Mood Swings

November 12, 2013   by in Business Strategy, Industry   

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.

PREOCCUPIED CONSUMERS

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

What She Wants

November 12, 2013   by in Business Strategy, Industry   

Despite political fireworks and personal financial concerns that weigh on consumers’ minds showing no signs of retreating any time soon, a recovering housing market and gradual return to economic normalcy are creating opportunity for home furnishings retailers.

The following examines potential furniture buyers and what motivates their decisions to purchase— or not purchase—based on Home Furnishings Business research.

 Furniture and bedding sales for this year’s second quarter totaled $17.84 billion, off a half percent from the same period in 2012. Excluding bedding, first-quarter 2013 sales were down 2.8 percent from last year’s first quarter; and the second quarter was off 1.4 percent compared with last year.

(For a breakdown of who’s doing that business— the U.S. population in 2012 segmented by age and income—see accompanying story “Who’s Out There.”) Following are some insights on consumer behaviors and attitudes behind those numbers.

What’s driving consumers?

When consumers start the process of shopping for home furnishings, the most important business intelligence for both vendors and retailer is the following:

·         Who did the consumer consider purchasing from?

·         Who did the consumer consider, but not shop?

·         Who did the consumer shop, but not purchase from?

·         Who did the consumer purchase from?

·          

It’s worth noting that the research found that consumers nationwide are well aware of alternative retail channels for furniture, in addition to traditional channels such as department stores, independent furniture retailers and regional home furnishings chains

Vertical retail models such as Crate & Barrel, Ethan Allen and Ashley had the highest awareness among consumers, 62.7 percent. The second highest— get ready—Internet sites at 60 percent. In third place, with 57.4 percent awareness among furniture shoppers, are mass merchants, which also should give traditional retailers pause. Independent retailers showed up third from last in the channel-awareness rating among consumers at 52.5 percent, followed by department stores, 50.8 percent; and lifestyle stores at 44.7 percent.

The good news is that consumers are interested in furniture. When asked, “Do you believe your home needs some redecorating that would include new furniture?,” the response was overwhelmingly positive: 87.4 percent said “yes.” Those consumers’ high awareness of other channels from which to find that furniture, though, should concern traditional home furnishings stores.

Also, while consumers recognize the need for furniture, getting them to act on that need remains a problem (see “Shopping Stages” graphic).

Getting a Sense

Our research posed several questions concerning the furniture buying process to consumers. When asked, on a scale of 1 (very likely) to 5 (not at all likely), “If you had a free afternoon, what is the likelihood that you would spend it in a furniture store?,” the average response was 2.9. We don’t rate highly on the “entertainment value” scale—retailers need to think about what they can do to raise excitement for new designs; and how they can make their store a place where people want to be. Note that when we asked “Please rate the degree to which store environment, décor, furniture display, atmosphere, and ease of navigating the store adds to your perception of the value of the product. Rate on a scale of 1 to 5, with 1 being ‘No additional value’ and 5 being ‘Much value,’” the average of all responses was 3.7.

Not surprisingly, most consumers are cost-conscious even if they have money to spend. When asked to rate their current style of living on a scale of 1 to 10 with 1 being “I have to be very conscious of what things cost and must live within a strict budget” and 10 being “If I want something, I buy it. Cost is not my first consideration,” the average of all responses was 4.5.

Women lead the way

When it comes to visiting a store, women still rule. We asked: “In your household who is usually the person who makes the initial visits to look at the furniture that is in the stores?” The top response “Self-Female” accounted for 79.7 percent of responses; “self-male” 10.5 percent; and “spouse/ partner-female,” 9.7 percent. “Spouse/partnermale”? Zero.

And, women are far and away the primary motivators to considering a new furniture purchase. We asked, “In your household who is usually the first to mention the need or desire for new furniture?” “Self-female” was the answer for 70.4 percent of responses; “spouse/partner-female,” 12.3 percent. The male spouse? You guessed it: nada, nothing, zero percent. While women inspire initiation of the buying process in most instances, the final decision in male/female households remains a joint decision, with 58.5 percent of respondents saying both partners make the call. And men apparently still command the pocket book, with 26.8 percent saying he has the final decision, while 14.7 percent of respondents said women decide on a furniture purchase. Once they’ve decided to buy home furnishings, what are the steps consumers take? According to our research, the first thing most consumers do is Internet research. That’s followed, in order, with visiting a store to see product on display; save newspaper and magazine articles and ads; do research in magazines; get recommendations from friends and relatives; respond to television or radio ads; and consult with or hire a design professional for advice.

