The conversation around this category tends to focus heavily on its features—voice activation recline, cup holders, USB chargers, and the like. While these features are undoubtedly important, today’s conversation needs to shed light on topics we are currently grappling with like the pandemic, low stock, and tariffs. Are manufacturers stepping up with solutions? One manufacturer’s approach is enlightening, though their techniques are not exactly new to the company. According to Anthony A. Teague, senior vice president of sales and merchandising at Jackson Catnapper, “In the wake of the coronavirus pandemic, dealers are more reluctant to import than ever. Domestic supply has become more important to our retailers across the country.
Fears over the growing tension between the U.S. and China has raised concerns of long-lasting tariffs. Also, our customers don’t want the risk of tying up cash for months with imports as they begin to rebuild their businesses. Providing a stateside alternative to import leather motion - with cleaner looks, luxurious Italian leathers, and aggressive pricing - has allowed us to gain significant share in the category.”
Considering the tumult that has defined our year thus far, consumers are purchasing furniture via retailer websites, by appointment, or as regular walk-in traffic where possible. Many retailers are seeing record-breaking sales results while juggling supply chain and delivery issues. This brings us to the ultimate question: what are consumers looking for in their motion furniture purchases? Luckily we can lean on a FurnitureCore, Inc. survey developed by Impact Consulting Services, parent company to Home Furnishings Business, to address exactly what consumers want.
According to the survey, consumers were asked which mechanisms are preferred as a reclining method. The results were hand operated (lever) models at 53.33%, followed by power operated models at 33.33%, and body pressure, or push back models, coming in last at 13.33%. These preferred mechanisms seem to be price driven as the same survey also polled consumers on how much more they would be willing to pay for a power recliner as opposed to a manually operated recliner. The top response was only $50 more at 37.5% of surveyed consumers. 25% of those surveyed would pay $100 more for a power reclining model, 12.5% would pay $150 more, and the remaining 25% would pay $200 or more for power options.
Ultimately, the consumer must understand the value in power and motion products: comfort. Says Gentry Long, vice president at HomeStretch, “Our custom comfort collection continues to excel on retail floors. Consumers in the market for motion furniture expect exceptional comfort, a durable covering and unique function.” When consumers are shopping upholstery, the retail sales associate must make them aware of their options. The same study conducted by FurnitureCore, Inc. found that only roughly half of consumers are informed of the reclining and power options available in an upholstered product. Let’s drive those average tickets up by highlighting the great advances in the power and motion category!
The purpose was to reduce the public’s inter-personal contact and slow the spread of this dangerous virus. Many furniture retailers continued to do business online or through limited contact personal appointments in the showroom. By late May, and through the middle of June, most stores were allowed to reopen to customers with many rules and restrictions in place. I am not here to debate the effectiveness of what was done. Indeed, given the warnings of the potential for a second wave of cases this fall, it will be some time before we know when and if we will ever get past this threat to the world’s physical and economic health.
We have only gone through what is probably just the first phase of this crisis, with many more challenges and learning curves yet to be encountered. After going through an experience like this my recommendation would be to look back and see what we can learn from it. They say hindsight is twenty twenty, and I certainly do not claim to have all the answers, but I think it would be a valuable exercise to review some of what happened as we came out of the lockdown and then present some thoughts about what we might want to consider doing going forward to survive and hopefully prosper in the “new normal” that is sure to follow.
Here are a few observations from the retail clients we serve pertaining to their experiences in May and June followed by some recommendations for things to consider going forward.
Many of the retailers we spoke with at the beginning of the pandemic felt that the year would be ruined, and it would take a very long time for business to rebound. I personally felt that would not necessarily be the case because we heard the same comments after 9/11. Yes, stores were empty for a month or so while people hunkered down and recovered from the shock of that disaster, but then our industry had the best quarter we had ever seen. Why? People want comfortable and attractive homes and when they end up stuck inside, they realize things could be better so home furnishings and home improvement businesses tend to do well as they come out of hibernation. Here are some of the comments we heard:
- Many home furnishings retailers had near record or better numbers for May, even if their stores were closed for the entire month. One retailer said, “I’m happy to report that May was a record month for us. We were 34.9% above last May.”
