Merchandising Success: Logic or Luck?

January 23, 2017  by Jane Chero in Industry, Merchandising   

Where is the magic in the furniture industry?  The majority opinion is that it is merchandising.  However, that term is as mystical as anything in the furniture industry.  This industry lore is punctuated by references to manufacturers as product men or retailers as great merchants.  The success of many manufacturers and retailers is attributed to the talents of those individuals in merchandising, designing, and selecting products that the consumer loves.

As the industry struggles with what is referred to as the “commoditization” which relegates furniture to a utilization status to be used and discarded rather than cherished and passed on to the next generation.  As is presented in the Statistically Speaking article, the consumer price index declined for the fourth year while other consumer products have increased 10 percent over the same period.

Can we look to merchandising to bring the consumer back into the store to make aspirational purchases instead of searching for the best price only ignoring the value proposition?  Before casting our hopes on merchandising it may be good to define it.   The objective of merchandising, whether a supplier or retailer, is to present to the targeted consumer a selection of product that appeals to that targeted consumer and, rising above price, becomes  a “must have” purchase.  To accomplish this requires a combination of many functional areas all of which are focused on satisfying the goal of enticing the consumer.

The connecting point between the supplier and the retailer is the consumer.  Unfortunately, that is the point that is most often ignored.  In fact, merchandising suffers from both suppliers and retailers working in silo only coming together at Market to see if the product concept envisaged by the supplier matches the merchandise strategy defined by the retailer.  Only later the consumer is engaged by the retailer on the selling floors for the thumbs up or thumbs down.  It is too late at that point.  Unfortunately, merchandising takes time and money.  However, product failure consumes even more money and time. 

Planning? Marketing? Who has time for that?  Savvy furniture manufacturers and retailers say it’s critical to make plenty of time for merchandising.  It’s what separates the leaders from the also-rans.  In the home furnishings space, merchandising is critical at both the wholesale and retail levels of the business.  A manufacturer’s trendy, but poorly merchandised line that, for instance, fails to address a critical price point, is likely to languish.  “If the product isn’t right, then it really doesn’t matter what the price is,” said Pat Watson, vice president of merchandising at Hooker Furniture. “You have to be able to merchandise at certain price points.”

By the same token, a retailer who buys a trendy, well-merchandised line, but displays it haphazardly on the showroom floor is likely to have similar results.   “Unless you’re having some kind of a warehouse sale, I don’t see how you can just line up a bunch of sofas and expect to sell many of them,” said Jeff Selik, general manager of contemporary retailer Hillside Furniture.

Retail executives say manufacturers nearly always merchandise their showrooms by collection, or at least by product category.  However, the retail merchandising story varies widely. Some retailers set aside dedicated space for major collections — especially if they are licensed collections such as Standard Furniture’s mega-successful Magnolia Home or Klaussner’s popular Trisha Yearwood line.  There are retailers who merchandise their sales floors using lifestyle vignettes.  South Florida-based El Dorado Furniture is a standout here.   Others arrange products by category, by style, by price point, or any combination of the above.  “We’re all searching for something that will really entice the consumer,” said Geoff Beaston, senior vice president of case goods at Klaussner.

The Design Story

Design, of course, plays a huge role in any merchandising scheme. And that’s a big reason why manufacturers often urge dealers to display all pieces of high-profile collections together. They argue that good design can’t be fully appreciated if a collection is broken into items and scattered throughout the store.   Design-focused displays also give manufacturers and retailers a chance to tell a story – a story they hope will capture the consumer’s interest and motivate that consumer to add a part of that story to the home. 

 For example, the story behind Fine Furniture Design’s licensed Biltmore collection is one of a fabulously wealthy man – George Vanderbilt – and the magnificent 250-room “country retreat” he built in the Blue Ridge Mountains of western North Carolina in the 1890s.  Today, the home and the surrounding Biltmore Estate are open to the public, and the vast property is owned and managed by Vanderbilt’s descendants.  “We try to come up with classic designs that reflect what we see at Biltmore House, but are functionally relevant for today,” said Eric Graham, president of Fine Furniture Design.

The design of Stanley Furniture’s newest collection, Havana Crossing, is anything but classic, but it has a solid merchandising story centered around a country most of the world has begun to see only recently.  Randy Wells, Stanley’s vice president of creative, said the collection, which will begin shipping to retailers this spring, features a 1950s mid-century modern design that is found throughout Havana today. The city’s unique architecture, he said, gives the appearance that it’s stuck in time.   “People fall in love with a story, and there’s a unique story behind each piece in the entire collection,” Wells said. “They can learn about the place (Havana) and the people who live there.”