Internet research and store visits were close; but it’s worth noting that responding to an ad was near the bottom of the list of steps.

The rubber meets the road

Once shoppers are in the store, are your salespeople focused just selling a sofa or bed? If they are, you are missing an opportunity. We asked consumers to choose from two sentences which one most nearly explains how they shop for furniture: “When I shop for furniture, I think about the total room plan before purchasing”; and “When I shop for furniture, I am only interested in purchasing a specific item.” A large majority, 68.5 percent, said they think about the entire room when shopping. What first impression does your store make? We found that the first thing shoppers look for are product displays, even before sales and promotions, which are followed by price tags, latest designs, and then—pretty far behind—a salesperson or service from sales personnel. When they do interact with your sales team, the most important thing consumers want them to provide is product knowledge (36.7 percent of respondents). Order writing was next at 26.3 percent.

Another indication that shoppers have done their research is that those first two items they said are most important for salespeople are far ahead of other things they want your sales staff to provide: help with color combinations (14.6 percent); style advice (13.3 percent); and assistance in developing a room layout (9.1 percent). Let’s consider those responses against the next question, which asked, “From your experience, what does the sales person in a furniture store/ department actually provide to you?”

Order writing was first (35.6 percent); followed by product knowledge (35.1 percent); help with color combinations (12.5 percent); style advice (9.9 percent); and assistance in developing a room layout (6.8 percent).

While they feel salespeople are very strong in those top two services, consumers indicated room for improvement in the other three. Our research also found that shoppers are fairly quick to pull the trigger. We asked, “How long did you shop for the product before you made your most recent furniture purchase?” A third of respondents said less than a week; and another 43.8 percent bought within a month, almost half of those one to two weeks into the shopping process. The lesson: Keep working those close rates, or they might buy somewhere else. HFB

Who’s Out There

The first part of reaching consumers is a basic understanding of who they are. Here’s a look at U.S. consumer households in 2012 by age and income percentages.

First, let’s look at the age groups.

No surprise here, but Baby Boomers (45 to 64 years of age) remain the largest age demographic, comprising 38.53 percent of U.S. households. Not far behind, though, is Generation X (25 to 44), with 35.17 percent of the population.
Pre-boomers, those consumers age 65 and older still represent more than a fifth, 21.22 percent of U.S. households; and Generation Y, consumers under 25 years of age, 5.08 percent. (Let’s hope that last group has some kids.)

The good news for furniture retailers is that older Gen Xers—those 35 or older—and “second wave” boomers, age 45 to 54, are in their prime income producing years. Together, they represent 40.52 percent of U.S. households. This cross-generational segment has the largest percentage of families with incomes more than $50,000—25.41 percent—than any other segment. As a comparison, older boomers represent 9.79 percent of such households; Gen X’ers 25 to 34, 7.94 percent; those over 65, 6.86 percent; and Gen Y (under 25), 1.14 percent. (51.14 percent of total U.S. households have income more than $50,000.)
Also, the second wave of Gen X (25 to 34) is catching up to its older siblings in terms of income. Their households represent 7.94 percent of those earning than $50,000 a year, compared with older Gen Xers at 11.56 percent.
Moving it up a notch, the younger Boomer/older Gen X combination stacks up pretty well in the $100,000-plus household category—10.52 percent of their age group. (Total U.S. households with income at that level comes to 19.3 percent.)
For older boomers, 4.2 percent of that group’s households earns $100,000-plus. They’re followed by pre-boomers (2.25 percent); younger Gen Xers (2.16 percent); and Generation Y (0.19 percent).

Attitudes and Behaviors

Furniture isn’t a frequent purchase, but consumers view it as central to their self-image, and its facilitation of sharing togetherness with family and friends makes buying it an emotional decision.
That’s among key findings from “Consumer Attitudes and Buying Behavior for Home Furniture,” a study this year from the Franklin Furniture Institute’s Furniture Outreach Program at Mississippi State University.
The results are based on a national survey of 2,007 adults who participated in an online consumer panel.

