Currently, the most impactful is the ecommerce retailers that increase advertising spend (12%) and focus on digital (Internet) while providing free delivery (14%), eliminating the physical presence (store) for the consumer with a goal of making a profi t. For most, such as Wayfair, profi t is still in the future. While not yet profi table, Wayfair and etailers in total have taken 15-18% marketshare. The result, as with all category killers, is the loss of smaller furniture retailers and a fi nancial impact on larger retailers. Not only is the retail sector impacted by the disruptors, but also the supplier sector and they must change to accommodate this new player in the industry sector. They need to provide a different level of support, such as bett er collateral, as well as absorb some of the additional cost associated with a national distribution strategy, such as returns and additional packaging.
The retail disruptors create supplier disruptions that create a model just to serve their needs— a model without showrooms at market, or sales representatives to serve the retailer— becoming suppliers with an outstanding supply chain.
What should an established furniture retailer do? Establish a disruptor model. Typically, this strategy is not possible. However, an established retailer can migrate his model to refl ect the changing industry and to off set the industry. However, this will require the diffi cult decision to consider changing long held beliefs. For example, with this issue we have addressed the Internet and how it has matured into an important strategy to communicate with the consumer. If managed properly, it can be very cost eff ective, but it must be measured for eff ectiveness. With this accomplished, other media can be released such as newspaper, television, and circulars. You cannot have both. Advertising cost is declining — speed the process, release the old, and embrace the new. The new disruptor didn’t begin with the old approach to advertising.
Another example is real estate — own versus lease. The old adage of “let the store feed your family and real estate fund your retirement”… Disruptors do not want to be in real estate and therefore can expand faster into the key consumer shopping areas. Related to this is the size of stores. The productivity of 100,000 square foot stores compared to 50,000 square foot stores provides a distinct advantage. Not only is gross margin per square foot of selling space higher, but occupancy cost is lower. Additionally, the emerging consumers prefer the smaller footprint of curated merchandising. More traditional retailers are “twisting” themselves into pretzels to justify purchasing the closing big box stores in malls to capture a great real estate deal. Commercial retailers love it!
Of course same day delivery is considered a must. But the disruptors are pushing consumers out 2-4 weeks. Consider the reductions in inventory.
The message is not to create a new “disruptor” model, but to tweak your old model to more accurately refl ect today’s consumer and improve profi t at the same time. Consider the data below and get more from our June 2019 cover story “Retail Metrics for Furniture Retailing”.
While digital advertising has continued to be a component of most major newspaper’s revenue streams, it is not a major influencer for the consumer for durable purchases. The consumer has achieved, to a certain extent, freedom from being “sold to” until they are ready to consider purchasing.
Consumers today are well versed in the ways of the Internet, casually entering the name of the retailer and going directly to the retailer’s website, bypassing Google search. For an established retailer, 20-25% of a retailer’s unique visitors are direct.
Another 25-30% are captured via organic search, which is facilitated by basic SEO, by satisfying an ever-changing algorithm of Google — a topic that could be a feature article by itself.
Another 20-25% can be achieved by paid search at a cost of $1.25-$1.50 per click through either Google, social media, or another digital source.
Obviously, there are other sources, such as direct email, referrals, display, and others. Compared to newspaper, a retailer’s website can tell you a measure of “Is your message getting through?” A weekly/monthly analysis of Google Analytics is a must. The simplified snapshot is shown above from Impact Consulting’s (parent to Home Furnishings Business) FurnitureCore.com application.
Obviously, comparing costs each month is facilitated by this type of analysis. But this still leaves the question: Is my web presence delivering? Comparing your unique visitors to your site compared to traffic to your store provides that measure. The graphic below illustrates.
The dream of every retailer is having a place where consumers could be directed to view their merchandise and be exposed to their unique selling proposition. Depending upon the merchandise price point, 62-74% of all consumers visit the Internet before purchasing. Unfortunately, the consumer is exposed to the traditional furniture retailer’s major competitor – the etailer – and purchases 12-18% of the time. Don’t be surprised by the difference between unique visitors and store visitors. A 60-80% difference is most typical. Monitoring this difference between store traffic and web traffic is essential. Equally as important is knowing what is your cost for the web “Up” compared to the in-store occurrence.
For retailers, the major decision is when to let go of the old and fully embrace the new. The cost of advertising midyear is 5.91% of revenue with the Internet being a little more than 10%, which is in line with print. The table above breaks down advertising expense from FurnitureCore’s Best Practices application.