- This was achieved with almost no advertising other than online. n We also heard from many that limited hours and appointments worked very well. One owner said, “We had the largest two weeks in our history even though we were still only handling appointments during the last two weeks of May. From May 15-June 14th we did the largest volume in any 30-day period in our history.”
- Another group of retailers told us that traffic was down, but business was up. The stores were able to set appointments for the first half of the month and then opened-up to the public for the second half of the month. Traffic was down from last year, but sales ended up 24%, due to a big increase in Revenue per Up driven primarily by the appointments.
- Others saw increased traffic saying, “Traffic was up 20.7%, Sales Volume was up 45.2%, and Revenue per Up was up 20.3%. It was a record month!”
- One store that could not open until later in May, reported that their online sales grew tremendously—over 800%. The first half of June was still strong. Here’s what we heard from retailers:
- June is up about 35% so far, traffic continues to be good and Close Rate and Average Sale are way up.
- June MTD is 107% up, traffic is up 66%,
- 20% increase written sales from June 2019, traffic 10% down from June 2019
- Up 100% in written sales over last June same week
- Up over 40% in written business, even after being closed for first seven days. Conclusion: The world has not ended, and there is plenty of business to be done. However, the big question is how long it will last, and what can we do to make the best of it in the future?
- Appointments will be more important than ever! Traffic may shrink again after the initial lockdown needs are filled. With less people likely to visit stores, appointments must be part of salespeople’s business plan – they cannot just live off the door traffic like they are used to doing. The crazy thing is that for the last thirty years every great sales trainer and all the best programs have stressed how critical making appointments is to maximize your business. Every business professional, from real estate to medical, sets up appointments to prepare the client and themselves for the best outcome possible. Literally every salesperson that has ever had any training has been told this, but very few do it and those who do are always the top writers on the fl oor. Perhaps one outcome of this crisis will be that more of your staff will increase their eff orts to make appointments and build their client base. It may be necessary to survive.
- Virtual house calls will be the new norm because in-home visits will be less desirable! We have watched the growth of in-home business in most furniture stores, even those not traditionally known for design work. I believe that the market for this and personal shopping services, like we reported on in the May/ June issue will grow even more as a result of the pandemic. However, a large segment of the population may not want in-person visits to their house to get it done. Therefore, every store must develop a Virtual House Call Program that delivers the same results without an actual visit. Here are a few items that will need to be addressed in order to develop a Virtual House Call Program in your store. It is by no means complete, but it will get you thinking in the right direction.
- Sketching skills will be vital. Just like selling on the fl oor, the ability to create a working drawing of the room being developed is critical. It is the center point of your eff ort and the major note taking/ record keeping vehicle you will use. Since you will be exchanging ideas and developing plans remotely, it is even more important to be able to put your design thoughts into a picture the client can see and understand.
- Online room planning apps will be critical to sharing ideas. While sketching is still the best way to develop and present ideas on the fl y, to be successful doing virtual house calls, it will be necessary to use a quality online room planning app or other such software that can create PDF fi les or pictures that can be exchanged with the client as the project progresses. Find one that is easy to use, provides all the functionality you want and has a good training/support function included.
- Learn to work from pictures of rooms. Since you will not actually be visiting the room you will be working on, you must become profi cient at using pictures to develop your design recommendations. This will include advising the client how to take the shots you need, and also the best ways to provide measurements needed for the project. There is also software becoming available that will enable you to actually show a piece you are considering in the room, which would certainly be a big plus for you to use.
- Enhanced e-mail skills will be vital. The main communications vehicle that will likely be used to exchange ideas and images will be e-mail. It will be vital that you become comfortable with all if its functionality. You should also make sure your writing technique and terminology are as professional and precise as they can be.
- Romancing the product on the phone and via e-mail will be critical. Since the client may not come to the store to actually see, feel and touch the products you recommend, you will need to be able to describe them in terms they will not only understand but can also easily visualize. This is important in the store too, but even more so when selling on the phone or online. Parting Thoughts Here are a few additional things you may want to consider:
- Social media will be even more important. People who are spending more time at home will rely more on social media for inspiration, reviews, communication and shopping.
