From Home Furnishing Business
Welcome to our third annual Home Furnishings Business Power 50 ranking.
The ranking—our take on how the industry’s retailers should be ranked— takes into account retail sales volume, social media power through Klout scores, the popular vote and new for this year, market share. It’s a different spin on home furnishings retail rankings, and throughout the next several pages, you see the different ways in which we sliced and diced the data. Dissecting things in a way that shed a bit more light on our industry’s retailers.
To those of you who took the time to vote with our online ballot: We salute you. Your input makes ourPower 50 a retail ranking with some personality. Thank you!
Enjoy the lists.
Click here to see the list.
An Independent Front
Independent retailers make up a huge chunk of the furniture retailing community. We thought it would be interesting to shake up the bag and see how the independent retailer— those with less than $50 million in annual sales and operating in one state—stack up.
Here’s our look at the top 20 independent retailers.
Click here to see the list.
Regional chains tend to make a big splash in their markets. For our classification purposes, regional chains are those retailers with stores in states other than their own home base. Retailers like Rooms To Go and Havertys who bring big name recognition into the markets in which they operate rank on this list. Other retailers, like Art Van and Grand Home—which have more recently ventured out of their home state to broaden their consumer reach—make the list, too.
Click here to see the list.
Large independent retailers tend to rule their markets. They have annual sales in excess of $50 million, and operate stores within one state. Name recognition among consumers is powerful, and the large independent retailers generate the rewards from owning the lion’s share of their markets.
Click here to see the list.
The line between manufacturing and retailing continues to blur, and vertical retailers are gaining steam. Suppliers see great benefit in the ability to control the message and presentation of their brand. Retailers like the Williams-Sonoma lineup of brands, reap similar benefits in controlling look, feel and scent of their products and stores. Here are our vertical lists for both manufacturers who cross over into the retail side of the business and for retailers who step over into the supply side of furniture land.
Click here to see the list.
By Bob George
Revealing 2013’s Sexiest Furniture Retailers!
Relax. We’re not really going to do that even though that the issue for many consumer magazines is the one most often read. Nonetheless, people DO love lists and they DO love to compare. Therefore, in this issue we present Home Furnishings Business’ Power 50. This is the third year we’ve analyzed this topic and believe it is evolving as a mechanism to identify outstanding performance beyond revenue.
The question becomes, “What are the variables?” First, we must remember the ultimate arbiter of who an “Outstanding Retailer” is the consumer. As a consulting firm, we measure how the consumers perceive each retailer in their markets in terms of 11 retail experience factors that influence consumers’ purchase decisions. If we consider the national ranking of these 11 factors by importance, we see the following. Price of the product is the most important factor. Following in order of importance are Reputation of Retailer and Product Selection sharing the position of second most important factors. The other factors follow in this order: Customer Service, Ease of Shopping, Store Interior, Effectiveness of Sales Personnel, Store Display, Advertising, Financing Options, and Store Exterior. This approach is difficult to do on a national basis, but we continue to work on it.
Next, we must recognize there are varying business models that have emerged in the last 30 years emphasizing different experience factors to better engage the consumer. Therefore, we analyzed several of these models and the performance of the participants.
And finally, we looked at the rationale for each of the Power 50 factors. Figure A graphically presents the rationale for each of these factors.
The Klout Score measures the social media presence of a retailer. It is a surrogate for Brand Awareness. The Alexa Score is a relative ranking of visitors to a retailer’s Web site. This is a measure of both brand awareness and the effectiveness of a retailer’s Advertising and Promotions. The Market Share measures a retailer’s performance in securing the sale when compared to a retailer’s opportunity for a sale in the markets that retailer serves.
There are many areas to be challenged not only in the weighting of the factor, but also in the factors themselves. While everyone wants to be No. 1, the point really is to measure current performance and to determine how to improve that performance. I welcome your comments as we make the Power 50 a benchmark to be considered.
By Sheila Long O’Mara
During this holiday season of peace, joy and thankfulness, I’ve been fortunate enough to stumble upon one of the most incredible journeys into the furniture business that I’ve come across in some time. Here in Columbia, S.C., no less; right under my nose.
