Training Day

January 17, 2014   by in Business Strategy, Industry   

By Powell Slaughter

GET MORE OUT OF YOUR SALES TRAINING PROGRAM. YOU DO HAVE ONE. DON’T YOU?

It’s a rare athlete who’s at the top of his or her game every time the clock starts or the first pitch is thrown. The reason all-stars maintain and even succeed on “down” days is the training they do between contests and in the off-season—they’ve drilled on fundamentals to the point that good habits are second nature even if they aren’t feeling at their best. Furniture retailers should look at sales training in a similar way—what you want your sales team to project to your customers must be ingrained at a deep enough level to ensure they’re doing the right things all the time.

IT STARTS WITH PEOPLE

At City Furniture, sales training starts with finding the right people for the Tamarac, Fla.-based retailer’s culture. Vice President of Sales Garry Ikola said City’s approach is that sales is a real profession, and for the right person, a job on the retailer’s floor is entry into a rewarding career path. “What we do is a little different from a lot of stores,” he said. “Besides the traditional method of finding people online, we also do a lot of college recruiting.

“We’re fortunate to have a great university system both locally and in the state of Florida. We participate in (the schools’) specialized training programs.” For instance, Florida State University offers a degree in sales and sales management. City also is working to improve its use of online recruiting channels and the quality of new-hires through those sources. “There are some challenges there, because that pool is skewed toward males, and we’re trying to achieve a female proportion of 50 percent,” Ikola said. “We’re focused on improving that process. We’ve implemented video interviews, along with additional screening. “With the college pool, it’s easier to meet with and interview them, and it’s much easier to get a feel for if they’re a good fit, and if this is the path they want to take.”

City also has an internship program that gets students into its stores during their sophomore or junior year. “The goal is to get the right ones to join us after they graduate,” Ikola noted.

DON’T MAKE TRAINING AN AFTERTHOUGHT

One problem with furniture retailers’ sales training is that many don’t make it a priority—or assume that sales are something that can be learned through osmosis. “There’s a huge spectrum from zero to 100 in how much value retailers put on training,” said Mark Lacy, president of Furniture Training Co., North Logan, Utah. “I talk to hundreds of retailers a month, and it’s surprising how low a priority training in this industry is.” Lacy’s guess for why that is: So many furniture retailers come out of a family tradition.

“Dad, or Mom, ran the store, and the children or cousins worked in the store, learned the business, sweeping floors, working in different departments,” he said. “Learning is the permanent acquisition of knowledge, skills and attitudes. The acquisition of that knowledge was passed working side-by-side. On-the-job training would occur over decades in a family business.” He noted that even new stores are largely started by perhaps a husband-and-wife team: “We have a lot of individual entrepreneurs.”

In some cases, sales training might amount to “You’ve shopped in stores, and you know what you’ve experienced,” so the salesperson replicates what they saw elsewhere.

“Those new salespeople are expected to sell based on what they’ve experienced, and that wasn’t always good,” Lacy said. “Even a couple of years ago, in the midst of the economic crisis, we know how many family businesses closed. The short-term future right now for home furnishings is pretty good. We’re expanding again … but a lot of retailers have run out of family and we’re hiring total strangers.”

If there’s no history of formal sales training, that can make problems for retailers looking to open second or third stores. City Furniture’s no mom-and-pop, but as it expanded from serving the Miami area to opening stores on the Gulf Coast and now in central Florida, it’s moved from a centralized training format to a more individual-oriented program; and as with any organization, training depends upon the logistics of bringing people together.

“In the past, we did a lot of classroom training at our corporate facilities, but as we grew (geographically) we moved to online training, self-paced, in the showroom,” Ikola said. “We have a standard program online combined with exercises at the store level with managers and training specialists.”

Those “floor exercises” in the store help gauge how well salespeople are absorbing the online training. And all that’s not to say the classroom format doesn’t have a place.

“We just added Bernhardt last year, which was a big move—we’d never sold high-end goods before,” Ikola noted. “We brought people in for classroom training with Alex Bernhardt. For major initiatives like that we like to bring people together in groups.” City arranged separate Bernhardt sessions in southeast Florida and for Gulf Coast stores, plus another session for City’s new Orlando-area stores.

TRAINING THE TRAINER

When training your sales force, one thing to consider is whether they know exactly what you’re looking for beyond the no-brainer of more sales. And that responsibility lies with your sales manager, or whoever is conducting the sales training.

