On July 22, 2019, the annual issue came out from Floor Covering Weekly (FCW). It is the statistical report of the 2018 flooring industry in the US. Most of the data comes from Catalina, a research company, but FCW produces an excellent issue.
We love this report because it's very similar to the Canadian market, it gives a good idea of the trends in the US and what we can expect to see in Canada. It's a really good report to help all of us understand the breakdown of the industry, which portions of industry are growing fast, which ones are declining. The report shows a total industry of US$27.17 billion, industry growth of 5.7% in 2018 over 2017. A 5.7% growth rate in the industry is very healthy. We have seen a lot of growth over the past decade, very good for the industry as a whole.
Below is a screenshot from the report, breaking down each segment and the volumes. These are manufacture costs:
Carpet and area rugs remain the largest portion of the industry representing 43.1% of the market. That's about US$11.72 billion in annual revenues (at manufacture cost, retail is much higher). The next largest is the ceramic & porcelain floor and wall tile, that is about 14.4% of the market $3.9 billion. Followed by hardwood flooring (included engineered hardwood) which is 13% (about $3.52 billion). LVT, which is the fastest-growing portion of the industry, is 12.6%. Sheet Vinyl and Vinyl Floor Tile is 6.8% ($1.85B). Stone at 5.6% ($1.53B). Laminate flooring at 3.4% (US$922M) and then the last 1% is a mixture of cork, some other plastic flooring, rubber and is just a bit of a catchall ($304M).
High-level trends are: laminate flooring and hardwoods/engineered flooring are reducing and LVT / Vinyl are growing rapidly. A key area of growth is seen especially in the LVT rigid core products (SPC and WPC). SPC core type flooring is exploding in 2018 and we see that same in 2019. The growth rate of LVT well over 40% in 2018 vs 2017. I fully expect the same growth numbers to continue this year.
A big part of the growth is because of the waterproof characteristics in vinyl, and the marketplace is falling in love with a lot of the different visuals and the advancements that we saw in that segment of the market. The laminate market, in turn, is responding with a waterproof version of their own, so I expect to see the growth in high-end laminate get back on track in 2019.
Great Vancouver, Richmond markets
Understanding the Great Vancouver / Lower mainland flooring markets, I think that the trend we’ve seen is very similar to these USA numbers. From what we have seen from our Richmond, BC location along with numerous colleagues I talked to in the industry, we have seen the LVT / SPC flooring category explode in popularity. It has taken a huge percentage of the market share, and a lot of that is taken away from the solid hardwood and engineered hardwood segments. We have also seen lower priced laminate (like 8mm products) drop as well, as the switch to a low priced vinyl is attractive to many consumers.
Waterproof and water-resistant are terms we hear our customers use a lot. So that trend is something we have seen in Vancouver as well.
We know numerous Executives of large American and International companies and they have an interesting take: they feel that premium laminate flooring (as an example, 12mm with water-resistant characteristics) are holding their own. In fact, in some segments, that portion of the market has grown very nicely. The issue for these large players is the price point, low feature laminate products, have been completely replaced. “We can’t give away low feature thin laminate flooring” is a quote one of them gave me. There is another gentleman from a European group and he comments that laminate flooring is there core offering of premium laminate flooring is not reducing at all, it is growing. Their laminate flooring is doing even better in big box type environments (Home Depot, Lowe’s) but it's the cheaper lower laminate flooring, with fewer features and benefits, that are being replaced by the LVT category. That seems to be a common observation.
The same executive makes the argument that European laminates are growing in the North American marketplace where Chinese laminates have seen a decline. I think in general it's fair to say that Chinese flooring has seen a reduction in America because of the tariffs put on by the Trump regime. But I'm not sure if this argument against the Chinese made flooring declining in 2018 makes sense. The reality of what happened was, before the first 10% tariff was imposed, in September 2018, what we saw was the opposite. What happened was a surge of imports into America, a very large percentage of importers moved up their orders to get their Chinese products into the country before the tariff kicked in. So the end of 2018 likely saw a massive amount of imports of Chinese products, and this would have meant a flood of products on the market in late 2018 / early 2019. The same again happened in 2019, when tariffs went from 10% to 25%. So I do believe that premium laminate has done better than expected, but so has imported Chinese products. The tariff effect will likely show up in 2019 numbers, and certainly 2020. When the full effect of the 25% tariff trade war with China is felt.
Ceramic and porcelain tile has grown in the USA even with the soaring popularity of LVT. That category of C&P tile is continuing to grow because of innovations with various wood looks and stone looks at competitive prices, improved digital printing, and manufacturers going upscale with better technologies to make the tiles look more realistic. They are also offering larger sized tiles and their finding a way to go thinner with their porcelain tiles.
The other interesting trend is in soft surfaces, we've seen carpet sales decline but area rugs have grown. Area rugs over the last three or four years have seen a very impressive growth rate. Wall-to-wall carpet has reduced but area rugs have done well. The other key driving factor in the growth of area rugs is because of e-commerce. E-commerce sites have grown the area rug market (ie: Wayfair). It is a trend I predict will continue.
Types of Flooring Sellers
Types of sellers are interesting, about 45% of the market in America is specialty retail stores. Home-improvement big box, like Home Depot and Lowe's, represents about 16% of the flooring market. Then there some very specialized hard surface stores like Floor & Décor, Lumber Liquidators flooring, and The Tile Shop, and that segment represents about 7 1/2% of the market. We have about 2.3% sold on the Internet the rest of the market is bought directly from a contractor (about ¼ of the market).
These numbers are pretty similar in the Vancouver marketplace. We don't have a large Lowe's presence but Home Depot certainly does a lot of business. We have a lot of floor covering stores/specialty stores that would represent approximately half the market. Contractors certainly could make up 25% of the market, so they do very well. The Internet is present for sure, but it's a pretty small percentage, very likely less than 2% of the overall Greater Vancouver market.
As far as trends we see in Richmond / Vancouver / Burnaby / North Vancouver, Surrey, etc… LVT vinyl floors are the fastest-growing segment in the market. Hands down. We still have a very healthy laminate demand, and pockets of BC are seeing a large interest in waterproof laminate flooring. It is still a niche in volume here, but it is growing and could turn into a larger portion of the 2020 market. 12mm Laminate remains popular because of scratch resistance and the feeling underfoot (some people will never be comfortable with vinyl, non-wood floor). I love the beauty of an engineered hardwood floor, but with the interest of water resistance / waterproof flooring, the hardwood segment of the market is dropping some.
Greater Vancouver, specifically locations like our Richmond, BC warehouse, we are all the beneficiary of the US Trump trade war with China. With fewer options for Chinese factories shipping products to America, we have access to high-quality products at amazing prices. I know that engineered hardwood is not gaining market share across North America, but here, with such amazing deals due to the tariffs and duties on this specific product, I think this could be one of the best times to consider a real engineered hardwood floor. An example is we had a 3mm oak wide plank engineered hardwood floor that would normally wholesale at $6.50 square foot, on clearance, for $2.99 (Canadian dollars). That is a price I can’t ever remember seeing a high-quality 3mm hardwood veneer product sell for. This isn’t a sales pitch, it is just a reminder to keep your eyes open. Macroeconomic issues at play (USA / China trade war) can mean some amazing deals for the Vancouver flooring buyer for the short and medium-term.