It’s the perfect backbone for a book. There’s strife. There’s true love. There’s crime, and there’s a good bit of struggle.
Also, woven through the story are elements of human nature that make us all warm and fuzzy inside when they are revealed. Kindness; generosity; faith; courage and good ol’ fashioned hard work and tenacity.
And, for us, it has furniture and retail and success. Darby Hiott is the owner and founder of Beds & Such in West Columbia, S.C., a one-store operation that in the last two years has taken hold in a market filled with interior design studios, big box retailers and a few independent home furnishings retailers.
Darby opened the store in 2011 shortly after marrying his wife and partner Lori. Typically, the opening a small, family-owned furniture isn’t the thing great books are based on, but Darby’s journey along the way to Beds & Such is just shy of remarkable. Prior to the store and before meeting his wife, Darby had fallen on tough times. He’d had some experience in the business when he worked at a large furniture store here in town. Times got hard, and Darby was out of work, out of money, out of food and out of his home.
More times than not, Darby found food from fastfood dumpsters. He wore holes in the only pair of shoes he owned. He was pretty much down and out, but he’ll tell you his faith helped him pull himself back up. He landed a job at a local furniture store—the store where he happened to meet his now wife, who just happened to be shopping for a big girl bed for her daughter. Fate; kismet; destiny. The two were meant to be together. Misfortune struck again on the couple’s wedding day when Darby lost his job at that store. Through much consideration, prayer and support from his new mother-in-law, Darby and his new bride put together a plan. A plan to create a family-owned furniture store.
Today, that plan has come to fruition. The work, the effort, the passion—all have come together in Beds & Such. The Hiotts work in tandem with one another and their team of employees to help customers furnish homes throughout the Midlands of South Carolina. A wonderful twist of fortune. The man who was once homeless is now helping people furnish their homes.
Now that is a happy ending.
Here’s wishing all a peaceful and bright holiday season filled with an abundance of love. I look forward to the year ahead and I’m excited about what 2014 holds for the home furnishings industry.
Eight years ago, South Florida retailer City Furniture had come far from its beginnings as a waterbed retailer in the 1970s, evolving from a specialty store into a full-line home furnishings powerhouse in the highly competitive South Florida market, concentrating on value pricing and bringing services such as one-day delivery to customers ranging from Key Biscayne, up the Atlantic Coast to Stuart, and west to customers in Fort Myers and Naples.
That was when the Tamarac, Fla.-based retailer began another transformation that’s coming to fruition this year. The process involved renovating the brand through revamped stores and bright footprints at new locations, a move toward more upscale and unique product, and national-quality advertising that projected emotional appeal—plus attention to detail on all consumer touch points to carry through on that brand promise. And now, City is set to open its first stores in Central Florida this month, two locations in The Villages shopping area, which lies between Orlando and Ocala. What commands attention here is that City was doing all this during a period when a lot of its retail counterparts were retrenching or going out of business. At City Furniture, an investment that President Keith Koenig said is well above $100 million reflected a faith in its markets, the business model it envisioned, and its team.
Koenig sat down with Home Furnishings Business during the October High Point Market and later on the phone to discuss his company’s direction and how it pointed itself that way.
NEW TALENT, LONG EXPERIENCE
“We have fundamental belief in our business model, our team and our marketplace,” he said.
That team has leadership from old hands with a sense of the company’s roots, but also has an infusion of fresh faces with bright ideas that City goes out of its way to find. City actively recruits among colleges for sales management trainees, but while it goes to great lengths to find fresh talent, City’s core executive group has been together for a long time.
Mike Lennon, senior vice president of marketing, and Koenig have known each other since sixth grade and roomed together in college—they came on board in 1978. Garry Ikola, senior vice president of sales, has been with the operation since its days as a waterbed retailer, joining in 1973.
CFO Steve Wilder came on board in 1980; Senior Vice President of New Markets Curt Nichols and Vice President of Human Resources Janet Wincko have 20 years in the company, Vice President of Finance Kevin Riggott, 10 years; and Andrew Koenig, Keith’s son and managing director of operations, grew up in the business.