- Know where your audience hangs out online (Facebook, Pinterest, Instagram, Houzz, etc.) and consider using those channels to make contact. Be visible in the online community and pay att ention to the analytics; watch what gets likes, comments, etc. Remember to use lots of photos and videos and share exciting ideas.
- Brands, magazines, and design shows will be very important as more and more people get their ideas from them – refocus some of your advertising dollars to give them ideas, not just prices.
- Online auctions, design seminars and other outreach eff orts will be more meaningful to the home-bound consumer.
- Join Facebook follower groups for the most popular home reno and decorating TV shows. Read the fans’ comments to gain insight into current trends by studying what they like and do not like.
- Stay away from political discussions this election year. However tempting it will be, it is never a good idea to share political views with a potential client. We have made it through the fi rst phase in our fi ght against COVID-19 and the havoc it has wreaked, but there will be more to come. Hopefully these ideas help you survive and prosper in the second half of 2020.
As job losses mounted, many consumers cancelled, restricted, or redirected their spending. While the unemployment rate did improve 1.4% in May as stores and companies began the process of reopening, unemployment was 9.7% higher compared to May 2019. In addition, Consumer Confidence was still down 47.5% and the stock market remained wildly unstable. In this article we dive into the impact of three months of the pandemic on consumer spending and retail sales for March, April, and May, comparing the level of impact on different consumer categories. The article also strives to quantify the advantage given to online retailers and brick and mortar stores deemed “essential”, and the devastating impact that advantage has had on brick and mortar businesses forced to close.
The decline in consumer spending for furniture and home furnishings was considerably less than the plummet of retail sales for brick and mortar furniture and home furnishings stores. The difference centers around consumers taking to the internet like never before as well as warehouse price clubs (Sams/Costco) and big box stores (Walmart/ Target) being allowed to stay open while retail furniture stores and other brick and mortar stores deemed non-essential were forced to close. As shown in Table A, with the exception of total retail sales, the steep decline began in March when a majority of the country shut down by mid-month. Propped up by online sites and “essential” brick and mortar retailers, total consumer spending decreased only 6.6% in March, followed by an additional 12.6% drop in April, but rebounded 8.2% in May as businesses began to reopen.
While consumer spending on furniture and home furnishings suffered greatly from March to April (-17.2%), retail sales from furniture and home furnishings stores forced to close dropped a record 50.6% over the same time period. After many closures were lifted in May, sales in furniture and home furnishings stores responded – jumping 98.4% from April to $7.7 billion. And while this jump almost doubled sales over the previous month, May was still 23.4% below May of last year. Consumer spending on furniture and furnishings in all retail channels increased 29.4% in May compared to April. Consumer Spending (All Channels) by Product Type
In March, consumer spending on durable goods stalled almost immediately as most consumers curtailed spending out of either necessity or caution (Table B). Dropping 12.4% the first month of the pandemic, spending on durable goods decreased another 12.4% in April, before jumping 28.6% in May. Due to a massive rise in grocery sales during March as consumers stocked up, consumer spending on nondurable goods increased 3.9% before dropping 14.0% in April. Spending on nondurable goods increased only 7.7% in May. Not surprisingly, as the shelter-inplace orders began, consumer spending on services decreased down 8.9% in March and another 12.2% in April. May increased 5.4%.
Consumer spending on furniture declined 9.5% in March and another 18.3% in April to an annual rate of $99.5 billion. In May, furniture consumption increased 32.8% (Table C) as consumers fled to newly opened stores. Smaller home décor purchases often made over the Internet like clocks, lamps, lighting fixtures, and other household decorative items, still declined 9.5% in March and another 15.9% in April. Numbers in May were up 15.5%. Carpets and other floor coverings fell 17.6% in April and spending jumped 50.4% in May.