Tom Zollar, practice manager of retail operations, Impact Consulting, Atlanta, Ga.—called the Performance Index (Revenue devided by Ups) “the ultimate measurement for the efficiency of your selling rate.”

“When your traffic is up and your revenue per up is slow, that means you’re not staffing the floor properly,” he said. “I’m more interested in consistency when it comes to closing. … The performance index is the red flag. It tells you the efficiency of the store and the efficiency of the individual. It’s the first number that tells you where you need to look. It separates the strong from the weak, the way GMROI does with product.” Is your sales manager a coach who can pinpoint who needs more counseling?

“When you decide whom you need to work with, look at closing rate and average sales,” Zollar said. They might be underperforming “because they’re not connecting with enough people, or if they are, they aren’t pleasing enough of them, getting them the product and options they’re looking for.

“It’s a matter of drilling down like you would in a financial report, looking at each account individually. Am I giving them too many ups?” Coaching is a fine line.

“The numbers are the objective, but you can’t do anything with numbers,” Zollar said. “You do everything with your eyes, your ears and your mouth—that’s observation, feedback and coaching. … Numbers are a management function; observation is a training function.

“The key to the numbers is knowing whom to look at and what to look for. The key, once you’re studying and observing a person, is to find out what’s impeding their rates. Performance is a function of knowledge, behaviors to apply that knowledge, and practice.”

Tiger Woods couldn’t have changed his golf swing when he was at the top of his game without tens of thousands of shots on the driving range—or without a coach. Even your top performers can use some work.

“The manager has to watch that knowledge being applied and guiding on the sales floor,” Zollar said.

“You’re not going to be successful until doing the right thing becomes a habit.”

At City Furniture, sales training centers on four keys: selling skills; product and service information; what City calls “World Class Service”; and personal business development.

The first two are self-explanatory, but “World Class Service” refers to customer service standards City developed based on standards established by Ritz- Carlton, where the attitude is “everyone is a problem solver.”

“Personal business development” ties back in to City’s approach to sales as a true profession. It helps that the store has developed its own customer relationship management platform, which all sales personnel are required to use.

“We train salespeople to build their own business— register guests, contact customers for special events, telephone prospecting,” Ikola said. “They have a CRM tool they’re required to use. We have successful special events, but that’s because our salespeople are bringing the right customers in. Our internal CRM allows them to look for the customers they should call for these events.

“Retail sales operations have a lot of down time, and this puts that time to good use.” City gathers its key metric for sales performance is an electronically gathered door count compared with revenue, combinded with close rate and average ticket.

“If traffic grows 2, 3, 4 percent, we want to see that revenue growing at a faster rate, so we know we’re making the most of that traffic,” Ikola said.

“YOU DIDN’T BUILD THIS”

Lacy at Furniture Training Co. believes too many retailers don’t hold their salespeople accountable for the opportunities they’re afforded. Retailers provide the location, the inventory, the advertising and promotion,” he said. “If someone’s selling $1 million a year, they might not want to be trained, but the reason people do as well as they do is the retailer hands them the business.”

Owners should recognize that they’re providing the business opportunity.

“You have the right and responsibility to help them be better,” Lacy said. “Management’s job is to make the best use of assets, and the job of sales management is to make the best use of salespeople, that asset. Set standards, train to hit those standards, and then raise those standards.”

Look beyond numbers such as close rate and average ticket to the behaviors that influence the numbers: quality of greeting; engagement in conversation. “And if they get the conversation going, are they asking the questions that open the mind of the customer to something beyond their immediate need,” Lacy said. “Do they know the product they carry will be enough to match those needs? The most magic phrase in sales is: ‘Based on what you’ve told me, let me show you what we have.’ When the customer hears that, she breathes a sigh of relief.”

Keep in mind that more customers walk into the store having done a fair amount of research into what they’re looking for, and salespeople must offer intelligent, informed information to maintain their value to those shoppers.

“For home furnishings salespeople I have two keys: First, maybe a customer has looked on the Internet, even printed off a sofa from the manufacturer or another competing retailer,” Lacy said. “We’ve done the research to know there are 15 basic styles of sofas—with variations— on a sales floor, and your salespeople need to know those. Sales staff should be able to say: I see what you’re interested in—that’s a kidney-style sofa—tell me more about the room it’s going in, so we can show you some sofas that might work in that room.

