Cover Story: What Does Today’s Consumer Want?

November 14, 2019  by HFBusiness Staff in Business Strategy, Industry   

As always, the furniture industry is greatly influenced by the population. As can be seen from the prime furniture buying population graphic, the Baby Boomers are fading away while Generation X is beginning to provide the growth until the much anticipated Millennials arrive.

While the prime furniture buying population has been diminishing, the amount of average household purchases has increased over 40% in the last five years, exceeding the growth of other home furnishings products. The consumer spending graphic presents the spending by product category. The consumer expenditure has resulted in a $300+ billion home furnishings industry of which furniture (consumer durables) represent 42% ($129.9b). Those other product categories typically not sold by traditional furniture retailers may become important in the future. Generation of traffic by these other products may be important to the more postponable furniture category.

There is an ongoing tug of war between furniture stores and home furnishing stores, but with both losing out to other distribution channels as can be seen from the graphic.

WHAT ABOUT YOUR CONSUMER?
The furniture consumer today is much more diverse as the Baby Boomers dominance has given way to Generation X and anticipating the much discussed Millennial.

The most important consumer is your consumer. In the last decade, what was a simple process of good/better/best has migrated to retail experience. The traditional furniture store is battling and trying to serve all consumers while lifestyle retailers, such as Restoration Hardware, are focused on a narrow band of consumers.

The first step is profiling the consumer that you are selling, or more important, those you are not selling. To do that we tap into FurnitureCore, the research arm of Home Furnishings Business. The graphic below provides the output from FurnitureCore’s consumer segmentation application illustrating the prime consumers.

To execute, this information must be drilled down to the market/store/product level.

The wide range of customer demographics can be bett er explained with an industry analysis of purchase price points. With all of this, it is understandable that the consumer has rushed to the bott om in terms of price. When almost 25% of all sofa (units) purchased this year were less than $399 at retail, we see the magnitude of the problem.

Lifestyle is important and is usually measured by psychographic cluster. Psychographics transcend demographics and focus on how the consumer lives and on the activities in their lives.

Using this concept in direct mail and email marketing can produce signifi cant results. The graphic from FurnitureCore – CONSUMER SEGMENTATION – illustrates the concept.

Beyond demographic diversity is ethnicity. While retailers have emerged that cater to certain ethnic groups, such as FAMSA, for the most part all groups are integrated into the total retail focus. However, a retailer should check their appeal to all groups. Business intelligence today allows a measure of ethnic concentration. FurnitureCore’s Consumer Segmentation application provides an ongoing measure on page 16.

What is the Consumer’s Buying Process? Solving the consumer conundrum often seems like searching for the Holy Grail for retailers. Opinions on consumer trends tend to be all over the map, but most observers agree that furniture purchases today involve much more study and research than in the past.

There are many demands on the household incomes that leave only a small portion of disposable income. The line blurs between needs and wants when it comes to expenditures, such as a car, computer, communication, leisure travel, and fi nally, furniture. This is where rationalization begins. The decider is the att itude that the consumer has toward decorating and home furnishing. The range is from “home furnishings are not a consideration” to “my home furnishings must communicate who I am and refl ect a sense of current style.” The fact is that more than 50% of consumers have a positive inclination towards home furnishings. The graphic on the next page illustrates.

There are many indicators that start the consumers on the road to the purchase. Some are life changing events, such as marriage or divorce. Others are life events like a recent move or the addition of a second home. Others, such as remodeling, redecorating, or desire for new furniture, are planned and anticipated. The fi nal indicator is replacement, which is a signifi cant number today (over 40%). The industry has created its own obsolesce factor in the last decade with a replacement factor 4x what it was 20 years ago to the chagrin of the Generation X population that complain of purchasing three sofas since their fi rst household while recalling the furniture of their childhood as being more substantial.

In a household, someone has to get the process started to buy new furniture. Based upon a new FurnitureCore national survey, it is still the female that has the inspiration. Having the idea is followed by the female performing the initial scouting trip to identify the retailer to shop.

However, after all the shopping and research on the internet, the purchase decision is a joint decision.

With the time starved consumer, the shopping process is fast with completion within two weeks for more than 50% of the purchases. Because of the research on the Internet, the number of stores shopped has been greatly reduced to just over two stores shopped per purchase. This change has caused signifi cant concern for the retailer — why is the traffi c down over 10% nationally in the past fi ve years? However, a more confi dent consumer produces higher close rate and larger average ticket.