For that reason the company is urging dealers to display Havana Crossing in a dedicated space, using the storyboards and other material the company has developed that describes the design inspiration for many pieces and discusses the historic significance of several key buildings.  “Havana is a very special place that the world should see,” said Wells, noting that a percentage of sales from the new collection will be donated to groups working to restore the city’s historic buildings.  Stanley devoted a large chunk of its showroom to the Havana Crossing launch at last October’s market.

Producers say input and inspiration from retailers also is an important part of the process, and Hooker Furniture, for one, takes it a step further by meeting with small groups of dealers once or twice a year to discuss upcoming product launches.

The meetings, which the company calls Dealer Councils, often result in design changes and provide other valuable input, said Hank Long, the company’s senior vice president for merchandising and design.

“We’ve come out with some great product by listening to them,” Long said of the Dealer Council meetings. “You can always learn a lot by listening to your customers.”

He said a meeting typically involves representatives of 15 to 20 dealers – some of whom may be retail sales associates. Attendees are surveyed individually prior to the meeting, and the results are shared with the group. That often spurs additional discussion, which can result in more ideas for improvement, he explained.

“It’s usually helpful to let them bounce ideas off of one another,” said Long, noting that the subjective nature of design makes it impossible to pin down a “right” or “wrong” idea.

Plus, the relationships fostered by the meetings give the company an edge in what Long calls the “tiebreaker,” when a dealer is trying to decide whether to make room for new Hooker Furniture product or that of a competitor.

“It’s good for all those tiebreakers. When everything else is just about equal, they may be more likely to give it (product placement) to us,” Long said.

Watson agreed that the showroom display is critical from a merchandising standpoint because it often influences how the retailer displays it.  He said Hooker Furniture’s merchandising team meets regularly with the showroom design team to discuss how various collections should be displayed. And before a market begins, the sales and merchandising force is provided with a detailed list of the accessories used, names of other vendors used, and even the specific color of the paint and/or wallpaper. That’s because many retailers, especially smaller operations that don’t have in-house merchandising teams, want to replicate what they see in the showroom as closely as possible, he said.   “We try to help the showroom designer get the feel of the environment we’re trying to create for the collection,” Watson said.

Selik, for one, encourages manufacturers to use as many vignette displays as possible because it simplifies his job as retail buyer. He said his time at Market is limited.  Therefore, a manufacturer that ships him the rugs, occasional tables or other accessories in his displays – or at least gives him the name of the vendor for each product – is more likely to get his attention.  “If I can get these items in their showroom, I don’t have to shop for them when I go to High Point or Las Vegas,” said Selik. “It’s a better use of my time … and it makes their stuff look a lot better.”

Selik said vignettes are critical to Hillside Furniture’s merchandising scheme because he believes that it’s really important for people to visualize what it will look like in their home.  But he cautioned that it’s also important to merchandise vignettes with items that blend well together and are similar on the price spectrum. “You don’t want a beautiful $3,000 leather sofa with a $149 cocktail table,” he said. “People who can afford a high-end sofa usually aren’t going to want to buy an inexpensive table to go with it.”

New Product Churn

Like many retailers, Selik wants to see new product at each of the five markets he attends every year and many vendors comply – albeit reluctantly. Some furniture manufacturers would like to follow the lead of the bedding industry and concentrate product introductions at a single market (the January Vegas show), but most feel compelled to have something new at each High Point and Las Vegas market.

Beaston, of Klaussner, said “it’s crazy” to plan merchandising strategy that way, but no one has come up with a better idea. And for his part, Graham of Fine Furniture Designs believes such frequent introductions are almost a necessary evil to keep retail sales people motivated to sell a particular company’s product line.  “A consumer only shops a furniture store once every few years, but the sales people are there every day,” Graham said. “They need to see something new to keep them interested.”

Licensing Success Stories

One merchandising scheme that has been a tried-and-true winner for Fine Furniture Designs, Klaussner and numerous other manufacturers is licensed collections. While such deals can make product development and merchandising more complex (depending on the level of involvement of the licensor), many have found it’s an effective way to open new accounts and secure more floor space from existing accounts.

