives them the ability to order from the retailer's mammoth inventory and burgeoning online ordering network.

"It's a matter of convenience and demand," said Tom Nicholson, Sears' director of public relations.

"For the most part, our freestanding stores are operated outside of major markets in small rural areas. Instead of having to drive 50 miles to 100 miles to get their floor covering or take-home blinds at a full-line Sears store, as many of them do now, consumers can find the merchandise they need much closer to home," he said.

In forging a niche outside of the major markets, Sears hopes to regain some of the market position it has lost over the last 30 years. Three decades ago the retailer's traditional department stores ruled when it came to flooring, and Sears was solidly entrenched with 9 percent of the flooring market. By 1999, however, home improvement retailers accounted for nearly half of the $6.8 billion in sales posted by the top 50 U.S. flooring retailers.

Still, Sears' expansion comes as the floor-covering business is emerging as one of the hottest areas for home improvement sales.

Home Depot, which is Sears' biggest competitor in the category, launched its own free-standing flooring store concept July 12 when it opened a 45,000-square-foot unit, located in Plano, Texas. The store has an inventory of 15,000 floor-related items and accessories, including carpeting, area rugs, ceramic, and wood and vinyl flooring. The concept, called The Floor Store, takes the home improvement giant's commitment to floor coverings to a new level, no mean feat considering that the company is already ranked No. 1 on Floor Covering Weekly's Top 50 list of residential flooring dealers in the United States with flooring-related sales of $2.1 billion.

The annual list ranked Lowe's second with sales of $750 million, specialty chain Flooring America third at $725 million and Sears fourth with $387 million.

Undaunted by Home Depot's lead, Sears is arming itself to compete more aggressively in the floor wars.

"There are a lot of experienced carpet and flooring people out there who would like to own and operate their own business," said Bill Rudolph, Sears' dealer store representative. "Our floor-covering stores provide a unique opportunity for them to do so without the financial headaches associated with franchising."

According to Rudolph, one of the more appealing elements of the Sears flooring dealership-owner opportunity is that individuals earn commissions on the merchandise they sell, but they are not required to pay any franchise fees. Each owner is responsible for leasing or buying a facility and for operational expenses such as those incurred to hire and train employees. Payroll and insurance are included in the owners' responsibilities.

"They have access to our extensive inventory and online ordering network, in addition to management support and Sears training programs," Rudolph said.

Dealer store owners can expect to shell out an initial investment of $65,000 to $130,000 plus the cost of leasing or building space. Sears assists in finding a suitable location, with cost being determined by market requirements.

"We're still in the infancy stage of things with our format," Nicholson said. "[But] this format has been so very successful for us in the past, it was almost a natural to apply the principles of it to the specific merchandising of flooring. And, even though we have 13 freestanding [flooring] stores with 12 more slated for completion by the end of the year, we consider them all part of ongoing testing."