Other takeaways: The survey found that quality is the most important criterion consumers use to evaluate furniture for purchase. Made-in-the-U.S.A. is stronger than environmental friendliness overall, but the latter is increasingly important among younger, Generation Y consumers.

They aren’t in their prime buying years yet, but “green” will grow in importance for furniture as that group’s incomes increase.
The study identified five stages of the consumer decision process regarding attitudes and buying behavior for home furnishings: problem or need recognition; information search; alternative evaluation; outlet selection and purchase; and post-purchase evaluation.

WHERE THEY BUY

The Mississippi State project found that most consumers have little brand or store loyalty; and since most have already done their research online, they come to a store or e-commerce site with a good idea of what they want. The good news here is that their prior exploration means less buyer remorse after the sale.
For furniture retailers, the study suggests they must be on target with display, selection and price all the time. Only 26.3 percent of respondents said they are loyal to a specific furniture store; and 76.7 look at numerous stores before choosing where to buy.
The good news: Quality is important. Almost three quarters of survey participants disagreed with the statement: “I prefer to shop for furniture at discount stores like Target or Walmart.” (That still leaves a significant share of overall respondents who would, though.)
Do you think consumers won’t buy your product online? The study found 21.6 percent of surveyed consumers had made a furniture purchase on the Internet, almost double the figure from a similar 2008 research project.
Plus, more than a third of respondents say they will shop furniture online over the next few years, compared with 25 percent last time around; an more than half, 52 percent said they are willing to buy furniture online.

Regarding attitudes toward online furniture purchases, the study found significant variation among different age groups. When asked if they would shop for furniture online in the next few years, 46.9 percent of Gen Y respondents said “yes”; 36.7 percent of Gen X; 28 percent of Baby Boomers; and 3.9 percent from the Depression/Pre-Depression age group.

The full study can be found here: http://bit.ly/1aOd3Z8

From the Publisher: $1,000 Purses and Furniture Flatlines

November 12, 2013   by in Business Strategy, Industry   

By Bob George 

Yes, I am fully aware of the depth of the recession that our industry has experience since 2009. However, we are not the only industry that has been impacted by the worst financial meltdown since the Great Depression. Rather, we are an industry that is struggling with a recovery. The Consumer Price Index for all products has continued to move upward while furniture and bedding have remained flat. The CPI indexed to 2008 (100) is shown in the accompanying chart.

As can be seen from this graph, our situation occurred some years before in a previous downturn and has continued as the industry became “fixated” on price. I know many out there will point to the great value that we have given the consumer as production as moved offshore. However, a careful analysis of transportation costs, duty, inventory carrying costs and obsolescence will yield minimum savings. Nonetheless, the price has been reduced, but at a cost, the loss of quality. A sobering thought comes to mind—maybe the furniture we are producing is worth what we sell it for.

The group that is losing in this scenario is the consumer. We must ask ourselves the solemn question, “Are we presenting to this consumer worthy product?” It is important that we challenge ourselves as an industry to consider where we stand on these key factors:

Quality—Manufacturers, are we proud of the product we present to retailers who will then present this product to the consumer? We are speaking not only of upper-end products, but also the middle-priced goods.

Designs—Are we creating new and innovative collections that reflect classic shapes and forms, or are we knocking off our competitors? The result: The average life cycle of a new design is less than three years with most designs merely filling the pipeline only to be discontinued in a year.

Marketing—Are we resorting to a celebrity brand name to be noticed rather than designing collections that are inspired by original concepts that evoke dreams?

Sales—Are we basing sales on a true desire to achieve great product turnover that results in a great GMROI? Will there ever be another Collectors Cherry (Thomasville) or Fontana (Broyhill)?

Before you dismiss me as a ranting old man, there are signs that are positive. Witness the Amish phenomenon that inspires consumers to pay for quality or premium bedding where consumers appreciate innovation and will pay for it.

Yes, there is a chance. For the past 20 years of research when consumers are asked the question, “Does your home need redecorating that would require the purchase of new furniture?” the answer “Yes” has never been below 87 percent. It is our challenge as an industry to get the consumer to act on this need. Price is not working.

Let’s try a different approach.