“Second—and this is the saddest part of our industry—the home furnishings industry is a fashion business, but the salesperson on the floor so often acts as if they’re selling the customer a toothbrush they like,” Lacy said. “Every salesperson doesn’t need to be an interior designer, but they need to know something about creating a room environment. The job of the salesperson is to know what it’s going to do for the room, so they should have an understanding of basic room design.

“Don’t show a book of swatches and ask what the customer likes. ‘Let me show you colors that would work in that room.’ The customer is about to drop a significant amount of income on a purchase that will last a significant number of years. They’re all buyers—they wouldn’t come to the store if they weren’t—but they walk out because they don’t know what to buy. That’s why product knowledge and room design go hand-in-hand.”

REAL LEADERSHIP

Zollar once saw General Norman Schwarzkopf give a presentation on the subject of leadership.

“His point was that leaders lead and managers manage,” he said. “Leaders get people to do things they wouldn’t do on their own. It’s about knowing your people, developing common goals and a desire to succeed, and a lot of it has to do with hiring the right people.

“You can’t lead from an office. When times are tough or when times are good, the best leaders are coaching in the game, on the floor.”

To properly service a customer and help them solve a problem they have in their home, it’s less about how many people a salesperson approaches than it is about getting the customer to talk about the problem and provide a solution.

“The goal of sales management is each customer getting the most out of every sales interaction,” Zollar said. “Always look at that from the customer’s point of view. Teach your salespeople to really connect with more people versus giving them more ups.

“Sales managers have to remember they manage individuals more than groups, and they must manage each individual’s strengths and weaknesses.”

Independents should know that the big boys aren’t standing pat on training.

“The Top 100 retailers are going after this, it’s amazing how many are making training a priority,” Lacy at FTC said.

To whit, the approach at City Furniture: “I believe selling is a profession, and the way you approach it is critical,” Ikola said. “I’m a big advocate of adding more professionalism to the job, and it can be a very professional position if you manage it properly.

“There’s been an image perpetuated of sales as a game.” HFB

Sell Something

January 17, 2014   by in Business Strategy, Industry   

By Bob George

This adage has been a constant admonishment to me during the course of my career. Those for whom I have had the pleasure to work know that we are constantly exploring ways to approach the home furnishings business. The foundation of that exploration is always based on the question, “Will it allow the retailer or manufacturer to sell not only more today but also, equally as important, more in the future?”

From my perspective, improving the selling function is out of vogue. It was a hot topic 15 years ago when the retail store was populated with an army of sales consultants, each with a “unique” program of five steps or 12 steps, or some other method of selling, a list that goes on and on. Yes, there are still consultants, including my firm, Impact Consulting. However, the eyes of retailers and sales associates begin to glaze over when the suggestion of sales training comes into the conversation. Why is that? Perhaps the fault lies in a case of over-promising and under-delivering. Could it be a situation akin to binge dieting? Positive results may have been swift. Unfortunately, however, they were short-lived.

This does not mean that training doesn’t work. We can look at other retail sectors and find them spending millions in this area. Why? The answer is simple. The incremental gains put millions of dollars to a company’s bottom line. Consider a typical salesperson taking 150 opportunities each month with an average ticket of $1,500 and a close rate of 25 percent. This person is a great asset. He or she will sell $675,000 each year earning $30,000 to $35,000 in commission while contributing $145,000 to $150,000 to your fixed cost and ultimately enhancing the retailer’s profit picture.

However, what would make this good sales person reach that mythical level of the million dollar sales person? Simply put, it would be a close rate of 33 percent and an average ticket of $1,750 or some combination of these two metrics. For those who want to simplify even further—the sales associate would need to sell three more customers per week with a lamp or area rug added to each ticket. On the one hand, this is simple to calculate; on the other hand, difficult to execute.

Let’s address the “how” of doing this. Every weekend we watch sports, sometimes in person, often on television. We observe the coach actively involved in the game maybe running up and down the sideline or shouting from courtside or the sideline. We see this coach yelling at his “charges”, making suggestions after every play.

Let’s take that approach into your store. Is your sales manager on the floor, observing, coaching, motivating the “players” or is that office door closed with his or her attention focused on paperwork? Ask yourself—which is more important?

Using a final sports analogy, we know that, in preparation for a game, the participants may spend hours studying the problems encountered in the last game and readying themselves for the next opponent. Relating this to your store, the sales associates should be assessing their sales techniques used earlier. Approaching this analytically, they can place the positive tactics in their “re-use” baskets and either rework or retire the unsuccessful methods.

