Monthly Issue
From Home Furnishing Business
August 22,
2014 by in Financial Reports, Furniture Retailing, Industry, Internet 
E-commerce’s impact on the furniture sector shows no signs of slowing—and that affects all retailers, whether or not they sell furniture online. Based upon FurnitureCore's national consumer surveys conducted last year, of the consumers who purchased furniture, 17 percent purchased in on the Internet.
Of all consumers purchasing, 40 percent did not consider the Internet for the transaction, but that left 60 percent who did. Of the 60 percent who considered, 12 percent did not shop; 31 percent shopped, but did not buy. Still, that left a significant 17 percent who did purchase online.
To compare how the above consumers fared with independent furniture retailers, check out the accompanying “National Market Performance” graph from FurnitureCore.
Of all consumers purchasing, 48 percent did not consider an independent furniture retailer (excluding regional chains); 21 percent considered, but did not shop; 22 percent shopped, but did not buy; and only 10 percent purchased from an independent store—neither regional chains nor department stores.
NOT STANDING STILL There’s plenty of action among furniture stores moving into the online channel.
Take a look at Blueport Commerce, whose customers include brick-and-mortar retailers who want to extend their reach into e-commerce. Blueport recently announced that its sales are up more than 150 percent through 2014’s first two quarters compared with the first half of 2013. Sales for its Furniture.com e-commerce Web site are up more than 400 percent, comparing the same periods.
Part of the growth is attributable to a number of big name retailers who have joined the platform.
This year, $1.3 billion Canadian retailer The Brick signed up. Seffner, Fla.-based Rooms To Go has joined Furniture.com, and Ontario-based Leon’s plans to invest in Furniture.com and extend its Blueport contract for another seven years.
Those are just a few examples of how the big boys in furniture retailing are making moves. Such investments in time and money speak volumes about the present and future potential of the e-commerce channel for furniture.
FIRST STEPS Andy Bernstein, founder of Internet marketing and Web site services vendor FurnitureDealer.net, has seen growth in e-commerce’s importance in furniture retailing as consumers grow more accustomed to making online purchases.
In its business, Furnituredealer.net is focusing on two aspects to help clients address e-commerce: First, making it easy for consumers to use the site and buy online with a pure shopping experience; and second, communicating to consumers why they should buy from their client versus an online retail specialist.
“Ease of use means less clicking, easier navigation,” Bernstein said. “Second, is getting prices on the site.”
Regarding pricing online, retailers need to consider two aspects: inventoried product and special orders.
Manually pricing products is labor intensive. Bernstein pushes his clients to create Web sites that feature seamless access to price information through a store’s operating system.
“Forty percent of our clients (have sites) that are hand-shaking with their inventory management system,” he said. “It allows them to: one, communicate (to consumers) which products are in stock or in the store to see; second, it allows them to price it out” for special orders.
The hard part is up front, getting the Web site data set to match the store system’s data. Bernstein gave an example of the issues involved: If you’re selling a three-piece sectional or a seven-piece dining room, the shopper sees that as one “item,” while your store system sees an assortment of SKUs.
If a retailer is using photography from manufacturers online, it should match what is being sold. For instance, a vendor’s dining room image might show seven chairs, while a retailer sells dining groups with five chairs.
“Once you put a price on it with a picture, it gets tricky to make sure you get it right,” Bernstein said.
Custom orders pose a particular pricing issue for selling online, but progress is being made there, as well.
“We’ve been working hard on publishing manufacturer price lists that retailers can go to and put on a multiplier to get a price,” Bernstein said.
Manoj Nigam, president and CEO of Charlotte, N.C.-based Internet marketing and services vendor MicroD, believes a time will come when e-commerce won't be an option for furniture retailers, but a necessity.
"It's not a question of if, it's a question of when," he said. "E-commerce in our industry is in the same spot where Web sites were some years ago. Today, nobody questions the need for a Web site that shows your location, the products you carry, the services you provide."
Other retail sectors have created new online expectations for consumers that furniture stores must eventually match.
"The consumer expectations today are 'I can see it anywhere' and 'I can buy it anywhere,'" Nigam said. "When you are serving customers in any retail environment, you need to do it in an omni-channel way. That means the customer can see products in the store, go home an make a decision and purchase online; or find the product online and then come to the store to see and feel it, and make the purchase there."
Take a look at what other retail sectors are doing on line. Electronics, apparel and a host of others are meeting consumers' "see it anywhere, buy it anywhere" expectations.
