It is hard to ignore the closing of retailers that have been in business for decades and manufacturer brands once stalwarts now liquidating.
Home Furnishings Business, with its parent company Impact Consulting and sister company FurnitureCore.com, has the same concerns in that our future is imbedded with the furniture industry. Reflecting on our masthead “strategy for the furniture industry,” we need to deliver on our promise.
The furniture industry is not an early adopter in terms of forward strategy. In fact, as other retailers are abandoning a “store on every corner,” furniture retailers are expanding their market footprint, rejecting the concept of furniture as a destination retailer. The need for gross margin per square foot of selling space will become a key performance indicator with this strategy. Likewise, furniture retailers are moving to smaller footprints with less selection (brands) and unique retail experiences. This is similar to the restaurant industry where unique upscale restaurants were replaced by mid-priced chains, such as Applebee’s and Outback. As with the fast-food chains trend of two decades ago, such as McDonald’s and Burger King, they are replacing the mom and pop burger joints, trading uniqueness and quality for dependability and consistency. The results are good food, but not great food.
Now, twenty years later, consumers are seeking out the unique burger joints and steakhouses, willing to pay more for a great meal. Creating this experience is the entrepreneurs will to replace efficiency with the unpredictable “farm to table” concept. Maybe furniture retailers and manufacturers could speed the repeat evolution and create excitement in product and the retail environment in which it is presented.
The focus of this issue is merchandising, the functional area of the industry responsible for creating the product and experience that would eliminate the boredom in the industry. Without better merchandising, the industry will continue to sell 50+% of the consumers with incomes over $100k sofas below $399.
If current retailers and manufacturers don’t, the market will correct itself with entrepreneurs emerging to excite the consumers.
“Planning involved in marketing the right MERCHANDISE at the right PRICE at the right TIME in the right QUANTITIES and the right MESSAGE.” – American Marketing Association
THE RIGHT MERCHANDISE
The manufacturer’s merchandiser is not typically the product designer. However, many entrepreneurs in the furniture industry have a background in furniture design. Often this becomes a challenge as the company becomes a success and grows. Bill Becker, founder, CEO and Design Director of BDI, has faced this dilemma. “I founded BDI with the belief that great design has the potential to enhance the way people live and work. Design-driven entrepreneurs are most successful when they lead with their strength while surrounding themselves with individuals who bring varied areas of expertise to the organization. While I come to work every day passionate about design, I realize that in order to lead a successful organization, I must have equally passionate people in all roles— from operators, to marketing, to customer service. There’s a true excitement for an entrepreneur in building an organization that consists of a diverse team from a variety of disciplines. I feel we have successfully developed a team that shares our company’s passion for design and innovation, while bringing a wealth of knowledge and experience to the table.”
However, the merchandiser must give direction to the product designer. Today, as the consumer has moved from a preference, to a distinct style, to a more eclectic look or lifestyle, defining this direction can be a challenge.
In recent research confined to urban areas (markets $100M+ in furniture sales) in order to capture more diversity in style direction, we found some interesting perspectives.
It should be noted that the term “transitional” was not used because it is an industry term that has allowed the consumer to accept the confusion of no style. We have been “transitioning” for 20 years.
This lack of definition has created a problem at the retail level when the consumer cannot communicate their style. In fact, in the just completed research, only visuals were used.
There is a distinct dividing line between the younger furniture purchaser (<45 age) and the older furniture purchaser (>45 age). The graphic below provides the comparison.
As would be expected, the younger consumer has embraced contemporary and midcentury. However, the merchandiser must anticipate using the overused quote, “know where the puck is going, not where the puck is now.”
In the same research conducted by FurnitureCore, the research arm of Home Furnishings Business, the question was asked about the consumers’ “dream style.” The following presents the findings.
Looking to the future, we see the driving force will be those consumers under 45.
The traditional furniture industry is in a race to the bottom in terms of price. The pending tariff (25%) if implemented will increase prices by necessity, but if the industry follows the past tendency, it will begin to find ways to reduce prices—unfortunately at the expense of quality/design.
The manufacturing merchandiser must create product at price points that the retail merchandiser is seeking to maximize sales to the consumer. This collaboration between manufacturer and retailer is critical to success. Unfortunately, much is missing from this collaboration. The result is the race to the bottom.
Comparing the retailer and manufacturer’s selling (not list MSRP) price point to the industry is critical. FurnitureCore shared the current (2018 YTD Q3) information for standard sofa / fabric / independent retail chain.
Currently, the industry is underselling this consumer based upon the percentage of units sold to households with incomes over $100k. From FurnitureCore, we received the following data for 2018.
As can be seen from the table, when over 50% of all fabric sold under $399 is purchased by consumers with household income over $100k, the industry has a marketing problem. We cannot continue to excuse those sofas are for the playroom in the basement.
