From Home Furnishing Business
Having been raised in the Information Age, Millennials are the most tech-savvy generation yet. They transitioned from snail mail to e-mail to text messaging in under a decade and have an affinity for the digital world. Their inherent need for speed is in their DNA, and they expect instant gratification.
As a result, a large portion of the workforce is drawn to STEM careers (science, technology, engineering and math) and hard technical skills. And even though top employers today value technical skills, most of them say ‘soft skills’ are just as important.
Soft skills such as leadership, communication and collaboration are crucial, and the Millennials who were selected for the Home Furnishings Business Forty Under 40 list exhibit all of that, and more.
However, according to Caroline Beaton, a contributor to Forbes magazine and a workplace psychology journalist, there are four additional soft skills that are under appreciated, but essential in the modern workforce:
Attention: Attention to detail is the ability to achieve thoroughness and accuracy when accomplishing a task. But Jake Rozmaryn, CEO of Eco Branding, told Forbes that his firm sees a lot of “careless typing and formatting errors in Millennial applicant writing and work samples, cover letters, resumes, etc.” In the workforce, even the grandest project depends on the success of the smallest components. It really is “all in the details.” Time management and the ability to follow through are must-have skills as well.
More Than College: Bachelor’s degrees may now be less important than they used to be – largely because they have almost become commonplace. College education isn’t the simple recruiting filter it used to be. Most entry-level business jobs involve a customer-facing component, but few colleges offer classes preparing students for sales, customer support or client relationships. Therefore, curiosity and commitment, not college, will be among the most important skills for Millennials in 2017 and beyond.
Agility: To adapt to the rapidly changing demands of modern work, employees need agility and the ability to overcome setbacks. Agility manifests itself in individuals as resourcefulness, goals-driven behavior, a team player mentality, and relentlessness. Agility is “not getting stumped at an early stage,” said Anna Crowe, CEO of Crowe PR. Instead it’s “here’s plan B and C to get us where we need to be.”
Humility: Not taking yourself too seriously, admitting when you don’t know stuff and asking for help when you need it are some of the most advanced skills of all. In the digital age, it has never been easier to inflate your successes and white-lie your way to and through a job.
In summary, Millennials want their work to serve meaningful purpose. They’re looking for career development, more meaningful conversations, and a more connected workforce. Companies that can find ways to make their workplaces exciting enough to attract good Millennial talent can reap the rewards by harnessing their power and developing future leaders.
The Millennials on the newest Forty Under 40 list are on that track. And for those Millennials out there who may be waiting for their own nomination -- be a story worth telling.
A Story Worth Telling
Success requires passion, resilience and wisdom and the talented home furnishings professionals you will see on the following pages have had a measurable impact on their brands, their peers, their companies and the industry.
Meet the Home Furnishings Business 2017 Class of Forty Under 40, a fine selection of ambitious individuals. Some are entrepreneurs and some are leaders who have climbed the ranks of the family or corporate ladder, but all of them have what it takes to excel in their fields and are ready for any challenge that may come their way. As the new generation of home furnishings executives, their stories are worth telling.
This month our focus is on those individuals who will ultimately lead each of their respective companies into the future. The importance of these individuals to their companies cannot be overstated. At a time when significant challenges are occurring not only in furniture retailing, but also in all retailing, the future is top of mind. Specifically, is brick and mortar retailing destined to disappear to be replaced by ecommerce?
Without a doubt, e-commerce, led by Wayfair to be followed by Amazon, has taken 15-20% of furniture/bedding sales. Will these juggernauts be stopped as the 1-800 distribution channel was stopped forty years ago? These are the discussions many multi-generational retailers are having as the next generation plans their careers.
The analysis is straightforward. Can a world-class web presence, supported by a national marketing campaign and a white-glove transportation/warehousing system, deliver a consumer experience more economically than the traditional brick and mortar stores? To date Wayfair has failed to do so as their losses mount even with increased revenue. However, this year Wayfair is implementing a national delivery system that will cover a substantial part of the nation’s households. Retailers who cope daily with executing the “last mile” are skeptical. Even third party delivery services that specialize in the furniture industry anticipate the challenge of execution on a national basis. What are the financial numbers? We will address this in the upcoming September issue on Internet Strategy.
