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From Home Furnishing Business

The State of Advertising

Developing furniture and bedding advertising was a relatively simple process for decades.   For retailers, it meant getting material for the upcoming weekend’s newspaper advertisement submitted on time, and possibly taping another radio or television spot to go with it.  Yes, there were direct-mail pieces and the occasional billboard to deal with, but for the most part, the biggest concern was what other newspaper ad or news story would get placed adjacent to the space purchased by the furniture or mattress retailer.

 For manufacturers, it meant checking insertion deadlines for their favorite shelter magazine, and touching base with key retail customers to do a deal on getting them co-op advertising dollars (that means the manufacturer foots some or all of the bill).

 But a few years ago – way back in the early 2000’s – consumers started yelping about late furniture deliveries, tweeting about their comfy new mattress, and pinning pictures of that cool living room makeover they saw on HGTV.  So much for those meetings with the ad salesman for the local newspaper.

 “What has happened is that the amount spent on print – except for circulars – has dropped significantly.” Said Steve Rotman, president and CEO of Rotmans Furniture in Worchester, MA.  “Radio and TV has dropped from what it used to be.  And the amount spent on (direct-mail) circulars has dropped, although we still do them.”

 No, Rotman and other furniture and bedding retailers like him haven’t cut back on advertising.  But their dollars are being re-directed in a big way to the digital realm, which includes everything from social media sites such as Facebook and Pinterest to paid search programs such as Google AdWords to YouTube videos.

 What use to be simple in terms of communication has exploded into a multiplicity of ways to communicate with perspective furniture consumers.  Let’s start the discussion with how retailers are allocating their advertising budget.

 Print is definitely trending down with some larger retailers in larger markets moving entirely away from the medium even with substantial discounts and value added.  The fact is the consumer has moved away from the newspaper as a source for news reducing the impact of advertising.

Television which exploded on the scene more than a decade ago as the workhorse to attract potential customers to furniture retailers, is slowing.  The fact is that consumers are viewing less television and when they are viewing, they are doing so on devices that exclude advertising. 

 Even in instances where television is the centerpiece of a marketing and branding strategy, digital media plays a key supplemental role.  This is especially true with brand-building strategies by well-known manufacturers who advertise nationally such as La-Z-Boy, Ethan Allen and Tempur-Pedic.

 Internet is either the first or second step when the consumer decides to make a furniture purchase.

 As can been seen from Graphic B, 46.3% of consumers first visit the internet shopping various sites before selecting those 2-3 stores they will visit.  This is a devastating blow to the less dominant retailers in the market.  More retailers today have a web presence of some degree.  However, the challenge is the site management, populating the site with new products and current advertising are the basics.

 The other 38.8% visit the store first to scout out the retailers shopping environment.  This is a critical visit influenced by the retailers branding effort as well as the reputation in the market.  An important note is how the sales associate treats the scouting consumer.  A lack of interest by the sales associate because of a perceived “tire kicker” can result in no return visit.

 Of late, however, Rotman said his store’s most effective ads have been videos used as so-called “pre-rolls”, or short ads that run before a user can watch a selected video. He acknowledged that the click-through rate on such is small, but those who do click on the ad and visit Rotman’s website are much more likely to visit the store.

 “It has a positive effect on store traffic and sales because it drives people to the website”, he said of the pre-rolls.  “And, we’re finding that when website traffic goes up, store traffic goes up.  And there’s a direct relationship between store traffic and store sales.”

 He said that makes it critical to keep the website fresh and engaging so it accurately reflects what the in-store shopping experience is like.

 “We want to create value for each web visitor,” said Rotman.  “It has been very effective for us in terms of (an improved) closing rate and in terms of store sales.”

 Social Media still has the buzz to be the solution to the furniture retailers advertising problems.  Anecdotal research is the most often cited as reasons for pursuing this medium.

 As can be seen from Graphic C from the consumer research, social media is not the most effective method to inform the consumer.

Rotman and Julia Rosien, brand manager to bedding producer Restonic, agreed that the measure of social media and digital programs is very important, but they noted that the traditional advertising measure of gross ratings points is only a small part of the measurement puzzle.

 “At Restonic, we measure a wide variety of things – impressions, reach, engagement, and especially sentiment, which is very difficult to measure in traditional advertising,” Rosien said.  “There’s a misconception that a social media strategy is easy to develop and implement.  You can spend hours on social sites gathering and creating content, commenting on others content and sharing it all, and measuring the wrong thing. Valuable resources could be wasted on a vehicle that is not driving toward your goals.”

