Come Out Swinging

April 1, 2013  by Powell Slaughter in Economic News, Industry   

Furniture Retailers Should Get Ready to Come out Swinging This Year.

Home furnishings retailers are getting back into fighting trim versus survival mode as the economy returns to some sense of normalcy.

Wretched headlines out of Washington and news media that seem more intent on generating heat than light in a 24-7 competition for attention sometimes overshadow the fact conditions favorable to our industry have improved. Could the furniture retail sector be in for a stronger competitive stance relative to other areas where consumers can spend their money, such as travel, electronics and automobiles?

While he predicts a “mild” recession next year, economist Alan Beaulieu, president of ITR Economics in Boscawen, N.H., thinks the answer is yes.
Beaulieu talked to attendees at last month’s Myriad Software Conference in San Antonio about moves retailers should make this year and the next.

“2013 is going to be a positive year, but 2014 will have a mild consumer recession,” he said. “The government has ensured that” with changes to FICA and concerns about the impact of health care legislation.
He added that 2015-2018 will be see very positive growth, with increased hiring and economic activity.
“How do I get ready for 2015?” he said. “Training, cross-training, improving efficiency. Start doing it now, because training takes time.”
He pointed out that a little more than 40 percent of American’s still think the country is in recession, largely due to negative headlines and continued high unemployment levels.
“Don’t let the media tell you the economy’s going to crater,” he said. “This (2014) recession—a mild one—has nothing to do with the last one. … The consumer has done a tremendous job of right-sizing and deleveraging. … Debt-to-equity ratios are at 20-year lows.
“If you can reach that consumer and line up with their expectations you’ll find they will spend.”
Home furnishings, he predicted, will outperform other retail sectors, what with steady improvement in the housing market: “While overall retail sales are okay, people want to buy what you’re selling.”
He added that now is the time to borrow money to invest in your business, since the Dodd-Frank (Financial Regulatory Reform Act) will have a negative effect on lending in 2014.
“You have this year to get your best deal,” he said. “You have to spend money to invest in a growing business.”

POSITIVE OUTLOOK
While furniture retail is off to a desultory start in 2013, retailers should expect and set themselves up for brighter times ahead, said Jerry Epperson, director, Mann Armistead & Epperson, Richmond, Va.
“Unfortunately, we were slammed pretty hard in February—retail was tough in general, and home furnishings was one of the worst categories,” Epperson said. “We think a lot of that has to do with severe weather tax returns running 10 days behind. A lot of retailers are telling us March is flat at best.
“If you want the reasons we’ll have bad business this year, there’s a long list, and Washington has been a very generous contributor.”
Now, for a very large “but” that gives retailers reasons for optimism.
“The housing numbers are blowing the doors off what anyone expected in their wildest dreams—we’re getting in range of it being a healthy market,” Epperson noted. “This year, new household formations will be double what they were in 2010, and Amex just said 50 percent more people will be changing homes than during last year.
“If you focus on what we rely on as an industry, you can have a good year—if you just watch 24-hour news you won’t,” he said. “The things that create demand for home furnishings are up. That’s what we’re trying to get people to focus on. If you want to be miserable, be miserable, but someone’s going to be out there meeting demand for all these people.”
Epperson believes exciting concepts are emerging for home furnishings retail, such as Ashley’s Sleep and Art Van’s Pure Sleep shops, and pointed out that more retailers are expanding, with more new stores opening in any year since 2002.
“The larger retailers are investing in growth,” he said. “Last year our total sales for all routes of distribution were up 5.9 percent. The real driver was the mattress sector, which I showed as 9.7 percent growth, the third straight strong year for mattresses.
“I think this will be a great year for outdoor furniture sales,” Epperson said. “We had this exceptionally cold, snowy winter, especially compared with last year, and people are excited about spring and summer.”
New stores in Epperson’s home town of Richmond, Va., include a Rooms to Go, and he said what happened there is an object lesson in opportunity.
“Their being here has made our Ashley stores, our Value City stores, Haynes Furniture, which is local, better,” he said. “Television, print ads are way up. It’s like Rooms to Go woke up the city.
“I don’t have the exact numbers, but with their coming to town, I’m willing to say furniture sales around Richmond are up 20 to 25 percent because of all the excitement created by this big guy and what everyone else did to respond.”

THE ENEMY AIN’T US
Retailers don’t need to wait for new furniture competition to start building consumer mind-share for furniture relative to the real competition—other categories of consumer goods.
“The mom and pops need to not worry about the big boxes and the giants of our industry,” said Mary Frye, president of Home Furnishings Independents Association, which is merging along with the National Home Furnishings and Western Home Furnishings associations next month into the new North American Home Furnishings Alliance. “They need to tap into their knowledge of their customers and customize the experience for those customers.”
Frye always has believed furniture retailers’ true competition lies outside the industry, and that retailers should have some fun in taking on other sectors.
“Retailers can take a tongue-in-cheek approach regarding other categories in their communications,” she said.
Going on a cruise? You might come back with some pictures, and you might also end up on a broken ship. Did that hotel look as good in person as it did on the Internet?
“Spend your money on something you can’t keep, or you can turn your home into the place you want it to be,” Frye said.

