King in the North

January 12, 2015  by in Retail Snapshot   

When you think of major U.S. markets, your eye might gravitate toward the seaboards. The Minneapolis region, home base for HOM Furniture, might be a familiar name across the country, but it remains among the nation’s metropolitan areas second tier.

That doesn’t mean it’s a dull market for home furnishings retailers.

“I am not going to lie—business has been challenging and it always will be,” said Kyle Johansen, merchandising manager at Coon Rapids, Minn.-based HOM. “No one is going to just lay down and let us take their market share.  We have a lot of very tough competitors who keep us on our toes every day.  Everyone is here and Minneapolis is only the 16^th-largest market in the U.S.”

The region’s home furnishings retailers include Ashley, Slumberland, Schneidermans, Becker Furniture World, Macys, Mattress Firm and Ethan Allen—as well as lifestyle retailers such as Pottery Barn, Restoration Hardware, Room and Board, Crate and Barrel. Don’t forget the big box guys in the game now such as Menards, Costco, Target, Big Lots and Ikea.

“Did I mention the online retailers like Wayfair and Hayneedle?” Johansen said. “We are always looking to keep our showrooms unique with fresh assortments and staffed with great, engaged people to compete with all those other outlets for furniture.

“Since we offer sofas from $267 to $20,000, everyone is our competitor. We do not have the luxury of being a niche store who only has to beat others selling, for example, high-end contemporary or low-end RTA.”

You might not have been there, but you’ve heard of Minneapolis—you’ve probably heard of HOM Furniture, too. The retailer has prospered in the upper Midwest through developing its namesake stores for appealing to the specific markets they serve; spreading its reach into upper price points through acquisition (Gabberts); and acting on retail trends that scream “value” to consumers (Dock86).

Now, HOM operates 15 namesake showrooms; three Gabberts Design Studio & Fine Furniture showrooms; and two Dock86 showrooms in Minnesota, Iowa, North and South Dakota and Wisconsin. Those combined for 2013 revenue approaching $216 million.

Starting Small, Ending Big

HOM Furniture’s roots go back more than 40 years to 1973, with the founding of JC Imports. Wayne Johansen (Kyle’s uncle) opened a small wholesale and retail import gift business in partnership with his uncle and mentor, Bill Christensen, who’d been paralyzed in an accident at age 19.

The two would drive down to Mexico, where Christensen found affordable treatment and his nephew found affordable merchandise and jewelry

In 1979, a friend convinced Wayne to convert one of his retail gift shops into a waterbed retail outlet, The Waterbed Room, which soon became the largest retailer of flotation sleep products in the upper Midwest.

Recognizing the need to expand product lines to capture greater market share, two HOM Oak & Leather showrooms opened in 1990. In 1993, to expand customer reach, all Waterbed Room showrooms were converted to Total Bedroom showrooms, along with further expansion of HOM Oak & Leather.

In 1996 HOM Oak & Leather and Total Bedroom were merged into one entity, HOM Furniture, making HOM a complete full-line furniture retailer.

The business continued to grow, and in 2008 Wayne, his brother, CEO Rod Johansen (Kyle’s father) and COO Carl Nyberg forged a deal to purchase high-end Minneapolis retailer Gabberts Furniture. 

“The aspiration was to open Gabberts gallery stores across the upper mid-west to expand the brand in multiple markets,” Kyle Johansen said. “Today there is a Gabbert's gallery in Sioux Falls, Sioux City, Fargo, and opening in 2015 a second Minneapolis location.”

In 2009 HOM was on the move again and acquired Seasonal Concepts, one of the largest specialty outdoor and Christmas businesses in the country; merged the concept into HOM’s full line furniture stores and branded the department "HOM Seasonal Concepts" in every HOM Store.

2010 brought another year of brand extension as HOM opened a new concept showroom called "Dock86," playing off the "weekends only" and "The Dump" approach of offering high value with no frills and only open four days a week.  A second location was opened in 2013 in Minneapolis adjacent to a new HOM showroom.

Filling the Floor, Selling the Product

HOM includes multiple brands (see Sidebar: Brand Extensions), but it seeks to tell distinct stories even on its namesake floors.

“Merchandising is a key component of any furniture showroom and we put a lot of time, money, and thought into how our showrooms layout from a sense of product flow as well as how vignettes are created and where our galleries are located throughout the store,” Kyle Johansen said. “We don't want every HOM Showroom to look exactly the same, so each HOM store will provide a different, yet similar, experience.

Each HOM showroom has its own design team of visual merchandisers, who get full authority to put whatever lamp, rug, cocktail table, and accessories in each vignette they choose.

