From Home Furnishing Business
Though the category has become much broader than the basic inner spring model, this familiar means to an end is still the most popular selection among consumers based on a FurnitureCore, Inc. survey developed by Impact Consulting Services, parent company to Home Furnishings Business. Of consumers that recently bought a mattress, 52.27% reported buying an innerspring model. This number is followed by memory foam at 40.91%, air (like Sleep Number) at 4.55%, and the most expensive, but durable solution, latex, at 2.27%.
With the circulation of the many ads on social media regarding new and exciting mattress products, familiarity and excitement surrounding sleep innovations will allow the consumer to increasingly branch out from the most basic models. In this pandemic economy, word of mouth has been more important than ever as many consumers are weary of leaving their homes to try out mattresses in person. One of the leading innovators in the field, not only in innovation, but also recommendation by word of mouth, is Intellibed, who has earned the coveted 2021 Women’s Choice Award for their excellent customer recommendation rating. Colin House, CEO at Intellibed, gives the insight behind the award winning technology, saying, “Intellibed’s Gel Matrix is the most innovative and technological breakthrough in beds since the invention of memory foam in the early 1990s. Gel Matrix technology, originally used (and still used today) in professional medical environments to bring comfort to burn and long-term patients, is scientifically-engineered to provide both a firm and soft sleep surface at the same time, reducing pressure points. The Intellibed Gel Matrix mattress provides retailers with a unique selling proposition to help them increase per-square-foot profits and elevates the shopping experience for every critical store visit.”
The fact that consumers are aware that mattresses should be replaced every few years keeps the category at the top of mind. Depending on several factors involving sleep patterns and the type of mattress purchased, the life span of a mattress may vary. But most important is the consumer perception of how often their mattress should be replaced. Based on the same consumer survey, the majority of consumers, 54.55%, believe a mattress should be replaced every 6-10 years. 11.36% of consumers believe that a mattress should be replaced every 5 years and will continue to invest in new mattresses until they find a solution to suit their needs. Of the remainder of the group, 27.27% replace their mattress every 11-15 years and 6.82% replace them between 16-20 years.
The year 2020 certainly brought about many disruptions in the industry with the mattress category significantly affected, but experienced a recovery late in the year. Margins placed on product can significantly boost retailer average ticket to help them over the slump. Manufacturers, such as Malouf, have product proven to do just that. Says Eric Holmstead, director of North American sales, “Our best-selling Wellsville Gel Memory Foam Hybrid provides a high-end feel and price point without the National brand cost, allowing retail partners to capture significant margin with placement on their floor.”
Though sales have been boosted through Q3 of 2020, product delivery is still being impacted at the retail level. Many retailers have expressed their challenge to receive product, but few manufacturers are situated perfectly to meet the demand. Shaun Pennington, president of Diamond Mattress, explains his company’s unique ability to satisfy demand, saying, “As a vertically integrated U.S. manufacturer, Diamond Mattress is delivering products on time nationwide while avoiding many of the supply chain issues the industry is facing. The ability of U.S. producers like us to innovate and create more value for retail programs continue to make bedding a strong and growing category for furniture and mattress retailers.” Cheers to 2021 and the hope the year brings as we inch closer to our new normal with product innovations, supply chain solutions, and with the help of a good mattress, some deep sleep!
Many also reported, not just that they liked working remotely, but also getting away from the frantic lifestyle of a big city. There has been a lot of discussion in the media about the pandemic causing an exodus of people from big cities as more companies are looking at “working from home” as a viable, long-term solution. Early evidence suggests many families are already exploring alternatives. A late summer 2020 survey by Redfin, the home listing company, shows that before the pandemic, 37% of its online searches were in urban areas, but only 19% during the pandemic. Suburban area searches grew from 43% before to 50% during the pandemic. And perhaps, most shocking, 9% of the online searches prepandemic were rural areas compared to 19% during COVID-19 (Figure 1).
Redfin also reported that 29% of people looking for homes on its sites in the third quarter of 2020 were looking to move to a different city.
It is still too early to tell if the shift out of the urban areas will occur or how it will affect small markets. For decades smaller markets have seen steady decline across the country with population shifts to bigger markets. Despite the losses, many small markets are continuing to produce steady furniture industry sales. This month Statistically Speaking dives into the segmentation of markets by furniture industry sales looking at population shifts and employment and income growth with focus on the trajectory of small cities.
