From Home Furnishing Business
In 1917, A. Leon Capel got his first look at a mechanical tractor, and quickly realized there wasn’t much future for his tiny business making rope plow lines that farmers tied to their mules while working their fields.
The forward-thinking Capel was undeterred, however, and decided to buy a sewing machine so his ropes could be braided instead of twisted. The braids were then sewn together to form the first-ever reversible braided rug.
Two years later, Sears Roebuck bought 5,000 of them and included a picture of Capel’s creation in its famous catalog.
And the rest, as they say, is history.
One hundred years later, those braided rugs (and woven rugs, as well) are still produced in the small town of Troy, N.C., where the company’s founder fashioned that first rug. About 150 of the company’s 200 employees work at facilities in Troy, and its domestically-made product accounts for roughly half the company’s annual sales.
The founder’s three sons, A. Leon Capel Jr., Jesse Capel and Arron Capel ran the company after their father retired, and when the trio retired a decade ago, four of the founder’s grandchildren took the helm.
Today, Leon Capel Jr.’s daughter, Cameron Capel, who is vice president of national accounts, and her cousins Ron (managing director of the company’s eight retail stores), Richard (director of manufacturing), and Mary Clara Capel (director of marketing and administration) are leading the company into its second century. But they’re taking time to celebrate the first 100 years with a year-long series of events that have included a cake-cutting ceremony at the High Point Market and a festive catered lunch for employees, where each worker received a $100 gift card.
Recently, Cameron Capel spoke with Larry Thomas, senior business editor of Home Furnishings Business, about the challenges of running a 100-year-old family business and the growth prospects for the rug category.
Home Furnishings Business: As you know, a very small percentage of family-owned companies remain in the hands of the founding family in the third generation and beyond. What have been the keys to keeping the business strong – and family members happy – for such a long time?
Cameron Capel: It can be challenging, and not even because it’s family. In any work environment, you’re going to have disagreements, but when you’re family, it obviously brings other challenges. There are four of us from the third generation who are involved, and we each have our own strengths. We all handle different areas of the business, so we’re not stepping on each other’s toes. It just kind of worked out that way.
When we come together for board meetings or management meetings, sometimes there are disagreements, but we’ve found that the four of us are very open to listening to other points of view. We keep an open mind. It’s not just ‘my way or the highway.’ You can’t have that in a family business.
Plus, we’re able to leave (problems) at work and not bring them home. We don’t let it get in the way of birthdays, anniversaries, holidays and other family events.
HFB: What are your earliest memories of the company?
Capel: I remember going to visit my Dad in his office when I was a little girl. Just being a little kid, I didn’t really understand what was going on. But I also remember going to the outlet store (in Troy) and climbing on piles and piles of rugs. It was like a jungle gym (laughs). That was before we had display racks.
All four of us started working here in our teens. Some of us worked in the outlet store, learning to sell rugs. I worked in the office -- answering phones or filing. The boys did a little harder labor. They got to drive forklifts and stuff like that.
After college, the other three came back to Troy and started working for the company. I went straight to New York and worked in the Garment District in the fashion industry for two years. I always say I went from rags to rugs, but it was an easy transition.
HFB: In addition to parties earlier this year in your Las Vegas, Atlanta and High Point showrooms, what other anniversary celebrations are being planned?
Capel: We’ll continue to celebrate all year. We’ll be doing a big party in High Point on Oct. 14, the first day of the October market. One thing that we did in April that everybody seemed to like was ‘pop a balloon for cash.’ When you placed an order, you got to pop your balloon. Inside was anywhere from $20 to $100 in cash. Some people who got $20 were just as excited as the people who got $50. We’ll continue to do that, because I think that was a big hit.
Recently, we had a big employee celebration here in Troy. We had lunch brought in for all of our employees. They didn’t have to work for a couple of hours, and everybody got a $100 gift card to celebrate our 100th year. I think they really appreciated that. We wouldn’t be where we are without all of our loyal employees.
HFB: What challenges and opportunities do you see for the rug category?
