Monthly Issue
From Home Furnishing Business
July 28,
2023 by HFBusiness Staff in Business Strategy, Industry 
As we reflect upon this milestone, it fills my heart with immense pride to acknowledge the incredible success we have achieved together. Since its inception, the Forty Under 40 has celebrated the very best in our industry, highlighting the dedication, innovation and unwavering commitment of the honorees to deliver unparalleled service to their customers and communities. I am thrilled to share that throughout the last ten years, we have honored an astounding 400 individuals who have left their mark on our industry. These honorees have consistently set the bar higher, redefining what it means to excel in the home furnishings realm. From visionary designers and creative artisans to enterprising retailers and innovative manufacturers, each recipient has played an important role in shaping the landscape of our industry. We have also taken a “look back” at nearly two dozen repeat honorees who were nominated after initially landing on the list in a previous year indicating that the industry continues to recognize their contributions as their career trajectory progresses.
But it is not just the honorees who deserve recognition; it is the collective support and engagement from the industry that has made this program thrive. To our readers, industry professionals, partners and advertisers, I express my deepest gratitude. Your enthusiastic participation, insightful nominations and invaluable support have been the driving force behind this program’s longevity and prestige.
As we celebrate this remarkable milestone, I am filled with anticipation and excitement for the future. Together, let us continue to champion the exceptional individuals, business and innovations that shape our industry, and create a legacy that will inspire generations to come.
With heartfelt appreciation,
July 29,
2021 by HFBusiness Staff in Business Strategy, Industry
Furniture stores, along with the entire retail trade, are struggling to attract and retain employees. In April of last year, during the forced shutdown across the nation, furniture stores lost 38% of their employees. While many employees returned the following month, the industry has not returned to 2019 levels (97%). The graphic below represents the statistics.
These employee levels would be fine if it wasn’t for the fact that the industry grew 29.8% in Q1/2021 over the same quarter last year. Anecdotes abound about the lack of the delivery crews to deliver the product that finally arrived or the need to hire quality sales associates. These two components of the process — selling and delivering — are essential to a retailer’s success. Although employee search sites may produce applicants, the resulting interviewees who show up are the problem.
Obviously, a solution is increasing the hourly rate or guarantees for retail sales associates. In desperation, many retailers have gone this route. However, once an increase is done it can’t be recalled. A key performance indicator for retailers that has not been considered recently is wages as a percent of delivered sales. For every percentage point increase, it must be recouped with an increase in gross margin. It sounds simple, but with the jump in gross margin due to rising transportation cost, will the consumer accept the price increases?
Wages, as a percentage of sales delivered, range between 14.5% and 21.5%, dependent upon the retailer’s price point and the retail experience delivered. The graphic below presents the industry functional breakdown for the initial quarter of 2021 compared to same quarter last year. When comparing Q1/2021 to the same quarter last year (Q1/2020), the average retailer expenditure has been reduced by 2%, primarily due to higher volume (10.7%). As we move to the new normal, the traditional ratios will be hard to compare. But gradually, a new business model will emerge. And increased wages will be part of the new normal.
May 31,
2021 by HFBusiness Staff in Business Strategy, Industry
This decade began in the thick of what many refer to as the “Retail Apocalypse,” with a sharp decline of stores happening each year. While the pandemic has produced a surge in furniture purchases, many analysts predict online penetration will increase with no indications that retail store closures will slow. The number of brick-and-mortar retail stores (establishments) for all consumer products peaked for most entities between 1988 and 1991. As bigger corporations evolved, translating to fewer owners and bigger stores — coupled with rapid internet technology advancements — retail began to change and hasn’t looked back. Furniture and home furnishings stores are among the big casualties.
This article picks up from Statistically Speaking’s September 2019 article “Charting the Progress of Survival: Furniture and Home Furnishings Stores.” The heaviest decline in both furniture and home furnishings retail locations occurred between 2005 and 2010, which coincided with the Great Recession. The number of furniture store establishments dropped 12.1% in those five years, alongside a huge 21.7% drop in the number of firms (Graphic A) as smaller independent retailers were hard hit.