Before you get the idea that the retail management is blame free, evaluate your investment in training methods. For less than $2,000 annually per sales associate, you can train a million dollar writer. You entrust that sales associate with 150 Ups per month—1,800 each year. Is it not worth slightly more than a dollar per Up to provide the training? After all, you have spent $23 to create the opportunity. The return is an additional $180 per customer per year for an investment of $1 per customer.

Initially, I said that “nothing happens until you sell something.” In essence, the “happening” is that you will increase your bottom line by 30 percent to 50 percent.

Double Down in Vegas

January 17, 2014   by in Business Strategy, Industry   

By Sheila Long O’Mara

No doubt about it, home furnishings markets are big around our industry. It’s a biannual marathon that keeps every one of us in planes, trains and automobiles skirting bouncing from Atlanta to Dallas to Las Vegas to Tupelo. Toss in a few of the international markets like Cologne, Toronto and Shanghai, and the road warriors among us are in full force schlepping from place to place.

Right or wrong, the rituals of semi-annual markets carry a great bit of cachet. They’ve become—dare I say it—a necessary evil in the cycle of the furniture supply chain. No retailer “wants” to miss market and miss seeing the hottest introductions. No supplier “wants” to miss out on the opportunity to capture more retail floor slots. However, getting away from the office or store can make for tricky time and business management issues.

Markets are exciting and invigorating. We, as a collective group, come together to share, learn and seek out the new. The events are like a huge brainstorming meeting where great ideas blossom.

Here, at Home Furnishings Business, we jump into the market fray, too, and eagerly plan out market issues, interview schedules and showroom visits. It’s a big darn deal.

As part of our planning, we look at the best, most efficient way in which to cover the Markets and to provide our valuable readers the most useful information possible. Our goal is to arm you with valuable tools and knowledge that can be used to better your business strategies back at the storefront.

As part of our strategy, we deliver to you this, our first-ever double issue. We’ve doubled up on some of our most popular features to give you a jumpstart on the New Year and the new Market cycle. Inside, you’ll find two times the cover stories— one on sales management and the other on sustainability in the home furnishings realm.

You’ll also find two consumer surveys in which shoppers who have recently bought furniture share their tales from the retail floor. What Sells zeroes in on the dining—both casual and formal—category. Our expanded On Bedding explores consumers and their mattress buying preferences and features top-selling frames from the supply viewpoint.

We’ve also included a look at products being showcased at the Las Vegas Market to whet your buying appetite for the show. Here’s to doubling down in Vegas and kicking off the New Year in home furnishings in fine fashion. Our entire team will be at the Market; give us a shout across the courtyard or in the hallways. We’d love to catch up. Happy 2014! Here’s to a great year filled with new adventures.

That’s Entertainment

December 18, 2013   by in Business Strategy, Industry   

By Sheila Long O’Mara

Big screen televisions and other consumer electronics are holding a tight grip on the top of the holiday wish lists this year. Why not? The category is sexy and bright and is a source of in-home entertainment. Furniture retailers are holding out hope that consumers hold on to enough dough to cover the cost of a home entertainment console or wall unit to accommodate those electronic purchases. Quality and design of home entertainment products top the list—even above price consideration—of purchase influencers for consumers of the category. That’s according to the most recent consumer survey conducted by Home Furnishings Business, in which more than 160 consumers participated. Those consumers had recently made home entertainment purchases and shared insight into the product and their likes and dislikes.

 

 

Not surprisingly; the bulk of home entertainment purchases landed in either the living room or family room. That’s where 93 percent of the pieces are housed. An interesting note —and one that retailers and manufacturers should keep in mind—10 percent found their way into bedrooms. Those bedrooms, smaller than family rooms, require smaller pieces that can still accommodate electronics.

Storage needs remain a priority for the home entertainment consumer. Many of them have accumulated a library of DVDs, video games and Blu-Rays over the years, as well as a variety of components. Eighty-eight percent rank disc storage as somewhat important to very important in their home entertainment unit. More than 56 percent own flat panel televisions and more than 18 percent have a satellite or cable box that needs to be housed.