 Rotman likes to call it “web-oriented advertising.”  And he said, it now takes up about 40% of his annual advertising budget, and by next year, it probably will be 50% of the total.  Five years ago, it was barely 10%. “I don’t see that trend reversing itself,” Rotman said.

 Neither does Rosien who is an early proponent of a digital-heavy advertising and marketing strategy.  “The goal of any well-conceived digital campaign should be to improve the connection between the brand and its consumers – turning fans into ambassadors,” she explained.  “In this way, the sale becomes the by-product, but the community that drives engagement and love for the brand, that’s the sweet spot.”

 She said Restonic’s digital media strategy has become important for both a business-to-business and business-to-consumer standpoint.  Restonic dealers, for example, have access to a library of blog content they can incorporate on their own social media pages, while the company’s Facebook page now has more than 30,000 “likes” from consumers.

 “Brand awareness and growth have been phenomenal in the past few years,” Rosien said.  “Our blogger outreach campaigns have allowed us entry into groups and communities on social media that we wouldn’t have reached otherwise.” 

 She said the B2B side is important because retailers, especially smaller independent operations, often lack the time or staff expertise to execute the strategy.  “We know retailers struggle to produce content and our digital publishing program takes the burden from them,” she said.  “Social media is no longer a nice-to-have. It’s a must have.”

 Rotman agreed, but said social media can be the classic double-edged sword if a retailer’s customer service or product quality consistently falls short of expectations.  That can result in numerous negative comments and harsh reviews on sites such as Yelp, which a retailer generally has no ability to remove.

 “If you have a lot of customer service issues, then it’s not a positive thing,” Rotman said.  “But, if you have good customer services, there’s no reason to be afraid of it.”

 Direct Mail, with the advent of computer graphics and digital printing, has evolved to the next level.  This process allows small-run quantities with the ability to change product shots to match the targeted consumer.  From the consumer’s perspective using more information/product shots makes the message more effective.  Graphic D illustrates. 

  Over the past two years the concept of magalogs has been introduced to the traditional retailer.  A combination of editorial content and product presentation devoid of a “sales pitch” has produced substantial results with 9%+ of existing customers and 4%+ of targeted potential customers visiting the store to make a purchase.  Lifestyle stores, such as Pottery Barn and Restoration Hardware have used this approach instead of television advertising.

 The introduction of targeting the consumer “most likely to purchase” has more than doubled the response rate of direct mail.  The same targeting concept is now being applied to email transmissions.  This involves moving away from the weekly total emails to numerous emails to specific consumer targets with products that most likely would appeal to them in terms of style and purchase cycle.

 The focus going forward will be to direct a specific message to a potential customer incorporating a feedback loop for performance.

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WHO DOES THE TALKING?

Advertising is the communication from suppliers and retailers to persuade a consumer to purchase their product.  It is a simple statement but a difficult objective to accomplish, especially to quantify success.

 The starting point must be what influences the consumer purchase.  According to the latest buying process study conducted by Impact Consulting Services, parent company of Home Furnishings Business, price was obviously number one well down the list.  The graphic to the right illustrates all of the purchase motivators.

 Manufacturing Role to
Attract the Consumer

 In the past decade, the industry has lost many of its major brands or, of those that remain have muffled their voices.  The traditional role of the manufacturer was to create, in the minds of the consumer, an aspirational desire for the product.  The chief purveyor of this message was the “shelter” magazine.  Starting at the upper end with Architectural Digest and Elle Décor and moving down stream to Southern Living and Good Housekeeping.  If they still exist, there is little furniture advertising.  Interestingly, there are rugs and accessories advertising which could explain the increase in the consumer price index for these product categories (index at 93.8 compared to furniture/bedding at 71.9).

 There are brands that are the exception.  In our discussions with Eli Winkler, Vice-President of Digital Customer Experience and e-commerce, he shared the La-Z-Boy approach to advertising to the consumer.

 “La-Z-Boy’s hugely successful “Live Life Comfortably” effort, featuring actress Brooke Shields, wouldn’t be as effective without the benefit of digital media, despite the presence of her high-profile television and print ads,” said Winkler.

 “La-Z-Boy has an integrated media plan across numerous channels: print, TV, digital video, display, social and search engines,” Winkler said.  “It has been incredibly successful for us, garnered attention, and shifted people’s perceptions and knowledge of the brand based on our research findings. And, we have seen unprecedented sales growth.”

 He said a key goal of the branding strategy is to change the perception that La-Z-Boy only makes recliners – a view that persisted among consumers despite the company’s nearly 90-year history of making a variety of upholstery products.

 “We addressed the outdated associations head-on”, Winkler said.  “We used Brooke to capture consumer’s attention, and her welcoming personality and authentic charm helped communicate that La-Z-Boy offers a wide range of great looking furniture options that fit almost any lifestyle and home.  And, with Brooke in the furniture, customers took notice of our variety of stylish offerings.”