"If you’re are going to be a retailer of any size, protect your market share, and come across as a company that's keeping up with the times, it's almost a requirement that you provide a click-and-mortar model," Nigam said.
Nigam does believe traditional furniture stores bring some advantages to the table.
"The online retailers' ticket size is typically smaller than that of brick-and-mortar retailers—for now," he said. "If you notice, Amazon is not in furniture in as big a way as appliances and other categories. Furniture is still one of the unique categories where consumers want to touch and feel, and that's a brick-and-mortar advantage.
"Big online retailers have created an awareness and expectation in consumers' minds. What (brick-and-mortar) retailers need to do to compete is to advertise and market in the channels people expect them to be like Google and social media, and promote their advantages" over online-only retailers.
For example, an online retailer can't hold in-store consumer events, and doesn't have a physical store where shoppers can experience the products in person. Retailers should tout their service stance and immediate, local recourse for consumers should problems arise.
"If you look at what's selling online (in furniture), it's mostly simple case goods, and not much in the high end," Nigam said. "If retailers sell specialized (custom order) upholstery, they need to promote that, along with the validation in the showroom of what shoppers see online. It's a huge advantage.
"Whether you sell online or not, advertise the fact that you're local and that you service what you sell."
How can retailers translate their store merchandising for a more impactful Web presence? Nigam had some suggestions. First, instead of single products, why not use a high-quality photograph of showroom vignettes? The items should could be sold as a package, but also allow shoppers to add individual items to their cart. This calls for a Web site robust enough to provide all the necessary information with a click.
"If you merchandise a group setting online with accompanying accessories and rugs, most sophisticated Web sites allow you to not only show that photo, but also have information on the individual items in the group," Nigam said. "We just launched a program with Havertys that allows you to slide in another rug and add that to the shopping cart. … The key is having a Web site robust enough to support your in-store merchandising and create a bridge to online merchandising."
Don't expect an immediate increase in sales once you step into e-commerce.
"I would say that having an online e-commerce presence is insurance in preserving your market share," Nigam said. "You might not have a lot of immediate sales, but not having the (online purchase) option is detrimental in customers' eyes. Hayneedle is selling every day in your market, and if you don't have the presence, you aren't even in the game."
And remember that a Web site with a shopping cart isn't the whole store for e-commerce. Your organization has to support inventory, delivery and after-sale service on items ordered online.
And while average tickets for online furniture purchases might not meet those of brick-and-mortar stores, expect that gap to shrink as consumers become more comfortable with big-ticket purchases via the Internet. MicroD manages Bassett's and Ethan Allen's online custom-order upholstery package.
"We've seen a steady increase in that sort of order online, and volume has steadily increased," Nigam said. He didn't give an exact figure, but the increase "is enough to where they've continued to support the channel."
THINK MOBILE An e-commerce Web site is more than a sales vehicle, it is today’s most valuable digital channel for driving traffic in to a physical store, according to Lance Hanish, co-founding partner of SOPHIS Integrated Marketing Innovations.
In developing that site, make sure to incorporate mobile-friendliness.
“Did you know that mothers turn to mobile when in store to save money?” Hanish asked.
If a retail site isn’t mobile friendly, consumers aren’t going to stay in the store long when browsing on the phone.
With e-commerce becoming more important, consumers have more ways to buy. If they use their phones in your store, make sure your mobile presence stacks up well with the competition.
“Today, everyone has a smart phone,” Bernstein said. “Every product has hundreds, if not thousands, of companies who can deliver it to (consumers), and they are operating inside your four walls through peoples’ smart phones.”
Suzy Teele, COO of Snap Retail, which has 2,500 retail clients across the United States and also works with designers and vendors, noted that starting last year, more online sales came over phones than computers.
“Does your product look good on the phone?” she said. “Use an app for mobile, or build a Web site that’s responsive, that readjusts its size automatically to fit the screen it’s appearing on.”
RETAILER RELEVANCE One way traditional retailers looking to take on e-commerce to compete with pure e-tailers is to do what they do best—talk to customers.
Bernstein is big on a full-service “assisted” shopping cart process.
“We see assistance from the retail associate as the most important part for the local retailers we deal with,” Bernstein said. “Our focus is not on the national-shipping part of e-commerce, but helping retailers do business better in the local market.”
That said, national shipping e-commerce players are a major competitive problem for retailers.
“Amazon wants to be the place where people buy everything,” Bernstein said, adding that a company such as home furnishings retailer Wayfair has the reach to get manufacturers to store product in their warehouses.