Features and functions built into the furniture is an added, often required, benefit that consumers for which consumers are shopping. More than 42 percent want to be able to hide those components. Also ranking above the 35 percent thresh hold are display space for knickknacks; and built-in powerstrips. Another jewel could be docks for MP3 players and tablets. The majority of our panel bought their furniture from a bricks and mortar store, In fact, 62 percent bought from furniture stores, followed by 15 percent at other and eight percent at a warehouse price club. Must shunned the Internet as a shopping source, and most report that they’d likely follow that same protocol for future purchases. Only 18 percent said they’d be very likely to buy home entertainment online.

Compare that to consumer electronics where more than 43 percent said they’d be very likely to buy those products online. More than 76 percent of our consumers spent more less than $2,000 on their home entertainment purchase. The good news from our panel is that they are mostly satisfied with their purchases based on quality, style and functionality. More than 83 percent give their new furniture the thumbs up on style; 78 percent give high marks on function; and 68 percent give a passing grade on quality.

With the sleek, sexy design of televisions and other components these days, consumers are eager to show them off. Gone are the days of armoires where the doors could shutter and hide the fact that the great room was used as a viewing spot. Instead, 72 percent are looking for consoles that also accommodate component and media storage. When asked specifically how important it was to hide the television, 82 percent said not at all. Why spend all that money on a great-looking TV without being able to show it off to your friends and family, right?

Just so you’ll know. The second option, falling at a distant 18 percent, would be to hang the screen on a wall. And, when it comes to screens, size does matter. More than 88 percent of our panel have at minimum a 37-inch television as their primary viewing screen. More than 28 percent report having a 55 inch or larger television as their primary choice for viewing. So what does the future hold for our home entertainment consumer as far as purchases go? Well, more than 65 percent will be buying a 37-inch or larger television within the next six months to one year.

Here’s looking for an uptick in home entertainment sales as they fill the need for additional space to hold those TVs.

What Retailers Say

SUNNY DESIGNS 2733RO

“It’s vintage oak with mixed media. It’s a pretty big look in our market. When it goes in the family room, our customers like that mixed media.” Retail is $799.

Gene Stoltz, CEO

Wolf Furniture

Bellwood, Pa

Ashley Furniture’s W430-28 TV Stand

 “It’s a great updated country style that gives a modern feel but works great in New England homes. It fits today’s most popular size flat screens and gives ample storage.” Retails for $398

Bill Abrams, vice president

Allen Wayside Furniture

Portsmouth, N.H.

THE CABANA COLLECTION (1) AND GRAND HACIENDA (2) BOTH FROM LONE STAR RUSTIC

“Both looks are rustic, but one is more refines rustic style. Both of these looks out through the sometimes sameness of traditional looks. The consumer seems to be looking for something unique and different that they can identify with for their living space.” The Grand Hacienda 60-inch console retails at $487.97; the Cabana 60- inch console is $467.97 and is available in 72 inches for $497.97.

Phyllis Zaepfel, COO

Furniture Market

Austin, Texas

Sunny Designs’ 3403DC

“The different colors of the slate make this wall unit suitable to match many collections that we carry. In addition, it has great dimensions and price point. It also has built-in media storage, pullout game drawer and wire management. These characteristics seem to be very important to our consumers.” $999 for complete wall unit.

Suen Capo

El Dorado Furniture

Miami Gardens, Fla

 

 

 

 

 

 

 

 

 

 

 

Hooker Furniture’s  TELLURIDE CONSOLE

The Telluride’s console-hutch format has increased in importance for Hooker Furniture for some time now. Hank Long, senior vice president of merchandising and design, said it is a best-seller because it accommodates a 60-inch television, offers a lot of look for the money, and two major retailers are running it. Telluride is featured in hardwood solids and veneers in a black paint finish with rub-through and physical distressing with carved leather panels and nailhead trim for a masculine looking entertainment center furniture. Hutch and console as shown retail around $3,198.

 

 

 

 

 

 

 

 

 

RIATA BY RIVERSIDE FURNITURE

Part of the newly introduced 39-piece whole home collection, this entertainment console offers casual contemporary styling. Designed to target younger consumers, Riata offers clean lines with sophisticated, rugged hardware.

 

 

 

 

 

 

 

 

Stanley’s La Palma Media Wall

What makes is saleable: The La Palma media wall’s casual styling accommodates up to a 60-inch television and has plenty of room for media storage. The unit also can be repurposed as an etagere. Suggested retail is $3,600.