Capel: The market has shifted so dramatically over the past decade. The price points have had a major drop. It’s such a different animal now, and it’s constantly changing. For years, our sweet spot was $499 wholesale for a five-by-eight. Now, with machine-made rugs, you can get down to $99 or $199 for that five-by-eight. But I feel like we were able to respond to that change the past two markets with some great-looking products.
We have really worked hard on revamping our line and listening to our customers’ needs. We have had a lot of introductions (in the past year), and we’ve had a great reaction to them. I think it’s because we’re listening to our customers and giving them what they want.
The Millennials are the ones driving these lower price points. They’re buying rugs at $199 or $299 retail. They move around, and since they didn’t spend much money on their rug, they’ll just leave it and go buy another one. As they grow and settle down and become more prosperous, I think they’ll spend more money on rugs and home furnishings in general. But they’re buying them more often because their tastes change, or they move. We’re not specifically marketing to them (Millennials), but we’re responding with product lines at those lower price points. That was a huge focus for us at the April market. There was a time when we really didn’t have a product that was applicable to that generation.
HFB: Does is present any special challenges being a domestic producer in this pricing environment?
Capel: It does. We have thought about going offshore to complement our braided rugs with a less expensive line. We’ve toyed with that, and even brought in some samples and some proprietary items for (specific customers.) But we’ve found, frankly, that the quality is just not there. Yes, it’s less expensive, but there are a lot of reasons why it is less expensive. We’re completely vertical, and there’s a lot of labor involved. But we feel like we make the best braided rug out there. People appreciate the quality. They appreciate that it’s American-made. And they will pay more for an American-made product. And they will pay more for quality.
This may come as a shock, but you are likely to see the words “motion furniture” and “technology” in the same sentence throughout this story.
Yes, we’re talking about the same motion furniture that, not all that long ago, was limited to basements, man caves, and other areas of the house that were largely out of public view and used only by guys named Bubba.
But today’s motion furniture user just wants a comfortable place to relax after he – or she – comes home from work. And the relaxation begins with the press of a button to open the ottoman, adjust the head rest and even provide lumbar support for that aching back.
And since most people can’t go more than 30 seconds without checking email on their smartphone or tablet, they’re constantly needing a place to charge the device. So a USB charging port is conveniently located in the arm of that same piece of motorized motion furniture, so the user can relax, surf the internet, check email and charge the device – all at the same time.
It’s all about motion furniture for today’s technology-laden, always-on culture. There’s an app for it, too, but more on that later.
“The bridge is being built between our everyday tech lives and our everyday relaxing lives,” said Bobby Jones, director of motion and import upholstery at Klaussner. “The technology is the overall driving force for growth in the category.”
Jones and other executives believe the motion category still has plenty of growing room left. The growth may not be as rapid as it was in the early 2000s when it was being driven by flat-screen television sales, but our rapidly changing technology needs will be a force for years to come.
“That’s where we’re seeing the innovations,” Jones said of the motion category. “You can’t really update too much on the stationary side, so I think motion is where we will continue to see the innovations.”
But stationary upholstery is having a major influence on motion upholstery because producers are designing their motion products to, well, look more like stationary products.
“Our product is much different today that it was just a few years ago,” said Chuck Tidwell, vice president of merchandising and product development at Franklin. “It has the look of stationary, and oh, by the way, it’s got reclining action.”
One way Franklin has achieved that “stationary look” is by adding legs to its motion furniture, a process that Tidwell said isn’t as easy as it sounds. That’s because the product must be designed, in effect, around the mechanism. And with many of today’s motion pieces having as many as three motors (for the ottoman, head rest and lumbar), it presents some significant challenges. But the result makes it well worth the trouble, he said.
“As the styling improves, it’s just going to continue to grow,” Tidwell said of the motion category. “People today usually buy recliners and motion furniture because they want to be comfortable. It’s the stationary look, but has reclining comfort”
A survey of recent motion furniture purchasers by Impact Consulting Services, parent company of Home Furnishings Business, indicates producers are achieving the proper blend of style and comfort. On a scale of 1 to 7, with 7 being the highest on the satisfaction meter, 27.6% rated their purchase a 7, and another 31% gave it a 6.
