In 2020, ceramic tile consumption in the United States was 263.6 million m2 (1), that includes 182.7 millon m2 imported, mainly from:
Spain 37.8 million m2 at $ 12.4 / m2
Mexico 31.1 million m2 at $ 7.2 / m2
Italy 30.2 million m2 at $ 21 / m2
Turkey 23.1 million m2 at $ 8.1 / m2
Brazil 21.8 million m2 at $ 6.9 / m2
India 18.6 million m2 at $ 7.2 / m2
Tile distribution in the US is very fragmented and the residential business (new and remodeling) accounts for 70% of the ceramic tile consumption, which prevented a further drop in consumption in the COVID pandemic.
The market channels: independent stores, factory owned stores (Daltile, FloridaTile, Crossville Tile, Interceramic) and home centers.
Ceramic tile factories push with new products, an excessive number of formats and variants, prompting many stores to sell with samples and without stock. The consumer prefers better prices and stock availability, in stores like Home Depot, Lowe’s and Menards.
The two largest ceramic sellers Home Depot and Lowe’s had a percentage decrease of the flooring business over their total sales. In 2016, this segment represented 6% in Lowe’s total sales and 5% in 2020. In Home Depot was 6.8% in 2016 and 6.2% in 2020.
Even so, the biggest market share losers have been independent stores and those who sell with samples and without stock.
Floor & Decor
It has stores with an average surface area of 7,254m2, with a warehouse format, they sell hard floors (ceramic, porcelain, wood, vinyl, etc.) and what is necessary for their installation. The view of the product supported by the stock is a key success factor and a critical point in Floor & Decor’s strategy.
Assumptions About the Low-Cost Advantage Strategy
100% focus on floors: generalists need and spend more resources in a more complex operation (construction materials, plumbing, gardening, decoration, furniture, etc.).
New store openings: with only 133 stores at the end of the 2020 financial year, they achieved a critical mass to be on the podium of the business. (in July 2021 have 140 stores)
View of the assortment with stock in 7,254 m2 store: many consumers do not want a promise of delivery. The Floor & Decor customer will remember the impressive assortment, never seen elsewhere. For example: A Home Depot store has an average covered area of 9,661m2, but the flooring segment occupies about 800 m2.
Spartan pallet-based display: minimal expense for modifications (very usual in this industry). Open view of the store shows the magnitude of the «specialist». Boutiques, or those based on expensive exhibitions, have high construction and maintenance costs.
The customer chooses against the stock (actual): Large assortments lead to negative consequences, such as dissatisfaction. It is very likely that the consumer will be satisfied with the Floor & Decor offer. The possibilities of size, shapes, finishes, typologies, etc. are enormous. Thousands of products that the ceramic industry has in its catalog and continues to launch without limit. Products that a professional buyer would not be able to distinguish between similar ones, let’s think about the home consumer, in general they choose products, not brands.
author: Julio Sol
- Market, import and price data: Dept of Commerce / TCNA.
Sales data, number of stores, business participation: Annual Report of Home Depot, Lowe’s and Floor & Decor.
Making Great Strategy, Arguing for Organizational Advantage. Jesper B. Sorensen and Glenn R. Carroll – Columbia Business School – First Edition – 2021.