Following 2010, the number of furniture store establishments decreased an additional 18.0% over the next 10 years, finishing 2020 with 21,703 stores. The most recent data on firms (ownership) from 2018 show the number of firms recorded a 17.8% decline, down to 12,365, since 2010. While the number of furniture stores has continued to fall for the last 30+ years, home furnishings stores grew steadily until 2005. Economic pressure during the Great Recession, coupled with the rapid rise of electronic shopping, has taken its toll on brick-and-mortar home furnishings stores even more than furniture stores. Between 1990 and 2005, the number of establishments grew 15.1% but dropped by 18.5% down to 28,056 from 2005 to 2010. Over the last decade, the number of home furnishings stores fell another 13.2% to 24,348 (Graphic B).
The decline in the number of home furnishings store firms also began in 2005, decreasing by 19.6% in 2010, followed by an additional loss of 3,170 firms by 2018. The primary signal for the decline of independent furniture stores, with ownership of generally one or more local stores, is when data show the loss of furniture store firms (ownership) falls faster than net growth in store counts. Over less than 20 years, the number of furniture companies with primary operating ownership of one or more stores fell 37.6% and the number of brick-and-mortar stores declined by 21.3%. In 2014 and 2015, furniture store firms were hitting negative growth between 1.1% and 1.4%, respectively, while establishments showed slight increases. However, in 2016, stores started to decline alongside ownership by 1.7%.
Not surprisingly, employee growth began to decline by 2017 – decreasing 0.5% in 2017 and 1.1% in 2019 before the dramatic drop of 12.8% brought on by the pandemic in 2020 (Graphic C).
The pandemic has had a mixed impact among furniture stores, with federal stimulus propping up much of the brickand-mortar industry in the third quarter of last year and beyond. For 2019 through 2020 Q2, the industry had a net decline in stores five out of the six quarters (Graphic D).
The largest decline hit from 2019 Q2 to Q3, marking a net decrease of 255 stores. But with the consumer’s renewed interest in furniture and home furnishings during the pandemic, the third quarter of last year saw a net increase of 538 furniture establishments over the second quarter of 2020 and an increase of 380 stores over the third quarter of 2019. As shown in Graphic E, the pandemic was especially hard for home furnishings stores. Already faced with a steady net decline of store closings each year, last year resulted in a net decrease of 579 home furnishings establishments, preceded by 454 in 2019.
Furniture establishments fared slightly better after overcoming the hit in 2018 of a net decline of 387 stores. In comparison, 2020 only produced a net decrease of 86 furniture establishments. The furniture and home furnishing stores picture comes into focus when compared to other types of retail brick-andmortar stores also selling furniture. While furniture and home furnishings stores have continued to lose establishments, warehouse price clubs/supercenters and pure electronic shopping retailers have maintained positive growth rates. These average annual growth rates in five-year segments since 2000 is shown for select furniture retailers in Graphic F-1.
Other key brick-and-mortar retail stores have also been in decline for decades, feeling the pressure from warehouse price clubs and supercenters, but especially from electronic shopping retailers. Table F-2 shows a select group, with office supplies/ stationary/gift stores and department stores experiencing the largest net declines. Smaller independent furniture stores have felt a majority of the brunt from retail consolidation, but larger chains have also gone by the wayside. The rapid growth of electronic shopping and online retailers throughout the last 20 years has added significantly to the brick-andmortar crisis.
And it seems the pandemic may have further strengthened the relationship between the consumer and the internet. Brick-and-mortar furniture stores celebrated record sales in the third and fourth quarters of last year. And for the first two months of 2021 sales are up 13.1% over 2020 (Graphic G).
The rain cloud that persists is that while consumer spending for furniture has catapulted to 23.8% in January/February over the same two months last year, furniture stores have increased sales but lost market share. The gap between furniture store sales and total consumer spending on furniture has continued to widened. In 2014, furniture store sales of $53 billion represented about 57.5% of total consumer spending on furniture. Last year, that ratio had fallen to 42.5% (Graphic H). The Census Bureau and Department of Commerce reported $60 billion in furniture store sales last year compared to $141 billion total consumer spending on furniture and bedding.
As shown in Graphic I, the annual growth of furniture store sales began to decline in 2019 (-0.2%), followed by a 2.4% decrease in 2020. Meanwhile, consumer spending on furniture has continually shown positive growth every year since the end of the Great Recession and finished 2020 with an annual growth of 7.9%. What remains to be seen for the future of brick-and-mortar furniture stores is whether the momentum of the consumer’s interest in their homes can help furniture stores counteract the internet’s pull and last long enough to keep these stores and other furniture and home furnishings establishments in business.