PRIMING THE PUMP
Home Furnishings Business asked a number of retailers what they’re doing to get consumers thinking more about buying the products they offer.
With Internet shopping—and purchasing—gaining ever more traction across a range of consumer categories, e-commerce is getting plenty of attention.
Colfax Furniture & Mattress in Greensboro, N.C., for example, is getting set to open its online store within the next couple of months after it tested the waters with an e-mail program that generated a big response from consumers.
Starting at the beginning of February, the retailer began showing products on its Web site for which consumers could request a quote.
“We have a person who manages those e-mails and sends back a price to the customers,” said Jan Linder, finance operations manager for Colfax. “They can come to any of our locations with that e-mail with pricing, and we’ll process a special order for them.”
The move generated overwhelming response.
“We haven’t tracked how many of those converted to sales, and that’s the reason we want to get our shopping cart up and running,” Linder said. “The interest is out there—we’ve been very pleasantly surprised at the amount of interest.”
Colfax is working with Micro D on phase two of the project, setting up online product displays with pricing.
“The general market is going toward online shopping, and also the ability to see the product and the pricing is often enough to drive people into the (brick-and-mortar) store,” Linder said.
The online move is attractive from an overhead standpoint, she added, noting that it’s far less expensive than opening another brick-and-mortar store.
“Online shopping is a boat that has sailed, and the furniture industry needs to get on it,” Linder said. “If we limit our shopping cart to our delivery area, we can deliver absolutely anything we can sell in our store. We believe it can do just as well or even exceed our brick-and-mortar sales.”
In March, Furnitureland South in Jamestown, N.C.,  went live with its online store, targeting shoppers across the country and beyond.
That initiative also came in response to consumers’ tendency to hit the Internet first when shopping for just about any big purchase.
It also builds on Furnitureland South’s brick-and-mortar service roots. Customers are encouraged to contact a design consultant for full-service design expertise; from space planning to color coordination and fabric selection, expert consultants work to create a turnkey service free of charge. Purchases also are delivered by the retailer’s in-house, white glove delivery team.
Colfax expects its online store to pay dividends at its brick-and-mortar locations.
“Everyone starts on the Internet seeing what styles they want, whether it’s a store they want to go to,” Linder said. “That’s very important for us because of where we’re located—we’re a destination, we aren’t sitting on Wendover Avenue (a major Greensboro traffic artery), and you have to make a decision to come see us.
“It’s not just a matter of convenience for shopping, it entices customers to come to the store if they’re not an online shopper.”
Above all, Colfax wants a “seamless” relationship between its online presence and its stores.
“We’re trying to design our Web site and our Web store to match the message and the quality of our brick and mortar,” Linder noted. “We don’t want customers to go to the Web site, decide to come see us and have get a different impression of the our stores.”
Frye at HFIA noted that retailers can offer customers via their Web sites service that pure online retailers often don’t.
“Retailer’s can search out that source and make things happen that the customer doesn’t know how to do,” she said, noting that with an Internet-only retailer, customers can be on their own. “We sell a very subjective product. What’s beautiful to one is awful to someone else. Our reasons for buying are equally subjective. Emotion sells so much more than statistics do.”
The economist Beaulieu noted that e-commerce held up better during the recent recession, and retailers should explore that avenue before the next downturn.
“E-commerce can provide additional opportunity if you can optimize your presence on the Web,” he said.

PLAYING TO STRENGTH
Bassett Home Furnishings licensee Bassett San Diego’s San Marcos, Calif., store is the network’s No. 2 performer nationwide, and Bassett’s new HGTV Home collection should help maintain that high standard, said Matt Huffman, vice president.
Bassett San Diego has been doing in-home sales for more than 10 years—the technique accounts for as much as 20 percent of business. HGTV is all about makeovers, and the Bassett/HGTV Home connection makes Bassett San Diego’s in-home efforts an easier sale.
“Our HGTV partnership helps tie up our in-home designer sales,” Huffman said. “And that’s really important since those are normally five times the average ticket of other sales.
“There’s a correlation between HGTV and what we’re trying to do. It makes what we’re doing so much easier—people just don’t invite you into their home very readily,” he said.
 Larry Marquez is president of La-Z-Boy Furniture Galleries of New Orleans in Metarie, La., which has two stores in the New Orleans market. His plan is to continue what worked last year.
“In 2012 we were up 30, 31 percent,” he said. This year we want a minimum of 12 percent growth, hopefully closer to 18 percent. Since we’re a La-Z-Boy dealer, the brand’s not an issue.
“We sell our quality story and the La-Z-Boy brand,” Marquez said. “It appears people are looking for quality products and that they do have the financial means to buy that middle to upper-end product.”
Marquez’s advertising goal is to focus on direct mail and television, the two media getting people into the stores.
“We’re also offering some special financing on occasion—30 months, no interest,” he said. “When you can buy something of quality and can pay it off in three years with no interest, that’s a draw. We do that once a quarter.
“It’s a simple plan—it worked last year and we’re going to try to carry it on this year.”