 In 2017, he said Shields’ (and La-Z-Boy’s) visibility will increase as her ads will be used more extensively online, and will move into prime time broadcast TV slots.  That’s in addition to the usual mix of non-prime broadcast and cable TV.

 “Our target is the woman who wants to create a great looking, comfortable home where she can relax and enjoy life; where both family and friend feel at home the second they walk in,” Winkler explained.  “She looks for quality and style that will stand the test of time and provide the functionality of her family needs, and is never interested in just following the newest trend.  Her home is a place she really lives, not just a showpiece meant to impress others.”

 Another successful brand-building effort built around TV and digital is found at Palliser, a Canadian upholstery producer who is wrapping up a national campaign in Canada and is planning to extend into the U.S. later this year.

 “The secret to our success is the Palliser brand reputation in the Canadian market,” said CEO Cary Benson.  “Palliser believes everyone deserves to have their home furnished exactly how they want it and when they want it. Their home furnishings reflect their personal style, color, comfort and function that matches their taste and lifestyle.”

 He said the most recent TV commercials aired during early morning and evening news shows, as well as several national entertainment and sports broadcasts.

 “We included a large hockey buy because, in Canada, female buyers are avid watchers of hockey broadcasts with an almost 50-50 split with men,” Benson said.  “In addition, we have been sponsoring nationally televised Winnipeg Jets games with signage on the rink boards” (Palliser is based in Winnipeg).

 He said the company currently is evaluating the best way to spend its media dollars in the U.S. market, but said the campaign will probably focus on digital and social media because national TV buys in the U.S. are not as cost effective as Canada.

 “Our goals with our advertising investments are to help educate consumers about our brand and attempt to develop brand preference for our products so a consumer will visit our website, learn about our products and visit one of our local retailer partners,” said Benson.

 Manufacturers acknowledge that some retailers are reluctant to promote a particular furniture brand – preferring instead to promote the store as a brand.  Rotman, however, said he’s fine with including both the store brand and the manufacturer’s brand in his advertising, since the combination can convey the message that the store carries quality products from reputable manufacturers.

 “The store brand is effective when it’s placed with the manufacturer’s brand,” he said, pointing out that some of Rotmans ads promote a particular category of furniture, such as solid wood and don’t mention any specific brands.  “In that case, it’s the store brand used with a phrase that signals quality to the consumer.”

Retailers Role to Attract Consumer

 The retailer’s role is to communicate price/value, selection and service.  However, this message has evolved to “you can afford it” a financing message.  The costs of this message, in addition to the medium used, is a hefty sum.  The following graphic compares traditional retailers to the lifestyle stores (retail verticals).

These expenditures are quite a bit out of the average gross margin 48.6% that can be achieved.  We should carefully understand the comparison to other distribution models such as lifestyle (retail verticals) brands Crate and Barrel, Pottery Barn and others, as can be seen from the graphic.  An expenditure of half that amount by these retailers can be used to reduce margin targets or increase advertising.

 As traditional furniture retailing moves into the future, the role of the suppliers to this distribution channel must be better defined.  Suppliers are now comfortably selling other distribution channels, such as Etailers and Lifestyle stores as private labels. 

 Likewise, many retailers are directly importing using their brand.  However, the focus from the consumers perspective is not aspirational, but one of price.

 Without branding to the consumer of a product’s attributes, quality, design, etc… the product category will become a commodity.

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WHO ARE YOU SELLING?

There is an old adage that says, “I know 50% of my advertising is not effective. I just don’t know which 50%!” This is the challenge that must be addressed in order to reduce the cost and to improve the effectiveness of advertising. The foundation must be to know who you are selling at the most basic level of age and income. This is accomplished by appending — on an ongoing basis — the consumer demographics down to a product category level. Impact Consulting Services/FurnitureCore, the parent company of Home Furnishings Business, provides a Consumer Segmentation application that delivers this ongoing service. It is shown in the graphic above.

Comparing these findings to the consumers in your individual markets allows you to better understand your primary consumer. This information, when compared to the consumer you should be selling based upon your merchandise mix, gives direction to the buyers.

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TARGETING YOUR CUSTOMERS

One of your most valuable assets is your customer list complete with mailing addresses, email addresses, and telephone numbers.  When this list is appended with basic demographic data and purchase history it allows you to use a “rifle approach” to targeting your consumers.  Impact Consulting Services/FurnitureCore, the parent company of Home Furnishings Business, maintains a subscription-based application that maintains your databases.  The targeting screen is shown in the the graphic above.