Only 6% rated their purchase a 1, meaning they were not at all satisfied, while 9.5% gave it a rating of 2, the survey results said.
Interestingly, some 52.7% of respondents said the style of reclining furniture was not an inhibitor to their purchase, but 47.3% said it was. Plus, a surprising 52.6% said they preferred a manual reclining mechanism, and another 16.4% preferred a “push-back” mechanism activated by body pressure. A more modest 31% said they preferred a power mechanism.
Tidwell said around 41% of Franklin’s motion and recliner sales are units that include power mechanisms, while Jones noted that Klaussner’s “fully loaded” motion sofas, which are equipped with a power ottoman, power headrest and power lumbar support, are outselling units with manual mechanisms by an incredible 9-to-1 margin.
“Getting our retailers to commit to flooring at least one piece fully loaded is the key,” said Jones. “It offers a great in-store experience (for consumers). It’s one thing to be comfortable with the power headrest, but once you experience that with the lumbar support, it makes a powerful sales tool.”
And the Impact Consulting survey showed that consumers are willing to pay a little more for these features. The survey said 52.1% of respondents would pay an additional $50 for a power recliner, and another 25.8% would pay an extra $100. And surprisingly, 11.2% said they would pay more than $200 extra for that feature.
So what’s the next hot innovation in motion furniture?
At Franklin, it’s a radically re-designed seating system that makes the product more comfortable and easier to deliver – a win for the retailer and the consumer -- while Klaussner recently unveiled a Bluetooth-based app that allows the user to control the motion sofa through a smartphone or tablet.
Tidwell said Franklin’s new seating system was a huge hit at the High Point Market in April, and its popularity has caused the company to start converting its product line to the new system much faster than originally planned.
“It has really turned our factory upside down. But that’s one of those high-class problems,” he said.
Not only does the new system make its seats more comfortable, the re-design allows the backs of sofas to be removed, which Tidwell said makes it easier to get them through small doorways and stairwells. Plus, if a mechanism ever needs repair or replacement, the service can be done in the consumer’s home. It’s no longer necessary to haul the sofa back to the factory.
“We originally were going to put the new system (only) in our new products, but because everybody wanted it, it’s now going into our new products and best-sellers,” said Tidwell. “And soon, it will be in our entire line.”
Jones said Klaussner’s Bluetooth-based app, called Complete Comfort Control, also was a huge hit at the April market. The free app allows the user to synchronize the seat to a smartphone or tablet and then operate the power mechanisms – all three of them – from the device. Such apps previously were available only with high-tech massage chairs costing thousands of dollars more.
The app includes a memory function that moves the seat to the user’s favorite position, as well as a reset button that takes the seat back to its upright position. Jones said the app is available at no upcharge with Klaussner’s motion sofas, sectionals, free-standing recliners and high-leg recliners.
“It was extremely well received. We’re looking forward to a lot of good retail action from it,” he said.
The ultimate sales performance metric is total sales. Everything else rolls up into it. If life was simple, this would be all we need, since it is the main end result we all want to maximize. However, as with any result, in order to understand how we got it we have to look at its main ingredients and analyze them. That is because you cannot teach, train or coach a result, you must work instead on the individual elements that go into making it happen. Only when the right things are being done in the right order and at the right time, do we generate the consistent high-performance results we desire.
Each of these main factors has its own elements that go into making it happen and so do the individual elements down the line. Over the past few years, we have dissected and discussed many of these individual performance measurements and how to use them as you work to improve sales performance. I think this time we should step back a bit and look at the process of analyzing our sales performance metrics. Perhaps in doing so it will make more sense to anyone that has struggled to put a sales management process in place.
It is really a process of digging down through the numbers until you find something that needs to be either corrected or congratulated. This is a similar method to what you would go through to analyze your P & L. First you would review each of the major expense categories against your target for it and if it is not where you want it to be, you would drill down to the line items that roll up into it and try to determine where you went south. Once you find a line item problem, you would look into all the things that affect it and see what might need to be fixed.