“The key is how do we communicate (online) why people should do business with our clients? What are your values, beliefs, services, community involvement? It requires a mind shift for us, because most of that information today resides in people’s heads, it’s not always published,” Bernstein said.
Most retailers tout their great service and knowledgeable, helpful people, along with selection or pricing, as reasons for consumers to shop and buy from an establishment.
“Get into the specific types of services you offer, the types of sales you do that differentiate, the types of financing you offer,” Bernstein said. “And tell them (online) why that matters to them.
“The Internet is going to commoditize a lot of products, and we have to communicate what value the retailer brings.”
Retailers should endeavor to build relationships and trust online. Retailers strive to do that in stores already?
“There’s going to be a huge need for retail salespeople and designers who can listen and help people solve problems online,” Bernstein said. “These people need to become experts at assisting customers over the phone and via chat and must have the tools they need to do that available.”
DEDICATING RESOURCES Do online shoppers browsing an e-commerce site see just the store’s telephone number, or are they directed to a dedicated call center when they want to buy or learn more?
The latter may be the better option. Think about it. Will a potential online customer wanting assistance call the store or go to the store?
Retailers showing particular online sales growth have established dedicated call centers for that segment. That way, the customer doesn’t get put on hold when she calls while the operator looks for the right person to field the inquiry.
“If you talk to the customer, that’s the moment of truth, and some of the best salespeople aren’t comfortable with the technology,” Bernstein noted. To compete with pure e-tailers, “our clients need to try to get people to talk.”
Del Sol Furniture in Phoenix decided to create a dedicated call center for its online sales, which the retailer started last year.
Alex Macias, vice president, had decided to spend time taking Web site-generated calls himself and realized how important they are. After the first day, he realized Del Sol needed to invest in an online sales team and service department.
“Those customers who come to our Web site are as valuable as those who come into the store,” he said. “If your Web site is an online store, today’s online customers have a high expectation of service.”
The first key to staffing such a call center is finding someone on your sales force that truly understands your company. It could be someone who isn’t doing that well on the showroom floor. That person might thrive in an online sales environment.
“Your best sales associates on the floor aren’t always the ones who have the skill for online sales support,” Macias said. “It’s a different skill set.”
A NEW CUSTOMER “There are a lot of people who have nice Web sites who don’t do e-commerce,” Macias said. “We consider our Web site to be our online store, 24-7, where the customers start the process.”
As it began selling online late last year, Del Sol had to make some adjustments. The store had catered traditionally to the Hispanic community with an emphasis on credit.
“That’s not the customer who comes to our Web site,” Macias said. While that traditional customer still leans toward in-store shopping, the online store attracted a much wider variety.
“Furniture retailers either get (e-commerce) or they don’t,” Macias believes. “Is your Web site just a Web site to you, or is it your online store?”
Even if you don’t sell online, it’s still a store.
“Look at leads coming in from the site. If they still think it’s just a Web site, they don’t get it,” he said.
ADDING VALUE ONLINE Furniture retailers have a depth of product knowledge sometimes lacking among pure e-tailers, and they need to make that resource available to online shoppers.
That’s one reason Sam's Furniture & Appliances in Ft. Worth, Texas, incorporates a live chat function on its e-commerce site.
“It's a great tool and gives customers another way to make contact with our stores when they have questions,” said Seth Weisblatt, vice president.
Consider incorporating e-mail marketing into your e-commerce strategy.
“I'm not talking about just e-blasts with promotions,” Weisblatt said. “We've started using prospect lead generation and it has had a great success. A customer provides their information to us via a pop up on the item page they are on, we will then follow up with targeted promotions for the products they were browsing for.”
Sam’s is constantly updating its Web site.
“From graphics, to product catalog, making sure every item has a price and stock availability,” Weisblatt said. “The ‘mission statement’ of our Web site is to provide customers the information they need to select Sam's Furniture as their place to shop.”
It’s all part of the retailer’s seamless shopping experience, whether the customer is in the store, on her computer, or using her smartphone or tablet.
“The more information we can provide customers the better our success will be online and in the store,” Weisblatt said.
SAVING THE DAY Goedeker’s, a furniture and appliance retailer in St. Louis, stepped into e-commerce after the recession hit in 2008 and crippled its business.
Owner Steve Goedeker said he launched e-commerce not as a grand strategy, but to keep the business afloat.
After starting e-commerce with 15 brands and around 4,000 products, the retailer now has more than 200 brands and a selection of more than 180,000 available items.