The application has a feedback loop to measure the results of direct mail campaigns as well as email campaigns. This provides the opportunity for you to communicate directly with your millennial customers (25-35 years old) about the targeted merchandise just purchased at Market or a special offer to your customers with available credit line or even the customer who has recently bought a bed, but not a new mattress, etc.  All of this allows a more targeted approach to advertising.  But most important, did it work?

Magic Carpet Ride Ahead?


By Larry Thomas

Continuing a pattern of slow, but steady growth, area rugs kept pace with nearly all other home furnishings categories last year amid the often turbulent election-year retail climate.

That wasn’t surprising since furniture and rug purchases often go hand-in-hand, but many rug company executives believe the bevy of products launched at January trade shows – particularly the Atlanta International Area Rug Market and the Las Vegas Market – could help send the category to new heights.

Executives say blues and neutrals remain the dominant colors – known as colorways in the rug world -- on most top-selling rugs, but rugs containing splashes of brighter colors have worked their way onto the best-seller lists of several vendors.

“Our hand-tufted and hand-knotted rugs continue to evolve with changing and modern color palettes, bringing an updated look and feel to traditional interiors and providing texture and sophistication to modern environments,” said Satya Tiwari, president of Surya.

However, he noted that modern color palettes are no longer limited to hand-made products, which typically carry a high retail price tag.

“With our new machine-made rugs, great ‘high-end’ design is within the reach of more people,” Tiwari said. “What’s possible in rug design continues to inspire us every day to create ever more relevant designs that are so well in tune with home design and color trends.”

Research by Impact Consulting Services, parent company of Home Furnishings Business, shows that retail sales of area rugs totaled an estimated $5.49 billion in 2016, a 3.7% increase from 2015. Furniture and bedding sales growth was slightly slower, rising 3.4% to an estimated $95.68 billion in 2016.

For the first three quarters of 2016, area rug sales growth outpaced furniture and bedding growth more significantly, rising 4.2% from the first three quarters of 2015. During that same period, furniture and bedding retail sales grew just 3.1%.

In fairness, the furniture and bedding figure was dragged down by bedding sales, which grew a meager 1.3% in the first three quarters of 2016, according to Impact Consulting research. When bedding is taken out of the mix, furniture retail sales were up 4.1%, just 0.1% below area rug growth in the first three quarters of 2016.

It’s Not All Blue and Neutral

Additional research by Impact Consulting, including a survey of consumers who recently purchased an area rug, bears out manufacturers’ focus on blue and neutral colorways – but indicates the door should be left open for some brighter hues. According to the survey, 36% said neutral was the dominant color of their new rug, while 24% said it was blue.

Interestingly, 24% also said red was the dominant color, but no other color was named by more than 8% of those surveyed.

The survey indicated design trends are not as clearly defined as color trends. Some 24% said geometric was the overall design element, but another 20% each said solid and contemporary print was the main element, and another 16% said it was a traditional print.

Florals and zig-zags garnered 8% each, while stripes were mentioned by just 4% of those surveyed.

If the increased interest in brighter colors and non-solid design patterns continues, executives say it wouldn’t be the first time for such an occurrence. Capel Rugs, for example, said they saw significant growth in those areas last year, and is celebrating its 100th anniversary this year by bringing out two colorful collections inspired by products that were popular in the 1970s and 1980s.

One is a collection of braided rugs that gives “the original colonial design a modern spin,” while the other is based on a design that was selected for the World Floor Covering Assn. Hall of Fame in 1978.

“Our theme for the centennial celebration is ‘100 years of heritage in every rug’,” said Cameron Capel, vice president of national accounts. “One hundred years in business is a major milestone, and it underscores our long tradition of providing the very best quality, service and customer satisfaction.”

Who Needs the Internet?

Unlike furniture, where internet research is king, 40% of the recent rug purchasers surveyed said they did no internet research before making their purchase. Some 20% said they did one to two hours of internet research, while another 32% said they spent two to four hours.

The relative lack of internet research suggests an area rug is often purchased as an add-on during or shortly after a furniture purchase. Some 84% of those surveyed said they bought their rug after buying furniture, and another 4% said they bought the two together. Only 12% said they bought furniture after their rug purchase.

Another casualty of the lack of internet research (and quite possibly a lack of retail sales training) is basic product knowledge, the survey also suggests. A whopping 88% of those surveyed said they did not know the country of origin of their most recent rug purchase, while 52% said they did not know what their rug was made of (wool, natural fibers, synthetic fibers, etc.).

And not surprisingly, 40% said they did not know if their rug was machine-made or hand-made.