What about our secret weapon? As important as our future leaders are, there is another group of individuals that cannot be replaced by a world class web presence. They are the retail sales associates. How important is the $1M writer to the retailer? How important are those long-tenured individuals who year after year consistently achieve that level of performance? They are expensive, but they are worth it. Industry statistics indicate that sales associates and their managers absorb 9.2% of every sales dollar. While this seems like a significant amount, the sales generated make the business run.
One of the key differences between average performance and top quartile performance is the percentage of repeat business. That is the percentage of sales in a quarter that is from consumers who purchased in the last eight quarters. For the retailers who exceed 25% for this statistic, total financial performance increases by 50-75%. These are the consumers who consider the retailer as their furniture store. The front line for creating that relationship is the retail sales associate.
While we recognize their importance to the long term future of brick and mortar furniture stores, the challenge today is attracting and keeping this talent. Minimum wage will not bring them through door, but a career that delivers $60-75K will. Moving them through the process is the challenge. Retailers, such as City Furniture, are making that initial investment by recruiting at some of the best colleges for entry level associates beginning with an internship and moving into a full-time position. An example of this importance is shown in the following. One retailer nominated one of his long term sales associates for the Forty Under 40. The only problem was that she was a bit over 40. From this retailer’s perspective he stated the following:
“We have a sales woman who is 71 years old, but is very young at heart. She’s spunky, acts like she’s under 40, and is an exceptional salesperson and an outstanding employee. She writes over $1 million in sales consistently year after year.”
We understand his perspective.
The overall point is that nothing can replace the knowledgeable, caring attention that only people can provide to a consumer when making a purchase that will impact their quality of daily life.
So I say to digital retailing – bring it on!!!
Although Healthcare spending still leads the way, durable goods, including Furniture and Home Furnishings products, have steadily increased their share of post-recession consumer dollars since 2009. This is despite the fact that last year for the first time Americans spent more money on health care than the total amount spent on living in and taking care of their homes -- $2.95 trillion versus $2.91 trillion. Housing expenditures grew 4 percent last year and include rents, mortgage payments, utilities, housing maintenance, all household and outdoor furnishings, tools and equipment but excludes cell phone, internet, cable, and telephone services. Meanwhile, spending for heathcare grew 5.6 percent and includes all out-of-pocket costs for health insurance, physicians, hospitals, outpatient facilities, nursing homes, etc. as well as prescription and non prescription drugs and medical equipment.
After a gradual post-recession recovery, consumer spending continues to grow an average of 3.8 percent a year since 2009. According to the Bureau of Labor Statistics’ Personal Expenditures Survey, Consumer Spending by U.S. Households totaled $12.76 trillion last year – increasing 3.9 percent from 2015. At a seasonally adjusted annual rate, the first quarter of this year slowed 2.7 percent to $13.11 trillion. This article picks up from Statistically Speaking’s August 2015 article Where are Consumer’s Spending Their Money.
Growth of Durable Goods
Between 2000 and 2009, consumer expenditures for services surged as durable goods lost ground during the Great Recession. However, since the recession’s end in 2009, spending for durable goods has seen the largest increase with nondurables declining as a percent of total consumption. Durable goods now comprise 67.8 percent of consumer expenditures (2017 Q1 Annualized) compared to 63.9 percent in 2009 (Table A).
As shown in Table B, both durable goods and nondurable goods lost tremendous ground from 2000 to 2009 as spending on services skyrocketed by 53.2 percent while consumer spending on housing and healthcare services steadily increased. On a positive note, in the years following the recession (2009 to 2017Q1), durable goods have surged growing 40.6 percent compared to 27.8 percent for nondurables and 33.7 percent for services.
Top Consumer Spending
With healthcare last year finally exceeding total housing expenditures, including furnishings and maintenance, the trend is on track to continue this year. Total combined housing and home furnishings expenditures lost 1 point share of all spending since 2009, mainly through declining utility expenses and slow to recover rents early in the recovery. Home furnishings products have generally held consumer spending share with the exception appliances and televisions. Meanwhile healthcare has increased its share 1.5 points in the same time period – up to 22.5 percent of total spending the first quarter of this year. Total consumer dollars spent on housing and furnishings trailed closely at 21.6 percent in 2017 Q1. Meanwhile Americans are eating out more, with corresponding spending on food consumed at home declining. Table C compares the share of consumer spending 2009 to 2017 Q1 by various goods and services. Itemized categories exceed three percent of spending.