“We were just at the beginning of the recession in 2008 and were looking for a way to survive the challenges,” he said. “We started with a single table with two people, one who would answer the phone and one who worked on the Web site” adding and removing products.
As online sales increased, the Web site team went from two people seated at a table in the showroom to a separate, walled-off room with about a dozen people. The department moved upstairs when the online-employee count surpassed 20.
“Eventually we had to completely redo our building to accommodate more staff and inventory,” Goedeker said
Business grew to the point that two years ago, Goedeker’s converted 45,000 square feet of its 50,000-square-foot showroom into warehouse space and the hub of its online operations.
Selling online involved a tremendous cultural shift at Goedeker’s, with an explosion of information and an intimidating learning curve.
“It’s like starting all over again,” Goedeker said.
The Goedekers had no shipping experience and minimal knowledge of marketing.
“The challenges have been many,” Goedeker said. “From not knowing anything about how to start advertising, how to ship, how to deal with damages, hiring and training people. We literally were learning as we went along.”
There were also control issues. Along with delivery companies handling fulfillment came the need to hand over part of the business to an outside party.
SHOULD YOU SELL ONLINE? E-commerce represented 6.2 percent of total retail sales in first-quarter 2014, according to Snap Retail’s Teele, and is up 12 percent over the same period last year.
If there’s a single compelling reason to online for sales, she believes it’s that someone selling at least some of the product you offer is doing so online.
“A competitor might be supplying online the same item or service you do,” Teele said. “It might be a big-box retailer’s online (store) or an e-tailer with online sales only.”
She added that e-commerce is the No. 1 channel for electronics; No. 2 for apparel and accessories; and No. 3 for consumer packaged goods.
“It’s never flattening,” Teele said.
July 25,
2014 by in Industry
What are the elements for blending eye appeal and a profitable product mix on your floor?
“Non-traditional” competitors for consumers’ disposable income for home furnishings such as Arhaus, Crate and Barrel and Pottery Barn, perform quite well on much smaller product assortments shown than in the traditional home furnishings retail store.
How do you stack up against that competition?
Naples, Fla., retailer Clive Daniel Home’s floor is decidedly large at 85,000 square feet. Management decided early on that its merchandising scheme, which might not work for a lot of retailers, would have definite appeal for its high-end clientele.
The strategy requires an abundance of attention from the retailer’s merchandising team. Attention that the owners feel is warranted and with a big floor, there are lessons here for other retailers when it comes to creating their own, distinct space.
“Out of the gate, what we continued to do is have a very eclectic approach—we’ll mix and match manufacturers on the floor, show one’s table with another’s chairs,” said CEO Daniel Lubner. “That’s difficult to do, but we have an exceptional merchandising team, and Clive (Lubner) to this day is the greatest visionary in the business.
“We took (eclecticism) a step further by putting architectural salvage and vintage furniture on the floor. We have a lot of single-turn items—once they’re sold, they’re gone. For managing the showroom it makes merchandising much more difficult, but it gives the client a one-of-a-kind feel and design. It just feels right for us.”
POINTS OF INTEREST Retail consultant Bob Phibbs said the furniture industry in general doesn’t do a very good job of engaging shoppers from a product standpoint on showroom floors.
“Too often, (vignettes) look like a model home where nobody lives,” he said, “or it’s a boring line-up of brown.”
That’s one reason Dallas, Texas-area retailer Stacy Furniture & Design has been shaking things up of late, adding more color and cleaner lines in a market that’s traditionally been geared toward safe looks.
“We create points of interest, and we try to do a better job featuring individual items,” said Dorian Sims, president.
IMMEDIATE IMPACT
What are some tips for merchandising for visual impact, encouraging consumers to actually buy, creating aspiration?
“You have to mix it up,” Phibbs. “Choose a bold piece that gets someone talking, maybe smaller groups, a chair with a table, not as many whole rooms.”
Phibbs is a bit contrarian when it comes to the idea of retailers creating aspiration on their floors: “There’s no one size fits all. If I walk in the door I’m aspirational, I’m looking for something.”
One of the biggest issues furniture retailers face is a failure to connect the consumer’s purchase of the products they sell to the most important result or benefit they get from those products—greater happiness with both their home and lifestyle, according to Tom Zollar, practice manager with Impact Consulting.
“Next to family, the home is the most important thing in most of our customer’s lives and our mission is to deliver the style, comfort and livability that they,” he said. “Therefore, the better we merchandise and display our products in our stores to help the consumer visualize the result in her home, the more successful we will be at helping them fulfill their aspirations and thus deliver on our mission.