Small markets include small MSAs (under $50 million in furniture industry sales), micro statistical areas, and rural areas. These markets represent 18.4% of the U.S. population (2019), and include 68.6% of total counties. Small MSAs equal 29.5% of the total 404 metro areas. Of importance to the furniture industry is that small markets account for 14.2% of personal income as of 2020 Q3, but only 11.6% of furniture industry sales (Figure 2). Furniture Industry Sales As shown in Table A, the top 28 markets, contributing over $1 Billion each in furniture industry sales, make up 40% of the total industry. Mid-to-large MSAs, between $50 Million and $999 Million, contribute almost half (47.7%) of furniture industry sales, and smaller markets under $50 million make up the other 11.6%. All markets size segments increased in furniture industry sales each year since 2017 (Figure 3). However, growth varies significantly by individual MSA. The combined growth diminished slightly between 2018 and 2019 with many retail size segments – large and small – falling below a 5% increase. Despite the pandemic, 2020Q3 YTD combined sales in all retail sales ranges are above 5% growth with the exception of rural areas at 4.9%. The impact of Federal stimulus on this growth is unknown at this time.
Figure 4 shows a sample of key performing markets within these market size segments. Excluded are markets where positive industry growth may have been impacted by one of the many natural disasters seen in the past two years. Small Market Population Shifts While the population of the United States grew swiftly over the last 60 years, not quite doubling, the actual share of the population living in small markets did not change as much as one might think. Table B shows small markets lost only seven points in population share. However, because of population growth, these same small markets gained almost 15 million people 1960 to 2019.
Since 2010, population growth in general slowed. Over the last five years, large markets saw the most growth (over 4%) (Table C). Small markets struggled to maintain the current population levels. Rural areas began losing population gradually each year, and since 2014 lost 0.7% of its residents.
Over a third of the U.S. population lives in only 183 counties out of a total 3,142 (Figure 3). These 28 markets (MSAs) combined are the fastest growing in population – up 4.2% from 2014 to 2019. Meanwhile, the slowest metropolitan population growth occurred in MSAs under $50 Million in furniture industry sales. Markets with $25 Million to $49 Million in sales increased population by only 0.7% and those under $25 million just 1.3%. And over the last 10 years, rural areas gradually lost population for the first time in history. Table C and Figure 5 show for the five-years 2014 to 2019, rural areas lost almost 1% of its residents.
One of the biggest problems facing the furniture industry is the slow and often negative population growth of future prime furniture purchasers. Millennials are expected to take up some of the slack over the next 10 years as Baby Boomers continue to age out of prime furniture buying years. Table D shows the Millennial population now fully into adulthood with ages 25 to 34 years growing 5.7% over the last five years. On the flip side, the heart of the Baby Boomers (ages 65 to 74 years) grew by 19.5% 2014 to 2019 which in turn reduced the 45 to 54 age group populated by the smaller size of Generation X. This affluent cohort remains strong furniture buyers.
Figure 6 may cause many industry retailers to panic seeing the dramatic shift from 2014 to 2019 in the population age groups in the different sized markets. Some examples:
• Low U.S. birth rates reflect the negative growth in all markets for the 0 to 9 age group.
• Smaller markets show negative growth in almost all age groups up to 25 years old, further reflecting on the long-range future of these communities.
• Millennials are firmly entrenched in the larger markets over $50 million in industry sales.
Coming out of the Great Recession, employment grew rapidly through last year – up 7.3% for the total U.S. from 2014 to 2019. However, this year the pandemic lowered U.S. employment to 2015 levels as of October 2020. From 2014 to 2019, employment grew rapidly in the big markets - jumping over 9% in markets with furniture industry sales above $500 Million. As with population growth, increases in employment grew at a slower rate (roughly 3%) among smaller markets. Conversely employment growth in smaller markets did not fall as far as bigger markets from December 2019 to October 2020 (Table E).
Alongside employment, personal income grew rapidly for all market ranges between 2014 and 2019. Not surprisingly, the two biggest market segments showed the highest growth at 26.8% and 28.5% respectively. Markets ranging from $50 Million to $499 Million had income growth between 20% and 23%. Rural areas and markets with industry sales from $25 Million to $49 Million ranged in income growth from 13.8% to 17.6% over the previous five years (Table F). If furniture industry sales in smaller markets had kept up with these cities’ income levels, they would have gained an additional $2.4 billion dollars in industry share.
