It’s been 50 years since Raj Shah’s parents started a company in the basement of their home in Ft. Wayne, Ind., called MS International. According to Raj, who left investment banking in 2003 to join the company, which he now runs along with his brother, Rup, the company now known as MSI works continuously to make flooring and countertops accessible to the consumer without sacrificing quality. Today, MSI has surpassed the $2 billion mark in annual sales and is among the top 15 importers into the U.S. FCNews publisher Steven Feldman recently sat down with Raj to get his thoughts on a host of issues ranging from the election to the economy to the flooring industry to, of course, MSI.
What was your initial reaction to the election results back in November?
I don’t really have much of a view on the results one way or the other. I take away from a Warren Buffett quote: “Red or blue, we make green.” I think that comes from my parents being immigrants here. They always just taught us: fit in and be adaptable and you’ll be fine.
Why do you think Trump won more decisively than anyone thought?
There are a lot of interesting views on that. The first one is about the Polymarket guy who placed a big bet on Trump. Although most polls were showing either candidate up one, down one, he ran his own poll and the question he asked everyone was, “Who is your neighbor voting for?” And it became very clear most were voting for Trump.
As far as my view goes, there’s clearly frustration in the United States over immigration and inflation, and Trump did a great job marketing that. And the Democrats didn’t come out with a great message. So putting all that together, it completely makes sense. It’s what Bill Clinton once said: “It’s the economy, stupid.” And that’s what played out here.
What does it mean for the flooring industry?
This could go in a lot of directions. If you listen to the narrative, there are pros and cons across the board. But when you think through it, reducing regulation is a positive for flooring. Tax reducing is a positive. Stock market increasing, that’s a positive. On the other side of this is ongoing deficits will keep interest rates higher. That’s a negative. Potential trade wars is a negative from a pricing standpoint of flooring. Immigration coming under control will increase the price or limit the amount of installation that can be done, so that’s a negative. It really comes down to the details.
Did you seen an uptick in business right after the election? Retailers have told us they’ve seen more people coming into their stores.
There’s been a lot of optimism post-election. So I’m not shocked that retailer showrooms are more crowded, their websites may be getting more hits. There are more dollars being unleashed with the stock market rising a bit. I think people feel like there’s a certain amount of uncertainty gone and because of that they can unlock a certain amount of dollars.
You’re expecting 2025 to be better than 2024?
Yeah. Based on the reports I read and talking to the industry for the last six months, we’ve been floating around at this place. It’s not falling further. The good news is employment remains strong. So I don’t see where it just caves. The real question is do we continue to bounce around here or do we start seeing some growth? The good news is there are some headwinds that are no longer there. Deflation is no longer a headwind. Destocking is no longer a headwind. Inflation is starting to get under control. You can argue the short-term interest rates are starting to fall. Hopefully at some point that has a reaction on mortgage rates.
Why hasn’t it yet?
It’s pretty simple. It’s long-term view vs. short-term view, and mortgage rates are tied to long-term. There is a belief that higher deficits run by the United States will cause inflation, which will cause interest rates long-term to remain higher than we believe.
How do we get interest rates lower?
There’s only one way—controlling inflation and the best way to fight that is productivity gains. So the good news is with AI, robotics, all kinds of tools starting to unleash, there is a lot of room for productivity gains. Now, whether deficits are run and things like that, we’ll see how that plays out. There was a big jump in productivity during the internet years, then we flattened out. And now with AI being the next big thing, I think from a productivity standpoint the country is poised for growth.
If the tax rate on business stays at 21% or even drops to 15%, that theoretically would increase productivity, correct?
Absolutely. It allows you to make more investments. The real question is what happens to secondary effects. The primary effect, you’re absolutely right. The secondary effect is was there a way to fund that tax cut or are we just running bigger deficits? The real question is how we pay for those tax cuts. If it’s from greater output, then yes. If it’s from running a bigger deficit, then we may have a problem.
What’s more critical to this industry—inflation, interest rates or the stock market?
They’re all somewhat tied together. But at the end of the day, I think the average consumer best understands the stock market. You just open your phone and it’ll tell you what’s going on with your portfolio. It’s not as easy to get what is inflation or how does that affect me? That’s a little bit more intricate and happens over a longer period of time. When the average consumer sees their stock portfolio increase, they have a little more confidence and may loosen the purse strings on their disposable income.
Are you concerned about tariffs?