From the Editor: The Happiest of Quarters?

November 12, 2013   by in Business Strategy, Industry   

By Sheila Long O’Mara

We’ve stepped into fall. The season in which Mother Nature pulls out her best and brightest colors to show off her splendor. Halloween has passed, and we’re charging head first into the holiday season with Thanksgiving, Hanukkah and Christmas.

Cooking With E-TAIL

October 10, 2013   by in Industry, Web Retail   

Retailers and Vendors come together to carve out ideas on tackling e-commerce in home furnishings.

By Powell Slaughter

Take four home furnishings retailers seasoned with varying degrees of experience in e-commerce. Add six furniture vendors active in online channels. Toss in a dash of technology experts and consultants. Stir with questions about their thoughts on the challenges and opportunities facing our sector when it comes to selling furniture online. Cook thoroughly in a daylong discussion. Serves: Anyone looking for ways to think about how online commerce is affecting their business. That was the recipe for “The Future of Furniture Retailing,” a gathering last month of vendor and retail executives at Internet marketing technology vendor MicroD’s office in Hickory, N.C., where they took part in a roundtable discussion of e-commerce in the furniture industry. Key takeaways from the event: Data and information, product delivery, pricing and defining a brand are challenges facing the home furnishings industry as it ventures onto the online playing field. Participants hashed out their online initiatives and the challenges they face in bringing the home furnishings sector up to speed in e-commerce. “MicroD is in a unique position of serving both sides—the retailers and the manufacturers,” said MicroD CEO Manoj Nigam. His goal in the meeting was to “get a group together to start a dialog on how we should be doing things. “E-tailing is not just e-commerce. How do we get the products online? How do we engage consumers? How do we bridge the gap between retailers, manufacturers and consumers?”

INFORMATION INTENSIVE

Roundtable participants said organizing product information and presenting it in a manner that’s easy for online shoppers to use is one of the toughest things about e-commerce. Walter E. Smithe Furniture in Chicago was set to go live this month on an e-commerce platform developed with MicroD. President Walter E. Smithe said getting data is a huge headache. “A tiny sliver of our vendors are truly e-commerce compatible at this point,” he said. “Some kind of industry standard is necessary for it all to work. It seems like MicroD could become the default for the industry.”

The industry could learn from other sectors when it comes to standardizing data formats, said Richard Sexton, founder of Concord, N.C., retailer Carolina Rustica. “The lighting industry does a much better job. The industry accepted American Lighting Association standards for e-commerce data,” he pointed out. “The downside is its further commoditized the lighting industry. Every Web site looks the same. It’s a good guideline, but if you’re serious about e-commerce, you need to personalize it with your own descriptions, your own photography.” Access to data is extremely important at Boston, Mass.-based online home furnishings powerhouse Wayfair.com “We track reasons people contact our call center,” Mike O’Hanlon, vice president of corporate and business development. “Number one is ‘Where is my stuff?’ but number two or three is product information.” Getting that information online demands time. Colfax Furniture’s biggest Web-related challenge is integrating the store’s point-of-sale system on the Web site, according to Mandy Jeffries, general manager of the Greensboro, N.C., retailer. To do that, she wants vendors’ support. “Our information on the Web site is only as good as what we get from the manufacturers,” she said. “Our biggest challenge in resources is that our industry is so far behind, our point-of-sale system, for example. We tried SAP, but that was like driving a Mercedes in an alley. I had to settle for a POS that was furniture-related. … Every package has its own pros and its own cons.”

VENDORS WANT STANDARDS TOO

As a fairly young company, a lot of the technology solutions Four Hands brought to its retailers were homegrown. “Doing that costs a lot, and we’re looking now to partner, moving from proprietary platforms to more widely adopted ones,” said Mike Bullock, vice president of marketing. “Second, we bring out 600 new products a year. Getting all that data together, building the discipline to do it is something we’re working hard on. We’re working on ease of ordering, a consistency in the process, providing the tools retailers need.” Sherrill Furniture focuses heavily on custom finishes and fabrics as part of its high-end value proposition, and that creates complex information needs.