“We have experience, but also a young team, and they’re ready for the responsibility of working new stores,” Koenig said.
DEVELOPING A MODEL
In 2005, City decided it needed to make a deeper connection with consumers in the markets it serves. “Our real estate, our brand wasn’t where we wanted it to be,” Koenig said. “Too much of the industry is transactional. The customer wants to be emotionally connected to the furniture in her home and the brand she buys from.
“The goal has to be a real emotional connection with that consumer that essentially gets her to prefer our store to any other—who we are, what we do, and why it matters.”
The questions were: Where does City want to be? How does it build an emotional connection, a brand that makes consumers want to choose its stores?
“From that, we wanted to build all the touch points,” Koenig said. “We put the most investment into the stores, but we also put a lot of investment and time into the Web site.
“We had to learn how to shoot world-class photography that competes with the best online merchandisers in home furnishings, the Crate & Barrels, the Restoration Hardwares—and we had to do it at a lower price. That’s those others’ Achilles heel.” Television ads, which can be viewed on City Furniture’s Web site, were remade to resonate on emotional levels with the consumer and connect in a way that made her want to come to the retailer’s showrooms.
“The brand, whether it’s in an ad or the Web site, has to be aligned with every touch point in that customer relationship—store appearance, delivery, you name it,”
Koenig said. “That relationship is very fragile and has to be nurtured. “To do that, first, we’ve invested in our stores to create the shopping experience that’s consistent with what she’ll find appealing.”
On the Web site, City invested in new architecture, and in its own photography. “It’s not enough just to throw a manufacturer’s shot up there,” Koenig said. “Our television ads are shot in beautiful South Florida homes. Our advertising is national quality.”
This year, City Furniture added Bernhardt as its primary high-end vendor. “We have Bernhardt galleries in all City stores now,” he said. “Bernhardt is the best fit for us at the high end for value and service.”
Those galleries range from 3,000 to 4,000 square feet. Since the first opened in March, the galleries already produce high dollars per square foot, Koenig said.
“It definitely opened some new doors for us and created a favorable shopping experience for our customers, whether or not they’re a Bernhardt customer,” Koenig said. “It makes everything look better.
“It fits what we want to do as a brand—fashion forward, beautiful furnishings, many of which people can’t find anywhere else.” That last part of City’s brand equation—really more than any cost savings—is what’s driven its extensive sourcing and manufacturing of private label product. In addition to its proprietary Kevin Charles upholstery line, the retailer sources exclusive case goods overseas; and works closely with key domestic vendors on product development.
Koenig credited Lennon and his team with helping City offer unique product to customers. “He’s the genius behind all our marketing, merchandising and branding,” Koenig said. “He’d put all the credit on his team, but he’s the leader.
“Mike’s developing more and more proprietary product that fits what our customers want, and to work with our vendors on that product. It’s not about saving the last nickel, it’s about getting what the customer wants.”
CUT COST, ADD VALUE
“What the customer wants” also means pulling out waste in the process so there are no unnecessary costs. “If we’re over-priced on any item, she’s going to know it, and that doesn’t add to our brand, which is quality furniture at an outstanding value, and in many cases, something she can’t find anywhere else,” Koenig said. “The operational logistics have to be place in order to deliver on all of that brand promise, not just one or two parts.”
Recycling and energy efficiency are part of that cost cutting equation. City has recycling programs for a huge amount of its packaging and paper, and it has broken ground among furniture retailers in making its stores environmentally friendly. “We just completed our sixth LEED-certified furniture store,” Koenig pointed out. LEED, or Leadership in Energy & Environmental Design, is the U.S. Green Building Council’s standard for energy efficient building design. City also is considering transitioning its truck fleet to operate on compressed natural gas; and Kevin Charles upholstery uses soy-enhanced cushioning. “We aren’t ‘tree-huggers,’ but it’s the right thing to do balanced with business sense,” Koenig said.
Meanwhile City’s transformation nears completion—and further enhancement. “At Cutler Bay, we bought the land next door to an existing location—the old store didn’t meet our new standards,” Koenig said. “With the completion of our Cutler Bay showroom in Miami, all our stores are now in the right location, and the right size and have the right merchandising.” HFB
City Furniture at a Glance
Homebase: Tamarac, Fla.