June 3,
2020 by HFBusiness Staff in Business Strategy, Industry
But that hasn’t slowed down the 75-yearold Ploy. He maintains a schedule as rigorous as an executive 20 years his junior, and travels regularly to furniture markets and meetings with customers. “I love what I do,” he says. “I wake up every morning eager and anxious to get to work.” Recently, Ploy made time in his busy schedule to talk with Home Furnishings Business about what keeps him motivated, AICO’s unparalleled success in the past two decades, and his work with non-profit groups such as City of Hope and the American Home Furnishings Hall of Fame.
HOME FURNISHINGS BUSINESS: What is it about the home furnishings industry that keeps you motivated to go to work every day?
MARTIN PLOY: One of the wonderful things about this industry is the fact that there is constant change. This change is the challenge we face every day, and this continues to drive and motivate me more. I’ve always believed that yesterday’s lessons quickly move to the rear-view mirror as we train our eyes on the road ahead. The unpredictability of the day is an exhilarating and stimulating part of my life. I may drive to work with an agenda in mind for the day, but it often changes with the first email or the first phone call. Take5 The one constant is the fact that we still need to work and deal with people. Each employee is unique, and their needs, concerns and efforts make them a part of my daily routine. Sometimes their issues are about business, and occasionally they are even greater -- they are personal. If our staff didn’t feel that I care, then I can assure you that our turnover would be higher and productivity lower.
HFB: Much has been written about the culture at AICO. What makes the culture so unique? What are you doing to make sure it remains intact for years to come?
PLOY: I think our culture has been very solid and appreciated because it is very employee centric. We call it the AICO Family. We encourage new ideas. Each person has the power to make a difference, and we make sure they feel empowered to recommend and create change. Plus, it’s critical that individuals feel respected in our company. We help by giving them the best working environment possible. From the break room to the individual office spaces, to all the available facilities, we prioritize quality and comfort. Their health and well-being are most important, so we provide a complete gym, locker room and showers for their personal use. In addition, we provide excellent employee benefits … and host a fun filled AICO Family Day picnic, an annual Holiday party with recognition awards, a fabulous Halloween costume contest, various employee luncheons as well as our Employee Appreciation Day. And we always have a monthly Employee of the Month meeting. In the end, AICO has a very loyal staff, with over 65 percent employed for more than 10 years, and we have many at 15, 20 and even 25 years. I feel confident that this culture will sustain itself because it is so heavily employee focused. If the culture of a company is strong and positive, it will mark the path to the future.
HFB: The industry has changed significantly since you joined AICO in 2002. How has the company continued to grow and thrive in this rapidly changing environment?
PLOY: The shopping experience has been dramatically altered by generational changes and constant access to the digital world. Consumers have become far more educated and their expectations are greater than ever. It is our responsibility to be adaptable and have the flexibility to offer different designs that are more targeted to today’s consumer tastes. As you know, we were once known for our ‘Old World’ traditional designs. Michael Amini was able to sling-shot this company forward by offering these heavily carved, over scaled traditional masterpieces at great values. As one of the pioneers in China, he created a company synonymous with unique and original designs at great prices. Then Michael created a look the marketplace didn’t even know it needed -- the brilliance and bling of ‘Glam.’ Our Hollywood Swank collection launched a new era at AICO, and since then, we’ve introduced a diverse catalog of contemporary, modern, urban loft and now elegant and chic transitional furniture. As a designer, Michael has displayed great creativity and flexibility in his ability to answer the buyer’s question of “What’s new?”
HFB: What have been the keys to the success of the Michael Amini/Jane Seymour Collection? What makes it stand out from other licensed collections?