The next to decline is television. The popularity of streaming with the Millennials, and to some extent Generation X, is decreasing the importance of television. With the increasing scope of OTT (over the top) and CTV (television connected to the internet) traditional television will decline as an advertising medium.
There will always be brick-and-mortar furniture retailers. That seems to be the consensus in the industry. But as ecommerce continues to grow, just how many will be around in five, 10 or 20 years is the subject of much conjecture. Opinions vary widely. Some say the percentage of online purchases will level out at about 20%, while other say it could reach 50% or higher.
Research by consultancy Magid shows there is a definite generation gap when it comes to online furniture shopping preferences. Magid’s research shows 39% of Millennials buy furniture online, compared to 20% of baby boomers. Magid also found that 73% of consumers are likely to research furniture products online, second only to the consumer electronics category. Matt Sargent, Magid’s senior vice president of retail says, even when consumers do their digital research, most still want to come into the store and touch and feel products. “It’s important to see the product and how it will fit,” Sargent says. “That’s good for traditional furniture players. Many customers find a disconnect between the physical and digital experience.” There is a huge difference in numbers and shopping tendancies between Millennials, Baby Boomers and GenXers, Sargent notes. The millennial population is much larger than the GenX population. “Millennials are growing into the life stage where they are acquiring furniture. As Boomers, and to some degree GenXers, slow their acquisitions, Millennials become more important. Their size and the way they acquire things digitally will accelerate some of these issues for the furniture category.”
Rob Davis, chief client officer for Diakon Logistics, is in a good position to observe the evolution of furniture ecommerce. His firm plays an integral role in the success of the delivery of furniture purchased online. He notes that to be competitive, furniture retailers must meet consumers where they are. He offers a recent personal shopping experience as an example. “This summer my family and I were vacationing in Lake Winnipesaukee, New Hampshire,” Davis says. “During our trip we were planning for my daughter’s birthday party at our house, which was scheduled to take place the day after our return. While we were away, we decided that we really wanted to purchase new barstools, a chandelier, and a table to have in time for the party. Fortunately, we had already done the shopping, so it was just a matter of placing the order in time for it to arrive before the party. We ended up buying some items from a national retailer and some from a local retailer and both were able to complete the transaction with little effort. The order was placed from our mobile device, merchandise was delivered just in time for the party, our home looked beautiful, the party was amazing, guests were comfortable, our daughter created wonderful memories, and my wife was over the moon.” Davis says it is all about making it easy for customers to finalize and receive a sale. Retailers can’t be everything to everyone, but they have to be everything to customers in their market.
“I don’t ever see brick and mortar going away in our industry,” he says. “Customers will always come in to touch, feel, and experience. But if you don’t make it easy for them to complete and receive an order then they will end up at their second choice or not purchasing anything at all. Implementing an omnichannel solution that gives your customers options doesn’t have to be difficult.”
RETAIL SPACE DEMAND IS BRISK
While growth of furniture ecommerce business is robust, so too is the demand for retail space. America’s heartland offers a prime example, as furniture retailers have been filling up space vacated by big box retailers. Terry Ohnmeis, a director in the Cincinnati office of commercial real estate services firm Cushman & Wakefield, says demand is strong in Ohio for furniture retail space. He says the two largest categories seeking vacant back space are furniture and fitness. “We are seeing a connection in how people shop, as retailers are integrating how they design their stores and the number of stores.” He says it makes sense for furniture retailers to congregate in real estate markets because it makes it easier for shoppers to hit several locations on one trip. According to Ohnmeis this holds true whether the retailers sell high-end or discount-oriented products. Shopping convenience is the driver for consumers, he says. “We’ve noticed in Cincinnati a consolidation in its submarkets where furniture retailers tend to gravitate around each other. Although there has been a huge increase in online sales with companies like Wayfair, there is still a demand to see furniture in person. It’s also difficult to return those items purchased online. It’s still important to have a retail presence for customers to go try out furniture, double check the color and return it if they need to.”
A VARIETY OF APPROACHES
Retailers are taking a variety of approaches to ecommerce. What follows is a look at the strategies of some internet-savvy companies. Fort Lauderdale, Fla.-headquartered City Furniture has sold furniture online for about 10 years, but kicked that effort into high gear about three or four years ago, according to Andrew Koenig, president. He says City’s objective is to grow top-line sales, whether it’s online or in one of the firm’s stores. City is on track for another year of double-digit sales growth, which makes Koenig happy. He attributes much of the growth to City’s significant investment in technology.