TWEAKING THE APPROACH
Harkness Furniture in Tacoma, Wash., isn’t into full-blown e-commerce, but it’s tweaking its online approach to grab consumers’ attention and business.
“It’s a long road. One of our main competitors is the technology realm—televisions, electronics,” said Kellen Harkness, purchasing manager. “The hard thing for us to compare against is the ease of purchase. We’re trying to make furniture easier for consumers to buy.”
For that reason, Harkness Furniture has added pricing to its Web site like Best Buy would.
“We aren’t in full-on e-commerce yet but we want to head in that direction with a cart or taking credit card information,” Harkness said. “We recently updated our Web site—we priced our top best-sellers that we know we have in stock. When people see anything priced online they assume you have it.”
The store was on an older version of Ayr1, but upgraded three months ago.
“If we do go with e-commerce we’re set up for it now,” Harkness said. “We’re still determining what to price and what not to. … The big boxes do that well, but it’s a slower process for furniture.”
Around 150 people a day review the Harkness Web site, which the store views as a virtual showroom.
“We get buyer inquiries all the time from the Web site. They can build a shopping cart and send it to us,” Harkness said. “I took those inquiries over, and I try to answer every one the same day, and I attach a $25 gift certificate good on any purchase in the store over $99.
“We don’t have a set letter, and I try to personalize that e-mail. If they’re looking for something we don’t carry in stock, I might say, ‘I can definitely special order it in X-amount of time, but we also have these options you can purchase immediately.’ I also include pricing.”
Formerly, Harkness just sent pricing on customer inquiries, but Kellen revamped the process when he took over the e-mail responses about a year ago. Those inquiries get a lot more traction now.
“In the first week, we had five people come in the store with the $25 certificate—before, we had none,” he said.
He’s also transitioning into a new position where he’ll have more access and more time to work on the Web site.
“In the near future, we’re looking at pricing as much product as we can,” he said. “That means staying up-to-date with what our competitors are doing; examining our stock levels; and if special ordering, focusing on the amount of time it will take.”

REPOSITIONING RESOURCES
Vermuellen Furniture in Jackson, Mich., is examining where to put marketing dollars in a time its traditional print advertising partners are cutting back. Part of that process involves better tracking of what brings customers to the Jackson, Mich., store, and that’s one of the reasons Vermuellen signed on with Myriad Software a few months ago.
“Our local newspaper is printed only two days a week now, and is just online the other days,” said Denise Fisher, CFO at Vermuellen. “A lot of the (surrounding) rural communities had their own newspapers, and a lot of those are going away.
“We used to do a lot of print broadsheets, but we can’t rely on that now. My boss isn’t real comfortable with digital, but we’re pushing him into it—life is pushing him into it.”
Vermuellen has begun e-mail marketing, which Fisher said is cost effective, and more television advertising and is using its new Myriad system to better track what brings customers to the store (Vermuellen also operates three La-Z-Boy locations, but uses La-Z-Boy’s own system at those). Fisher said the store’s local market demands care in how it approaches digital marketing.
“Jackson is a very traditional town,” she said. “We can’t necessarily do what everyone else is doing. It has to be area specific. We’re getting more into television, but there you have to decide whether to go cable or broadcast.

“We do direct-mail pieces, but that’s pretty expensive. We’ve started doing billboards, but we haven’t determined their effectiveness … We need to collect more data on what brought people in, and Myriad has a program for that.”
Vermuellen’s advertising manager also is developing the retailer’s Facebook presence to appeal to newer customers.

“Expectations are very generational,” Fisher said. “Our older customers expect a lot of customer service—they’ll want to repair a 15-year-old recliner. The younger buyers don’t seem to want as much since they’re used to finding everything online.”

TAP INTO ASPIRATIONS

HFIA’s Frye said furniture retailers need to celebrate the fact that they do good things for people, and the smaller independents that make up so much of the association’s members can make that happen personally.

“I can’t imagine there are many retailers I deal with who can’t sit down and call all their customers and have a meaningful conversation in a reasonable amount of time,” she said. “Be the person who can make it happen, who’ll use all their contacts and all of their knowledge to get that customer something they might not even know they need.

“We need to give our customers permission to say, ‘I’ve changed, and this doesn’t fit me anymore,’” she said. “Furnishings can lift you up.” HFB

Inset Story

Checklist for 2013-2014

Alan Beaulieu, president of ITR Economics in Boscawen, N.H., offers this checklist for ways retailers can
prepare for business conditions in the next year and a half.
•  Positive leadership modeling (culture creates behavior).
•  Invest in customer market research (know what they value).
•  Training programs (people, process, internal metrics).
•  Review and uncover your competitive advantages.
•  Spend money on new products, marketing, advertising.
•  Improve efficiencies with investment in technology and software.
•  Check systems for readiness to accommodate increased activity.
•  Add sales staff and hire top people.
•  Lock in costs.
•  Judiciously examine credit.
•  Work on “What’s Next” (What are you doing to get ready for improved conditions?).