Store Stats: 11 City Furniture stores totaling around 750,000 square feet; and 11 Ashley Furniture Homestores with around
300,000 square feet serving greater metro Miami and South Florida Atlantic Coast; and Naples/Fort Myers.
Other Holdings: 800,000-square-foot, high-cube Fort Lauderdale-area warehouse serves all locations except new central
Florida stores with same-day delivery.
Future Plans: Set to open two stores in early November in The Villages, located between Orlando and Ocala.
Key Vendors: Kevin Charles Upholstery, Cheers, Bernhardt, Serta, Casana, HTL, Lifestyle, Steve Silver, Idea Italia, Natuzzi.
Web site: CityFurniture.com
Keith Koenig, president
Mike Lennon, senior vice president of marketing
Garry Ikola, senior vice president of sales
Steve Wilder, CFO/CIO
Kevin Riggott, vice president of finance
Curt Nichols, vice president of new markets
Andrew Koenig, managing director of operations
Janet Wincko, vice president of human resources
Dave Francis, managing director of City Furniture Lean Conversion Office.
A Look at City Furniture’s Markets
Furniture kept expanding during an economic downturn, and a big reason is faith in its markets’ future.
“The economic data clearly shows housing will be on a growth track for the next few years,” said City President Keith Koenig. “We’re looking at 900,000 new home starts in ’13; 1.1 million in ’14; and 1.4 million in ’15.
“We’re seeing it on our South Florida market after several years of a really challenging housing environment. The demographic trends for Florida are going to be solid. You’ll still have baby boomers moving to Florida. We have a favorable economy, and I think the state will outperform the rest of the country. All that makes us very confident in investing in the future.”
Stuart, Fla., City’s northernmost location, opened in 2005, is a fair drive from Miami, but is still part of a whole.
“It’s really part of the Southeast Florida metro area,” Koenig said. “There are 6 million people in multiple (greater metropolitan areas) and television markets, but they’re all easily serviced with same-day delivery out of our Fort Lauderdale/Tamarac distribution center. Past that you really can’t do same-day.”
There’s a lot to be had there.
According to Home Furnishings Business research, City’s East Coast markets are projected to total more than $1.1 billion this year; and around $400 million in the Gulf Coast markets it serves.
While City is expanding into Central Florida at The Villages between Orlando and Ocala, the retailer is holding off on same-day delivery there—for now.
“Our long-term vision is to have stores in Tampa, Orlando and all across Florida,” he said. “The Villages is the first step, and it was a little earlier than expected … Eventually, we’ll make the investment in local distribution centers.”
No doubt about it, consumers shopping for furniture are antsy these days. Things were cooking along pretty well this year at San Diego-based Jerome’s Furniture—until September, that is.
“This year had been very strong because the housing market turned up, and less people are underwater on their mortgage; and as housing values firm up there’s a wealth effect to the stock market going up, and we think that’s going to flow our way,” said CEO Lee Goodman. “That all helped us until May, when interest rates started rising again. That’s led to a gradual cooling off. Then in September, with the Syria situation creating some nervousness and then the shutdown, we saw slower sales.
“We were running 10 percent ahead in July and 20 percent in August. September was off more than 6 percent.” Jerome’s business model gives the retailer a sense of overall consumer appetite for and interest in furniture. “Our message doesn’t change. We don’t run sales, we’re talking about Jerry’s Price, about our own brand, the customer experience, so we think we’re a good barometer of the macro-economic situation,” Goodman said. “When we see a change in our business level, it’s usually macro-economic related. All things equal, we’re more likely to see macro-economic indicators impact this year’s business.”
In conversations at High Point Market, plenty of other retailers reported taking a hit on sales, and most cited consumer preoccupation with the government shutdown and debt-ceiling brinksmanship as a big reason.
Britt Beemer, CEO of America’s Research Group in Charleston, S.C., believes consumers have plenty to worry about besides political games in Washington, especially when it comes to personal finances, and the impact of taxes and healthcare costs. He cited an ARG consumer study after Labor Day that indicated 19 percent of people said they take home less than they did a year ago because of health care cost increases in their paycheck.