Using sales performance metrics to help drive improvement in that important part of your business is roughly the same. You look at each of your sales people’s individual sales results, then look deeper into the ones that did not perform to your target for them or at least to the store’s average. As with your financials, you would be searching for the specific performance area that is holding back or dragging down that person’s results. Having zeroed in on the specific number that is hurting performance the most, you then need to determine what they are doing wrong or not doing at all that is causing it. In essence, the sales metrics numbers are the objective measurements you use to point you towards a problem area. Once you have that, you will often use more subjective processes and information to fix the situation.
We need to note here that we are not always looking for those metrics that are low. It is very possible to be super high in any single measurement (even total sales) and actually be hurting the overall store effort. For the most part though, there is more to gain by bringing under performers up to an acceptable level. Therefore that will be our main focus.
First, you must establish a target for where each number needs to be in order to be at least acceptable. It is not fair to expect everyone to be a super star. So looking at your top writers and comparing the rest to them is not a good idea and will lead to jealousy and failure. The best approach with all of these metrics is to use the store average as your “line in the sand”. Certainly, if you have more than one type of sales effort in your organization, such as a design or in-home team, you can separate each type of selling process and use separate averages to establish your targets.
As stated earlier, the main metric we are all concerned with is total sales, which if you read this column regularly, you most certainly know is the result of the following equation: Ups X Close Rate X Average Sale. The more you can get your sales staff to understand that their success is the product of how many people they work with times the percentage of those they actually sell something to, times how much on average they sell each one, the more important these sales metrics numbers will be to them.
Once you have determined which total sales performances fall below where you want them to be, the first thing to look at is the number of Ups that the individual took. The number of Ups that a sales person goes through each month is very indicative of how they sell. If someone consistently needs more opportunities in order to hit your total sales target, they could be hurting you more than you realize. It is what I call the “double whammy”, because people that take less time with each customer will wait on more customers and they most often sell less than the store average to each one (see Revenue per Up), which means that the more customers you let them wait on, the more they hurt your business!
You also need to be aware that those who wait on too few customers may be taking too long with each one. Generally, their total sales will be lower because they are so inefficient with the Ups you give them, but it might not put them below your target. So, you need to be aware that this is happening since it hurts you by causing you to need more staff to handle your traffic.
The Ups you allow each of your staff members to interact with are truly the most valuable asset you have as a retailer. Therefore, how they handle them from both an efficiency and effectiveness standpoint is extremely important to your business. Traffic per sales person is one of the very first things I review when asked to help improve a client’s sales. It is at the core of the store’s staffing needs, it lets me know how each person shares the workload and when compared to sales results it says a lot about their value to the company. Don’t forget its importance. And, when you do see a possible issue, then go on to the next metric which is revenue per Up, to see if there really is a problem and how bad it might be.
Revenue Per Up (Performance Index or PI)
Revenue per Up is defined as: Total sales volume divided by the number of customers seen (Ups), However it can also be calculated by multiplying Close Rate X Average Sale
Revenue per Up is the next critical metric used by management to understand the true effectiveness and efficiency of each salesperson. It is valuable because it takes into account the effects of both close rate and average sale by combining their effects into one comparative index that indicates how many dollars of revenue are generated each time an individual salesperson greets a customer. This is the best way to determine how much of an issue you have with an individual. As an example; if the store average PI is $600 and your lowest person is delivering under $300, then every time they take an Up it is costing you over $300. If they are seeing 120 customers/month, there is nearly $40,000 walking out the door that you had a chance of getting, if virtually anyone else had waited on those people. If you rank your staff by PI, you will know where you need to spend your coaching time and effort!
Keep in mind though, that revenue per Up, like total sales, is a result that can’t be directly coached, it is mainly a “Red Flag” that makes you aware of how staff members are contributing to your business. Since Rev/Up = Close Rate X Average Sale, you must drill down to those numbers to find the driving factor for the performance.
Defined as: Number of sales divided by number of Ups and expressed as a percentage, this metric really tells you how well your people are connecting to their Ups. It also gives you direct indications of the quality of their selling skills, since understanding and consistently using the right steps in an effective selling process is key to higher closing rates.