Questions remain: Can the bleeding be stopped in smaller markets? Will younger people and families be enticed to flee the big cities for a different lifestyle? Is the “work from home” or “work from anywhere” really a revolution or just a pandemic blip in our economic history? Small markets need a hook – either vacation spots, rural scenic areas, or cities where the drive into urban workplaces one or two days a week would be doable.
I am fast approaching the 50th year of my post college business career. Most of the first five were in retail management and the other 45 years have been spent working for three companies in the furniture industry: Kroehler, La-Z-Boy and Impact Consulting Services. Over the years I played many roles and had a lot of different titles. During the first half of my career most of my responsibilities involved selling, developing, merchandising and marketing furniture products. Later my focus became more on teaching and training people about these areas in both the wholesale and retail arenas. I have had the opportunity to work with a ton of people throughout these last five decades, most of which had information to give, opinions to share or lessons to teach. But as my Dad indicated not all of them offered advice that was worth taking. Luckily for me, many of them did and over time I became better and better at figuring out who to listen to and who to ignore. I also realized that many authors and famous people have passed on a great deal of wisdom in their works that can help move the needle too. As a result, much of the success I have had was because I got good advice from people who knew what they were talking about. So, I thought that it may be helpful to those who take the time to read my column, if I offered a few examples of good advice that helped me win a few battles over the years.
Learn how to sell what’s in your bag My first position in the industry was as a sales rep for Kroehler Manufacturing, who at the time was the largest furniture maker in the country. I was probably a bit cocky, as new kids often are, and initially hung around with similar young reps in the “Bullpen” at markets and shows. We would spend our time criticizing the product line and complaining about what was missing, poorly designed or overpriced. Luckily, one of the “old-timers” took a liking to me. He pulled me aside one day and told me that he thought I had the potential to be a success, but I would never make it until I learned how to, as he put it, “sell what’s in your bag.” His good advice was to stop wasting time with losers talking about what we did not have and find some winners to teach me how to sell what we did have. That was a turning point for me, because with his help and the help of others, I was able to refocus my efforts and ended up setting some sales records, which got me moving up the corporate ladder. The lesson here is to resist the temptation to complain about or criticize what is not and concentrate on doing the best with what is.
Find out who to be important to and make yourself important to them My coaches also made it clear that you could not be successful trying to sell a branded line like Kroehler to every dealer in a market. If they all had it, then price would become the competitive weapon of choice and that would diminish the product’s value and kill the line. He told me to study each market in my territory and determine which would be the best store with whom to partner. Then do everything I could to make my company and myself important to that dealer. This is wonderful advice for whatever a person does because we all have to sell ourselves and our ideas to succeed and it is certainly best to make sure you are targeting the best people or companies with your efforts. The most interesting thing about this advice is that it was also the philosophy that Pat Norton brought to La-ZBoy when he began building that company up to greatness in the early 80s and that ended up being my next career stop.
Salespeople are more important than buyers and owners Another thing the “old-timers” told me was that even though it was critical to sell the buyers/owners on flooring and promoting my products, the most important target to win over was the sales staff. They are the ones that make or break the success of a line on the selling floor. If they do not understand or like your products you will fail. If they do not trust you or your factory to deliver as promised, they will avoid presenting your line. As a result, no matter how good a value it presents to the consumer, you will never maximize your sales in the store. Therefore, providing information, communication and motivation for the salespeople was ultimately the biggest key to success. Find out what they want and make sure they get it. That along with great donuts, bagels and pastries for the sales meetings proved to be the differentiator for me at many good accounts! The moral of this story is to always find the key people that will deliver the end result you seek and make sure all your bases are covered with them. Never ignore problems, they will not go away by themselves!
As an extension of the point above, I was taught that the sale does not end when you finalize the order. Indeed, a sale is an ongoing process that does not end until everyone in the process, particularly the end consumer, is happy with the result. You must take ownership of the process and the outcome to make sure that every step is completed on time. When and if a problem or delay happens, winners communicate and then facilitate the best result possible, while losers ignore the situation as if it is not their issue. There is no better way to lose the respect of a client than to run from conflict and leave them to take care of it. This is true not only in sales but in every facet of life – be a problem solver who steps up when needed and you will be a trusted partner.