Rents and mortgage payments make up 73 percent of consumer spending on housing, while the biggest chunk of healthcare was paid to hospitals (7.9%) and outpatient services (7.8%). Actual medical health insurance totaled 1.3 percent of consumer spending.
Housing and Household Expenditures
Since the end of the 2009 Recession, household insurance has surged as the fasted growing housing expense – up 67.8 percent but tapering off over last year (Table D). Both furniture and home Furnishings have maintained a steady upward trajectory – averaging 3.5 percent and 3.7 growth each year, but still lag slightly behind overall consumer spending growth of 3.8 percent. Televisions and appliances have been outpaced by other household spending. Household utilities have stabilized with little increase.
As Americans are staying put longer, household maintenance spending has grown 29.2 percent over the last five years. Last year, rents and mortgages saw a high growth of 4.7 percent as supply tightened in many areas. Consumer spending slowed during the first quarter of this year in all household spending categories, except televisions/video and audio. Figure 1 itemizes the growth of the housing and home furnishings expenditures five years, one year and 2017 Q1.
Furniture and Home Furnishings Products
In this first quarter of this year at a seasonally adjusted annual rate, Consumer spending on furniture alone totaled $109.7 billion dollars. Major appliances is the second largest home furnishings spending category at $41.4 billion. (Table E).
Although window coverings is the smallest of the home furnishings categories, it has experienced the largest post-recession surge in consumer spending increasing 42.1 percent. Table F visually depicts the indexed growth of spending on the major home furnishings categories post-recession. Carpets and other floor coverings have surged since 2015 with a total 32.2 percent growth since 2009. Both furniture and home furnishings accessories also experienced over 30 percent growth post-recession at 31.8 and 31.7 percent growth respectively.
Looking at the five year, one year and 2017 Q1 growth (Figure 2), all home furnishings categories except televisions and major appliances, exceeded 20 percent five-year growth. Spending on televisions has been depressed with only 2.4 percent five-year growth, although sales picked up the first quarter of this year. Major appliances has also underperformed growing 11.3 percent in five years. Growth last year was under 1 percent last year and continues to decline in the first quarter.
If curious about the spending categories with the largest increases, Table G shows the biggest winners and losers 2015 to 2016. Spectator sports are at the top of the winner’s list at 10.9 percent growth, followed closely by hairdressing salons and personal grooming Establishments at 9.4 percent. Gasoline and other energy goods are the biggest losers in consumer spending posting a 10.3 percent decline with second place going to securities commissions falling 5.2 percent.
Phoenix-based Trendwood, now a major player in youth furniture, got its start in 1985 in an entirely different furniture category – waterbed furniture.
Capitalizing on the flotation frenzy of the 1970s and 1980s, the company did a brisk business making waterbed frames and headboards for waterbed specialty stores. The furniture was made of Ponderosa pine, a wood known for its strength and durability that could support the heavy bags of water that made up waterbed mattresses.
Scott Coor, Trendwood’s vice president of marketing, recalled that many in the waterbed business were convinced the frenzy would last forever, but by 1990, he said the company began to see indications the industry was peaking.
“What we did best was cut long pieces of pine, so when waterbed sales began to stall out, I started looking for other applications for that process, and we settled on bunk beds,” he said. “There were a ton of guys making little cheap bunk beds, and there were some real expensive ones out there, but nothing in between. So I thought if we could make a really strong, durable bed … we might have something.”
So, in 1992, Trendwood secured a small, temporary exhibit space at the now-defunct San Francisco furniture market to show its first three bunk beds – while still making its line of waterbed furniture.
Coor said it took a couple of years for Trendwood to establish credibility as a bunk bed producer – after all, the waterbed business had more than its share of questionable operators – but the program finally started humming.
The timing couldn’t have been better. Waterbed sales began a breathtaking decline in 1992, and by 1996, the once booming industry – not to mention Trendwood’s waterbed furniture business – had all but disappeared.
Parents and grandparents often recoil at the notion of spending hundreds and hundreds of dollars on furniture that a child may outgrow in a few years.
They face a similar dilemma with clothes, shoes and toys, but at least those items can be passed along to a sibling, sold at a yard sale, or donated to charity. It’s not as easy to do that with a captain’s bed.