Appliances, televisions, and other household consumer purchases also took a major hit during the first months of the pandemic as shown in Table D. Consumer spending on major household appliances fell less than other home products as major home and garden retailers, like Home Depot and Lowes, were able to stay open. Major appliance spending declined 9.3% and 6.2% in March and April before increasing 16% in May. Initially decreasing just 6.2% in March, spending on televisions dropped 11.1% in April before increasing 16.1% in May.
Only falling 3.0% in April, the tools and equipment for the house and garden category fared much better during the quarantine, as many consumers spent time working in their yards, again as building materials and garden stores were deemed “essential” and allowed to remain open. Spending in May was up 12.6%
Consumer spending on personal computers/tablets and peripheral equipment grew 4.6% in March due in part to online learning for students and much of the workforce having to work from home. While spending on telephone and related communication equipment, including cellphones, tanked in April compared to March (-29.7%), consumer spending growth on cellular services remained flat (Table E).
Initially, consumer spending on groceries jumped 23.0% in March before dropping 12.2% in April. Growth eased up in May increasing 3.2% over April. Spending on restaurant and fast food meals declined sharply beginning in March down 25.4% from February and continuing through April (-30.8%). As restaurants opened in May, growth jumped 24.6%. Clothing and footwear, despite the Internet, also took a huge hit as consumers curtailed much of their spending in March and April – down 28.8% and 28.6% respectively. Interestingly consumer spending on newspapers and periodicals did show an increase throughout the pandemic as many people turned to reading as a way to fill their extra time – up 5.5% in March, 10.2% in April, and 10.8% in May.
Retail Sales by Type of Store Overall retail sales were up 3.9% from February to March before falling 12.4% in April. Total sales rebounded in May by 21.9% as stores reopened but were still 3.4% less than May 2019 (Table G). Furniture and home furnishings retailers felt the brunt of store closures in April – dropping over 50% to $3.8 billion in sales. While retail sales were up 98.4% for those stores in May, sales during May 2019 were still 23.2% higher. Non-store retailers (e-commerce and mail order), had positive growth throughout the pandemic as most consumers turned to online shopping. Warehouse clubs and supercenters comprise about 70% of the general merchandise stores category. Not surprising, this category which for the most part was considered “essential” and allowed to keep doors open, increased by 17% in March before decreasing by 14% in April and then evened out in May – up 14%.
With many consumers quarantined and home during March, April, and into May, sales from the “essential” building material/garden equipment retail stores grew exponentially, increasing an average of 16.2% a month, as many turned to yard work and home projects as a way to stay busy (Table H).
During March and April, retail sales for electronics and appliance stores declined sharply – dropping 13.1% and 48.3% respectively as stores remained closed. In May stores were up 61.5% over April, a number still 31% less than May of 2019. Clothing and clothing accessory brick and mortar stores were among the hardest hit by closures with sales decreasing 42.4% in March, followed by a 74.9% decline in April. Sales rebounded 209.2% in May but still 63.3% less than May of the previous year.
As shown in Table I, gas station sales decreased 7.4% in March and another 21.7% in April as a result of people not driving or commuting to work. Sales increased by 20.4% in May but with gas prices low and many people still working from home, gas sales were 31.5% below May 2019. Grocery store sales jumped 32.5% in March as people swarmed the stores to stock up in the early weeks of the quarantine. Sales fell 12.8% in April before increasing 6.2% in May. As restaurants across the country slowly opened, retail sales among food services and drinking places increased by 38.1% in May after dropping 23.8% in March and 36.6% in April.
Looking at the cumulative impact this year through May compared to the first months of 2019, the brick and mortar distribution channels forced to close during the quarantine still have a long way to go to catch up to 2019 (Figure 1). Through May, furniture and home furnishings stores were still 18.1% below 2019. Electronics and appliance stores and department stores fared slightly worse, down 19.3% and 21% respectively. It will be a few months before data is available to quantify how much of E-commerce’s 16.6% May YTD growth furniture and home furnishings were able to capture.