“Very few furniture manufacturers have a brand name, but licensing gives us a brand,” said Beaston, whose company has licensing deals with Trisha Yearwood and North Carolina artist William Mangum. “I don’t really care if the consumer knows if her furniture came from Klaussner or not … as long as she buys Trisha Yearwood’s or William Mangum’s furniture.”  Beaston said the company is very pleased with both licensing programs, noting that five collections have been launched with Mangum since that line debuted in October 2013, and the company’s third Trisha Yearwood collection will be unveiled later this year.   “What it has done for Klaussner is that it has opened people’s eyes to the fact that we are a total solutions company,” he said. “We’re not just upholstery.”

According to Beaston, Mangum and Yearwood are “very much involved” in the product development process and the personal relationships that have evolved between them and the company have been big contributors to the success of the programs.  “Nothing takes the place of good product at value. But when we can deliver that with a licensing story, that’s a tremendous competitive advantage,” he said.

Graham agreed, noting that Fine Furniture Designs’ Biltmore products, which are at the upper end of the company’s product line, provide aspirational purchase opportunities. Those aspirations are especially important in reaching consumers in the southeastern U.S., where the majority of Biltmore Estate’s visitors live. However, it has become a destination stop for tourists from all over the world.  “There’s an authenticity to it,” he said of FFD’s Biltmore line. “There is a difference between just renting a name … and providing a product that has an air of authenticity to it.”

The Biltmore collection was launched in April 2013, and Graham said the company just signed a five-year extension of the licensing agreement. About 140 pieces are available now, and several more will be introduced at the April High Point Market.  He said occasional pieces in the collection have been the best performers of late, but dining room, especially casual dining, is also doing well. Dining rooms start at $2,499 for a table and four chairs. 

The collection is being produced at FFD’s factories in China, and Graham believes that provides some peace of mind for the Biltmore licensor, knowing the company is not using third-party outsourcing.  “We’re not just going out and finding somebody to make it for us, and slap our name on the box,” he said. “We’re using our factories and our warehouse, which has about 30,000 pieces of furniture ready to go at any time.”

Licensing, of course, has its risks. Just look at the licensing deals Paula Deen lost a few years ago when she was accused of making racially-insensitive comments (although Universal Furniture and its sister company Craftmaster stuck with her, and the program has done well).  However, some furniture licensing deals have been spectacular flops. (Think Elvis and Sponge Bob.)

But neither Graham nor Beaston have had any hint of such problems with their programs, and they have no reason to believe that will change. Graham said the prestige of the Biltmore brand and the great reputations of the Vanderbilt family erase those worries.  “It’s not going to do us any harm,” he said. “They’re not out there getting DUIs or going to prison. They’re just being good stewards of the property they own.”

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The answer to the question, “How do you merchandise?” is often a loose series of comments that leaves the inquirer with the perception that the magic cannot be revealed without the statement, “If I told you, I would have to kill you.”  Home Furnishings Business corralled two leading industry participants, each of whom could be referred to as a “product man” or “merchant,” to get the straight story.  However, both of these individuals would reject the label, insisting that it takes a team to execute merchandising and it does.

Building the Perfect Beast

Merchandising a stationary upholstery line may seem like a magical combination of creative thoughts, clairvoyance, luck or maybe even directions from some alien intelligence.   Clearly, creativity is critical and working hard to find a style with sales velocity has a bit of luck attached to it.  However, there is much more to finding the winning recipe for an upholstery product portfolio.

To start, a clear understanding as to whom you want to sell and an understanding of the key items needed to start a product portfolio to address your audience becomes the first step.  This is where your due diligence on your competition becomes critical.  You either have to zig where they zag, or do what they do at a better value (not only just cheaper which gets you into a pricing box, but also with better sales/marketing support or better operational support).  Be disciplined to build the fundamental merchandising scheme with products to hit the “good, better, best” formula.

Many elements of style, shape, or scale attract the buyer(s).  With this in mind, as you research the competition by style and price point rationale, ask why these items sell as well as they do.  Is it the overall silhouette, comfort level, cover application, scale, function, price, or a combination of several of these elements? Use this information to build into your styling as the models are being discussed and planned for development or purchase. 

As the designs are selected, close attention to every component used to develop the model is weighed to help reach the cost target (to hit the selling price with appropriate margin).  Do you select softwood plywood, strand board, hardwood plywood, or even solid wood for the frame construction?  Each has it’s own attributes, but can vary in cost by as much as $50 added to the frame cost.  Which one is more readily available from a reliable source, which one can be replicated in the factory more efficiently with automated equipment, which gives you a stronger frame with less labor – and still hits your cost for the target selling price? 