The shopping process is very proactive, “visiting the store” or “research on the internet” are the fi rst two steps, equally distributed as number one and number two. This activity is followed by input from friends and research in printed materials. Far down the list is designers or advertisers.

The choice of retailers and corresponding retailer experience are extensive. However, for now the traditional furniture retailers’ single store and regional chains dominate, the Internet follows closely to being considered.

The furniture consumer has moved away from destination stores to stores closer to their homes. This change has resulted in more stores per households in a market, thus leading to smaller stores located in more expensive real estate areas. A signifi cant change in the furniture retailer business model is combining occupancy and advertising expense considerations.

The furniture retailers are doing a good job of accomplishing a positive experience for the consumer with all factors rated above average.

 

HOW OTHER RETAIL OBSERVERS PERCEIVE FURNITURE
Observers of consumer trends say the same disruptors affecting a broad range of retail purchasing decisions are also affecting furniture. These are affecting how people make decisions and how they shop.

Michael Solomon, a consumer behavior expert and thought leader in marketing and advertising, says would-be furniture buyers are doing much more research than in the past. This includes reading blogs or watching Joanna Gaines on HGTV’s remodeling show, “Fixer Upper.” The result is consumers are getting a lot of feedback in advance of making purchasing decisions.

“For 50 years or so there has been a tremendous amount of research on the steps that people go through when they make an important decision, which furnishings usually are,” Solomon says. “We know it is a linear sequence that people go through that begins when they recognize a need, all the way through the purchase itself, and then after the purchase, where they evaluate the quality of that decision, and how that affects future decisions. What we are seeing is that we are entering a period now where we have what some people call social selling, where a lot of these basic assumptions get turned on their heads.”

Solomon, who is also a professor of marketing at Saint Joseph’s University in Philadelphia, Pa. says, for example, people are doing a lot of research before the fact prior to making not only large purchases, but less important decisions such as where to eat.

“Traditionally, someone would decide that they want to buy a couch and you would shop a few stores, find what you like, and bring it home. Then if you like it and your friends tell you they like it, you will go back to the same store the next time. Mostly it was an individual decision or maybe a joint decision by a married couple. That’s not the case anymore. What we are seeing now is that people are working a lot harder, even though there are so many more choices, and so many timesaving apps and things like that. When you add it all up, more time is spent to research and look into decisions, to look into options, before they make the decision.”

Oracle Retail says consumers are increasingly open to whatever gets orders to their door the fastest, with more than 90% seeking free one-day delivery by whatever means is fastest, including drone, driverless car or a messenger. This is more than double (43%) the number of consumers who felt these delivery mechanisms would be “awesome” when asked just last year.

Most consumers recognize that furniture is not a “hamburger,” and it requires a little longer lead time. Per the FurnitureCore survey on the next page, more than 40% received delivery within a week, well within their desired time.

Solomon says it has been his experience that retailers are some of the most riskaverse people he’s ever met. “The ones who are dying in the retail apocalypse are the ones who are resisting change, who are not willing to take risks, because what they have to do is totally reframe their perspective to offer a customer experience that sells product,” he says.

Successful retailers are enhancing the shopping experience. As Solomon says, they have to give people a reason to get out of their pajamas and actually go to the stores. “Some people say brick and mortar is dead but I very much do not believe that,” he says. “But I do believe that a store is not just a place to inventory or display your furniture, your merchandise. A store should not just be treated like a warehouse. A store is an opportunity to create an experience. One of the biggest trends today is marketing as customer experience. It’s imperative to track the entire customer journey that starts well before you enter the store and finishes well after you’ve left the store. But that in-store experience is really crucial, especially with home furnishings. Being able to experience the product as you would experience it at home is a very important aspect.”

Solomon says consumers might post some photographs of furniture that they think they might want to buy, and wait to get reactions from their Facebook or other social network friends prior to making that decision. That represents a big departure from traditional wisdom about how consumers make decisions.