“You have a third of Americans saying someone in their household is unemployed, working part time, or working for less than they did a year ago,” Beemer said. “Forty percent of parents are worried about paying for their kids’ college because they can’t rely on the equity in their home. For the backto- school season, 44 percent of parents were telling us they’ll do most of their apparel shopping for that in December, when prices are lower.
“Thirty percent of families told us after Labor Day that they didn’t take a vacation of four days or longer this year because they couldn’t afford it.” Beemer doesn’t think uproar in Washington was an issue for consumers, but some measures indicate that it was. The Conference Board’s Consumer Confidence Index fell sharply just before press time, from 80.2 in September to 71.2 last month, a nine-month low.
“Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers’ expectations,” said Lynn Franco, Conference Board director of economic indicators. “Similar declines in confidence were experienced during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government shutdown in 1995/1996. However, given the temporary nature of the current resolution, confidence is likely to remain volatile for the next several months.”
Other drags on the Index: Those saying jobs are “hard to get” rose in October from 33.6 percent to 35.8 percent; and those expecting business conditions to improve over the next six months fell to 16 percent from 20.6 percent, while those expecting business conditions to worsen increased to 17.5 percent from 10.3 percent. Other measures of consumer confidence indicate similar worries. The Thomson Reuters/ University of Michigan Index of Consumer Sentiment fell to 73.2 in October, the weakest score this year, from 77.5 in September; and its Expectations Index is at its lowest level since late 2011.
That survey indicated that consumers believe the Federal shutdown and other restrictions on government spending would slow the overall pace of economic growth over the next several months.
It also found consumers increasingly moved toward the view that the government is the main obstacle to more robust economic growth. When asked to describe recent economic developments, the number of consumers that negatively mentioned the federal government in October was the highest in the survey’s 50-plus year history. “This was the third time in the past three years that negative references to the government’s impact on the economy set another half-century peak level,” according to the survey report. Indeed, after each repeated advance in optimism during the past three years, a revival of the DC follies promptly reversed the gain. It is hard to imagine how economic uncertainty will decline in the next few months since nothing was settled, only postponed.”
And in its survey of planned holiday spending, the National Retail Federation, for the first time, asked holiday shoppers if the political gridlock in Washington around U.S. fiscal concerns would affect their holiday spending plans.
On average, 29 percent of respondents said the situation would somewhat or very likely affect their spending plans. Nearly one-third of those between the ages of 55 and 64 said political gridlock in Washington was somewhat or very likely to affect their spending, the highest percent among all age groups surveyed. When asked specifically about the overall state of the economy and how it would affect their spending plans, more than half (51 percent) of consumers said the economy would in some way impact how they spend this holiday season, with 79.5 percent plan to spend less overall, looking to cut corners and tighten budgets.
Beemer worries that the importance of “the deal” in getting consumers’ attention will eat into furniture retailers’ profitability. “It’s all about the deal. How much margin are you willing to give up to get the deal?,” he said. “That’s what’s driving the consumer today for the most part. I think you’ll see more retailers impacted by this margin squeeze (they’re already tight). It takes bigger and bigger deals to get consumers in the door and close the sale. I’m concerned we’ve reached the point of no return on this.”
WHAT RETAILERS SAY
Retailers contacted for this article believe the shutdown and debt-ceiling battle did impact their business. For example, in reporting on its first fiscal quarter, which ended Sept. 30, Ethan Allen said that the government shutdown had impacted written orders. “While we had a strong first fiscal quarter with total written sales increasing 11.4 percent and a comparable increase of 13.8 percent on top of a 9 percent increase in the previous year, we believe the bickering in Washington and the continuous focus of the news on the subject created concerns and also reduced our written business in September,” said Farooq Kathwari, CEO of Danbury, Conn.-based Ethan Allen.
Belfort Furniture, located near the center of any political firestorm in Dulles, Va., saw store traffic continue to increase, but no commensurate gain in sales.