RIGHT MARKETING MATERIAL
The once elaborate catalogs produced by the manufacturers have all but disappeared. Unfortunately, timely photography has as well. The marketing material provided by the manufacturer provided inspiration for the marketing to the consumer. Did the inspirational spreads in Southern Living drive the success of Broyhill’s Fontana or Bob Timberlake’s Lifestyle Rustic Collections?
Currently, messaging from traditional retailers are focused on price and financing with an assortment of product shots. In comparison, lifestyle retailers such as Restoration Hardware and Pottery Barn sell the dream of a beautiful home.
The current dominant furniture purchasers is Generation X (35-45 age group) which is motivated by visual images, but as important as the look is the information of how to execute. Per FurnitureCore research, printed materials that present the product without the price/financing hype is more effective.
The visual display of the product in furniture merchandising is critical to creating the dream for the consumer. The success of the warehouse display, pioneered by Levitz’s in the seventies, declined as consumer in the nineties wanted to see products displayed in room vignettes. This consumer demand resulted in the creation of manufacturing galleries with space allocated to a specific style/collection.
Today, the consumers’ first step in shopping is research on the internet. Retailers are battling to communicate to the consumers, translating what the consumer likes to a definition of style is a challenge.
An attempt to accomplish this is being pursued by a new computer application, Shoptelligence. According to Denise Mahnick, Co-founder, “Not all shoppers have an impeccable sense of style, and most will readily admit that which is why shoppers crave assistance when furnishing and decorating a room. Shoptelligence makes it easier for shoppers to find inspiration and relevant merchandise that matches their individual tastes and preferences.”
Powered by machine learning algorithms including image and natural language processing, Shoptelligence enhances a retailer’s basic product data by adding over 900 style attributes. The style platform makes it easy for retailers to dynamically and automatically merchandise to the individual shopper in their context while increasing average order value (AOV), site engagement and customer loyalty. The technology automatically and dynamically serves contextual cross-category room décor ensembles, helping retailers deliver a seamless and rewarding shopping experience that boosts a customer’s buying confidence. The technology acts as a trusted style advisor that assists the customer throughout the buying journey and seamlessly connects online inspiration to in-store purchase.
Other applications, such as DesignCliq allow the consumer to pursue to process of self-discovery by defining their lifestyle and the application suggesting their style DNA.
RIGHT INSPIRATION: 2019 DESIGN DIRECTIONS
Each season as buyers and designers strive to predict consumer buying patterns, the role of trend identification and forecasting becomes essential. From color and material to shape and style, knowing what’s on-trend in home and interiors makes it easier to create showroom vignettes consumers can’t pass up. Here’s a look at some of the directions you’ll see more of in the coming year.
Interior design has evolved into a means for homeowners to express their unique point of view. As a form of personal expression, the concept of the ‘well-traveled home’ has emerged. Home furnishings have adopted the role of storytelling as consumers surround themselves with individual pieces reflecting their perspective and experiences. Matched suites of furniture have given way to thoughtfully chosen combinations of distinctive items with a shared connectedness.
No longer are interior spaces limited to only one style such as traditional, cottage, modern or industrial. Instead, the newest looks are multi-layered to create visual appeal. For example, an editorial feature in a current shelter magazine showcases a classic living room primarily furnished in an updated traditional style—punctuated with a modern cocktail table and contemporary artwork. Similarly, global and ethnic design influences are now mainstream and seamlessly blended with vintage and current elements. As consumers curate spaces that reflect their individuality, the high-low effect of combining expensive and inexpensive furnishings has taken root.
Craft + Function
At one end of the spectrum, handmade and artisan-inspired looks have never been more popular. Furniture and accessories reflecting weaving and hand-craftsmanship boast widespread appeal. Textiles featuring chunky textures and visual dimension are giving new life to classic furniture silhouettes while helping homeowners create cozy environments. Looks that mirror embroidered and hand-pieced constructions are also in-demand. The direction dovetails the prominence of earthy furniture design directions celebrating organic shapes and natural materials such as raw woods, roots, and stone. Rich textures, natural imperfections and effortless elegance are all hot themes.
In contrast, the demand for innovation and high-tech furnishings shows no signs of ceasing. While consumers love the appearance of a natural-wood end table, they can’t do without it when it has an integrated USB charger. A stylish accent chair in a shearling-like cover is a statement piece that becomes a must-have upon first touch. Products featuring integrated technology, versatility, and mobility are thriving across all home furnishings categories while comfort is just as essential. Performance fabrics that are durable and easy-care are quickly outpacing traditional options. And, multifunctional furnishings designed for smaller spaces are finding favor with consumers just starting out as well as those downsizing.