“To do this, our store must be visually exciting and inspire them to fulfill their dreams—it is absolutely critical.”
WHAT’S YOUR SIGN?
Phibbs said in-store signage is an area where a lot of furniture retailers fall woefully short. He described many of his experiences in the furniture universe as boring and drab.
“You need compelling signage,” he said. “Signage is one of the most overlooked things in furniture retailing.”
Why not step up your point-of-sale messages with messages along these lines? Say you’re selling recliners: “Can you see yourself watching television in this?”
Do you have an intimate vignette, say a comfortable chair and table? How about: “Can you see yourself reading a book by the fire here?”
FIRE UP YOUR STAFF
As if inspiring you customers isn’t enough, eye-catching merchandising can help excite your staff about what they’re selling.
“You look at some of these stores and it’s no wonder (employees are) bored,” Phibbs said. “The merchandise can’t do the heavy lifting—it can only catch the eye. If you have some guy standing there with a calculator that’s not going to inspire customers.”
Try using a color scheme throughout particular vignettes, said retail consultant Connie Post, CEO of Connie Post International and Affordable Design Solutions.
“Bedroom and dining presented in a color-block story is a great way to get attention,” she said. “Color blocking is using one color through out the vignette ... It simply creates a ‘wow,’ and it is also an opportunity for smaller dealers to appear on trend.”
What Does "Wow" Mean?
Retail consultant Rick Segel thinks retailers constantly on the prowl for interesting and different products may overrate their reaction to the goods.
What if they've already seen them at another store or online? It's no longer a "wow" to the customer.
"When it comes to exceeding expectations, we tend to think there’s this line—above it lies 'wow' and below it lies disappointment," Segel said. "We treat meeting expectations like there's no middle ground. We feel that we’ve either exceeded expectations or failed them completely.”
Segel, principal of Rick Segel & Associates, said customers sometimes have neutral attitudes to furniture—neither impressed nor disappointed.
"Obviously, we strive to constantly create that wow factor, but we if don’t, that doesn’t mean we’ve failed,” he said. “All it means is that the customer has seen our new product elsewhere. It’s still a good thing that we carry the product."
Disappointment is often out of the retailer's control, but one way to create "wow" is to leverage the element of surprise.
"The element of surprise works on everyone because there are no expectations involved," Segel said. "For example, if a young lady’s boyfriend buys her a one-carat diamond ring she wasn’t expecting, you better believe she’ll be wowed. However, if she’s been dating her boyfriend for two years and is expecting a diamond ring, that same one-carat ring probably won’t wow her. She expected a bigger diamond. She expected more."
Rather than seeking to exceed customers’ expectations, Segel suggests focusing on surprising the customer.
"Do things differently than you have in the past—and different than your competition."
July 25,
2014 by in Industry
Before Jim Muffi put the motion into sofas, consumers were forced to argue over the one or two bubba recliners in their family rooms when watching television.
Prior to Muffi’s 1979 founding of PeopLounger in Mississippi, sofas, sectionals and loveseats did little other than offer a place to sit. Today, 35 years later, motion upholstery has transformed the way many families congregate to watch movies, play games and become all out sofa spuds.
The category has come a long way since those early days, and today’s offerings boast gadgets, power reclining mechanisms, massage options and storage space, not to mention improved styling and design across the spectrum.
While hitting middle age, the category continues to resonate with consumers.
Total motion upholstery sales for 2013 were $10.02 billion, 14 percent of all furniture sales. When broken down and considering only upholstery sales, motion upholstery accounted for 36.4 percent of sales in 2013. For the first quarter of 2014, those percentages remained steady.
Home Furnishings Business and its parent company Impact Consulting Services/FurnitureCore recently conducted a consumer survey of 259 people who had bought motion upholstery within the last 18 months. The survey revealed relatively pleased customers when it came to their purchases.
Of our consumer panel most (61.4 percent) bought a reclining sofa and or a loveseat, and 82.3 percent of them fell in the range of five to seven. The scale ranged from one to seven with seven being “very satisfied” and one being “not at all satisfied”.
While in the industry we’ve seen quite a bit of improvement in motion upholstery design, our consumers see more room for improvement in styling. More than half — 57.6 percent — said the style of motion is an inhibitor to purchasing. Keep in mind however, that our group all bought some piece of motion upholstery so they must have found something they liked well enough. It only says motion designers could spiff things up a bit in the eyes of consumers.
Despite the focus of manufacturers and retailers to gravitate toward power merchanisms for reclining in higher-end models, consumers in our panel say they prefer the hand-operated style. More than 52 percent preferred lever mechanisms, while 28.7 percent opted for power recline and another 19 percent chose press-back reclining.
