From Home Furnishing Business
Consumers in the market for leather upholstery tend to be younger, live in higher income brackets and exude a slight preference for contemporary.
In a Home Furnishings Business survey conducted last month of consumers who had bought leather upholstery within the last year, 55.6 percent of them were 44 years old or younger. When you stack leather upholstery side by side with fabric upholstery, we found only 38.6 percent of the consumers who opted for fabric upholstery were 44 years old or younger.
We found it encouraging that younger consumers are choosing to buy furniture. Another interesting tidbit that made us take note—the leather category captures the attention of male shoppers. Men are more inclined, 51.2 percent, to choose leather upholstery over fabric.
Off On Leather
The 262 consumers in the survey also showed 43.2 percent of the respondents who bought leather had a household income of at least $75,000 while 35.8 percent with household income of $75,000 or higher bought fabric upholstery. Speaking of money, price of the product tends to have a smidge more influence on the purchase of leather than on fabric. It’s interesting to note, however, that quality is the most important purchase motivator for both categories.
Another key factor in the purchasing decision revolves around goods made in the U.S.A. We asked our consumer panel if they “like the style and comfort of a piece of upholstery” would they be willing to pay more if it was produced domestically. More than 81 percent—81.5 percent to be precise—of the leather purchases said yes. Of the fabric upholstery consumers, 76.5 percent said they would pay more for American-made product. Both the leather consumer and the fabric upholstery consumer are
Internet savvy, and both sets took to the Web to research prior to buying. The leather consumer at 72.8 percent edged out the fabric consumer at 66.2 percent in the research department. How do they feel about buying online? The leather consumer indicated a higher penchant to by online than consumers who bought fabric upholstery. Nearly 72 percent of the leather consumers indicated they would be likely to very likely to consider buying online. Nearly 55 percent of fabric upholstery consumers said they would be likely to very likely to do the same.
Once the research is done, however, the leather consumer is quicker to pull the trigger on the purchase.
Those in the leather market are more likely to shop for a month or less before buying, while those shopping for fabric designs extend the shopping period out to three months.
The overall leather upholstery shopping experience was not without its challenges for our consumer panel. The biggest problem they ran into was distinguishing differences between products.
Who can blame them? The leather category is filled with a variety of terms, an abundance of leather grades, types and even “bonded leather” that many in the furniture business don’t always understand. Interesting enough, despite the confusion about half of the consumers said they would like to have had a wider selection of products from which to choose.
In the style category, contemporary is the preferred choice for leather upholstery, while the fabric consumer leans more strongly toward the traditional realm. One thing is for certain in both leather and fabric upholstery. Custom order goods are great, but the consumer isn’t going to wait more than two months for a sofa to be delivered. More than 90 percent of the leather consumers aren’t likely to wait more than two months, and 43.2 percent want their product delivered within a month. Fabric upholstery consumers are a little more forgiving on the delivery time frame with 85.9 percent saying two months is the limit. When you look at the one-month period, 36.5 percent are willing to wait. Nearly 50 percent said they’d be OK waiting up to two months. Overall, our consumer panel was “very satisfied” with their upholstery purchases—both leather and fabric.
AMERICAN LEATHER’S PARKER SOFA
“It has great design and great size. The mid-century style is on trend, and it’s available in so many leathers and Ultrasuedes. Plus, it ships in four weeks.”
Circle Furniture. Acton, Mass.
“The combination of Flexsteel’s strong reputation and the incredible comfort of this style has carried it to the top of our sales charts for years. Our customers and salespeople also like the special order capability.” Retail is $1,899.
Mueller Furniture. Belleville, Ill.
HTL INTERNATIONAL’S 9170
“The casual/contemporary styling, 100 percent leather product, great seat comfort and the fact that it can be ordered in many colors and qualities of leather make it a winner.” Retail is $998.
Morris Home Furnishings
ASHLEY FURNITURE’S 4000138
“It’s a winner because of the track arm styling with wood trim in 100 percent leather. The seat comfort is superior to other manufacturers, and the price point is $998.”
Morris’ Ashley Furniture HomeStore
CLASSIC LEATEHR’S LARSEN
The classic styled sofa is the company’s top-selling frame because of its traditional styling, comfort and basic design elements that match with a variety of home interiors, said Tommy Shores Jr., CEO and president. The sofa is also made in Hickory, N.C., allowing it to speak to customers looking for American-made goods. Suggested retail is $3,390.
CR LAINE’S HANS CHAIR
Consumer desire for eclectic décor has driven CR Laine to add pieces with soft modern styling, said Holly Blalock, vice president of marketing. The design inspiration is mid-century modern which pairs in both funky and serious décor, she said. Suggested retail is $2,205.