Color & Pattern
Whether in wall colors or textiles, a general warming of color continues. Yet, there’s no one singular direction, as illustrated by the forecasts of leading color experts. Pantone announced Living Coral as its 2019 Color of the Year (COY). A peachy shade of orange with a warm undertone, it’s a hue the company says conveys optimism. Metropolitan, a soft neutral grey, is the COY for paint resource Benjamin Moore. Described as: calm, composed and effortlessly sophisticated, the barely-there shade is the epitome of understated. Sherwin-Williams identified Cavern Clay as its COY, a shade mirroring the warm reds emerging in home furnishings. This warm terracotta with elemental roots is described as having the soul of the American Southwest while giving a nod to Mid-century Modern style.
In textiles, the top color stories include warm reds and terracotta, Gen-Z yellow, leafy green and emerald, and indigo—with the blue family maintaining its status as the perennial favorite. Millennial pinks are migrating to a warmer, blush undertone. Fabrics artfully combining warm and cool tones, such as taupe and gray, offer a transitional solution for homeowners who only recently updated their home décor palette to gray. Look for patterns with faded edges, graphic overlays, and metallic highlights. This blurring of elements continues as the definition of what constitutes global, tribal and handcrafted relaxes. While florals haven’t departed, they’ve been reinvented with modern interpretations, multi-layered techniques, and unique colorations. Hand-painted and watercolor looks are trending as well as vintage motifs inspired by antique rugs and animal hides. Fabrics emulating natural stone or marble remain popular while ombre treatments and tonal shading effects add fresh appeal to classic constructions.
Merchandising may be the key to the future success of the traditional industry. With the familiar Wayfair jingle in our ears – Wayfair- we got what you need – we may need to take heed.
It has long been assumed that when it comes to winter weather and retail sales, it all evens out in the weeks or months to come. And often it does. But periods of extended winter weather can also impact profit in unexpected ways. The location of a winter storm, strength, duration and timing, are all factors that determine its impact on store traffic. Winter storms over weekends are especially adept at killing consumer shopping. And a winter storm in Buffalo is not the same as a winter storm in Charlotte.
All winter snowfall impacts retail sales and major cities in the northeast, especially, are equipped to clear roads and keep commerce moving. In preparation for this article, however, Statistically Speaking chose FEMA data to distinguish when a winter event is severe enough to impact local commerce in a major way. The Federal Emergency Management Agency examines each severe weather event and determines if it warrants Federal assistance. If so that event becomes either an “Emergency Declaration” or a “Major Disaster Declaration”. Often Emergency Declarations later become Major Disaster Declarations.
Since the winter of 2000-2001 through 2017-2018, FEMA has declared almost 90 broad weather events as major winter disasters impacting over 800 cumulative Metropolitan Statistical Areas during the period. (Table A and Table B).
The winter of 2002-2003 is in the record books as the worst snow storm season over the last 18 years with seven major storms, including the Blizzard of 2003 in February, impacting 22 states and 92 MSAs. While 2009-2010 only had five major winter storms, they were spread out over 22 states and 69 MSAs. The winter 2013-2014 was one of the coldest on record in the Midwest and February 2015 set records as one of the coldest Februarys in many major Midwest and Northeastern cities. The January 2016 blizzard was a crippling and historic blizzard that produced up to 3 feet of snow in parts of the Mid-Atlantic and Northeast. Finally things began to warm up with the winter of 2015-2016 recorded as the warmest winter on record by the National Oceanic and Atmospheric Administration. Last year recorded only three major winter storms, impacting three states and 11 MSAs.
The economic impact of winter storms is often judged by how many storms hit a retailer in a given winter. Table C shows that in the winters of 2004-2005 and 2009-2010, 16 and 19 markets respectively were hit by more than one storm strong enough for a FEMA declaration.
As expected, the Northeast is generally the hardest hit area with major winter storms that have been declared disasters by FEMA. As shown in Figure 1, the top seven markets with the most frequent and harshest winters occur in Massachusetts, New Hampshire, and Maine. The Worcester market, covering Massachusetts and Connecticut, and the Rockingham County-Strafford market in New Hampshire have both had nine years of major winter storms with 10 total storms since 2000.
Surprisingly, multiple markets in Oklahoma have been pummeled by winter storms over the past 17 years. Oklahoma City, Lawton, Tulsa, and Enid have all had seven years of major winter storms qualifying for FEMA aid, along with the Fort Smith, AR-OK market.
January and February are generally thought to be the strongest winter months, but Table D shows that actually December leads the way since 2000 with the highest occurrence of major winter storms at 29, followed by January with 22 and February with 16.
As Table E shows, 205 MSAs were impacted by major winter storms in December from 2000 to 2017.
Do Furniture Stores Recover Lost Winter Sales in the Second Quarter?