“Even though all the product is the same it's offered in a different way in each showroom,” Johansen said.  “These teams often meet together to share best practices and bring ideas to their stores.”

How would you like customers to cross-shop your floors if you have multiple storefronts?

“We often hear from customers they have a ‘favorite’ showroom they like to shop as well as customers who will shop multiple HOM locations,” Johansen said. “Our merchandising team consists of over 30 designers between all the stores and our corporate team.  The HOM Stores are unique in the sense that we do a combination of gallery plus departmental sales.

Those galleries include "Fine Furniture" (higher-end lifestyle), "Seasonal Concepts" (outdoor and seasonal), "Uptown" (reclaimed, vintage, eclectic), "Amish Craftsman" (all Amish-made furniture), "Sleep Express" (mattresses), "Lodge" (rustic lodge cabin-style furniture made in Minnesota), and "Bargain Shop" (entry level price points such as $267 Sofa),

“We have a great group of buyers and merchandisers that make the showrooms pop and look fantastic,” Johansen said. “Our corporate merchandising teams visit the stores weekly to ensure everything is in perfection.  They often ask us what the standard is. and we always say you need to look like the "Best HOM Store" you cannot compare yourself to a local competitor that perhaps has a low standard for merchandising or a low standard for store cleanliness.

“Our experienced buyers travel all over the world to get the best products at the best prices to give our customers the best value.  Besides the U.S., we buy from Europe, Mexico, China, Vietnam, Malaysia, India, and Pakistan.  

Beyond product, HOM emphasizes training for the people encountering the shoppers.

“We have a very talented group of stores sales associates that make a huge difference,” Johansen said. “No one wants to buy furniture from someone who says ‘Ya, this is a good brown couch and its cheap.’ We do extensive training with our sales teams before they even see the retail floor. 

“Then they get further support training several times a year from our corporate sales trainer as well as buyer training, sales managers, and of course training by our mfg representatives.  We even have a ‘HOM University’ online that everyone must enroll and pass.”

Telling Several Stories

Each HOM store has its own identity, logos, music, color scheme, and marketing approach based on the customers it targets.

“So, between the big three (brands) we are creating three different marketing campaigns each month,” Johansen said. “To make matters more confusing, each brand has sub-galleries, such as in Gabberts case Stickley; in HOMs case Uptown, Sleep Express, Amish, Fine Furniture, and Seasonal Concepts.”

He praised the efforts of Marketing Director Jerry Underwood and HOM’s internal marketing team for handling that array of messages.

“We shoot a lot of our own photography as well as TV commercials; and we do that internally, along with all the post production and editing work,” Johansen said. “We also do our own Web sites internally which is a huge undertaking by our buyers, and marketing and IT Teams.  We have a social media manager who works solely on our Facebook, Pinterest, Twitter, and Houzz accounts.

“We even have our own media buyer who negotiates our TV commercial rates and placements in all of our markets.”

Full, 24-page Sunday go into local newspapers; and HOM also incorporates electronic bill boards, radio, magazine, and other forms of online marketing into its messaging.

“When we launched Dock86 we even wrapped the Minneapolis Light Rail transits and buses with our logos,” Johansen said. “Due to the huge amount of marketing we do its hard to put your finger on the most effective tool. We believe it’s a combination of everything that gets the word out about our brands and what is going on and why they should come in to buy today.”

Looking Ahead

Johansen believes HOM in a great position to grow all its brands into current markets and expand into new ones.

“We are very fortunate to be in a strong financial position to make moves when they present themselves, and our ownership has the vision to see around the corner,” he said.

Look for the Internet to play a greater role in the business. 

“Whether its Amazon, Ashley, Wayfair, or Target.com they are all investing very heavy into their online capabilities and as consumers get more comfortable shopping (and buying) online that medium will continue to play a critical role in our industry,” Johansen said. “I do not think the Internet will take the same market share in furniture that it has in electronics but it will continue to grow at a much higher pace then the rest of the industry.“The Internet is absolutely critical to the future of our business. We’ve hired a whole team of Web designers and programmers who know the systems and the language.”

In late November, the store launched a new version of HOMFurniture.com that looks to optimize online customer service and e-commerce capabilities.

“Our long-term strategy is to do more nationwide selling and shipping, but our goal today is to support our existing customers who might want to purchase online,” Johansen said. “They can schedule a delivery or store pickup, too.”

While HOM’s delivery routes extend across multiple states, Johansen said the retailer is in no hurry to build out its e-commerce efforts further afield.

“If someone want’s a lamp in California, we can do that, but we aren’t ready yet for national shipment of a bedroom set,” he noted. “For now, we mainly want to give the (e-commerce) convenience to our local customer.”