PALLISER FURNITURE’S MIAMI
Palliser’s sectional offers an abundance of seating without overpowering a room. The casual contemporary design offers low profile, tufted seating for extra comfort.
KLAUSSNER FURNITURE’S CANOY
Priced to retail at $1,299, the Canoy features transitional styling with an inner soft coil seating for extra comfort.
Ellia is a traditional, deep button-tufted sofa, but it is made “extremely contemporary with the stainless steel” accents, said Martin Chapman, director of leather development. Ellia is one of the first leather frames the company introduced earlier this year with its Mia Bella by Michael Amini leather division. Retail is $7,999.
AMERICAN LEATHER’S INSPIRATION COLLECTION
A high-style factor with an understandable design make the Inspiration collection from American Leather a versatile work horse. The design is clean and functional and works in a variety of spaces. The two-seat sofa in a mid-grade leather retails around $5,400 and a sectional would be priced around $9,500.
SIMON LI’S ALPHA
A casual style with contrast stitching gives Alpha the ability to slide into any home with ease. The sofa comes with contrasting fabric pillows to soften the look. Retail is $1,900.
Traditional design coupled with total comfort makes this sectional among Natuzzi’s top sellers. Shown in this classic wine leather, the detailing of the shaped front offers consumer appeal. Retail is $1,699-$1,799.
Leather Upholstery Snapshot
Leather upholstery remains a bright star in the furniture industry and has garnered quite the following among consumers. Retail sales of the category for 2012 hit $4.49 billion, an increase of 7.72 percent from 2011 sales of $4.17 billion. The total upholstery market—both leather and fabric—totaled $24.18 billion. Leather sales were 18.5 percent of the total.
Leather upholstery sales have steadily increased since 2009 at a rather impressive rate, outpacing both the growth of the industry and fabric upholstery. The category’s cumulative growth rate from 2009 to now has been a whopping 20.04 percent. From 2011 to 2012, the category posted a 7.72 percent increase. For the same time period—2011 to 2012—the total furniture industry grew 6.95 percent. Fabric upholstery posted a 6.57 percent increase during that period.
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
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.
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.
The holidays bring with them lots of food, lots of family and lots of friends. We also find ourselves smack-dab in the throes of retail’s hottest quarter of the year. The magical three-month span can often either make or break a year for the best of retailers.
The pressure is on, and this year the consumer mindset is making things look a little scary. We only thought the ghosts and goblins had been packed away for next year!
Last month’s 16-day government shutdown, created by dysfunction in Washington, caused such a state of angst for consumers that I fear she may stay in hiding for some time more. Want another nugget of distressing info? The deal our politicians struck to reopen and refund the government only guarantees funding through Jan. 15.
So, just as we’re packing away the tree and other lingering decorations, the yammering and debating and cantankerous atmosphere will return to the political debate. Our daily newspapers and nightly news shows will be filled with “they did this” and “they did that”. Or, more aptly, “they didn’t do this” and “they didn’t do that” finger pointing.
The political atmosphere in Washington, D.C. makes the likelihood of suiting up for round two extremely high, and the consumer is well aware of the potential impact to her bank account or job or overall financial well being.
Consumer nerves are frazzled, and they are tentative and more than leery of spending in wake of a perceived economic crisis. The fortitude to shell out money for much more than the necessities of life just isn’t likely there under the looming cloud.
This season, families will slash holiday budgets and sock the extra away for a stormy day that, right or wrong, they’re confident is ahead. Santa will still come; but his sack is likely to be bit lighter, and Thanksgiving feasts could be a bit smaller. The essentials will get covered, but perhaps the planned purchase of a new dining room suite gets postponed by a wait-and-see-attitude. Furniture, like it or not, tends to be an easily postponable purchase. That worn sofa may be lumpy, but it’s still a place to sit. The bedroom group may not have the latest bells and whistles, but it serves its utilitarian purpose. The kitchen table is still standing on all four legs.
What to do?
Get in there and fight with all you’ve got. Furniture retailers must pull out their biggest bag of tricks to entice the consumer to invest in her largest investment and create a welcoming haven for family and friends. A soft, safe place to land at the end of the day remains a beautiful thing. Here’s to a bright fourth quarter filled with an abundance of lovely surprises.
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?”
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.
“We’re past the point of a long-term study, or we’ll be like the last livery stable guy. He survived longest, but he still went out of business. Like it or not, consumers don’t care if we survive.” HFB
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.”