“How do we bring our 600-plus styles, our 3,000-plus fabrics into focus for our retailers who are going into e-commerce?” said Tim Bohon, executive vice president of sales and marketing. “How do we get our customization capability to the masses without getting redirected off a site? They want seamless access to what’s on our site without leaving their selected brand. A Walter E. Smithe is the brand, we’re the vehicle. “We have so much data —10 brands, nails, fabric, shape, traditional—and no way to get to it. We need to slice and dice our data.”

Another concern is making sure that seamlessness applies to the devices consumers are using to shop online. “My biggest concern is the integration of all devices, from desk top to mobile,” said Bohon. Responsiveness to current technology is one thing, but it’s important to think ahead. “We’re talking about tablets, mobile devices. We have to think about where it’s going,” said Kevin Walker, president of Right2Home, the division of Home Meridian International that specializes in drop-shipments for e-commerce sales. “How do I get this site to work on a watch?” Right now, Walker said there are gaps between what vendors have and what types of information they need to deliver, both with sales initiatives and data. “How will you differentiate yourselves online? How will you define product value? It’s hard to differentiate promotional versus high-end from a picture without more information,” he said. “We have to get our data uncovered, organized and be able to feed it with EDI or an automated data feed. It takes time to get it on the site—Wayfair’s loading 7 million SKUs.”

Keeping product information up-to-date on the Web site was a big challenge at A.R.T. Furniture as it grew its business in the e-commerce channel. “Sales reps weren’t being fed the information properly, and (e-commerce channel) is a difficult animal for them,” said Bill Sibbick, senior vice president of sales and marketing. “It’s changed how we operate. Videos have become extremely popular, but when you do one for a retail salesperson, it’s completely different from what you’d do online for consumers.” Sibbick noted that one customer told him getting better information available online can help boost sales: “He said, ‘I’m not getting as many ups, but I’m getting a much higher rate of closure.’ That’s because that shopper has learned what they need online and are more ready to buy.”

The growing importance of e-commerce could make the industry improve its data management. “Retailers like Wayfair have raised the ante for the additional data requirements needed to interest the customer and increase conversion rates,” said Ron Carpenter, principal of Greensboro, N.C.-based management consulting firm Strategic Marketing Solutions. “I think you’ll see vendors change their product development process to capture that data at that point. We’ve been dealing with (e-commerce data requirements) by exception. What happens when you have 300 customers who want that data?”

Nigam noted that MicroD is building software to help manufacturers create a product catalog: “If you house your data with us, we’ll make it available to anyone you authorize.” “One of the things e-commerce is forcing us to do is make every element of the shopping process relatively simple,” said Samson Marketing CEO Kevin O’Connor. “Consumers are confused by such a big assortment of product that’s indistinguishable to the untrained eye.” That’s why retailers have to pay special attention to information management on their Web sites. “In talking to a lot of our retail customers, they think they’re in e-commerce because they take (a vendor’s) picture and put it on the Internet,” O’Connor said. “And a lot think (e-commerce) will be a passing fancy. Running a Web site, getting all the information in is a cost of doing business, and they’re asking ‘Do I want to make that investment?” He added that reps at Samson Marketing companies were encouraged to open accounts among e-tailers: “They needed to, because so much of our traditional retail channel went away. The amount of furniture sold through the traditional channel is half what it was seven years ago. We do restrict our e-tail business to those e -tailers who ‘play fair.’”

ONLINE PRICING ISSUES

Hooker Furniture is focusing this year on its proprietary e-commerce platform for retailers, P3. In addition to aggregating data online, Vice President of Corporate Marketing John Albanese, a former retailer, called “a complete disconnect with regard to minimum pricing policies” the biggest challenges facing furniture with regard to e-commerce. Hooker’s e-commerce platform relies upon an “Internet Minimum Price” versus Minimum Advertised Price (MAP). “We set what we thought was a reasonable cost for our Internet minimum price,” Albanese said. “Some stores might sell it for less inside the store. Our I-store lets the retailer make an additional note that ‘additional savings my be available at the store.’” Albanese did note that Hooker has “discontinued selling certain product to certain retailers” over pricing issues. “We haven’t had anyone who stopped doing business with us because of that,” he said. He suggested that vendors protect pricing by having customers sign documents to receive product data that indicate how it should be used; and for pricing policy. “If you violate policy, you lose rights to images and product information.” It might surprise traditional furniture retailers, but Wayfair.com is fine with pricing policies. “People buy from us because of convenience,” O’Hanlon said. “We have MAP. We have a lot of margin requirements, so we’re big fans of manufacturers having a pricing policy. The worst case is having a policy and not enforcing it.” Wayfair has some built in controls that in effect penalize vendors who don’t pay attention to pricingpolicy slips. “All our product rankings are driven by an algorithm,” O’Hanlon said. “It’s very complicated, but two important components are margin and popularity. If we can’t make margin, it falls, and if we’re too high in price due to non-enforcement, our conversion rates go down.”

