From Home Furnishing Business
Coach's Corner: Recovery for Furniture Stores The Good, the Bad and the Ugly
by Tom Zollar,
The good—currently lots of people want to buy our products After being cooped up in their homes for weeks, many consumers decided they needed to improve their living environment and started to search for solutions. They were on a mission and an extremely high percentage of them made purchases in June, July, and August. This drove industry sales to record highs for some areas and selected distribution channels. You have all read the articles and seen the numbers, so this is not news.
For most home furnishings retailers, the biggest issue during these last three months has not been getting people to purchase, but rather having product to deliver. Manufacturers and distributors are playing catch up to refill the pipelines and depleted store inventories. This will take time to rectify, creating a situation of “have and have nots” in most markets. The obvious winners appear to be those that have product. However, it seems to me that a high percentage of post lockdown customers are not interested in the commodity type items we normally stock, preferring instead to custom order what they really want, possibly mitigating the situation and closing the gap. This could be because they have had so much time at home to think about it, and with the help of the Internet and home renovation TV shows have already narrowed down what they want before going out to find it. This is just a guess, but it may have some merit.
One thing we do know for sure is that the customers we are seeing now are somewhat different than the ones we have seen in the past. They are highly motivated to solve their issues in the home and have had plenty of time to contemplate their purchase. Therefore, they arrive at our doorstep more ready, willing and able to buy than we have been used to. The bad—these hungry buyers will not be around forever We need to enjoy these motivated customers while we can and hopefully please them enough to make them lifelong clients, because at some point they will be gone. No one can tell when that will be, but we are going into our traditionally strong fall selling period and should do very well during the next couple of months.
Keep in mind that we could see a second wave of COVID-19 in the fall, which could cause a lockdown in some areas that will interrupt our recovery. If that happens, it may cause a recurrence of this phenomenon when it abates, but it seems unlikely that the impact on our traffic and business will be as dramatic as it was this time. The fear is that these post-lockdown customers will dry up at some point and our high close rates, bigger average sales, and in some cases, good traffic numbers will sink! We will then be back where we were before COVID-19 hit and that will be the new normal again. Not to be a doomsayer, but an even bigger fear is that it is quite possible that much of the good business we have enjoyed recently is actually future sales that we would have had a good chance of making in the first quarter of next year anyway. Obviously, that would make 2021 a struggle and further set back stores still trying to replace the business they lost during the second quarter of 2020.
Although not confirmed, I offer this thought as something we may need to be prepared to face when and if the time comes. The ugly—many of these new customers may not choose to buy from you As I am sure you have read in this publication and others, while most distribution channels have enjoyed some growth over the past few months, the share of sales each has received has been very uneven. Online retailers had tremendous increases from last year. Obviously, they had a big advantage over many brick and mortar stores since they did not have to close for several weeks and do not need face-to-face contact to make sales.
Given the captive audience the stay-at-home orders gave online retailers, that segments sales as a whole grew 78% in May, 76% in June, and then 55% in July over last year. Therefore, I would guess that their market share grew in most major categories. The biggest beneficiary of the uneven playing field in our industry appears to have been Wayfair which increased its second quarter sales 87% from $2.3 billion to $4.3 billion and actually made a profit. They also added almost five million new customers, which is more than they added the prior 12 months! Their challenge now is to keep them. In addition, many big box stores and larger multicategory retailers like Target, Big Lots and others, had two distinct advantages that helped them increase their normal share of volume even during the lockdowns.
They were open for those that wanted to shop, and they all have strong online businesses. Led by the furniture category, Big Lots had its largest year-over-year second quarter increase ever of 31.3%. The light at the end of the tunnel— small retailers fighting back As smaller stores opened, they began to claw back share and captured a high percentage of those customers that preferred to shop in-person, despite the pandemic. Indeed, the biggest advantage traditional furniture stores probably have is with the still large segment of the consuming public that wants to see, feel and touch home products before buying them. In addition, the ability to assist or even lead the search process by providing design and product guidance, could be their strongest selling point.
The need for face-toface interaction obviously worked against these retailers during the lockdown months, but the importance of their services is now overcoming many potential client’s fear of the coronavirus. While some have had strong traffic, many are seeing less people come in the door, but are doing so well with them on both close rate and average sale, that the result is record sales. Where do we go from here—things to consider doing as we move forward We are indeed moving into uncharted territory this fall and winter.
Normally we know what to expect based on our own history and experience. Obviously, we have not been through anything like the last six months before, nor have our customers, so we are all wondering what will happen next. With virus infections rising again in some areas we may see lockdowns return. The possibility of a reliable vaccine being available by the end of this year could be a game changer, if it actually happens. Throw in the volatility of this year’s presidential election plus the associated political tug of war, and predicting the future is more impossible than ever.
However, there are a few things we can do that would have a fairly solid chance of helping us get through it all, no matter what happens. Here are some ideas to consider: n If you don’t have a strong online selling effort in place, build one. You need it like your next breath! This should be the biggest take away from the pandemic. There is no excuse for not doing this and it could be the difference between survival and failure in the future. Also make sure that your website is equipped with features that can help you bridge the online-offline gap, such as product customization, 360-views, high quality zoom, alternate angles, room scenes, etc. n Re-double your online advertising and email efforts – reach out to your existing and potential new customers like never before.
We know your future clients are searching for you online more than ever – help them find you. n Maintain “cautious optimism” meaning prepare for the best but be ready for the worst. Be excited, be enthusiastic, but also beware.
- Try not to be overconfident because you are currently setting sales records. Once we get through this disaster, we will not necessarily be back to the pre-pandemic normal you remember. Furniture stores have lost a big piece of their market share in most markets and getting it back will require a huge effort. Be ready.
- Watch your financials and do not be fooled by great numbers in critical areas they may be temporary. Remember that customer deposits are not the same as cash, even though they may look like it on your books.
- Watch your staffing levels in the areas that touch the consumer – sales, customer service and delivery. Now is the time for you to capture new customers. We believe that most stores are operating with roughly 75% of their previous staff. It is not possible to spend the needed time with each customer if your floor is on overflow constantly. The biggest cause of lost revenue both now and in the future is not providing the experience your customer desires because salespeople are too busy. Do not allow your overworked staff to take customers for granted or back off of their follow-up and client development tasks.
- Build back your inventory but do not go overboard. Reloading your warehouse and rightsizing your stock will be a balancing act, but you must stay on top of it. n If you have not readdressed your home office effort, do it now. With so many working from home and deciding to make it permanent, this could be an area of opportunity for you. In addition, many children will be remote learning and home schooled, which will certainly create a need for many of your customers. Create a display with signage in your store and promote your store as the place to go for both home office and homeschool furniture.
- Take the virus with all its mandated and recommended precautionary recommendations seriously, because your potential customers will. Name or personalize your virus safety program and promote it in all your marketing. Think outside the box and go beyond what is normal by adding things like professional offices do such as, “call us from your car and we will come out to take your temperature and escort you to our clean, safe showroom for a personal tour and consultation.”
- Be ready for the bottom to fall out again for any number of reasons. You made it through this catastrophe, but you know there could be more to come. You should know how to prepare for it better now than you did before, so create a plan, just in case you need it.