People make decisions based on what they value A common piece of advice presented at every leadership course I took or seminar I attended, dealt with the fact that it is what a person values that drives the decisions they make. Good values tend to lead to good decisions. As a leader, one of the most meaningful things you can do, is to make certain every member of your team shares the same core values and that their goals are in line with those values. Everyone in the group may have a different role, but if they share the same values, the team has a much better chance of being successful because each person will make better decisions throughout the entire process. This is also critical to being a parent. In a very real sense, your main task as your children grow from baby to toddler, then adolescent and teenager, is to instill in them the right set of values so that when they leave home and you are not there with them, they will make the right decisions and have a good life as a result. I can’t think of a more critical role that we play in life than that!
Good judgment comes from experience, and a lot of that comes from bad judgment This piece of advice came from cowboy philosopher, Will Rogers. I believe this statement is right on and reflects a basic fact about how people can learn and grow from mistakes. Life is full of ups and downs, good days and bad days, plus successes and failures. There are many great quotes from Edison to Einstein about picking yourself up after you fall, learning from your errors and growing as a result. What Will is specifically pointing out is that we will all make bad decisions, but out of them will come new knowledge and positive outcomes. I have used this in the signature on most of my emails since I became a consultant 15 years ago, because I think it is our role to help our clients use good judgement, so they avoid bad experiences.
If you find yourself in a hole, stop digging This is another piece of advice from Will Rogers. It is pretty self-explanatory, but I think the bigger message is to always know where you are and where you are going. Should you find you are not where you want to be, stop, look around and decide what you need to do to get going in the right direction. Do not be too stubborn to go back and start over either.
General Schwarzkopf’s Six Points of Leadership
As a special bonus, here is some great advice shared by this famous leader at a seminar on leadership I attended. This was in one of my columns a few years ago but is worth repeating!
1. Things will not improve until you admit that something is wrong.
2. Set Goals – Pick goals that everyone can understand and know their roles in achieving them.
3. Demand High Standards – Let people know what is expected from them. People will rise (or sink) to the standards you set.
4. People work to succeed – Let them know how success will be measured.
5. Recognize Success – Also accept mistakes, “Latitude to learn, NOT Freedom to fail”.
6. Power Down! – Do not tell people how to do their job. Give parameters, give standards, give authority— tell them WHAT to do, then let them do it. Weak leaders lack confidence in themselves and thus their people.
Those who are too proud to accept advice when it is offered, will never maximize their results You will never be so smart that you cannot listen and learn. A final piece of advice from yours truly.
The obvious question is, “What happened to furniture stores’ share of the rebound?” The answer is that it is in the BACKLOG. At the end of September, on average, stores had a 10-15% backlog. In other words, you just need to ship.
You just thought to yourself, “easier said than done.” While enduring all that the last six months has delivered you need to sprint to the fi nish line to make your year. The task of securing merchandise while minimizing cancellations will be more of a challenge than coping with the shutdown and subsequent reopening. Finding and motivating a workforce will increase in diffi culty. However, the industry is up to the challenge. While facing this challenge, we should consider why the other distribution channels that have a 52% share of market already have recouped last year’s shipments and more. A topic for further discussion.
Slowly consumers returned to shopping at regular home furniture stores, not so much in quantity, but with a commitment to purchase leading to higher close rates and average tickets.
Higher WRITTEN SALES
averaging more than 50%— and at times doubling the same week last year—created an exuberance along with a fatigued sales team. Beyond what was obviously pent-up demand, there was a feeling that consumers had rediscovered their homes and would continue to allocate disposable income to home furnishings. The statistics supported that optimistic outlook. According to consumer personal expenditures (CPE), furniture has rebounded, recapturing the loss in March/April.
To better understand this shift, FurnitureCore, Inc., parent company to Home Furnishings Business, conducted a national survey of consumers who purchased furniture after March of 2020 to those that purchased in 2019.
Without a doubt, the COVID-19 pandemic caused a seismic shift in the consumers’ lifestyle. In general, our focus moved toward the home and away from travel. The benefi - ciary of this shift has been furniture along with other large purchases that had “stay at home” appeal. The most immediate need was home computers to address the transition to virtual learning and working from home (56% increase) and communication (29% increase). Leisure travel declined (3%), but not as much as the purchase of new cars. Table A compares the ranking of importance with “1” being the most important of five major purchases.
