Carpet Co-Op sees opportunity in market upheaval

Home Channel News, Oct 23, 2000 by Robyn Taylor Parets

Consolidation and big-box competition prompt the franchiser/co-op to map out aggressive expansion strategy

MANCHESTER, N.H. -- Carpet Co-Op of America has the world covered, Literally.

The world's largest organization of flooring franchisers and member-owned stores, Carpet Co-Op, has six retail divisions and a carpet cleaning franchise operation. Carpet One, the coop's largest division, generated sales of $2.6 billion last year. Total co-op sales -- including contributions from all divisions -- hit about $3.14 billion, according to Carpet Co-op figures.

Founded in 1985 by carpet store owners Howard Brodsky and Alan Greenberg, the organization's expansive network includes 1,060 Carpet One members in North America, Australia, New Zealand and Guam. These independent retail members are full-service floor-covering stores that focus on selling to DIYers as well as installers. The company, which has headquarters here and in St. Louis, is capturing about 15 percent of the worldwide market share in this category, by Carpet Co-Op's reckoning.

"We'd like to have more than 2,000 stores and 20 percent market share within the next five years. It's very attainable," said Brodsky, who, with Greenberg, serves as Carpet Co-Op's cochairman and co-CEO. Sandy Mishkin, president of Carpet Co-Op, directs buying and product development from the company's offices in Atlanta.

Carpet Co-Op's core growth strategy is to expand its membership and franchise base by attracting new dealers and acquiring retail and wholesale floor-covering companies.

Earlier this month, Carpet Co-Op announced that it had acquired a "majority interest" in FloorExpo, a company that currently provides 24 residential home-builder members with buying efficiencies for floor coverings and installation materials. The 2-year-old Atlanta-based company, whose founders include a number of former Abbey Carpet executives, generates more than $1 billion in member sales annually, and it is installing flooring into around 1,000 housing units per day, according to the company's president, Tim Joyce.

This merger is a win-win situation for both companies. FloorExpo's chairman, Dave Gheesling, who is staying with the company, said his organization gains "scale" and can provide more comprehensive services by being linked to Carpet Co-Op, particularly as the growing business attracts new home-builder members.

The deal provides Carpet Co-Op with an "immediate lead position" in a new market segment, Greenberg said.

Besides growing through acquisitions, Carpet Co-Op is helping its existing dealers expand. For one thing, the co-op expects its Web sites to open up more market share opportunities, Brodsky said. Carpetone.com and arearugsetc.com, for example, give consumers extensive product information and allow them to order online. The sites also direct shoppers to the nearest Carpet One outlet, increasing traffic in local stores, according to the company.

Another company Web site, Floorlink.com, helps facilitate back-end services for retailers, such as 24-hour ordering.

As far as basic services go, Carpet One provides its members with better buying power, stronger marketing and advertising clout, and training classes and manuals that most small retailers don't have. Members can either retain their own identity or adopt the Carpet One teal green logo, signage and color scheme.

Corporate divisions

Carpet One is the largest of several enterprises that Carpet Co-Op is currently expanding. These include:

* ProSource, a wholesale floor-covering franchise with 112 locations in 36 states and Canada. Launched in 1990, ProSource caters primarily to developers, designers and installers. Brodsky expects that 25 stores will be added to this operation this year;

* America's Carpet Gallery, a chain of franchised retail carpet stores acquired by Carpet Co-Op in 1998. With 171 stores in 40 states, America's Carpet Gallery provides floor coverings, decorating consultation and home fashion products. Carpet Co-Op expects to expand the franchise by 700 to 1,000 stores within the next five years by aggressively marketing and attracting new franchisees and current Carpet One members;

* International Design Guild, a group of licensed independent luxury showrooms specializing in serving interior designers. The Guild, formed in 1992, has 90 showrooms in the United States and Canada, which is expected to exceed 110 showrooms by the end of this year;

* Stone Mountain's Carpet Mill Outlet, a group of no-frills outlet stores that sells quality discounted flooring. Launched in 1993, Stone Mountain now has 54 stores, and the franchise is growing rapidly. Carpet Co-Op expects to add 20 more outlets in 2000 and have about 240 stores by 2005, including locations in Canada, Australia and New Zealand. Stone Mountain carries a heavy inventory of rolls and remnants, and the outlets are among the floor-covering industry's most profitable retailers, according to Carpet Co-Op. In fact, this store concept has been so successful that another prominent carpet chain -- Abbey Carpet -- recently launched its own version, called The Roll Store;