From Home Furnishing Business
Take 5: Pamela Danziger
Pamela Danziger is a speaker, author and market researcher known for her expertise on affluent Americans. Danziger, who is the founder of Unity Marketing, recently spoke with Home Furnishings Business regarding trends in the sale of luxury goods.
Home Furnishings Business: How important is celebrity branding to the sale of luxury goods?
Pamela Danziger: The brand thinks that celebrity is important. Brands have been using celebrities for advertising campaigns for years. Now, with social media, they are starting to turn to them more to stimulate having more eyes on them, to try to give them more attraction and more influence. I know there was a study recently about these influences losing influence. I think it’s a strategy that’s been overdone. Too many brands think that there is some magic bullet—if you do A, B, and C, that suddenly you’re going to stimulate sales and grow your brand and all will be well with the world, but that isn’t the case. You’ve really got to understand who your customers are and what influences them, and it may be that a celebrity endorsement may be more of a turnoff for many potential customers.
HFB: What do you define as the price points for luxury goods? For example, a fabric sofa at $2,000 or more?
Danziger: What we have to understand is that luxury isn’t some objective qualification, something that’s imposed upon it or determined by the industry or the manufacturer. Luxury is determined by the consumer and how they view the product that you are offering. Everybody wants luxury; not everybody wants to pay luxury prices, whatever that could be. There’s just no objective criteria that industry can apply that will ultimately translate into how the consumers view it. To my mind, the consumer’s perception is your business reality. HFB: Besides the decorator channel, what retailers do you perceive as luxury retailers for furniture? Pottery Barn? Restoration Hardware? Danziger: People that have money to spend are very skeptical of brands that call themselves luxury. Brands that try to elevate themselves into that luxury realm. They may look at those as all marketing and little substance. Pottery Barn might be a luxury to one segment of the population; Restoration Hardware might be a luxury to another segment of consumers. But Restoration Hardware might be considered mass market by the true ultra-high end, affluent consumers, who are the target for luxury.
HFB: With the absence of furniture brands, what is the impact on luxury goods?
Danziger: For the true luxury brands in the marketplace, like Louis Vuitton and Prada and Gucci and Chanel, brand is everything. They have spent over a century building that brand and the consumer perception. There is tremendous potential in the furniture industry to get more brand conscious. Ethan Allen has done it, Restoration Hardware clearly has done it. West Elm and Pottery Barn have done it, Williams Sonoma has done it. There’s a lot of opportunity to build a brand. It takes a lot of work, a lot of heavy lifting to go from no name to being a real name that stands for luxury.
HFB: Consumers are driven to the lowest cost. What is to blame: manufacturing, retailers or the consumer’s lifestyle?
Danziger: They look for the most cost effective solution when they are buying because if they save money here, they have more money to spend there. Affluent consumers, if we look at them as a group, are extremely savvy in the purchases they make, about what they are looking for, and how to find it. They will scrimp and save in one category to spend lots of money in another category that is meaningful to them. That’s why you see Mercedes Benz cars in the parking lot of Walmart. Price is always important, and with so many options available to consumers, Wayfair, Ashley, there is so much out there, there is so much competition. You have to be very strategic about where you price and what you offer, and building a high value proposition for your products is exceedingly important today. Without it, you are always going to lose sales to the lowest common denominator.
HFB: Is luxury only for the $250,000 income household that represents only 2.64 percent of the U.S. population?
Danziger: No, luxury is for when you come down to what I call the HINRYs, the high income, not rich yet, with incomes from $100,000 to $250,000, there are about 30 million of them, versus about 5 million of the $250,000 and above. These can afford maybe one luxury, but they can’t afford all luxury. I think that when you move further up, they have much more discretionary income and can indulge across more categories, and more regularly. But the HINRYs are the emerging and the next generation luxury consumers, one that the home furnishings industry really needs to focus on. There are the ones who are in the life stage. The ones who spend the most on home furnishings are those who are buying their first or second house, from age 30 to 54. That’s the age range when you are going to find a lot of HINRYs. They are on their way up in their careers, and becoming more established.
HFB: What is the biggest disruption you see happening in the overall luxury market and also specifically, in furniture?
Danziger: One of the biggest disrupters right now is the resell market and it’s going to come to furniture too. It’s harder to ship furniture, but luxury consignment company The Real Real is being very disruptive in fashion sales and the rental market also, where you rent an outfit for a weekend because you only need it for the weekend. We are going to see that translating into furnishings. I look at Interior Define, and I’ve written about them as being disruptive, because of the process where you design your own sofa and it takes 8 to 16 weeks to get delivered. I don’t think that’s a sustainable business model. You have to turn your products around faster and give people what they want. If you spend $10,000 on a sofa, they don’t want in in 16 weeks, they want it tomorrow. That’s a big challenge for furniture retailers, especially at the high end.
HFB: What trends are you observing in online vs. in-store shopping?
Danziger: All shopping experiences start online today. That’s the major takeaway. That doesn’t mean all sales are completed there, but they start online. So for furniture retailers, they’ve got to have a very sophisticated online presence designed to draw people to the store. They need to be using digital methods to attract people. Furniture brands need to have very good presentation online. They need to have a store locater, to help people find them. Wayfair, Josh & Main, and other digital providers of home furnishings are really a very big threat. Consumers really do view Ikea as more of a luxury brand than a mass brand that is quality.
HFB: What is your best advice for furniture retailers?
Danziger: You have to focus on the people. You have to understand who your customers are, you have to understand what they are looking for when they shop, you have to understand what makes them come into your store, what they expect to find and whether they are finding it in your store. You need to focus deep insights on your customers. They are the people you depend upon. Then you need to look at the people you have in your store and whether they are being served. How does the staff interact with the public? Retailers often do not invest the time and attention they need invest in training, re-training. They do not invest in the research needed to understand their customers. Those are keys that are going to cause brick and mortar retailers to fail.