Speaking of those power mechanisms. Consumers are pretty tight-fisted on their willingness to cover the cost of them. Almost 70 percent (70.6 percent) said they’d only pay $100 or less to get power recline in their motion sofa or sectional. Forty-one percent said they’d be willing to pay only $50 more for a power mechanism.
Ensuring the product lasts and doesn’t breakdown, consumers are adamant on warranty options for motion upholstery. Nearly 70 percent said they have a warranty on their furniture. When asked of the importance of warranties, 75.2 percent scored them a five or higher on our one-to-seven scale with one being “not at all important” and seven being “very important”.
Want More?
A more indepth report on motion upholstery is available for purchase at FurnitureCore.com—Industry Info—Industry Reports—Motion Upholstery, or by calling Natalia Hurd at (404) 390-1535.
July 25,
2014 by in Industry, Merchandising
What Does Your Store Sell? Furniture, or Solutions That Meet Your Shoppers' Aspirations?
Merchandising is an art. It’s also a vital function of a retail store’s profitability.
How well does a store blend eye-catching floor appeal with a product mix that brings dollars to the bottom line?
Home furnishings retailers can blend aesthetics with dollars and cents to boost the bottom line.
The execution of merchandising covers a broad range of disciplines including what stores display from a style and price point perspective to how it is displayed. The starting point is determining how much of the selling space is allocated to a product category.
The accompanying graphic shows FurnitureCore participants’ floor allotments through this year’s first quarter, excluding bedding. The point is, analytics will never make a poor merchant great, but they can allow an average merchant to approach that threshold.
UPHOLSTERY RULES IN FURNITURE
At stores reporting to FurnitureCore, upholstery accounts for more than 51 percent of furniture sales; case goods almost 42 percent; and occasional, almost 9.5 percent. Accessories and outdoor furniture have 3.5 percent and 3.4 percent, respectively.
We asked some retailers about their hottest categories, and their responses lined up pretty well with those overall numbers.
“Upholstery is what is working right now and we are devoting more floor space to upholstery,” said Peggy Burns, queen bee at Circle Furniture in Acton, Mass.
“For us, it’s stationary upholstery, then bedroom and bedding on account of the extra activity with power bases,” said Dorian Sims, president of Stacy Furniture & Design in Grapevine, Texas.
Sims is expanding its reach in the category, as well.
“In upholstery, we’re introducing different lifestyles and concentrating on more fashion at our price points—a little more color, a little cleaner lines than what we’ve traditionally done in the Texas market,” Sims said.
PRESENTATION ISSUES
Within the designated product areas, an allocation must be made to both price points and styles. If a retailer focuses on one price point, it is simpler.
As an example, a middle-price retailer might display fabric sofas at retail price points between $399 and $899, which addresses more than 50 percent industry sales. The decision to venture into upper price points—sofas ranging to $2,000, for example—might target another 25 percent-plus of industry sales.
The question here: Can the retailer allocate 25 percent to 35 percent of the department to provide a proper selection?
At the next level of detail is the percent of slots by price point. Instead of relying on a “feel,” take a look at industry sales—look at the accompanying graphic for percentage by units and dollars of middle price points.
This retailer’s sales, we should note, are skewed to the $599 price point at the expense of the higher price points. The following graphic compares the hypothetical retailer’s slot allocation to the industry average.
“Obviously, with more than 47 percent of the floor assortment allocated to $500 to 599, that is where the majority of the sales occur,” said Bob George, CEO of Impact Consulting the parent company of FurnitureCore. “Would allocating more slots to higher price points improve overall sales? We believe so.”
SMALL-STORE ADVANTAGE?
Sometimes smaller footprint stores perform better than the 200,000-square-foot behemoth. Why?
In a smaller, say 45,000-square-foot space, retailers have be more judicious in product selection. It requires them to really know their customers' tastes—a rifle versus shotgun approach, let’s say.
Circle Furniture’s stores fit that smaller category in terms of footprint.
“We tend to use a broader range of bold color than most stores and we are known for our floors using color,” Burns said. “Of course, not everyone can relate, as they would prefer a neutral pallet, as it is easier to envision it in their home.
“We have really terrific designers who will work with the customer and create a beautiful room in the customers vision.”
Stacy Furniture & Design has two 90,000-plus-square-foot stores, along with a 42,000-square-foot location. The latter has a distinct merchandising scheme.
