• Brett Rugo, Rugo Stone, LLC, Lorton, VA
• Tony Malisani, Malisani, Inc., Great Falls, MT
• Michael Twiss, Columbia Stone, Inc., Tualatin, OR
• G.K. Naquin, Stone Interiors, Loxley, AL (moderator)
How do you compete with low-cost pricing?
Malisani: Published pricing is always a challenge. Working in Montana, we have a different business strategy. Getting out and creating a dealer network has been very positive for us. We are working with kitchen and bath dealers as well as cabinet stores.
Twiss: We shifted our business model. In 1991, there were six countertop fabricators in Portland, and then it was over 100 in its peak.
With our residential work, it is only high end, and there is no competition on price. We are more involved in commercial work; projects like Nike Headquarters. The jobs are larger, so we lose the smaller shops as competitors and only have really two or three competitors. It takes a long time, and you have to develop relationships, but they stay loyal.
How do you keep your skilled employees?
Twiss: On the commercial side, they are all union-scale jobs. But we struggle to keep workflow when you can need 20 guys one day and then three the next.
Naquin: We have downsized a lot, but the remaining employees wanted to keep the company going, and they were engaged. In 2009, the market stabilized; 2010 was decent, and 2011 has been very good.
Lots of workers are doing multiple tasks. There have been no raises, so there is an increased stress factor. We have to find ways to encourage customers.
Rugo: A lack of turnover is key for us. You need to get to know your employees. It helps with morale as a business owner. We have maintained our 401(k) and health care benefits, so we have a better caliber of employee.
At a time when there is no room for raises or even cost-of-living increases, you have to live by example. Don’t drive around in a new car or have your toys out there in front of people.
Malisani: The most valuable asset your company has is its employees — not the five-axis CNC. It sounds cliché, but it is like a family. Leadership is by example. Our shop also does terrazzo and precast, and I can’t just find a guy on the street to do that. They appreciate the sacrifices that we have made, and we appreciate the sacrifices that they have made.
How are you dealing with larger islands that customers are requesting?
Naquin: We are seeing islands that are 100-115 x 50-60 inches weighing 750 to 1,000 pounds. It is my social responsibility to say that this creates a very dangerous situation.
We know how to handle slabs in our facility, but what happens when they leave? There aren’t lifts out on the jobsite. We are installing stone at beach houses that sit on piers, and at $35/square foot, there is no money there to rent equipment. So now we are putting seams in an island. The thought is that people won’t accept it, but we are educating customers on the safety factor.
Malisani: We once had a customer who knew exactly what they wanted; it was an 11-foot, 9-inch x 7-foot slab that was cut from a special block at Cold Spring. We have equipment for monuments, and we were able to lift it onto the deck. Six people installed it.
Overall, slabs are getting larger. It used to be that 5 x 8 feet was normal, but now we are getting 11-foot slabs. The important thing to remember is that you need to have a plan well in advance, because people don’t always work together.
Are you dry-setting layouts?
Rugo: Yes, we do that.
Naquin: If a job has a joint, it is dry-laid at our site. This is especially important because of all these exotics. We did a job in Typhoon Green, and we brought the customer to do the layout in masking tape. She couldn’t live with the yellow parts of the material, so we ended up using a third slab. If I had simply optimized slab use, it wouldn’t have worked out.
Malisani: We marry up everything. We did it digitally in our shop, and there is a minimal amount of hand-blending.
Rugo: Most of our customers are second- or third-time countertop buyers, and they have a certain amount of knowledge. There is pressure not to make a mistake when working for customers like that. Working with a sequential blend of slabs is critical.
Do you require the homeowner to inspect slabs and participate in the layout?
Twiss: Yes, for all jobs. When it comes to the super high-end customer, you want to spend time with them. Sometimes, the most logical solution is unacceptable to them.
Malisani: For us, it is optional. My sawyer has laid out thousands of jobs, so he is probably better at it than the homeowner.
Are you seeing more demand for marble countertops?
Naquin: Yes, especially white marbles like Carrara, Alabama and Rhino. We do those materials honed because of concerns over etching.
Are you working with quartz surfacing?
Rugo: Sure, you know exactly what you are getting, and there are no issues of color. We’re mostly using it for commercial work; it’s durable and consistent.
Twiss: We find that it laminates faster, with no rods. There is also no need for matching. It is really good for healthcare. It is durable, and it doesn’t look like they spent a lot of money.
The only challenge is that some of them are difficult to edge polish, but it’s really the same thing with granite. The darker ones are a challenge.
Naquin: In our case, nine out of 10 customers who are looking for a color range will want granite, with its depth of color. Exotics are popular for a reason; the pure nature of it is what sells.
For us, granite look-alikes didn’t work. If a person in our market likes granite, and they look at both, they choose granite.
Are any fabricators importing direct?
Naquin: At $2 per foot to ship and distributor margins being so low, it doesn’t make sense for me. With some exotics, it might make sense, but then I’m buying eight bundles instead of two, so I need to know that I will sell it.
Are you rodding large islands?
Malisani: It really depends on the material, and you need to know what you are doing. We have done some interesting furniture; trapezoidial tables with four-point suspension in Absolute Black.
Naquin: Rodding is for material handling, not for protection after installation. If we see a fissure, we will use penetrating glue and then rod across it.
How do you get started doing business with Home Depot?
Naquin: Home Depot is currently the largest retailer of granite counters in the country. Your systems have to be sophisticated. They require line reviews where you bid against other fabricators in your region. It is different administratively to work with Big Box stores. You need to have good accounting.
Also, you’re going to be represented by their salespeople, who are motivated to sell, but don’t necessarily understand the product. The sales are made without you, and you have to reset client expectations once you take over. Home Depot’s “Voice of the Customer” (VOC) scores are key. If those scores are poor, you are out of there.
They also really hit you on price structure. On the positive side, two days after the release, the cash is in your bank account, so it really helps with cash flow.
How do the Big Box stores handle claims?
Naquin: The Big Boxes are now standing behind the fabricator more. It all has to do with education. They have quality fabricators now, and they respect them. We enjoy the fact that if it is their error, they pay for it. If it is our error, we should pay for it.
What about profit margins with Big Box stores?
Naquin: Big Boxes are the number two profit center for us, but we are prepared for them. We can make money on the A products, but 60% of the jobs are B, C and D higher-end products that bring up the percentage, especially when you are considering undermounts and other extras.
Home Depot usually marks it up 25%, but 80% of our sales from them were promos, so you may be departing from that line. However, the promo is not always put back on us. In those cases, Home Depot gets little profit, but they have people in the store also buying tile, appliances, etc.