Sherrill Furniture doesn’t want its businesss in the e-commerce to alienate its existing brick-and-mortar distribution, and its pricing policies play a role there. “How to we get through to the merchant without upsetting them, that this is where we need to go--together?” Bohon said.

To that end, the company will have strict distribution limits on what can be offered online--and a very strict Minimum Advertised Price policy: “Two strikes and you’re out,” Bohon noted. “If they cross the line we cut them off for 90 days--and they come back. If we get too greedy with distribution, margins go down, there’s no bottom line.”

It remains difficult to fully to enforce MAP pricing. “It’s impossible to enforce with a heavy hand—it’s hard to have those pricing conversations without raising legal problems,” said Right2Home’s Walker, adding that “crawling” software lets e-tailers automatically drop a price if it finds something lower. “Do you drop the one who started it, or drop everyone?” (Wayfair’s O’Hanlon pointed out that with MAP-applicable products, the retailer’s pricing decisions are not automated.)

SERVICING THE BUSINESS

Fulfilling delivery and meeting customer expectations is critical to providing a good experience for the shopper whether they buy in the store or online. It might be even more important in e-commerce, since no matter how good your Web site, an online sale can’t be as hightouch as in the store, and that delivery might be the most personal thing about the online sales process.

“And now consumers are enabled with ratings and reviews to talk about your brand,” Walker said. “Think of the money you spend to get them to the point of purchase, and they see a bad review.” Right2Home is creating three-way partnerships among itself, its customers and the carrier. “Our goal is to get all of our customers to follow our white-glove shipping policy so it’s a level playing field,” Walker said. “We’ve ID’d our most (commonly) damaged SKUs. We’ll take them off your Web site if you aren’t using (specified) carriers.” Hooker’s P3 relies on retail partners ability and experience in delivery.

“We ship it to the retailer the way we would any product,” Albanese said. “We’re leveraging the infrastructure they already have in place. With our 21 (live) sites, we’ve exposed our product to 12 million more customers than we would have otherwise.” Bohon at Sherrill Furniture believes customer relationship management sometimes takes a back seat in online sales.

“They seem to be defaulting to the old ‘I made the sale so it’s over,’” he said. “On the e-commerce side, the sale is were CRM begins. I spend more time vetting the last mile than I do for anything else related to the e-commerce channel.” Carolina Rustica is willing to give some when it comes to returned merchandise. Fortunately, the retailer’s return rate is less than 1 percent. “You have to have a fairly liberal return policy, or people will go elsewhere,” Sexton said. He added that sometimes a product was clearly damaged in the plant, not in transit, but Carolina Rustica rarely goes after a vendor.

“It’s so much work for us, and we want a good relationship with manufacturers, so we eat that a lot,” he said. “We don’t get a lot of claims, though.” Consumers are used to fast, efficient service in their online purchases, and furniture retailers need to meet those expectations.

“Amazon has created expectations online that impact our industry. Our mantra is ‘fast, on time, clean,’” said O’Hanlon at Wayfair. “’Fast’ is that people see a good chunk of our assortment leaves in one or two days. ‘Ontime’ means you make sure when you say it goes, the customer expectation, matches reality. ‘Clean’ means managing the last mile.” He added that expectations created in other sectors are just about impossible for furniture, noting shoe e-tailer Zappo’s willingness to take return on multiple pairs of shoes no questions asked: “I think people get that they can’t order even sofas and the return six you decide you don’t want.”

That’s one reason the quality and depth of information available to the shopper online is so important. Say a shopper orders that sofa, but it didn’t look they way she thought it would after she saw it on a Web site. “We’d rather turn down a sale than sell something that’s awful for them and awful for us,” O’Hanlon said. “If it’s a distressed item, make sure the customer knows what that means. You don’t want something returned because it looks the way it’s supposed to look.”