“Our strategy there has been flooring our best-sellers for the most part, but we rotate items in and out faster” than in the larger locations, Sims said. “That floor space is too valuable to leave product out a long time for testing.”
VENDOR CHANGES
Making a major vendor change in categories you floor is a challenge when it comes to merchandising. Beyond the training and advertising issues involved, re-structuring the showroom floor can make for headaches.
Circle Furniture is pretty lucky in that regard, Burns said.
“It is a major undertaking to add a new upholstery vendor because of all the fabric samples,” she said. “We are very fortunate right now that we have some great vendor partners, and we don’t need to add another vendor today. We would have to have a very specific need to add a major vendor today.”
At Stacy Furniture, Sims said they have a predicament when it comes to flooring new vendors.
“In the bigger stores, what works for me in bringing in a new vendor is going big,” Sims said. “If I haven’t dedicated six or eight new slots, it’s not a compelling enough opportunity for (customers) to learn more.
“And the larger the launch, it shows my commitment to the manufacturer. A lot of people cherry pick lines, and when I go big, I would hope that would help us when distribution issues come up. If I do it the right way, I should have a little more protection.”
She added that the cost of an unsuccessful buy seems much greater these days, especially when business is inconsistent.
“When I launch, I want to give it every opportunity to be successful from the beginning,” Sims said.
Smaller dealers should make the decision to stand for something as opposed to try being all things to every customer, said retail design specialist Connie Post of Connie Post International.
“By this I mean look at where the most return business is, and use more floor space to have a good selection to appear dominant in that category,” she said.
BOTTOM LINE: SALES PER SQUARE FOOT
What are retailers doing to improve sales per square foot when it comes to merchandising, especially when they don’t have as much square footage to work with than big boxes?
It’s not rocket science: Look at product turns.
“We have very small footprints so it is important that what is on our floors is selling and earning the rent,” said Circle’s Burns. “If something isn’t working out we will take it our fairly quickly and try something new. We are constantly trying to ferret out the new best seller. We pay close attention to what customers are asking for should there be a need we cannot meet.”
Sims at Stacy Furniture & Design said it’s a must for product to prove itself on the floor at the retailer’s smaller store. Otherwise, the product is tossed from the merchandising mix quickly.
That particular store’s space is too valuable to allow a lengthy merchandise test.
Don’t forget supplementary sales, and the role merchandising plays there
“It’s all about accessorization and making each vignette its own unique story,” Sims said. “Adding the accessories and the rugs for easier add-on sales that build tickets.”
In smaller stores, retailers have be more judicious in product selection.
It’s indeed harder for a smaller footprint store to be “everything to everybody,” said Tom Zollar, practice manager for Impact Consulting. This requires retailers to really know and target their consumer’s wants and needs.
“The most successful small retailers do this with a combination of research, experience and what I call ‘customer intuition,’” he said. “Basically they watch what is happening in their market, they track what is selling in the store, they ask their customers questions and they listen to their answers. Salespeople, local reps, in-store events aimed at product feedback will all help you focus your merchandising decisions and increase your success rate.
“It all starts with knowing your market through quality research and analysis, then tracking and studying your results. But a consistently accurate ‘gut feel’ for what they want can be huge.”
DO SOME SURGERY
Bob Phibbs, the “Retail Doctor”, suggests going through a retailer’s product selection and doing some serious cutting.
“Cut your SKUs by 20 percent and give your displays some space,” Phibbs said. “The days of doing furniture like a department store are history.
“The consumer already has too much choice. The idea that you line up four brown recliners, maybe in a slightly different shade is old.”
Take a chance.
“Car dealers will find the most outlandish color, and that’s the first car off the lot,” Phibbs said. “Why not a turquoise sofa with a yellow pillow? Make some bold choices and stand by it—don’t discount it.
Appealing to various shopping demographics can be tricky. Different generations tend to prefer different styles and different store layouts.
Drilling down and really examining the different segments can make a difference in a retailer’s success—or failure.
Who's your customer? Who are you trying to sell? Does it matter for most retailers, and do they know the difference?
Do shoppers want a big selection of like product, or lifestyle vignettes? How do you make the call, and are there particular categories that lend themselves to the different approaches?
Target specific products to specific consumer groups. While typically 50 percent of a retailer’s assortment sells to all consumers, the other half is preferred by certain segments. Tailoring the store’s assortment to the store’s demographics is the next frontier for the traditional retailer.
First, do you know your best-selling frames? Do you know this by age and income of the consumer?