PLOY: Jane is not just a celebrity. Aside from being a world renown actress, she is an artist, author and a mother. She has always shown her commitment to the Michael Amini – Jane Seymour brand by her consistent visits to all of the markets. She’s always eager to engage and even educate customers on the new products. She’s really a part of the sales force and part of the public relations team. The longevity of this collaboration goes back to the launch of Hollywood Swank ten years ago with the introduction of Michael Amini – Jane Seymour, A Design Collaboration. This Glam collection was slow starting, but rapidly picked up steam. And after all these years,it’s still one of our top sellers. It’s just remarkable. This truly helped position Michael and Jane’s acceptance by retailers everywhere, which eventually led to other Glam intros like Overture, Hollywood Loft, Glimmering Heights and Melrose Plaza. There appears to be a greater consistency in the Michael Amini and Jane Seymour offerings that other licensed brands don’t seem to have. The longevity has so much to do with the ability to keep coming out with fresh new collections that reinforcethe brand and resonate really well with retailers and consumers. Today’s recent offerings of Michael Amini & Jane Seymour Living are setting new sales records with multiple collections offering a look of chic elegance, neutral tones and refined transitional designs. It appears that customers like the quiet elegance and subtle details that these designs offer, not to mention the value they represent. We’re also proud of our more recent relationship with Kathy Ireland. She has demonstrated a similar commitment and dedication to supporting the Michael Amini - Kathy Ireland Home Designs brand. Of course, these offerings are more causal and at lower price points. We’re optimistic that this relationship will be as long-lived as Jane’s.
HFB: AICO is well known for its support of several charitable causes – notably the City of Hope. Why is this important to the company?
PLOY: AICO does support several charitable causes, not just City of Hope. We also support industry groups like The American Home Furnishings Hall of Fame Foundation and ADL, as well as (organizations outside the industry) like Jane Seymour’s Open-Heart Foundation. When you are fortunate enough to have the opportunity to achieve and experience the rewards and accomplishments of your efforts, it becomes very appropriate and important to give back. But yes, there is a close connection at AICO with City of Hope. We have many supporters here. There is always a large turn-out for the annual Walk for Hope at City of Hope, benefiting women’s cancer research. (Executive vice president) Chuck Reilly does “Chuck’s Ride,” a hundred-mile fundraising bike ride for COH. Many of our staff participate every year in the West Coast Golf and Tennis Tournament for COH. And more recently, AICO hosted the City of Hope’s blood mobile with over 40% of our employees donating blood. We’re most proud of Michael’s philanthropic efforts, especially the Michael Amini Transfusion Medicine Center at City of Hope. This facility is where blood, platelets and stem cells are collected, processed and stored. Robert Stone, CEO and president of City of Hope said, “That building is the beating heart of City of Hope.” Why are we tied so closely to City of Hope? I think it’s because we have all been touched in some way by cancer and/or diabetes. It is the extraordinary work, research, clinical trials, and new drugs and treatments discovered by the scientists, doctors and researchers at City of Hope that pridefully connects us to this special place.
February 17,
2020 by HFBusiness Staff in Business Strategy, Industry
Furniture retailers responded creating a web presence. Initially, many were placeholders as there was a “land stampede” for domain names. Now, those placeholders have transformed into signifi cant presentations of not only product, but also the variance in the retailer’s services that make them uniquely diff erent from their competitors. Today, depending upon the merchandise price point, 72% of consumers visit the Internet during the buying process for research.
This presents the obvious question, “of the consumers actively considering or shopping for furniture within my market footprint, how many are visiting my website and how many are visiting my store?” Current research updated quarterly via FurnitureCore, the research arm of Home Furnishings Business, measures the stage of shopping for consumers as shown in Graphic A. Obviously these percentages vary by age group with 39% of the 35-54 age group having begun the buying process compared to the other age groups at 30%.
Understanding how many unique visitors come to your website is provided by Google analytics and is well accepted as the most accurate source of this data. Combining this with your store traffi c counts will provide a good perspective of how your advertising is impacting your performance. Graphic B combines all of these statistics into one graphic.
For many retailers, this visual is often a shock when they see the diff erence between those visiting their site and those visiting their stores. However, considering that consumers may visit more than seven websites on average, but only shop 2-3 stores indicates the challenge of bringing customers into the physical store (Graphic C).
Obviously, this statistic varied by age / income reflecting the demographics and depending upon the advertising media used to convey product differences.
Comparing the unique visitors to the retailer’s website to the number of consumers actively engaged in shopping for furniture is just as important. A large defi cit indicates that consumers are not considering the retailer. This factor measures the brand awareness of the retailer. Considering recent fi nancial fi lings by Casper that indicated expenditures of $400M in advertising to achieve 31% added brand awareness emphasizes the challenge. Consumer research that asks which retailers were considered, shopped, and purchased from measures the retailer’s market position. Graphic D presents the findings in a typical market.