“People are showing interest in home furnishings, but they’re not making commitments,” said CEO Mike Huber. “We actually saw an increase in traffic recently, but there were a lot who were looking. Getting them to buy was a whole other story.
“Immediately after the shutdown, we had cancelled orders because the customers weren’t sure when they’d be getting their next paychecks, and we gave them their money back. Now that things are back to normal, or what passes for normal, I’m hopeful, but I can’t say they all came rushing back in.”
Circle Furniture, Acton, Mass., had a very strong August and September, but also saw a dip in October. Queen Been Peggy Burns said it’s important to project a positive attitude in the store no matter what’s going on in the larger world.
“The minute people start thinking traffic is down because of the shutdown, they start reacting instead of serving the customer the right way,” she said. “We’re concentrating on giving the best, positive service we can, and creating the best possible atmosphere.
“The way we approach it is the world can be going to heck, so you have to make your home a haven. You have to be very positive. We just do what we always do.”
THE BRIGHT SIDE
Some retailers believe their customers are a little more used to negative headlines; and don’t foresee a return to the all-out gloominess of the recession. “It’s not like it was (in 2009) when people worried about the economic structure collapsing, the spigot hasn’t just turned off like it did then,” Goodman at Jerome’s said. “It’s noisy, but it’s not debilitating.”
Goodman believes consumers have developed some numbness to troubling news, but it would help if the politicians would make some long-term decisions on things such as the debt ceiling instead of short-term fixes. “They keep kicking the can down the road. We know it’s coming—Americans have a short attention span,” he said. “The government shutdown is a real issue on consumers’ minds, but it’s not their first time at the rodeo.”
Kathwari anticipates another round of soft conditions when the debt ceiling issue comes up again early next year, but agreed that consumers have grown more resilient. “The debt ceiling issue will remain as an ‘overhang’ and will impact consumer confidence,” he said. “However, its effects are minimized as consumers are getting somewhat numbed to the workings of Washington.”
BEST FOOT FORWARD
Burns at Circle isn’t alone among furniture retailers who’ve decided to get proactive and upbeat with consumers versus griping about what they can’t control. Belfort Furniture, for example, focuses on everyday low price in general, but moved fast this fall to boost business.
“Immediately after the shutdown, we went to a 36-month extended financing program, the longest we’ve ever done,” Huber said. “And if we think we’re going to have a slowdown, we advertise more. In addition to the 36-month financing, we came out with a 32-page circular. We typically do 12 pages, but we decided to show more product, put our best foot forward.” It helps to build some excitement in the store, as well.
“With HGTV Home, we’ll have Genevieve Gorder in the store on Nov. 9 when we launch that collection in the showroom,” he said. “That’s generated quite a lot of interest. Don’t get caught up in negativity—that filters through the organization and customers pick up on it.
“With our salespeople now, when we have a customer in the store—you know so many of them researched online what they’re looking for, so they’re ready to buy—we are working hard to improve the close rate,” Huber said. What is Ethan Allen doing to break through negative headlines and get consumers thinking about buying home furnishings?
“Our current focus is very exciting,” Kathwari said. “We are moving from being a leader in furniture to a leader in home fashion. This will also help people focus on home.”
“New Eclecticism” is the umbrella message for Ethan Allen’s product direction, and the company is reaching out to customers directly with a new vehicle.
“We have launched a 60-page magazine in October that focuses on eclecticism,” Kathwari said.
“We believe consumers are ready for fashion, which means color and the fun of mixing styles. Our variety of styles, our values, our 2,000 professional designers and about 300 Design Centers give us a good opportunity to make an impact.”
Looking at a looming big picture issue, Burns at Circle Furniture has a message for her fellow retailers concerned about the impact of health care reform. “I know there’s a lot of concern about the ACA, Obamacare, whatever you want to call it, but here in Massachusetts we’ve already gone through this with our former governor’s plan several years ago,” she said. “There were some costs that went up for some, but we’ve been living with it, and we’ve survived. It’s not the end of the world.”
It also helps to remember that some macro issues are happy ones. “This past month we’ve been promoting getting your home ready for the holidays,” Burns said.
“That’s a happier thought.” HFB