No. The only thing I wish I knew is what’s going to happen and when it’s going to happen. Any business owner will say once we have the rules of the game, we’re entrepreneurs, we’ll figure it out. The problem is we don’t know the rules of the game. We don’t know if it is going to be 60% on China and 20% on all other countries. Is it just a threat? Is it a timing thing that we’ll do over five years? We don’t know the rules, which makes it a little more volatile and dynamic to figure out. Do you invest in manufacturing? Do you invest in distribution? Do you invest in inspiration? Where do you invest your resources and time? And that can only be done well if you know the rulebook.
Is it safe to say that because you source from so many countries, MSI is better positioned than other companies to capitalize if they do put a 60% tariff on China?
I don’t want to talk about my competitors, but for us we’ve always prioritized having parallel and backup plans for all our sourcing. And because of that, we’ve always been able to thrive through trade wars, shipping challenges, you name it, we’ve dealt with it. In 2024 you had the Red Sea problem and the retailers accelerating their purchases. In 2022 and 2023 the pandemic had its set of shipping issues. We’ve had trade wars. We have the ceramic tile dumping case. We’ve dealt with it all and I think, ultimately, our belief is just have a very adaptable, flexible and quick supply chain and whatever happens we should be able to thrive through it.
Switching gears, dealers tell us they’re seeing a migration—low-end SPC to laminate, higher-end SPC to WPC and in some cases hardwood. And they’re citing cheaper, thinner products where they’ve seen failures on the SPC. Thoughts?
I don’t want to attribute it all to product quality, some of it naturally happens based on the economy. What we’ve seen is the high-end consumer has been the most, for lack of a better word, resilient. So that switch happened, but not because of the quality of SPC. Then you also look at what part of the business has slowed the most. Multifamily has slowed down, rental homes, all where the low-end product went in. So some of this just may be a reaction to where the business is going.
How do you preserve the vitality of SPC?
I think it’s going to do it on its own. It’s still a great product at a great price. There’s always going to be a place for SPC. The way to preserve the vitality is you have to keep innovating, whether it’s related to specifications, thicker or find ways within the same thing to protect against some of the issues you bring up. And then, obviously, aesthetics, you’ve got to find trend. The one thing that keeps changing in our industry is trend.
Last year at Surfaces, wherever I looked I saw a PVC-free SPC. Do you believe there’s a significant market for that?
There’s a lot of talk here, and we’ve seen it before, whether it’s made in the USA, environmentally friendly, green, all of that works as long as the price is exactly the same. And as soon as the price changes, I’m not sure the consumer cares one way or the other. So I think it sounds good in marketing, but this all came about because of the UFLPA issues and the forced labor, which we’re 100% against. But I think most people worked through their supply chain and got it to a place where PVC isn’t a challenge. That’s why I don’t think you’re seeing the popularity of this just take off. Ultimately, the melamine layers and all that cost more, so it’s not as resonating with the consumer.
What are your thoughts on consolidation at the retail level?
In general we live in a world where technology and globalization are not going away, in fact, you can argue they’re speeding up with each passing day and that is allowing for consolidation to happen at a faster rate. If the consolidation allows for more productive sales, however that happens, whether it’s back office, purchasing, marketing, whatever it is, that’s a good thing for the consumer because it’s taking cost out for them. So I have to say it’s a good thing.
What do you think today’s consumer is prioritizing when she makes flooring decisions? Is it price? Design? Quality? Sustainability?
There are probably three things that float to the top. Where am I using it, so what type of material can I use? What does it look like? And then, what’s the price? Those three things are somewhat interconnected. Price plays a big role, but the good news or bad news for our industry is installation costs, in almost all cases, is more than the material cost. So I think with consumers, assuming they get what they want from an aesthetic and material standpoint within reason, price is not as big a deal. Especially last year, where the lion’s share of the consumers were at the mid-high to high end. And those consumers care more about style and design than anything else.
A big issue in the industry that started toward the end of 2023 was terms. What are your thoughts on terms?
That’s interesting for a variety of reasons. One, a lot of those plays came into place when there was a 0% interest rate environment, which effectively was from 2008 all the way until 2022 or somewhere around there. We all got used to a 0% interest rate environment where money had no cost. Suddenly money had a real cost. So I can understand why the big guys would say, “Hey, I can’t keep funding you for free.” But I do think terms ultimately play a role in retailer decisions on how long they can get the money to flow. But at the end of the day, whether we put it into terms, price, delivery surcharge, whatever, a manufacturer has to make a certain amount of return and it’s going to fall into one of those buckets. Nothing’s free. So they could say, “I’ll give you the terms but my price goes up or I’m not giving you the terms but my price falls down.” It is some permutation of that. And I think retailers are doing the same thing they don’t give away any of their services for free. They may not charge for design, but they put it into the product price.