There’s often been an assumption that younger shoppers like lifestyle presentations, and older shoppers like categories lined up like soldiers to better compare. You’d best think before making that assumption.
Bob Phibbs, the “Retail Doctor,” disagrees that older shoppers like a line of like product. More than that, he believes the idea that you can sell to all generations is “a little off.”
“Who still controls most disposable income?” he asked. “The millenials are getting used furniture. Highlight the boomer audience and encourage it to take something home today.”
Tom Zollar of Impact Consulting also doesn’t agree that older customers prefer commodity products lined up like soldiers.
“If so we might as well be Walmart,” he said. “However, in many cases, displaying product by category can simplify the shopping experience for your consumer and that does have some merit.
“If you feel the need to lay out your floor in this manner, then the best thing to do is to create small lifestyle pods or mini-galleries within each category. Whatever path you chose, it is extremely important for both your customer and your sales staff, that the flow of product throughout your store makes sense and is visually exciting—tough, but doable if you think it through and plan it out in a war room first.”
Stacy Furniture is still figuring out how to sell home furnishings to various age groups, and President Dorian Sims said she has bigger fish to fry, particularly with the addition of Nebraska Furniture Market to an already crowded Dallas, Texas-area market.
“I’m trying to separate myself from my competition versus speaking to a specific audience and their buying habits,” she said. “My typical customer does tend to be older. When we expand to appeal to younger customers, I think they’ll be attracted more to a lifestyle experience. That’s what they’re seeing with catalogs and online.
“Lifestyle is the best way for us to go. Even if millenials have done their research and know what they want, they’re so used to (drilling) down on their computer that a huge amount of product in rows is overwhelming.”
Acton, Mass-based Circle Furniture doesn’t discriminate among customers.
“Our customer is anyone with disposable income who wants and needs new furniture,” said Peggy Burns. “Generally they are older, as our price points tend to be higher and furniture has not yet become an important purchase for the younger crowd. We do our display in more of a lifestyle vignette and space is tight, so it is often more crammed than I would like. I don’t like a lot of accessories, I prefer to have the furniture be the focus.”
Retail design specialist Connie Post of Connie Post International said the new rebranding of home décor retailer Garden Ridge to At Home is an excellent example of appealing to multiple generations.
“Special vignettes show products that are cross merchandised, while some areas are still racked and stacked to show dominance in categories,” she said. “This is not typically how big boxes handle their displays.”
Within the newly formatted stores, the retailer shows completely decorated room displays.
“These displays show consumers how to bring it all together inviting and stimulating guests to buy more,” Post said.
July 25,
2014 by in Industry
In the furniture industry, we have a title that doesn’t appear on any organizational chart, but that title is understood in the daily course of business. That title is merchant. Everyone understands and respects that title. Often the success or failure of an organization is dependent upon the ability of this individual or team of individuals.
Just who is this person, and what do they do? Such a person exists at both retail and manufacturing and, simply put, this particular person sets the strategic direction of the company with regard to the product consumers expect from a company. Deviate from that expectation and declining sales creep in. Thus, merchandising not only drives the top line in terms of sales, but also impacts product discounts and markdowns. Current data shows our loss in markdowns and closeouts exceeds our industry profit by four times.
The question then becomes Where have all the merchants gone? When retailing was smaller, buyers actually envisioned who their customers were and bought goods to satisfy those tastes. It was a time when we saw merchant and customer more closely connected; much to the benefit of each side. Now, however, retailing is larger, and we’ve undergone an industrywide consolidation.
The consolidation has made it more difficult for merchants to stay in touch with consumers. In today’s business, management’s days are consumed with everything—except for knowing who their consumer is. Both merchant and customer may have felt some pain. A myriad of new technology and analytical tools are now available to allow us to connect with often-frustrated consumers. How do we use those new tools?
Why should we be concerned? Herein lies the strategic advantage non-traditional retailers are using to gain market share. It is not that the young product managers with fewer than five years of experience successfully selecting product are more talented. Rather it is that they have access to more analytical tools. In the future, the organization with the best data — or insight — wins.
While analytics will never replace interaction with consumers, it can provide valuable insight for the retailer and manufacturer. It can also be the first step to connecting or re-connecting with the shopper. The ability to segment your customer demographically and compare your information with the industry will provide insight into who you are selling, but more important those consumers you are not selling based on your merchandising price point. In addition, the ability to compare your sales to the industry in terms of product category and price points provides a benchmark against which to measure your product lineup.
Analytical tools will never make a person a merchant. However, if we give these tools to that person with talent, a great merchant is a possibility.