Cover Story: IT’S NOT YOUR PARENT’S FURNITURE BUYING EXPERIENCE

November 16, 2017  by Jane Chero in Business Strategy, Economic News, Industry   

The home furnishings industry is in a transition with total growth forecasted to be 3.4% this year, which would be an above average performance for all retail sectors.  Next year, Impact Consulting projects a similar forecast of 4.1% (HFB October issue forecast).  So, what is the problem?  In the last decade, a proliferation of retail formats has emerged to attract an ever-changing consumer.  Whether it is price, experience, or convenience, each format attracts a different, but overlapping consumer group.

The traditional distribution channels of Independent furniture stores, department stores, and national merchants, which decades ago controlled more than 90% of all furniture sales, have declined to less than 50%.  Capturing that volume has been new retail formats with new value propositions or new ways to satisfy the consumer’s need for creating an environment to enhance their lives.

Traditional channels have themselves morphed into different formats with different product categories.  In fact, the loss of product categories, such as small appliances to the mass merchants, has eliminated traffic to the stores.  Gone are the days of the credit stores, which ensured a continuing contact with the consumer.  This loss of product categories and credit solutions removed an element of loyalty.

The result is fragmented distribution at retail.  The accompanying graphic illustrates the distribution of purchasers.

In 2017, Regional Chains have gained share of consumers, which is best illustrated by the expansions of retailers such as Bob’s Discount and Art Van.  Department Stores have lost share to both independents and regional chains.  Retail Verticals have been combined with Lifestyle and have grown, as Ashley HomeStores have expanded their brand presence.  The resulting retail environment is a complex competitive network with each retail format competing for the consumer expenditure.

Unlike the previous 20 years, the Baby Boomers are not the dominate generation in the furniture retail sector.  While still a force, purchasing 34.7% of furniture and bedding in 2016, the growth trend is downward.  The children of the Baby Boomers, Generation X, represent 34% of the total expenditures and are still in a growth mode, as their children are beginning to leave the home and the consumer is adjusting for the empty nest phase.  The emerging Millennials, in size, will eventually dwarf the Baby Boomers and are still in the household formation phase.

The challenge for the furniture retailers is to satisfy all generations, the largest but declining sector, the Baby Boomers, while satisfying the unique needs of Generation X, which will continue to grow.  Accomplishing this, while anticipating the future Millennials, can be a challenge.  The following addresses some of the differences between each of the generations.

SILENT GENERATION (AGES 71-88)

While representing 13% of the households, surprisingly they consume 8.2% of the furniture expenditures.  This generation, especially the younger segment, is pioneering the concept of “aging in place.”

However, this generation still has a lot of living to do.  As the other generations cluster, over a third (36%) intend for their next purchase to be leisure travel, followed surprisingly by a new car (29.5%).  Furniture falls at the bottom (7.9%) of their plans.  One could assume they are going to visit their kids by plane or car.  Hopefully, this will generate second bedroom purchases in the succeeding generations.

This generational cluster, as would be expected, has a different attitude toward decorating and home furnishings.  By far (43.8%), they believe their “home furnishings should be practical and meet my basic needs for comfort.”  Obviously, they are not concerned (3.8%) with their home furnishings communicating their success and reflecting a sense of prosperity.

Unfortunately, the reason for their purchase was replacement (47.5%), reflecting a quality issue.  The other reasons were in line with other generational clusters:  desire for new furniture (25%) and redecoration (23.8%).

Like all consumers, the first step in the furniture purchasing process starts on the internet for research (45.8%), but the visit to the store (53.3%) still is favored by the majority.

The use of designers (10.4%) remains an important first step, a characteristic this generation shares with their grand or great-grand children.  Input from their friends (7.1%) is also important.

Before this generation starts the buying process, the advertising media having the most influence was the local newspaper ads (29.7%), followed by the internet/email (20.8%).  The other advertising media that excelled with this generation was radio ads (6.8%) --   more than three times the rate for all consumers.

As would be expected, this generation remains loyal to the independent retailer, with almost one-third of purchases made in this distribution channel (31.2%).  The interior decorator channel is almost twice (7.5%) as likely to be the channel of choice.  Only the mass merchants were not favored (13.8%) compared to all consumers. Old doesn’t necessarily mean frugal.

Looking to the future, the Silent Generation would most likely shop the Independent retailer (42.3%).   However, the intent to shop the internet (18.0%) increased from the actual purchase.  Also, the Interior Design sector saw an increase (14%).  Could this be an indication of more of a “personal shopper” need?

The Silent Generation was the group most pleased with their shopping experience, with 35% ranking it excellent, and a nil response below a 3 on a scale of 1-7.  As far as furniture shopping is concerned, they are not the “grumpy” generation.

Specifically, what they were pleased with in their most recent shopping experience was ease of shopping, which ranked the best (51.2%). The lowest was product knowledge of sales associates (40.3%), still higher than all consumers.  The older generation likes the furniture retail experience.

Why did this consumer purchase the furniture they purchased?  Overwhelmingly, it was due to the quality (35.1%).

What does the furniture retailer need to do to continue serving this consumer segment?  For the most part, the industry has done a good job from the Silent Generation’s perspective.  While not a significant part of the industry volume, it is a segment that has disposable income and is willing to pay for quality and service.

BABY BOOMER        GENERATION (AGES 52-70)

This generation, which represents 34.8% of the households and about the same in consumer spending for furniture (34.7%), is an important, but declining segment of the furniture purchasers.

This generation is facing a significant transition as they contemplate retirement.  Their choice - whether to age in place or downsize to a retirement community - involves a purchase decision. 