Koenig’s perspective is that City is a retailer.
It doesn’t identify as an online store and it doesn’t identify as a traditional brick-andmortar store. He says retailers must sell where the customer wants to buy and City is trying to grow its top line, both in its stores and online. “Our website is the first showroom our customers shop before they go into the store,” Koenig says. “We still believe a lot of the customers want to touch and feel what they buy. These are $1,700 to $1,800 average tickets, and customers want to touch those kinds of orders. That’s real important.” Koenig praises City’s website team. They are pushed to grow top line sales first and website sales second. He says this helps align the customer’s shopping experience with what they see and feel in the story matching up with what they see online. He attributes City’s recent online success to its “absolute commitment” to being best in class online. “We want to give a fantastic shopping experience, whether it’s online or in the store,” Koenig says. Wherever they want to shop, that’s great. That requires all-in commitment, whether it’s resources, budget, technology, people—we’ve really put our money where our mouth is and it continues to produce major results for both the online customer and the omnichannel customer. It’s been a big win for our business.”
Koenig says City’s challenge is to prioritize its opportunities and to focus on continually improving its one-on-on experience, whether it’s on the site, or email marketing to direct the customer back to the site, or in the store. “The sales associates in the store can pull up the customer’s profile and see what they shopped for online, so that essentially we can continue that cart or wish list that they built online, right there in the store,” he says. “For example, they may have looked at mattresses and selected one, but want to come in and try it out, lie on it to see if it’s right. It might be a two-minute transaction, once they have tried it, just click purchase and they are good to go. All our sales associates have iPads to make this easier.”
What direction will City go in the future? Koenig says the way City is approaching is that its website and its stores will not compete with each other, but will become one. “The experiences that tie the two together will be very important,” he says. “Technology will continue to play a big role to make that happen. It will become a more personalized customer journey. The website will adapt itself to your personal experience. All of us retailers need to continue to invest in technology to automate more of the process, eventually incorporating artificial intelligence. We are just trying to improve the overall experience, not getting too caught up in one channel versus another.”
Koenig says City will continue to expand its technology team in its ongoing effort to become a technologically advanced company. “We want our ecommerce team and our IT team to respond to our customers’ demands of what they want in their shopping experience, both online and in store, so that we can develop that as fast as humanly possible, rather than be at the mercy of a third-party vendor. We have to control that experience. We are going to both buy technology and develop technology. If we see something that the customer needs that hasn’t been developed yet, we will develop it. If we see a great vendor that has a fantastic tool, we will buy it and integrate it as soon as possible.”
Koenig says he thinks customers do not see any difference today between online and in-store shopping. Retailers still need to offer both. He says online furniture sales will continue to grow, and brick-and-mortar retailers have to step up their online skills. “Furniture can be a very exciting purchase in the customer’s life, whether buying their first child’s crib, or furnishing a new home, or updating an older home, he says. “Whether you go online or to a store depends on the timing and the situation. That’s why you have to have a both a great website and a great store, to capture a greater market share.” Koenig says City’s sales team will have the ability to see what customers do online in-store on their iPads later this year.
Tony Mitchell, ecommerce director for Englewood, Colo.- based American Furniture Warehouse (AFW) says the retailer’s online presence has been an extension of its stores. Growth has been incremental. “It is meant to be an extension of our brand and an education for our customers before they come in,” he says. “I call it pre-commerce. It’s not like we are going to close all our stores and just go online and become Wayfair or something like that. It’s helping educate our customers before they come in, and getting them closer to buying decisions and also giving them the option to buy online. They can finance online or come into the store and shop and then go home and buy online. We are offering them the online shopping experience because customers are spending more and more there.” Mitchell says AFW’s online presence has somewhat contributed to its brick-andmortar growth. Simply selling furniture has never been the company’s goal. It’s more about selling it and executing it so the customer is happy with their purchase after they take delivery.
What’s next in furniture’s ecommerce evolution? Mitchell says there will be more acceptance of online purchases. He says there is a growing acceptance for buying things sight unseen. He predicts there will be more pure-play online furniture retailers. “I do see it evolving as a growing segment, and also the customer with the right tools can get better visuals of what the product will look like and how it will fit in their home. It’s fashion first—we want to make sure they get an idea of how it is going to fit in their lifestyle and with their personal style, and the fashion of their home.”