 

 

 

 

 

 

 

 

SLIGH DIVISION OF LEXINGTON HOME BRANDS’ 100SB-660 PACIFIC ISLE MEDIA CONSOLE

Phil Haney, president and CEO of Sligh’s parent company, Lexington Home Brands, credits the Pacific Isle media console’s striking design as a reason it sells so well. “It is a significant design statement in its own right, even before the electronics are considered,” he said. Other pluses include trademarked functional features such as Smart Eye, Strong Arm and Smart Fan. IMP is $2,929.

 

 

 

 

 

 

 

 

 

 

 

Sauder’s 412922 CARSON FORGE ENTERTAINMENT CREDENZA

The Carson Forge credenza accommodates up to a 60-inch television weighing up to 135 pounds. A flip-up panel reveals a digital dock for parking, recharging and synching mobile electronics and game controllers. The adjustable center shelf holds audio/video equipment. There are two adjustable shelves behind each framed, safety-tempered glass door. The drawer with metal runners and safety stops features a patented T-slot assembly system. This piece is inspired by recovered materials. The reproduction finish and riveted wrought iron hardware will add authentic craftsmanship to any modern home. Manufacturer’s suggested retail price is $299.

 

 

 

 

 

 

 

 

 

 

Twin-Star International’s Enterprise

A fresh white finish with smoke tempered glass doors and clean simple lines make the Enterprise one of Twin-Star International’s top selling home entertainment consoles. It can wireless stream audio from any Bluetooth enabled smartphone, and it has a built-in docking station that play’s audio and video from Apple mobile devices while simultaneously syncing and charging. An integrated sound bar has four main speakers, two tweeters, rear facing passive bass ports and a powered subwoofer. The added bonus – a realistic looking electric fireplace in the center to warm the room. Retail is $999.99.

 

 

 

 

 

 

 

Bush’s AERO 60-inch Television Stand

The Aero’s sleek design provides plenty of functional space, and it accommodates flat screen televisions up to 60 inches and 154 pounds. It has a durable gray tinted glass top shelf; open top compartment for components or a sound bar; cabinets with adjustable shelves and tinted glass doors; a solid back panel that hides wiring and provides stability; and wire management zip ties and pass through slots. The unit is tested to Bush standards for tip stability. Retail is around $249.

 

 

 

 

 

 

 

 

Jofran’s 087-60

This 60-inch media unit is finished in the company’s Urban Lodge Brown and features a unique rough-hewn style. The 087-60 is a versatile with sex drawers and three openings that can be used as a media unit, accent piece or in the dining room as a server. The media chest is also available in 42-inch and 50-inch units.

 

 

 

 

 

 

 

 

Martin’s Carlton CN360 Television Console and CN 970 Pier

Carlton boasts modern architectural flare with clean lines and clear bourbon finish; and compliments a variety of home decors. The piece is inspired by the Kathy Ireland Home Architectural Style Guide; and is manufactured in Mexico. Retail is $1,349.

 

Home Entertainment Snapshot

The home entertainment category has remained in lockstep with the industry as a whole. The category has remained relatively stable with little growth since 2012 when it jumped 6.73 percent. Some of the strong growth in 2012 can be attributed to the boom in consumer electronics and new technologies coming into the marketplace. After all, those wide screen televisions needed a place to rest. Through the third quarter of this year, home entertainment sales have slipped just 0.01 percent when compared with the same period last year. Sales through the third quarter in the category are $2.4 billion. Home entertainment accounts for 28 percent of the overall occasional category with sales of $3.19 billion in 2012.

 

Trudging Upward

December 17, 2013   by in Business Strategy, Industry   

2014 Should See More Business for Furniture Retailers, But Shapes Up for another Slow Growth Year.

By Powell Slaughter

First the good news: Furniture and bedding sales will rise again in 2014, and at a faster rate than this year. The not so good news: That rate of growth remains slow. Home Furnishings Business predicts furniture and bedding sales to reach $76.3 billion dollars next year, an increase of 2.4 percent over a projected total of $74.5 billion for 2013. While faster than this year’s 1.3 percent overall growth, our industry probably will advance less than half as fast as overall retail in 2014.

That’s a little frustrating, since indicators such as employment, housing and the stock market are trending well overall. As the nation creeps forward from the depths it hit in 2009, the only indicator that really seems to count in our business is consumer confidence—and that’s certainly been a roller coaster ride this year.