PLAYING CATCH UP

Nigam said MicroD wants to make the ecommerce roundtable a regular event. He also suggested an online forum on the topic. “It’s not too soon, it’s almost too late to have this discussion,” Albanese said. “Gen X and Gen Y have said they don’t want to shop in a traditional furniture store. This isn’t a cutting edge conversation, it’s not bleeding edge. It’s healing edge. Only if (vendors and retailers) do it together will it work for the consumer. I think of how much of this business is moving to other channels because we’ve been slow to react.

Online Branding

TRANSLATING, PROJECTING YOUR BRAND IN THE ONLINE WORLD

Cooking with E-tail

The sheer number of eyes that can see a brand through an online presence creates both opportunity and challenge. The plus side is the exposure to potential new customers. The challenge: Those shoppers could be anyone from bargain basement price shoppers to a couple planning to create the home of their dreams. How do you tell your story online to attract the customer that’s right for you? Four Hands, for instance, has built its brand as a hip company largely through its market showroom atmosphere, which many retailers like to replicate on their on floors, according Mike Bullock, vice president of marketing. The company wants to figure out how to do the same thing on the Internet. It’s a work in progress.

“We’ve experienced a lot of growth by nailing down our showroom experience,” he said. “When people in the industry walk in, they get it, but doing that online is a very different proposition. “How do we take that showroom experience, where we’ve developed a strong skill set, and translate that (online) to inspire consumers?”

Sherrill Furniture has multiple brands in all categories, and offers a huge range of custom finishes and fabrics. The company looks to protect—and build—its brand online by teaming with retailers who will honor its pricing policies and work to project its custom story. Sherrill looks at what high-end brands outside the furniture sector are doing online as well. “By being online with the right partners, we build our brand presence,” said Tim Bohon, executive vice president of sales and marketing. “There are going to be winners and losers here, and we approach that from every angle. We look at BMW and see how they present themselves online.” Hooker Furniture feels having its goods available online is critical to its long-term success, but wanted to leverage relationships with its retail partners and help them establish an e-commerce presence.

“We decided that whatever we did had to help our retailers make the transition to e-commerce,” said Johne Albanese, vice president of corporate marketing. “Our product had to be on sale online through pure-players or traditional retailers. “Independent retailers were shrinking, and we felt part of that was because they didn’t take advantage of their proximity to the customer, who usually likes to buy locally … Forrester Research reported that 83 percent of consumers who can’t find a price on a Web site just leave.” P3’s reliance on retail partners—who have the infrastructure to service the sale—also protects Hooker’s brands. “Our focus was to acknowledge a retailers control of their ‘ground space’ and give them control of their ‘air space’ locally,” Albanese said. “I can say as a former online dealer that nobody bought a stick of furniture they hadn’t seen somewhere else.” A second belief central to P3 was the importance of education— a knowledge and understanding of the real cost of managing on online business, and offering a way to manage that business.

Albanese also would welcome the participation of other manufacturers in the P3 platform. “You can have seven guys in the same town doing e-commerce,” he said. “We have a way to get these retailers engaged in a local-focused, omnichannel program.” A big surprise during the development of P3 was how many retailers had no digital media presence. “When we got them to do digital ads, site activity increased 10 times; and cart activity 50 times,” Albanese said. Samson Marketing CEO Kevin O’Connor observed that a brand can’t be everything to everyone; and that whether a retailer or manufacturer, working with the right partner—store, vendor or carrier—will affect the way consumers view your brand.

Consumers don’t depend on advertising for inspiration, Four Hands’ Bullock said, and furniture companies have to get proactive in that regard. “They’re getting it from a global perspective,” he said. “How consumers make their decision is dramatically different from in the past. … They’re influenced from all over the place. How do we become an influencer?” He noted that many companies in the furniture industry traditionally gauged success by the sheer number of accounts sold.

“You’ll be forced to make choices, and then it becomes a less complicated problem than trying to be everything to everybody,” he said. “Who you choose as your partner, whether you’re a manufacturer, a marketing company or a retailer, is critical to your brand. You need a shared ideology.”