However, like the other generations, their first choice in the list of intended next expenditures is leisure travel (37.5%), followed by a new car (35.19%).  A furniture purchase, unfortunately, is the last of their intentions (5.7%). They are saddled with the “brown furniture” that was the preference of their generation, but their children don’t want it, and the consignment shops are avoiding this furniture.  So, the decision is just to keep what we have.  Unfortunately, in downsizing, the scale of their furniture doesn’t work.  This decision of what to do with the old furniture becomes a problem.

Unlike the Silent Generation, the Baby Boomers still want furniture that communicates “who I am and reflects my sense of style” (35.1%).  However, the Baby Boomers still have the need for home furnishings which “are practical and meet my basic needs for comfort” (28.6%).  This consumer is still attached to this more traditional/formal furniture, but is contrary to these statements and provides an opportunity to influence their decision to purchase.  A great trip lasts 7 days, but a new power/motion sectional lasts a lifetime – maybe.

Unfortunately, 40% of the consumers in the Silent Generation bought furniture for replacement.  We know furniture should have a definitive life span, but from a consumer’s perspective, the life of their furniture is short.  The next major reason for purchase is desire for new furniture (24.4%) – an opportunity the industry can stimulate.

What was their buying process? As with all consumers, the majority of the Baby Boomer generation starts with research on the Internet (51.8%).  However, a visit to the store is still favored by many in this generation (40.5%).  The brick and mortar stores still have the opportunity to influence the sales.  Many of these consumers “scout” the store with no intention to purchase at that time.  Retailers, be careful with slighting the “tire kicker.”  We only have one time to make a good first impression.

Of all the generational clusters, the Baby Boomers have some use for the local newspaper, especially in small markets.

Interestingly, the Baby Boomers have embraced the internet/email as the number one media to influence their intent to purchase (28.6%).  This is not to be confused with social media, which was the major influencer for only 5.8% of this generation.  As can be seen from the accompanying table, television/print magazine/direct mail/local newspapers are in a neck-to-neck race for the number two spot.

The Baby Boomers are still the major customers of the independent retailer (33%), followed by the regional chains (20%).  Their support of the other distribution channels is comparable, with the exception of the lifestyle stores (6.7%), which they have discovered.  Stores such as Pottery Barn, Arhaus, and Restoration Hardware reflect their need for a new style and comfort as they transition from their more traditional/formal furnishings.

Looking forward, they will consider regional chains (33.7%) at a higher percentage than their past purchases, along with the internet (20.5%).  The designer channel will also be one which will increase in importance.

As with the older generation, the Baby Boomers are pleased with their most recent shopping experience, with over 60% giving a positive rating (6 or 7) on a scale of 1 to 7.

The Baby Boomers are pleased with the courtesy of the store personnel (46.1%) and less pleased with product display and selection. But overall, it was a positive experience.

What brought the product they purchased to their attention was quality (38.8%), reflecting the attitude of all consumers.  The continued identification of product quality, as reflected in the reasons for purchase (39.6% all consumers) is creating a wary consumer.

Functionality is important to the generational clusters, reflected in the increased sale of “power” in upholstery and bedding.

Warranty is of little value to this consumer group, reflecting past experience, as well as an attitude of never buying extended warranty.

GENERATION X (AGES 36-51)

This generation is the overlooked or forgotten generation.  While smaller (27.5%) in terms of the number of households, they represent more of the consumer expenditure (34%) than the much-touted Millennials.  In many ways, this generation is leading the transformation in furniture retailing.  While the Baby Boomers are declining in terms of furniture purchase volume, Generation X will be increasing.

As with the other generations, they have a desire to travel, with over 43% stating this as the number one intent as to a major purchase.  While important, the car is slightly below (25.9%) the other generations.

The attitude of Generation X is comparable to their parents, with 34.9% believing decorating/home furnishings should be reflective of “who they are and reflect a sense of current style.”

This generation is contending with furniture replacement (43.9%) as are the other generations.  However, compared to the others, they are remodeling and adding to their homes (17.9%). The older end of the generation is seeing the first born depart, freeing up a bedroom for the “man cave” or “she-shack.”  All of this creating a demand for new furniture.

How do they go about their purchase?  Like all consumers, the Internet (50%) is the first stop in the process.  However, it is important to point out 40% make a shop excursion first.

The other important difference is their use of magazines.  Print is not dead for this generation.  The importance has been confirmed with Home Furnishings Business magalogs, which combine lifestyle editorial content with product to achieve a response rate of more than 9%.

Unlike their parents, few get recommendations from friends and relatives (7.6%). Remember this is truly the Facebook generation.

What is this generation looking for in their products?  As with other generations, the number one feature is quality (38.1%), Design and aesthetics (24%) are important, along with comfort (16.7%), but most important is value (11.9%).  Consumers are both time and budget constrained.

What advertising media influences them?  As compared to their parents, they are more likely to be influenced by the Internet/email (44.6%).  The next most influential media is targeted direct mail (15.4%).  While more influential (8.0%), social media is next to the bottom, just above radio.  Television viewing declined from their parents (12.8%).

The regional chains are the distribution channel of choice (24.1%).  Surprisingly, the Internet is less important, compared to both the Millennials and the Baby Boomers.  Unlike their parents, they accept the mass merchants as an acceptable retailer for furniture.  However, for their next furniture purchases, it appears Generation X would be very likely to consider the lifestyle stores and the internet, and less likely to consider the independent retailer and regional chains.

The reason for the propensity to consider other distribution channels may be found in the satisfaction with their last buying experience.  While not negative, it is not as positive (54.4%) as the Baby Boomers.  A significant area they ranked lower compared to their parents was the “courtesy of store personnel.”  This paints a portrait of a time-constrained consumer who does not have time for a sales pitch and has little patience for a lack of product knowledge (25.4%).