But the interest isn’t being totally dissed by consumers buying area rugs. The survey showed that 24% of recent purchasers bought their rug on the internet, while a solid 48% said they bought it at a mass merchant such as Target or Wal-Mart. Another 12% found it at a home improvement store such as Home Depot, and only 8% made the purchase at a traditional furniture store. The final 8% used a rug specialty store, according to the survey.

Regarding price, lower price points ruled the day, as some 80% said they paid $399 or less for their rug – 40% paid less than $100 and 40% paid $100 to $399. The next-highest price category was $800 to $1,499, which was paid by 8% of those surveyed. Just 4% each reported paying $400 to $799; $1,500 to $1,999; and $2,000 and above.

Loloi’s Anastasia

Ornate distressed traditionals are modernized by illuminating colorways in this collection. Power loomed in Egypt of polypropylene and polyester, the rug is durable and easy to care for, plus it gives the appearance of being a fine rug made by hand. The intricate detail, luster of colors, and unbeatable price point establish its value.

Safavieh’s Florida Shag

Detailed tropical patterns in warm, neutral colors bring Key West flair to this collection. The high and low pile of this shag floor covering accentuates the sculpted damask vines, colored in sandy beige, for a visual display with flowing dimension. It is machine-made using plush, durable synthetic yarns for added comfort and long-lasting beauty.

Couristan’s Madera

Made of 100% linen, this best-seller features cut pile accents over a sumac weave. Hand-made in India, it features soft, contemporary geometric patterns blended in a series of fresh, modern neutral colorways. Available in five sizes, it is shown here in a design that utilizes space-dyed yarns.

Tufan Rugs’ Vintage

This rug features a carving design that mimics a wear-off antique rug creating a “vintage” look, which makes it suitable for modern or classic settings. This luxurious rug is a combination of cotton and polyester and is hand-made in India. The collection comes in a variety of styles, designs and colors.

 

 

 

Jaipur Living’s Fables

Constructed of machine-tufted viscose and chenille, the Tria design brings any space to life with a fashion-forward color palette and a sophisticated, boldly-scaled contemporary pattern. The soft texture highlights the gardenia and pumice stone colorways.

Kaleen’s Weathered

This collection of indoor/outdoor rugs is hand-made of 100% PET polyester using a unique cross-tufting to create a distressed appearance. It is shown here in the popular blue/gray colorway.

Rizzy Home’s Dimension

Utilizing an innovative construction that combines a looped background with cut pile, this collection features a textured, striation appearance and a seamless blend of traditional and contemporary design elements. It is made of hand-tufted wool with a cotton/latex backing and is available in blue, gray and ivory colorways.

Orian Rugs’ Skyline

From the Next Generation collection, Skyline brings a casual look into the home with its exquisite details. The faded colors of cream and blue switch off to make an ocean tide theme. It is soft and durable and machine-made domestically. Suggested retail for a 5 x 8 rug is $375.

Surya’s Zahra

Hand-knotted in India, this 100% wool rug features a low-pile construction and is available in 10 colors. It comes in four standard sizes (2 x 3, 3 x 6, 5 x 8 and 8 x 11), but custom sizes also are available.

 

Nourison’s Twilight

A supernova takes shape in this rug as a spectrum of neutrals expands from the nucleus of rich platinum tones into an effusion of taupe rays on an ivory ground. With a burst of light, it brings dynamic radiance into the room. The hand-washed, hand-finished collection is machine-made of 40% wool and 60% Luxcelle.

Capel Rugs’ Simply Gabbeh

A traditional variety of the Persian carpet, tribal designs and geometric patterns are combined to create this colorful collection. It is hand-loomed in India of 100% wool and comes in four sizes.

Suggested retail for a 5 x 8 rug is $599.

Tayse Rugs’ Dakota

Part of the Festival collection, this versatile rug can be used with rustic or modern décor. Rich hues of brown, green, tan, red and blue are paired with a simple brushstroke pattern to make it suitable for virtually any room. It is machine-made with soft polypropylene fibers and jute backing.

Feizy’s Fiona

The Fiona collection is a dramatic grouping that interprets transitional designs in a bold palette of contrasting neutrals. Power loomed in art silk, the luminous sheen lends each piece a modern edge, while erased patterns impart a hint of vintage. It is shown here in dark gray.

Kas Rugs’ Artisan

Marketed as “artwork for your floors,” rugs from this transitional collection are hand-tufted and add an element of dimension to any room. Featuring a half-inch pile height, the collection is made in India of wool and viscose.