If this number is below the target you establish, there may be several reasons. It could be Ups related, such as having to take too many Ups because the store is short staffed, so they rush each one. Or, perhaps they burn through too many Ups because they can’t connect to most of the people they approach on the floor, so they keep getting back into the rotation. A big part of connecting is people skills related, which is the toughest thing to fix - you just can’t train “personality”. Often though, the problem lies in a failure to establish trust with the customers, which also can be caused by a lack of product knowledge, poor needs analysis and/or bad listening skills.
Lastly, many people can do all of the selling steps but just can’t or don’t ask for the order. Closing is just as important a step as it has always been, but with today’s customers we see that opening the sale properly and gaining the customer’s trust is the biggest issue we face. If they can’t open they can’t close and that is what a low closing rate tells you to look for.
Defined as: Total sales volume divided by the number of sales made, expressed in dollars. Average sale tells you if your people are maximizing their opportunity with each Up. When measuring individual performance and comparing one person to the store average, the conclusion to be drawn regarding higher performers is that they have the ability to recognize the greater needs of some customers. In other words, higher performers have and consistently apply selling skills that lower performers do not possess or do not apply. Therefore, we must look for ways to improve how low average sale performers use the needs analysis process and whether they have the product knowledge they need to step customers up to better goods. Some people struggle to understand and use a store’s established good, better, best story to make sure their customers get exactly the product they want, short circuiting the process by just selling the low priced or advertised goods.
Ways to improve this include: training and coaching the sketching process to slow down/focus needs analysis, checking category and vendor performance reports to see if they avoid selling case goods or better vendors, and adding design skills or in-home abilities to their toolbox.
Finding the Answers
As stated, these numbers are the objective measurement of performance within your selling team. They tell you a great deal about what is happening, but they only give limited insight into why it is happening. They are indicators that should be used to point you in the right direction so you can find the answer the only way possible, through getting out on the floor and actually seeing what your people are doing with the customers you let them wait on. Observation, joining sales and giving feedback for improvement during the game is the best thing your sales manager can do to create a winning team by improving the performance of those that lag behind the rest.
With Mobility in America at an all-time historical low and only 11.2 percent of people moving from 2015 to 2016, what drives the current movers and leads them to change residence? Picking up from the “who” of last month’s article, we now dive into “why” people have moved since 2000 and take note of both the growing and declining trends. Two major reasons to move, jobs and a desire or need for new or different housing, took hits during the recession. Since the end of the recession, jobs and housing have gained traction again as reasons for mobility. However, as shown in the previous month’s article, Americans need more than a healthy economy and a recovering housing industry to propel them to move.
Table A shows that for 42.2 percent of the 35.1 million movers from 2015 to 2016, the biggest reason to move continues to be a desire for new or different housing. Recovering from the recession, job related moves are back up to just over 20 percent of movers since 2006-2007. Meanwhile, over a quarter of American movers (27.4 percent) changed residence last year due to a change in family status.
Moving Reasons Vary by Age
The propensity to move varies by age group as does the reason (Table B). But one thing is certain, the older one gets the less likely he or she is to change residence for any reason. (See Statistically Speaking, April 2017 issue for additional age related moving data.)
Young adults ages 20 to 29 dominated all categories for reasons to move in terms of numbers of adult movers -- the principle reason for moving being housing-related (3.7 million movers). These young movers are starting new households, moving into their own apartments or homes or changing residences for various reasons. Job-related moves also dominated this age group more than any other with 3.0 million moving for employment reasons.
For adults 30 to 44 (a 15-year age span), housing-related moves were by far more important than any other category (3.6 million movers) and almost double employment reasons.
Adults 45 to 64 (20 year span) are a large part of the U.S. population and contain a chunk of baby boomers on the back end. However these older adults were most likely to stay put with 2.4 million movers citing housing-related reasons for moves and only 1.1 million moving because of jobs.
The broad category reasons for moving – Family, Job, and Housing can be further segmented into more specific moving motivators.