Foam and filling materials (cut fiber) are key components whose cost varies greatly.  A set of foam for a sofa can range in cost from $65 up to $100 depending on the density, ILD (Indentation Load Deflection), and size needed for the model.  Review solid foam versus coil/foam seat cores for costs/comfort relationship.  Seat cores have a ratio to hit the target comfort based on the ILD which is a measurement of the hardness of the foam, the weight or density (how much chemicals/materials are used in the foam to increase its cellular strength), and the dimensions of the seat core.  Care in selecting the right foam for the model at the right comfort/durability and cost is very critical.  Foam is also used to pad out the frame along with bonded fiber and other such materials. Likewise the type (virgin fiber, mixed fiber, short staple, long staple, slickened, number of crimps per inch, for example) and amount of filling materials (used in the backs and/or arm pillows) has to be justified to achieve the look, comfort, and durability to hit the target cost.

One of the largest purchased components is the cover.  The cost of the cover varies based on the amount needed models’ cutting and sewing pattern (is it a match pattern, is it a chopper, is it up the roll), the base cost of the cover (if a top grain leather with a split match is used, it can be as much as 65% of the total build cost of the item), the yield on cutting of the cover and, of course, the sewing labor.  In selecting the cover one must keep the price point in mind, but get the maximum look, feel and durability that you can afford at each price point level.  Paying close attention to color, patterns, and textural trends is important to maximize your item’s look and differentiate it from the competition.  The old axiom, “the cover sells the bones” is a true statement.

Other components that warrant attention in the costing and product line build-up are:

Seat suspensions – do you use eight-way hand tied, drop-in coils, webbing, sinuous wire, drop-in sinuous wire.  Each has a cost implication and a comfort/durability consequence

Back suspensions – sinuous wire, webbing, or elastic sheeting

Scale or size – the larger the item the more components used

Legs – made into the frame, screwed on; solid wood, resin, plastic, metal.  Legs can range from a few dollars for each piece to as much as $14-$16 each piece (heavily carved and multi-finished).

Throw pillows – size, cost of cover used (matched or chopped), inter-bagged and zippered closed, blown directly into the cover envelope and sewn shut, and the type of filling used (feathers, a mixture of feathers/fiber or fiber) can vary the cost of a pillow from $11 up to as much as $50 each.

Packaging – how much and what type is needed to ensure the item’s arrival to the end user without damage – cartons, shrink wrapped with trays/side suspensions, plastic bag tapped enclosed; costs can run from $10 to $35 in general for the type of sofa pack selected

Replication within the factory – Will the item run efficiently down the line in the factory?

From a manufacturing point of view, working closely with your product development and manufacturing team along with accounting is fundamental to reach your selling prices and margin requirements for the long-term health of the organization.  This is also true for retail merchants since they are charged with producing profitable sales across their assortment and maximizing their sales potential by having what their customers want at the price points that entice them.

As you build up the line with key styling staples like roll arm traditional looks or casual pillow top styles, keep in mind developing the line with some product differentiation to entice the buyer(s) to purchase from you.  Over the years in the furniture business, we have all witnessed a style jump off the sale chart and, within a few months, weeks or days, the competition has their own versions.  These items come along when all the elements of style, scale, comfort, and cover cross at the same time.  Learning from these moments is critical as the line is built up.  It may be as simple as an added sew line, an attractive pillow combination, the shape of the leg or some other design component.  Always keep in mind the price point level for the model and use more intricate shaping, sewing and components to walk up the price points.  You want to be able to demonstrate to your buyers your ability to fulfill their price point and style needs without their having to go anywhere else.

As the product portfolio strategy develops it is easy to imagine attacking higher price points since that’s the promise land of margins and, hopefully, velocity.  It is much more fun to work with more expensive covers and components than it is to wring out the best look for the least amount of cost in the lower price point arena.  One has to be able to take the customer on this journey with the least amount of questioning possible (“We don’t look to you for this price point” is a no-sale statement).  The value proposition you have has to be intact even as you walk them up the price point either from a style, scale or cover point view.  At the same time, keep a watch on your flank as the competition will try to eat into your base portfolio looks.  Shoring up the other price point levels as you take the price points up is the key to maintaining the sales and position of the line with your customers.

As you can see, components, manufacturing and strategy can drive your thinking on the scale, shape, comfort and look of the product line as it comes together.  Waving a magic wand would be easier.  However, until Harry Potter becomes an upholstery merchandiser, we will have to rely on the old fashion methods.