Are we able to estimate the actual dollar impact of disastrous winter weather on furniture sales? FurnitureCore, Inc., the research arm of Home Furnishings Business summarized proprietary furniture store sales data from retailers participating in its FurnitureCore.com portal. The FurnitureCore study looked only at retailers located in a FEMA declared winter storm disaster area since 2000 concentrating on storms in the first quarter of the year. The final study included data from 44 furniture stores representing 764 store locations and $13 billion in retail sales 2001 to 2017. From this study, two questions emerged: (1) Were retailers able to recoup sales declines from severe winter weather in a short period of time, and (2) was there evidence of any long term effect on annual sales?
According to this study, on average, first quarter sales in markets with harsh winters were 4 percent less than years where winter weather was less severe. In addition, for the most part those sales were recouped that year, but it took two quarters to do so. By the fourth quarter sales were stable.
This build up in sales from the loss of revenue in the first quarter during harsh winters is also illustrated in the changes in percent of sales by quarter comparing markets in FEMA declared disaster years versus normal winter weather years. In harsh winters, the first quarter takes on about 1.1 percent less annual revenue than other less severe winters. (Table F).
This doesn’t sound too significant on paper, but to add relevance, if the seven Northeastern states were the only ones impacted, the region would be down around $53 million dollars in furniture and bedding sales during the first three months of the year.
Less clear in the FurnitureCore analysis is statistically sound results on whether demand for furniture is made up over time. But according to research by the National Retail Federation in conjunction with Planalytics, a business weather intelligence firm, if severe weather keeps people indoors for a considerable time, profit lost in some product categories is never recouped. In the case of home furnishings, the weather delay sometimes gives the consumer time to reconsider the purchase or divert funds to a different purchase.
Slower sales in the winter season can also often lead to discounted sales in the spring, further impacting profitability. The flip side of the coin is that it is often easy to blame the weather for a winter of slower sales rather than focusing on the key marketing and operational issues.
But there are other opportunities some retailers miss as a direct result of slow winter sales, one of the most important being an increase in a retailer’s website traffic. Often the consumer stuck at home in an extended weather situation spends time visiting the retailer’s website and electronically perusing the store’s products. When this occurs, the use of web analytics to collect, measure, and analyze this increased traffic can give a retailer specific insight into the consumer’s product interests.
With consumers making frequent mattress replacement purchases, no wonder the category has maintained its profitability. Much of the category growth has been pushed forward by specialty bedding mattresses that have moved beyond the basic innerspring model — though according to the study more than 52% of consumers report that the latest mattress purchase was for an innerspring model. This was followed by nearly 41% purchasing a memory foam mattress with air mattresses (i.e. Sleep Number) at 4.55% and latex mattresses trailing at just 2%.
Manufacturers are now focused on finding a niche that will be a sticking point with the consumer as a way to drive sales. According to Nick Bates, president of Spring Air International, one way is to appeal to consumers’ need to change their seasonal sleeping arrangements. With Spring Air’s dual sided mattress, one side is designed for when the temperatures drop for a warmer night’s sleep and a cooling fabric on the flip side that keeps the consumer cooler longer in warmer temperatures. Bates says, “Mattress companies like to solve the cooling aspects of sleep, but they often forget consumers who like a warmer sleep experience. By solving the warming side, we’ve given retail sales associates the ability to sell both consumers with one collection at competitive price points.”
With market share being usurped by e-commerce, many retailers are getting ahead of the curve by anticipating the need to catch the consumer’s eye when they make their way into the brick and mortar stores. “As store traffic continues to dwindle, retailers are working harder to make more margin per sale. We’re providing them a bed that they can sell at $2,799 in queen to capture a better margin,” said Bryan Smith, president and CEO of Southerland of their Onyx Plush model. “This mattress is backed up by strong website support to drive consumers into the store and is constructed with quality components.” Classic Brands takes the approach of helping RSAs demonstrate their mattress’ performance on the retail sales floor with ticking that darkens when touched to show consumers the benefits of a cooler night’s sleep.
The makeup of the mattress category is vast, but retailers know that what belongs on the sales floor is driven less by aesthetics and more by the various sleep solutions consumers require. When asked, 52.27% of consumers reported that mattress coverings have no impact on their mattress purchase. Of the consumers polled, 84.09% also reported that their purchased was intended for the master bedroom with only 13.6% of the purchased mattresses going in a guest room and 2.27% in a kid’s room. Clearly most consumers are looking to truly revolutionize their personal sleep experience, though they are missing out on a test drive of the mattress before the purchase. According to the same study, a surprising 15.91% of consumers did not try their mattress before their purchase, and only 36.36% report testing the mattress for 15 minutes or longer.
With most consumers shopping for their master bedroom, it comes as no surprise that king size mattresses are performing well with 45.45% of consumers making a purchase in this size, followed by the queen sized mattresses at 36.36%, full mattresses at 11.36%, and twin trailing at 6.82%.