That makes youth furniture a much tougher sell at retail – so tough that some furniture retailers have abandoned the category.
But many youth furniture suppliers, for obvious reasons, think that’s the wrong approach. They say youth bedroom, just like master bedroom furniture for adults, is transitioning into an item business. That means retailers should focus on the items consumers want most – and de-emphasize the 20-sku collections that once were a staple of the category.
“Gone are the times when Mom and Dad went into the big box store and bought bed, dresser, mirror, nightstand and chest for the new little girl,” said Fran Scheller, vice president of merchandising and product development at full-line furniture resource Bernard’s. “That has definitely impacted the dollar volume of the youth business.”
But Scheller and other executives say the category is still quite vibrant – as long as manufacturers and retailers can deliver what the consumer really wants. That usually means a sturdy, safe bed and something that has lots of storage.
“If you look at the demographics there are still a lot of kids out there who need a place to sleep and a place to put their stuff,” said Scot Coor, vice president of marketing at Trendwood, a Phoenix-based youth furniture producer. “Most people want to buy something that’s a durable, safe product, but bottom line, they don’t want to spend a whole lot on it because they know the kid is going to outgrow it or tear it up.”
That’s why Coor and Scheller said their companies are now focusing on beds -- in many cases designing them with storage space that’s either under the bed or part of the headboard.
One of Bernard’s best-sellers, for example, is a design called a lounge bed that features a bookcase storage unit built onto one side of the bed. That allows it to be placed against a wall, which saves space in the center of the child’s room. Plus, it has storage drawers underneath the bed.
“People are still buying functional pieces that give them a variety of uses and lots of storage options,” Scheller said.
Don Essenberg, president of full-line resource Legacy Classic, said his company’s Legacy Classic Kids line is still experiencing growth, but acknowledged youth furniture is “a tough category” because products typically occupy a small footprint and separate, distinct section of a retail sales floor. That makes it essential for a retailer to promote the category heavily in order to be successful, he said.
“People who do the best with kids’ furniture are the ones who advertise it,” said Essenberg. “You have to let that mother whose out shopping for youth furniture know that you have it.”
“You had better be really good if you’re going to do youth, because the competition is fierce,” Scheller added. “It’s not like master bedroom, which is a fashion statement. It’s more like mattresses and recliners. It’s price driven and it’s need driven.”
Essenberg said his company’s line, which is at the upper end of the market, also is seeing less interest in purchases of multiple pieces, and said desk sales, in particular, have weakened.
“Desks aren’t an automatic. It’s not the essential SKU in the kids’ bedroom anymore,” he said. “It about sleep and storage now.”
Coor said Trendwood’s desk sales also have been sluggish, but said he has seen a slight uptick in sales of models that have a power supply and a charging station.
“For a desk in a kid’s room today, you better have a charging station. If you don’t, you’re selling an antique,” Essenberg quipped.
Research by Impact Consulting Services, parent company of Home Furnishings Business, showed that only 13.4% of consumers who recently purchased youth furniture were interested in adding a desk. But 26.5% of those surveyed were interested in buying a second bed – often a bunk bed or loft bed.
And interestingly, a majority of those surveyed were hoping their youth furniture would last a lot longer than the youth for whom it was purchased. Some 29.2% of respondents said they hoped to use the furniture in a spare bedroom some day, while another 36% said they hope the child can use it as an adult in their first apartment or at college.
In addition, the survey said 26.2% of respondents purchased their furniture for a child who was over age 13, while 17.9% bought it for a child age 10 to 13, and 17.6% bought for a child age 6 to 9. The highest percentage of purchases, however, were made for a child age 3 to 5, who was the recipient of 29.5% of the purchases.
Essenberg and Scheller said the majority of product from their companies are purchased for girls, which is not surprising because white remains the most popular youth furniture color.
“We still do well with the classic white girls’ groups in our line, whether they’re a little more transitional or the typical ornate Victorian look,” Essenberg said. “But the last couple of years, we’re also starting to do well with girls’ groups that are not in pure white. Some of the taupe and putty colors are doing well.”
Coor said Trendwood’s furniture is made of solid Ponderosa pine and has more of a unisex look, and noted that his company doesn’t keep track of whether the user is a boy or girl.
“Most of our product is developed around a youth’s need, be it a boy or a girl,” Coor said. “Neutral colors are not going out of style. They seem to be the most popular.”