Furniture Stores Top Selling Months

Many life events spur home furnishings purchases. But along with buying a new home, marriage, and having children, the time of the year plays an important part in overall furniture store sales (Figure 1). These sales are less important to other furniture distribution channels, for example, big box stores, but are the bread and butter of furniture stores. These event sales also serve the function of clearing out merchandise to make way for new styles.

Economic events can always alter consumer confidence, but the overall monthly ebb and flow of furniture store sales has changed through the years. Once the pinnacle of furniture purchases, the November/December holiday season has lost some of its sales glamour, not only for furniture but all consumer products as a total group. It is still the biggest season in total retail sales of consumer goods, but no doubt the 4th quarter has lost market share. For furniture stores, May and August have always been steady and strong, but March has emerged as a huge sales month. Online filing of income tax returns has resulted in quick returns for the end of February and especially throughout March.

Throughout the 1990’s and up until the mid 2000’s leading up to the Great Recession, November and December trended as the largest sales months for furniture stores, often combining to capture 18 percent to 19 percent of annual sales. The exception was in December 2002 and 2007 when economic downturns and uncertainty impacted furniture store performance in December. However, since coming out of the Great Recession, the entire 4th quarter has garnered less importance to the Furniture Industry. Table A tracks monthly indexed furniture store sales. Note that an index of 100 represents the average month (annual sales divided by 12 months). An index of 115, for example, indicates sales were 15 percent higher this month than the average.

Two decades ago in 1997, the 4th quarter far outreached the previous three quarters in furniture store sales (Table B). At 27.6 percent, the 4th quarter was 4.4 percent higher than the 1st quarter’s dismal 23.2 percent. Over the next 15 years, both quarter 1 and quarter 3 percentage of sales increased, while quarter 4 dropped below 25 percent. Although 2016’s holiday season performed better than 2012, quarter 3 rises as the year’s top-performing period.

Furniture store monthly sales center around calendar events and holidays. These events translate into the highest performing months in most cases.

1st Quarter

While the 1st quarter contributed less than 25 percent to furniture stores sales in 2016, tax refunds issued at the end of February and throughout March propelled sales upward impacting March significantly (Table C). January is negatively impacted especially in markets sensitive to winter weather. And with no big sales event to lure customers, it is the worst performing month of the year for furniture stores. February has the draw of big Presidents’ Day sales which helps the weather-sensitive markets recoup somewhat. However, consumers seem to be holding out until spring when income tax refunds arrive. In 2016, almost two-thirds of total annual refunds totaling $203 billion (out of $317 billion) were paid before March 25. March is the only month in the quarter that consistently out performs the average for all months, which is 8.3 percent of sales.

2nd Quarter

The 2nd quarter typically produces lower furniture store sales than the remainder of the year because of a historically poor performance in April. Memorial Day sales in May always produce excellent sales– an average of 8.4 percent throughout the past two decades. In recent years June has also performed above the average (Table D).

3rd Quarter

Since 2002, Quarter 3 has climbed to the best selling quarter of the year – mostly due to high August sales. The end of summer sales and the lead into Labor Day has kept the month of August percentage of sales at 8.8 percent until 2016 (Table E). Last year the Labor Day holiday weekend fell solidly in September which boosted it to the highest performing month of the 3rd quarter. Meanwhile July 4th events are producing average sales during a traditional consumer vacation period.

4th Quarter

Table F shows how market share of November and December combined has dropped from 19 percent in 1997 to 17.2 percent in 2016. While still commanding above average sales, the holiday season has lost some appeal as more consumers are choosing to take advantage of income tax refunds in the early spring and late summer sales. In addition, other consumer goods and electronics also compete for consumer dollars during the holiday season. Meanwhile, October has become the second worst performing month behind January averaging 8.0 percent of sales since 2002.

In a perfect world, furniture store retail sales would produce 8.33 percent of sales per month. And while all retail entities have seasonal variations based on consumer life events, which are beyond the retailer’s control, and holiday sales, which are within its control, every month that falls short of this mark potentially sends consumers to other product markets. If the 4th quarter of 2016 had generated the percent of sales as the average of the 1990’s, an additional $1.3 billion in furniture and bedding sales would have shifted to the holiday season. Is this loss a result of a shift to other seasonal sales and events, or is it a decline in the importance of furniture purchases to the consumer in the 4th quarter?

How to Drive Average Ticket Sales and Profit Growth in 2017

By Tom Zollar

Our issue themes for the first two months of the year, merchandising and advertising, play a major role in how well you do with the potential customers that enter your store. In this column, we are most focused on the third element in that process, the in-store experience provided by the sales staff. This ultimately delivers the results that we measure as closing rate and average sale/ticket. We have previously discussed the fact that training selling skills and coaching them can have a positive impact on closing rates, but we have not spent as much space addressing average sale/ticket. We have discussed its importance and some of the business dynamics that contribute to it, but I do not believe that we have specifically addressed ways to drive improvement to this extremely important number.