The belief is that once the immediate need for computers and communications are met, there will be a continuing shift to the importance of furniture.
As with most major purchases, the acquisition satisfi ed an internal need as well as an external statement to friends and acquaintances. After the pandemic, the external satisfaction has become more important. As can be seen from TABLE B, the external statements have become more important, such as refl ected by the consumer’s sense of STYLE and PROSPERITY.
Over the past twenty plus years, acquiring home furnishings has migrated from the “lady of the house” to a more joint endeavor. Interestingly enough, with time on their hands, the male has pursued furnishings with a passion. Table D compares the before and after.
This trend could be significant considering that males are more inclined to purchase online. There has been a sizeable shift in who initiates the furniture purchase. Again, the male leads the way as can be seen in Table E.
This is a signifi cant change that will impact how furniture is advertised. What are the advertising messages that will infl uence the male compared to female? All of this will be addressed later.
With this shift in the buying process, was there a change in the basic motivation for the home furnishings expenditure? The change in lifestyle dictated by the pandemic has created a surge in home purchases. As can be seen in Table F this surge has been refl ected in purchases instigated by recent moves and remodeling.
A special note should be made in regard to a signifi cant increase in buying for the second home. Free from the constraint of working at the physical offi ce, consumers escaped to the mountains and the seashore.
Following the trends of the previous fi ndings, the male overwhelmingly ventured out into the new world of shopping using a mask and following social distancing recommendations. Table G presents the statistics.
The survey fi ndings supported the anecdotal evidence that consumers turned to the Internet to conduct research before venturing out to the stores with 56.37% indicating the Internet was the fi rst step in the buying process, up from 47.98% the year before. Traditional advertising, such as television, newspapers, and magazines declined to be replaced by recommendations from friends and relatives. Table H contains the breakdown.
This finding was substantiated by a national sample of traditional furniture retailers’ unique visitors to their website.
However, note the trending down of visits to the Internet after Labor Day. Should we have concerns? After the initial shock of being sidelined by being designated as “non-essential” independent retailers fought back and retained their share of the consumer demand. However, the Internet gained a signifi cant share of the market. Table J presents the statistics.
It is interesting to note the loss in the lifestyle stores and regional chains. A contributing factor could have been the length of time stores were closed initially. Owner/operators are more driven to keep the doors open. Contrary to popular thought, after the pandemic shutdown the online home furnishings customers were not first-time online purchasers based upon this national survey.
No matter the experience level of the online purchaser, the concerns were the same, but the inability to “see and touch” was amplifi ed during the shutdown.
The impact of the pandemic has not been refl ected in how far the consumer is willing to travel to purchase furniture. However, in recent years as furniture retailers have added locations to make it easier for consumers, the concept of furniture shopping being defi ned as “destination” has all but disappeared. Across the nation in large and small markets 10-24 miles is the norm. Table M illustrates.
If the distance driven has not signifi cantly decreased, the time spent shopping has begun to decline. With 57% of consumers fi nishing the process in less than two weeks, this indicates the furniture retailer must be prepared to close the sale. This points out the growing necessity to begin the selling/ buying process on the phone with a more interactive retailer website using “chat” and email. Table N illustrates.
This reduction in time spent shopping has been driven by a reduction in the number of retailers shopped. The trend to fewer retailers shopped driven by increased pre-shopping research on the Internet will be accelerated by the pandemic as can be seen from Table 0.
In this period of intense demand, the reputation of the manufacturer has surged in importance (15.4% – 21.89%) and is indicated as most important while perceived quality and design declined as a purchase motivator. Price increased slightly. Table P provides the statistics.
It should be noted that general merchandise retailers, such as Big Lots and Target, are selling reputed brands like Broyhill. Obviously with the disruption, new requirements have become necessities. In the retail experience, consumers ranked the importance of these new requirements and confi rmed that the use of masks was most important compared to the other requirements. Table Q summarizes.
With all the noise around the signifi cant changes in everyday living, furniture retailers are perceived to be doing a good job by more than 50% of the consumers. However, we should have some concerns when we compare independent furniture retailers to the Internet.
Our challenge is to reestablish brick and mortar to provide the best consumer experience. Systematic changes provide opportunities.