Residential Construction and Sales Not surprisingly, the housing industry also halted during most of March and April, as shown in Table J. Housing permits declined 5.7% in March and 21.4% in April, but did increase 14.4% in May once many state’s shelter-in-place orders were lifted. Housing Starts also dropped dramatically during March and April, falling 19% and 26.4% before increasing by 4.3% in May. New housing completions have yet to show positive growth – still down 7.3% from April to May. New residential sales were down 14.5% in March compared to February, and another 5.2% in April before rebounding in May up 16.6%. Existing home sales continued negative growth over the previous month throughout the three months – March (-8.5%), April (-17.8%) and May (-9.7%).
As we look to the future, the remainder of the year will be hard for furniture stores as factories just restarted in May. The pandemic is still not fully understood and high unemployment will continue as companies work to adjust to the uncertainty. At press time many states were in the midst of a second resurgence of COVID-19 infections. While many consumers still desire and missed the physical act of shopping and going to retail stores, the preceding few months have shown the necessity and power of e-commerce and online ordering. For many consumer products, the online exposure during the first three months of the pandemic will perhaps permanently change shopping habits. But on a positive note, especially for the furniture industry, the consumer appears to have sorely missed the shopping experience.
In my weekly conference calls with our Performance Groups, I have been amazed at the resilience of the furniture retailers, who discovered new ways to engage customers via phone and email, which resulted in appointments while stores are closed. The results refl ect signifi cant sales during these trying times. The importance of websites that produce inquiries from the engagement applications has led to chat sessions that result in sales, leading to my belief that as the stores reopen retailers will survive.
From this experience, the retailers will embrace new ways to do business. Ecommerce will become a must and not a “maybe”, left to the major players like Wayfair and Amazon.
The business model by necessity must change with the probability of less demand in the near future. ADVERTISING as a % of revenue will decline as the need for the block buster promotions transitions to a continuing relationship with their best customers. SALES EXPENSE could change as less retailer sales associates sell more. The importance of LONG TERM FINANCING will be challenged. Does the retailer need to expand 3-4% of revenue for fi nancing? The bright spot is the consumer demand as can be seen from the graphic below. After an initial blip, the consumer is back on the Internet researching how home furnishings can enhance what is becoming the new normal of being at home. The graphic from FurnitureCore, (the parent company of Home Furnishings Business), is a national sample of a balanced sample of INDEPENDENT furniture retailers. The consumer is waiting for the industry to open.
The many sales tactics that can be utilized, such as selling as part of a seating group or as an individual cash-and-carry sale, will help captivate your customer—but merchandising will be key. As the industry continues to see the growth of Generation X and Millennials as the target audience, retailers will need to shake up their merchandising assortment to reflect their style. Manufacturer Durham Furniture has developed thoughtful solutions for retailers in their bestselling, customizable collection.
“Our contemporary-styled Milestone Collection was designed to reach the next generation of consumers and the interior design community,” said Luke Simpson, president and chief executive officer of Durham Furniture. “The style and design is more in-tune with what the younger generation of consumers are looking for and the mixed media look gives our design partners the diversity in texture and materials that they often seek when designing more contemporary spaces. The group is available in any of Durham’s more than 50 finishes, allowing our customers to express their individual style, a key selling point and benefit of our products on the retail sales floor.” Durham Furniture is not the only manufacturer that embraces the power of customization. Especially in our current climate that is grappling with the realities of newly implemented tariffs compounded by the ongoing Coronavirus wreaking havoc on manufacturing and shipping, American made furniture has found additional momentum. “Simply Amish makes a lot of occasionals, and on our Standard Order end tables, most can be raised or lowered up to 6” without a custom quote,” says Charles Curry, vice president of sales and strategy of Simply Amish. “American made occasional pieces, especially with custom options, are as hard to find as a white buffalo.”
When consumers walk onto the retail sales floor, what are they anticipating for their occasional furniture purchase? While the fastest growing section of occasional furniture is accent furniture, which includes bars, breakfronts, and the like growing 7.1% and exceeding the overall growth of the occasional category at 5.6%, we analyzed the general style that consumers are searching for. According to the same FurnitureCore, Inc. study, when consumers were asked what the style of their most recent occasional table purchase was, a tie was found between traditional and contemporary at 32.47%, followed at 15.58% by country/rustic. The remaining responses where European at 9.10%, mission/shaker at 5.19%, and transitional at 5.19%.