The good news is that it has been growing all by itself over the past decade rather nicely. We can probably take a little credit for that, but not too much, because for the most part, that has been more a result of the changes the consumer has made than to our efforts in the stores. They came out of the recession ready to buy and as the they have aged, Millennials, Generation X and others, have moved up to better goods, custom orders and lifestyle driven decisions that tend to lead to whole room/house make-overs. All this was predicted and has come to pass, driving increases in this vital statistic.

Today, better retailers across all product categories are using advanced research to maximize how much they know about their targeted customers. As a result, many are doing a much better job creating advertising that drives these motivated consumers into their stores and using targeted merchandising to have what they want, displayed how they want to see it. The result is that even in some product areas where retail prices have declined, we have seen increases in average sale because the customer is buying more. Our industry most certainly has benefited from this overall trend and the fact that so much focus has been placed on the home by the media and the public as the center of our life.

However, are you just riding the wave here or are you doing all you can do, to push it as far as it will go? Only you can answer this question for your company, but before you do, you need to realize one extremely important fact: you can do a fantastic job of driving in the right customers and having the right product for them, but in the end, it is the sales person that CONTROLS your average sale! They and they alone are ultimately responsible for this result, because it is their skills and desire to maximize the sale that delivers higher tickets. It is their attitude that influences what they do with each customer and when they stop trying to build the sale. Therefore, if you are not doing all you can to hire, train and coach your staff on how to increase their tickets with each and every customer, then the answer to my question is no.

Since it is your sales person who decides when to complete the sale, they are the ones that limit the size of it. Whether they do this in order to move on to the next Up and see as many people as they can, because they lack the skill to develop design/in-home opportunities or just are not motivated to give their all to each customer they meet, it is up to your sales management team to define the individual situation and take the appropriate steps to improve it or replace the person.

As a sales coach, I am often asked which of all the various sales numbers I would target for improvement in the coming year. For 2017 my answer is always average sale/ticket, the amount you actually sell to each customer with whom you successfully connect. Not only is there abundant opportunity for growth with today’s consumers, it is also the easiest number to drive improvement on from a training and coaching standpoint. Much more so than closing rate, which is more tied to people skills in most cases than selling skills. From an owner’s perspective, average sale is also the prime profit driver of them all, delivering more to the bottom line than any other single metric (except perhaps protection closing rate).

So, what can your sales management effort do to drive growth in this critical area? Here is a list of a few areas you need to look at and some activities that would deliver improvement to your average sale/ticket.

Sales Process and Selling Skills

Opening the Sale – The Greeting and the entire process of opening the sale has become the most critical step with today’s consumers. It is here that your sales staff most often makes or breaks the relationship needed to develop enough trust that the customer will share their needs and wants. It is the sales staff that will drive the sale and allow the development of larger tickets. Make certain that your sales people are not moving onto product or discussing business subjects before the customer is ready. Those sales, if made often, become more product than room focused and deliver lower tickets.

Needs Analysis – This is where average ticket development is really centered. The key is training your staff to ask the right questions, at the right time. Low average sales are often the result of a line of questions that is mainly product focused as opposed to room or lifestyle driven. If we concentrate first on finding only the product they seek, then we will miss out on the opportunity to help our customers develop their dream of a perfect room or home environment. Make sure your staff is room/lifestyle focused and not just a tour guide showing product after product to their ups.

Sketching – There is no tool or element in your selling process more important to building average sale than sketching. It is by far the main ingredient in developing both the relationship and knowledge to build larger room and home centered sales. This has been addressed in several previous columns, such as the one from our June 2015 issue, “Sketch to Build Sales”. Read it and make sure your staff is using this valuable tool to the fullest with every opportunity!

Design and In-Home Business Development – We all know that the biggest tickets come from design projects and in-home visits. This does not mean that everyone must be a designer but they do need to be able to recognize customers that need or want that type of service, then direct them to someone else on staff that can deliver it. If your process does not provide this great opportunity, both your customers and team are missing out!

Product Knowledge and Category
Performance

Product Knowledge – Having knowledge of your products and knowing how to use it to drive sales growth is at the core of successful selling in all industries. However, it is not the nuts and bolts, technology based situation we see in computers and other areas that are important to us. It is what the ingredients and look/feel of our products really do for the customer that matters. We must train and coach our sales people to understand that it is the happiness and satisfaction our products deliver that are key to answering our customer’s needs in the home. Make sure your staff is using lifestyle focused vs. only technical, product centered knowledge to excite their clients.