Both Divorce and Marriage rates have been on a steady decline since 2000 – lowering a “change in marital status” as a key reason for moving (Table C). Down from a divorce rate of 4.0 in 2000 (rate per 1,000 total population) to 3.2 in 2014, more people are staying married. On the flip side, less people are getting married – decreasing from a marriage rate of 8.2 in 2000 to 6.9 in 2014.
Luckily more people moved to establish their own households from 2015 to 2016 – up to 12.2 percent of all movers from 10.4 percent in 2016 (Table D). Although slow to leave Mom and Dad’s home, more Millennials are venturing out on their own and forming households. This increase should continue steadily over next five years as Millennials age.
According to the National Association of Realtors, between 2008 and 2016 America added an average of 835,000 new households per year. For 50 years prior, it was 1.3 million per year.
Slow job growth this decade coupled with more conservative corporate transfer policies during recessionary times have kept people from moving for a new job or job transfer. However that trend is improving as only 7.8 percent of movers from 2009 to 2010 cited new jobs or transfers as reasons for moves, now up to 10.8 percent in 2016. Also on the rise is a desire to be closer to work and have an easier commute – up to 6.0 percent of movers from 2015 to 2016, almost double that of 2001. Other job related reasons for moves impacting less than 2 percent of movers included moving to look for work or after a lost job or retirement (Table E).
A person was more likely to make an employment-related move based on the type of job (Table F). Professional and Service jobs are geared toward mobility more than any other type of employment, representing 23.3 percent and 21 percent of job-related movers respectively.
Continuing the historical trend, the strongest reason for a household move for any reason is simply the desire to upgrade to a nicer apartment or home (Table G). These movers represented 17.4 percent of the total in 2015/2016, up from 14.8 percent of movers between 2009 and 2010.
After a slowdown during the Great Recession, the desire for renters to own their own homes is trending up. Bottoming out at 4.6 percent of movers from 2009 to 2010, changing residence in order to stop renting and purchase a home grew to 5.9 percent of movers from 2015 to 2016. Other housing-related reasons for moves 2015 to 2016 included wanting cheaper housing (8.2 percent of movers) and a desire for a less crime ridden neighborhood (3.1 percent).
Other Reasons to Move
Although minor, from 2015 to 2016, both health reasons and a desire for a better climate were listed as reasons for a move, slightly more than previous years, reflecting most likely our aging population (Table H). Attending or leaving college also increased as a reason as Millennials filled universities – jumping from 1.9 percent of movers in 2006/2007 to 3.2 percent in 2015/2016.
While the percentage of Americans moving has been on a steady decline since the mid – 20th century, both the job market and housing industry are on the upswing and Millennials are entering full adulthood. More opportunity and more young adults could give way to higher mobility in years to come.
This letter is addressed to those retailers who work on their business instead of those who work in their business. That is not to say that the former retailers do not work, but their focus is on how to improve their performance.
The constant drive for fractional improvement leads to the bottom line, thus achieving the statistics illustrated by the top quartile performance in the feature of this issue. The drive to achieve this level of performance involves every week comparing historical week-over-week as well as that of the previous week. Unlike other non-durable consumer retail, each week it’s “game on” to entice the reluctant consumers into the store. It is like a bicycle – if you stop peddling, it falls over.
As a backdrop to this focus is the noise. The current environment of the economy that is causing consumers to postpone the purchase and other retail models that threaten to capture some of the market share are two of the nagging doubts. There is nothing that will eliminate those nagging concerns. However, having a contingency plan to handle those things that can happen is a beginning. The starting point is a detailed breakeven analysis dividing your expenses into fixed and variable or a combination of both. This is a good exercise. Illustrated to the side is a breakeven analysis for the all-industry model. The result is that an average furniture retailer would withstand a 13% decline and still break even.
What is your breakeven? Commit yourself to improving every variable line item to accepted performance. Consider every fixed expense item for potential cuts. Make your contingency plan to address. If your top line decreases by 5%, 10%, 15%, put it in a sealed envelope. Now relax and return to your daily focus of improving performance, knowing that you have a plan. If necessary, executing a plan will be tough enough without having to develop the plan in crisis.