Ken Smith, managing partner of High Point accounting firm and industry consultancy Smith Leonard, said our forecast for 2014 is in line with what he’s hearing. “The consensus is we’ll bump along with the economy in general, and we’re looking at 2 to 2.5 percent GDP growth” next year, he said. One might think consumers are getting a little numb to Washington shenanigans, or other drags on their confidence. “I tend to agree in part that they are a little numb to some of the negative headlines—that seems to be all they get—but I do think there’s an impact when you start talking about shutting down the government and how that affects the world,” Smith said. “Everyone I talked with at Market said things were bumping along pretty well until the shutdown.

“I’ve about come to the conclusion … that consumer confidence is the key driver to our business. You look at all the other factors—housing’s coming back, we have great interest rates and the stock market’s doing well. All those positives are out there, but it’s still slow.”

Causes for Optimism

Industry analyst Jerry Epperson, managing director at Mann Armistead & Epperson, Richmond, Va., is optimistic about the coming year, when some of those positive indicators could start pointing more dollars furniture’s way. “We’re pretty upbeat. From an economic point of view things are in our favor—housing’s up, employment’s up, and mortgages are affordable,” he said. “We need to consider life outside Washington, D.C. ...

Political brinksmanship has become more like ‘crying wolf’ for the American consumer. “If you look back at the functions that determine our business, it’s been a long time that things were going our way like they are now. Housing wasn’t a driving factor until 2012, that’s kicked in, and that determines our fate. The economy’s been recovering, but we did not participate until now. Other sectors did, and now it’s our turn.”

What’s driving the outlook?

Indeed, industry sales continued to creep up this year, totaling $19.2 billion in third-quarter 2013, combined growth for furniture and bedding of 1.9 percent above the same period last year; and 6.2 percent ahead of this year’s second quarter. Despite breaking that $19 billion barrier in the third quarter, though, year-to-date furniture sales were flat after nine months, bedding up 2.5 percent. So what will impact business for the coming year? There are some demographic trends that should give retailers pause for the next few years, both in terms of age groups (see sidebar, “Baby Bust?”); and in population make-up.

America’s the melting pot, and the immigrant population—especially Hispanics—continues to grow. The best time for thinking about how you’ll approach the unfamiliar people you see in your marketplace is right now. These trends won’t change, and retailers have to figure out how these growing segments fit into their business; or whether they’ll develop and hone a more “traditional” niche. Household formations have risen steadily, close to 120,000 million in 2012. That’s good, but a lot of those could be younger people without a lot of spending power, or immigrants unfamiliar with the brands and retail experiences they see. And while households are forming, a lot of those are thinking about what kind of television they’ll buy versus what they’ll sit on to watch it.

Retailers need to get creative in getting potential customers to see the value in creating a comfortable environment for watching their latest Netflix selection.

A Pricing Conundrum

Average annual household spending on furniture peaked in 2005 at a little north of $450. Even before the recession, when such spending bottomed out at under $350 a year, that figure was in rapid decline, dropping under $400 by 2008. By 2012, the last year for which we have an average figure, annual household spending on furniture remained a little below $400.

Retailers still rely on “lower pricing” as a way to drive traffic, but that tactic hasn’t had much effect on overall volume. And it’s killing margins. In 1983, the Consumer Price Index for all items, furniture, new cars and housing was roughly the same at around 100. By this year, “all items” and “housing” were hovering around 230, “new cars” just under 150. “Furniture”? It was around 120.

This year, consumer prices for furniture fell 1.9 percent. It also hasn’t helped that the United States has moved toward a service economy. Personal expenditures for services, motor vehicles, non-durables, and furniture and equipment were not far apart from one other in pricing shifts. By 2012, services accounted for close to $8 trillion in personal expenditures, while furniture and bedding has essentially flat-lined in comparison. It’s no wonder there’s a problem with household expenditures on our products.

Retailers who’ve decided to compete purely on price as the motivating factor for their shoppers in the coming year will be forced even more than usual to watch costs and trim inefficiency in order to have any hope of maintaining margins at levels sufficient for making their business sustainable.

Confidence Remains a Problem

Home Furnishings Business projects unemployment under 7 percent by the end of the year. That indicator is moving in the right direction, but not enough to drive business to the furniture industry.

And while jobs are being added the number of people not in the labor force will grow as Baby Boomers retire. That will be a factor for another decade or so. Coupled with the slowness of economic recovery, the impact another round of Washington brinksmanship on consumer confidence could put a damper on industry performance the first half of the year.