“It’s extremely important to retailers because when people go to a physical store to look at or order their furniture, they’ve already made up their mind prior to walking in the store,” Solomon says. “They are basing it on feedback they are gett ing from their social networks, or what bloggers are writing, reviews of various kinds. Some retailers are more aware of this than others. That doesn’t mean they can’t sway that decision, but the challenge for retail stores is very diff erent from what it used to be. They think they have a naïve shopper coming in who isn’t very knowledgeable about the furniture, and they think they are going to educate them on the options they have in their store.

They are going to be very sadly mistaken.” Sucharita Kodali, an analyst with Forrester, says in every retail category, more consumers are purchasing online. However, she says furniture is one of the least penetrated online, citing 2018 Forrester fi gures that had about 9% of furniture being sold online. She says the higher the price point, the more likely consumers are to buy in-store. “Looking online is a convenient way to fi nd what you are looking for,” Kodali says. “That’s why you see the percentage of online sales increasing.”

Solomon cites the example of mattress fi rm Casper, which allows customers to take a nap on the matt resses in the store. He says companies sell pillows, but people buy sleep.

“What that means is that a lot of companies still don’t seem to understand the fun damental difference between the attributes of a product and the benefits of a product,” he says. “They are selling the attributes but customers are buying the benefits.”

REI is another example. The outdoor retailer allows the customer to try products in the store and they even take customers on camping trips to show them how to use the products in a real environment. “That’s a very basic example of what I’m talking about. Understanding the customer experience is really key, and definitely understanding from the customer’s point of view, not from the salesperson’s or manager’s point of view. When you change the lens through which you view that kind of experience to focus on what if feels like to the customer, it’s a completely different perspective.”

So, what advice does Solomon offer furniture retailers? He suggests they get out of the “warehouse” business and move into the true retail business, which he says is about providing enough added value to motivate people to get off the Internet and actually come in to have a physical encounter.

Consumer Expectations and the Value-adds for Celebrity Designer Furniture Collections
Whether today’s consumer is buying food or furniture, fashion or accessories, there’s something singular they are seeking: authenticity. In the case of Rachael Ray Home by Legacy Classic Furniture, that authenticity is more apparent because of Rachael’s vibrant “whatyou-see-is-what-you-get” personality, said Don Essenberg, president of Legacy Classic. “Whether it’s a dinner Rachael is preparing, a TV interview she is doing or furniture she is designing, it reflects her personality and resonates with her fan base as authentic,” he said. Her design partner Michael Murray agrees. “Rachael Ray Home is Rachael telling her personal story of design through her furniture partners, Legacy Classic and Aria Upholstery. Those who know Rachael know she would never just slap her name on something. It has to be her truth.”

In truth, all the collection ideas begin with Rachael, and “she adds tremendous creative value because she is involved in every detail of the design,” said Essenberg. “She approves every sketch, every finish, every piece of hardware and even the hardware finish.” Rachael’s creative input has borne fruit, as Essenberg says. “Each collection we’ve introduced has been more successful than the one before. Rachael Ray Home, first introduced in 2016, is today stronger than ever.”

As an international television personality and author, Rachael has a tremendous consumer franchise, but addressing changing furniture design and lifestyle trends is more art than science and based more on her personal life and experience than on research or focus groups. “Rachael hears feedback from all walks of life and very much lives the same way her audience does,” Murray says. “Therefore, what works for her generally works for her audience.” Rachael puts it this way, “I like to design things that solve problems, whether it is an oval pasta pot or a USB port in the back of a nightstand.”

One of Legacy Classic’s top Rachael Ray Collections, Monteverdi, sprung out of Rachael’s love for the Tuscany region of Italy, relates Essenberg. “She’s in love with Tuscany. She got married there and visits a lot. So she came to us with the idea of a collection inspired by Tuscany. It became a rustic casual collection with planked tops and a sunbleached Cypress finish. It all began with her love of the region and the way it makes people feel.” Another appeal that comes with the Rachael Ray brand is her “approachable” point of view, Essenberg adds. “Her furniture is approachable, not stuffy. You could use her dining table for breakfast on a Wednesday or for the family Thanksgiving dinner.”

Her newest collection for Legacy Classic, Milano, is “fashion-forward and fearless,” Murray said. “It is fearless, but it keeps her most important (brand) promise. “My most important promise is, ‘You don’t have to be rich to live well,’” Rachael says.

That subliminal promise becomes a competitive edge on the retail sales floor as it attracts and draws in the consumer to experience an exceptional – yet accessible – life through Rachael Ray Home, said Essenberg.