Product Category Sales – In virtually every low average salesperson or store that I have studied, a common cause is inconsistent or poor performance in product areas that drive higher tickets. A store that is under performing on average sales is almost always a low achiever in case goods, premium bedding and/or better goods. This can be caused by a lack of product knowledge, a limited understanding of relative value or a poor attitude towards a vendor/product. Whatever the reason, this is the single biggest average sale opportunity I see in most stores. Make sure your staff understands your good – better – best story in each category and how to sell it. Some sales people will not sell a product because they would not pay that much for it, or they don’t like the company/rep/delivery, or are just too lazy to work a little harder for the sale. Run category and vendor performance reports for your total store and each staff member. Target those that underperform with any category or vendor for improvement. Find out the cause and train, coach or replace each person.

Average Sale Ingredients and Focus

Numbers to Track – Just like close rate and average sales are ingredients in revenue per up, that can be tracked and coached, there are also performance elements in average sales that can be tracked, trained and coached. Here are a few that will indicate how a sales person is doing:

o   Items Per Ticket

o   In-Home and Design Sales Percentage

o   Better Bedding Percentage

o   Leather Percentage

o   Power Motion Percentage

o   TLA Percentage

o   Special Order Percentage

o   Sketching Percentage

o   Personal Trade/Be Backs

Drive Focus with Coaching and Contests – Harry Friedman always said that the only reason to track a statistic is so you can improve it. Every one of the above numbers contributes to increasing average sale in a furniture store. I am sure you won’t be surprised to learn that you have people on your sales team that don’t sell better bedding, don’t waste their time on custom orders, seldom have more than a few items on a ticket, don’t sketch at all, etc. All of them are hurting your business. Find them and fix them. Run contests aimed at each statistic to create focus and drive improvement. A Saturday “Pass the Buck” contest for the Ticket with the most Items on it works wonders!

There are many more ways to improve your average sale and the great thing is that almost everyone on your staff can do it. Even your best people can grow by being more consistent and adding in-home or design skills to their toolbox. The key is to get them focused on it and make sure they are not rushing through customers just to wait on as many ups as they can each day – that is a real volume killer!

NEED OR DESIRE - IT IS UP TO US


By Bob George

I have just completed my semi-annual pilgrimage to the city in the desert, a  place created by the power of marketing and, more specifically, advertising.  It is somewhat ironic that one of our major marketing events occurs in a place that is our major competition for the consumer’s disposable income – leisure travel.  This is the number one answer when consumers indicated where they would allocate disposable income.

I realize that many of the visitors to Las Vegas are business-focused as opposed to vacationers.   However, the selection was motivated by the promise of “fun city” rather than a destination to conduct business while having some fun on the side.  No one anticipates that intention in High Point even though the Market Authority expends a great effort to provide some diversions.

Why does the consumer pay homage to the glittering strip that most locals avoid?  The fact is that it is the “aspirational” satisfaction that the consumer seeks.  This is the marketing genius of Las Vegas.  There is something for everyone.  From the time that one deplanes it is the noise of the slots and the oversized video screens that provide glimpses of the glamour that waits just down the strip.  Yes, Las Vegas lives up to its reputation as Sin City, providing access to gambling and adult entertainment.  Many may sample the fringes.  However, most are content just to be in the presence of the city. 

Now what does this have to do with furniture and advertising, the focus of this issue?  Simply put, Las Vegas has mastered the art of transporting the consumer for the moment to a place that evokes a perception of escaping the “everyday.”  Can we do this for the furniture consumer, spotlighting the excitement of the “reveal” when their customized new living room is delivered and placed in the home?  Just read the positive comments on the real time delivery surveys.  If we are honest, it is similar to the “James Bond – 007” feeling that we experience when we walk through the lobby of a glamorous hotel or restaurant.  That is marketing!

As it is in Vegas, this requires segmentation of our consumers, recognizing that each consumer cluster has specific aspirations.  We cannot mix aspiring needs with the more practical needs of low prices in conjunction with long term financing.  The consumer group that lives for the “deal” is a small percentage of our target.  There are many more consumers that aspire to a beautiful room or a comfortable functional environment.  The majority of our messaging, however, is about “What a deal we have that is over by Monday!”

What is the penalty for our not creating that aspirational consumer?  A Consumer Price Index of 71 compared to 100 in 2010 shows that we lost $32.8 billion in six years by undervaluing our product in the eyes of our consumer.  This is more than double our growth rate.  It may be time to consider an industry campaign such as “Got Milk” to communicate our product.  I know we tried this 25 years ago and failed because industry leaders could not compromise.  Maybe the pain now will overcome our individual egos. 

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