Housing continues to improve, both in sales and new starts, but gradually. Home improvements are an area where furniture retailers might think about grabbing some consumer mindshare. Those were climbing steadily before the recession, and the downturn’s effect on people’s ability to sell their home kept that an area where they spent money. Retailers could get into the consumer’s thought process early by cross marketing with local home improvement specialists.

The Right Attitude

Whatever else is going on in the world around furniture, Epperson said retailers had best project confidence if they want to increase their business in the coming year.

“I’d take a look at my store and make sure I’m in recovery mode and not hunkered down in a recession mentality,” he said. “More people are moving, and that means more bedroom, more mattress sales. And there’s no reason furniture stores shouldn’t be getting ready for the holidays.”

A number of retailers are making moves—our newsletters are once again reporting on more store openings than closings; new store concepts; and special events that get people in the store and make it part of the community, and get employees excited.

 

Who’s Hot, Who’s Not?

Forecast is for low single digit increases – Individual results may vary.

While Home Furnishings Business forecasts furniture and bedding sales to rise 2.4 percent next year, it’s important to note significant variance could occur depending on the size of your market. Bottom line overall? The larger your market, the larger your chance is to meet or outperform the industry overall in terms of percentage sales increases.

Breaking It Down

We took a look at sector business in metropolitan statistical areas comparing third-quarter 2013 performance with the same period last year. Third-quarter business across the board was up 1.9 percent in this year’s third quarter. Keep that figure in mind when reading the following.

We found the 10 MSA’s that accounted for $1 billion or more in 2012 furniture and bedding retail sales accounted for 19.4 percent of overall business during 2013’s third quarter. Those regions were up 2.7 percent over the prior-year period, the largest increase among MSA groupings.

The 24 MSAs that rang up $500 million to $999 million—21.8 percent of overall business—saw an quarter-to-quarter increase of 2.2 percent in the third period. Forty-one MSAs running from $250 million to $499 million brought in 19.2 percent of U.S. sales in the quarter, and were up 2.1 percent over the prior year. There’s a pretty fair drop-off from there in terms of quarter-toquarter increases, as market size declines. Seventy-seven MSAs that had $100 million to $249 million in furniture and bedding sales last year, and 14.9 percent of third-quarter 2013 business, were up just 1.4 percent that period compared with last year’s third quarter.

The 71 MSAs in the $50 million to $99 million range in 2013— representing 6.5 percent of third-quarter national sales—increased 1.3 percent; and 100 MSAs doing $25 million to $49 million, accounted for 4.9 percent of Q3 sales, when they were up 1.1 percent over the prior year period. Sixty-one MSAs that did less than $25 million last year represented 1.5 percent of third-quarter sales; and were down 0.9 percent for in those three months. “Micro Statistical Areas,” which number 575 did 8.5 percent of third-quarter business, and increased 1.5 percent; while rural areas representing 3.5 percent of business in the quarter saw their furniture and bedding sales rise just 1.3 percent in the period.

Size Isn’t Everything

We also observed significant variation among markets of the same size. We took a look at those MSAs broken out by furniture and bedding sales in 2012, and compared performance from that year’s second quarter through the same period in 2013. Following are the best and worst performing MSAs in the same market size categories as above, and their percentage change in sales during the period measured.

 

Baby Bust?

Here’s a tidbit to consider not only for 2014, but for years to come—consumers ages 35 to 44 years, have been declining in numbers since the early 2000s. Traditionally a prime target for the furniture industry, this segment will continue to decline for the next decade creating a significant “head wind” for the sector.

The trend calls for strategic thinking from furniture retailers. Ken Smith, managing partner at Smith Leonard was in Chapel Hill, N.C., in mid-November, where as a board member of UNC Hospital, he heard a detailed presentation outlining changes in demographics— the baby boomers aging, the next generation coming along, the growing immigrant population. “That was all in reference to the effect on health care, but retailers, manufacturers and distributors are going to have to focus on where they fit into all of that,” he said. “You have a large number of new consumers coming along, but most of them won’t be looking for high-end product yet. “I think we’ve learned by now that you can’t be everything to everybody, and you have to figure out where you fit in the demographics you’re dealing with.”

There’s a lot to look forward to demographic-wise— the upcoming Millennial generation is big and will create a boom, but retailers will need to cater their shopping experience to this tech-savvy gang.