Advertising is the process of changing these statistics. Having more consumers considering your store and having more consumers visiting your store after viewing your website is the objective. The advertising strategy of the retailer should be influenced by the media that most influences the consumer target. The leading influencer, according to recent research, is the Internet, followed almost equally by television and magazines combined.
Graphic E presents the findings. Obviously these statistics would vary by age with the younger consumer < 45 years of age, indicating television as 13.25% compared to older consumers 45+ at 17.90%. Again, the retailer must select the advertising media for the consumer they are targeting. For that reason, lifestyle retailers, such as Pottery Barn and RH (Restoration Hardware), use direct mail and social media as these mediums are the preference of the 45 age segment.
Interestingly, from a financial perspective, traditional retailers (independents / regional chains) expend significantly more on television (broadcast). The breakdown as a percentage of sales is shown in graphic F. Beyond the how of advertising is the what? What is the specific message that will most motivate the consumer to select you as the retailer of choice? The messages must start with the why. Graphic G shows the consumer is purchasing replacement furniture (43.95%), and is based upon recent research that explores the most relevant reason for the consumer to make a purchase.
For industry veterans, this is an astonishing statistic as it has more than doubled in the past 20 years. In fact, there was a feeling then that we “built our furniture too well,” and, “should we consider an obsolescence factor?” Unfortunately, a frayed sofa doesn’t create the same sense of urgency as a broken refrigerator. It is, therefore, a postponed purchase.
As can be seen from Graphic G, “desire for new furniture” is just over 27% of purchase motivators. However, for our prime furniture buyer age 25-54, a recent move and remodeling are over 50% of the purchase motivators. The importance of direct mail to influence the new movers is well justified with over 25% of purchases from this demographic. As would be expected, when the consumer’s reason to purchase is driven by furniture replacement, quality (29%) would be the most important feature that attracted the consumer to the product they purchased (Graphic H).
While quality is consistent across all age groups as being of importance, warranty is much more important to the 35-54 age segment, being the segment that have experienced the decline in quality first hand. The opportunity to provide warranty is a significant opportunity to add profitability. A key profitability item in appliances and electronics has not been fully executed in furniture retailing.
While the purchase motivator for new furniture is style representing only 25%, it does present an opportunity for larger tickets and higher margin. Where does the consumer get their style inspiration? Again, the Internet (37.5%) is the primary response, but there are other important infl uences as shown in Graphic I.
As you would expect, for our emerging furniture purchasers (25-34) age group, the Internet is more important. However, retail stores represent less than half. Are we creating the visual experience in our stores?
What ultimately motivated the consumer to purchase? Unfortunately, the manufacturer and retailer reputation contributed less than a third of the motivation (Graphic J). Again, the repeat of quality as the prime motivation was the consensus. From an advertising perspective, the most diffi - cult element to communicate is quality. In advertising, the substitute for quality is brand.
Finally, we must consider the financial aspect of advertising. Unless you have fi nancial backers, such as Casper, you cannot aff ord to spend 33% of revenue on advertising. A percentage in the 5.5% to 6.0% range would be appropriate. The table below (Graphic K) presents the statistics by retailer’s revenue.
Beyond the advertising expense must be the eff ectiveness of advertising. In other words, does your advertising bring the consumer through the door? The most common measure is the cost per up. The industry average can be seen in Graphic L .
As can be seen, the smaller retailer < $5M is at a signifi cant disadvantage. Advertising in furniture retailing today has become more challenging. While the Internet can be a more eff ective medium to communicate considering our time-starved consumer, it is diffi cult to communicate the quality. What is emerging is the direct to consumer brands. These manufacturing direct brands are Omni-channels with unique brands with unique points of diff erences, begun on the Internet and moving to physical stores will be their strategy. The need to expand customer bases will drive the need for brick and mortar.
However, their stores will be customer experience focused. By that, they will be personalized, frictionless, and enjoyable, staff ed by passionate sales associates. The stores will be smaller, less high-price environments focused on brand building assets, such as digital screens. The new retail will be data driven, putt ing the consumer experience first. Maybe the retail experience will become the advertising. We are beginning to serve the experience generation.