From your vantage point, what’s the biggest challenges facing retailers today?
People. For them to have a trained labor force both in the showroom and for install.
How do you overcome that?
That’s not a short-term problem. And immigration is not going to make it easier. We as an industry have not done a great job glamorizing being in our industry. I have two kids, neither of whom want to be in the flooring industry. They would rather go into robotics or medicine or what they find sexy, and they haven’t found flooring sexy. So we need to find a way to get youth to enter our industry.
If I put you in front of 14,000 retailers and they asked you what their biggest opportunities are, how would you answer that and how can MSI help?
I think the biggest thing they need help with is how to inspire the consumer. And we can definitely help. More tools than ever exist, and it’s become cheaper than ever to inspire consumers. The days of a customer entering a retail showroom where you just say, “Pick something and I’ll get it for you,” are over. You have to inspire the consumer. Once they’re inspired, price comes off the table, brand comes off. It becomes that inspiration.
Thoughts on AI? How can retailers leverage that?
There’s a ton of opportunity out there. You’re not going to get replaced by AI, but you’re going to get replaced by someone who uses it. Whether it is simple things like ChatGPT or finance capabilities, HR capabilities, marketing capabilities. There are just so many ways to use that AI and it’s democratizing so much of our industry and lowering the barriers to entry, which means more people can play. It’s no longer a David vs. Goliath type thing. AI will democratize a lot of these things.
Thoughts on 2025. What are you forecasting for the industry? MSI?
I think it’s going to be low single-digit growth, and a lot of it coming from the second half of the year. I think we’re going to continue to bounce around at this level for a while. We’re all going to have to see what happens to tariffs and immigration. But once that settles, all the economic factors point to a lot of pent-up demand. We just need to get the financial things to line up with this pent-up demand. As for MSI, our goal is always to double the industry’s growth rate.
Any particular product category you think MSI will outperform the industry by a greater amount?
Ceramic tile is poised because the cannibalization from LVT is completed and it’s actually starting to go the other way. The other thing with ceramic tile is more and more people are finding alternative uses for it. So the addressable market is getting bigger. Whether that’s walls, countertops, vertical surfaces or even pavers. I also think higher-end LVT is poised for continued growth.
What about stone? We talk about the high-end consumer dominating the market and stone tends to resonate with the higher-end consumer.
We are not seeing that, probably because tile has gotten so good at mimicking the stone surfaces without any of the issues associated with it. I think most high-end consumers would prefer wood or large-format tile over natural stone today.
Because of the maintenance issues?
Maintenance issues, consistency issues, etching issues. You name it, it’s an issue.
Tell me the one thing dealers don’t know about MSI?
There’s so much. I think the biggest thing is we exist. No. 2, is those who don’t do business with us have an image of MSI from a while ago, which is we are the leaders in low-end product. We’ve changed quite a bit where our products are quite innovative and can make them a lot of money. Third is the value we provide. And value has to be de- fined beyond just the price of the product. It’s who’s the easiest to deal with, who you get information from the fastest, delivery. So when you put the total package together, we believe we present a great value for retailers.
You recently introduced wood. What about laminate?
We are in laminate, but not quite as much. Our success has come by attaching ourselves to high-growth product categories. We got into ceramic tile in 2008, right when it was taking off. We got into quartz countertops in 2007, right when it was taking off. We got into LVT in 2019. We found our success is tied to attaching ourselves to a rocket. Laminate in recent years isn’t that rocket ship. Because then a lot of it is just trading market share and it becomes a price game. We’d rather spend our resources on traveling with the rocket.
What about WPC?
We just introduced a line. We are hearing from quite a few retailers they’re looking to switch some of their SPC to WPC. So we just introduced a line and assuming that goes great, we’ll keep doing it.
RokPlank, increasing capacity there?
Yeah, it’s called Premium LVT. We added a line there. Manufacturing is both art and science, and we continue to learn every day. We’re not at full capacity because we’re still learning. But once we hit capacity, I’m not against expanding down there.
I’m a dealer; why should I take on the MSI line?
First, you’ll be getting very innovative products. So if you want to increase the probability of closing a sale, it all starts with product. Before price or anything it starts with product. MSI is kind of the new guy in a lot of these categories, so we don’t have any legacy baggage. No. 2, we don’t try to sell to a retailer what we make, rather we try to sell them what they need. Then we strive to be the easiest to do business with. So what does that mean? You can get information from us 24/7 and we have the answer. We invest a lot of money in that information. And finally, because we do this at scale, hopefully there’s a price advantage to doing business with us.
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