Mitchell says there will be an evolution in the speed of delivery, survivable delivery, and execution. “Technology will play a role in augmented reality, which we are working on now, and virtual reality which will have to be usable on every device. Technology is helping customers make visual decisions about making a large purchase, either sight unseen or to inspire them to go into the store, feel it, touch it, and then hopefully buy more than they intended to while they are here.”
Mitchell says AFW’s technical team is growing with staff who have worked in the company’s stores. They know the products and how to explain to customers the execution and delivery process. “We explain the inherent flaws of furniture, which doesn’t really get touched on in most websites and that overcomes some of the buyer’s remorse where people didn’t know what they were getting. We don’t take cheap items and photograph them so that they look better than they are. Educating customers is at our core, so there is nothing misunderstood.” He continues, “It does happen that customers will shop in the store and then purchase online, but it is more common for folks to research or browse online and start their purchase journey on our site, and then come in and shop in the store. It speeds up the process if they have already seen the item online. Then we can show them other lateral products in their price range, but they know where to start stylistically and price point. The customers are more prequalified to make a decision in the store when they have done their online research. They know our stock level, so it takes a lot of the sales questions out of the way.”
South Florida-based El Dorado Furniture was one of the first furniture retailers to have a working website, says Jesus Capo, the company’s chief information officer. “We have always had a presence online,” he says. “We saw that this was something that was going to happen and so we started originally with basically an online brochure just to have a presence. We were one of the first furniture retailers to have a purchase site. It’s grown ever since we learned from that model, and we’ve grown ever since. We learned from our mistakes, where we had one person in charge of everything, and really if we wanted to have a real full blown ecommerce site and web presence, we realized eventually we would have to start pouring more money into that department.”
El Dorado created and developed its ecommerce department. It now has about eight employees, including a store manager and a product manager. Capo says El Dorado learned it had to treat the department just like a store. It’s not something separate. “The merchandise that is available there is available in the stores,” Capo says. “Any customer that buys online is automatically an El Dorado customer. If you walk into the store, we have your product history from what you have bought online, so it is all one system. It’s now a big chunk of our business. The store feeds the website, and the website feeds the store, which is very interesting, because you can observe spikes in sales of certain products on the website and then that weekend you will notice a spike of the product in the store. Also, customers will sometimes come in and shop the store, but not make a decision, then go home and purchase online. When you notice a spike online, you can then feature the item in the store because you know the interest is there. We try to learn from each side.” There is still the desire among many customers to come see the furniture and measure it to see if it will fit in their home. That’s difficult to ascertain online, Capo says, because shoppers cannot get a sense of the true size of a couch or table and chairs. “So, now we have a feature that allows people to click on the item and it will compare the size relative to other items,” Capo explains. “This type of feature helps on the sales side. A lot of people talk about the possibility that the future technology perhaps will include artificial intelligence, for example, transmitting sensory experiences such as being able to get a sense of the feel of the wood or the leather at home.”
Capo says that while it’s obvious that online shopping for furniture is here to stay, there is also a trend of the return to the value of the communal experience of coming into a store and being able to see and touch the items. “Years ago, many people thought furniture could never be sold online because of that in person factor,” he says. “But we see that there is going to continue to be a balance in the future where we have both the stores and the online experience. We want to make sure the customer has the same experience on both ends. Online, it should be easy, and there should be suggestions of items based on previous purchases. In the store, we should have the same thing, and we have made our store a very exciting place to go to, laid out in boulevards and avenues, not your usual furniture store. We create a very pleasant experience. We try to accomplish the same thing online.”
Accessibility on mobile devices such as smart phones and iPads is essential today, Capo says, as consumers want to be able to shop on those devices. He says this is the future of ecommerce and stores that do not offer that capability will be left by the wayside. Capo says brickand- mortar stores will never disappear, but he believes there will be a point where all will have to change their way of thinking and also offer their products online. “One of the things that held some companies back is the fear of competition. If you put your prices online, everyone is going to know what your prices are then there is the danger of being undercut. We crossed that hurdle years ago, but some may still think that way. Eventually it will likely be 50-50 and the two sides will feed off each other, and work together to make a happy family.”
As for future trends, Capo says there has been talk about using voice search to find products online, but he says furniture is not an impulse purchase and requires thought and research. Since it is an expensive item, he says it is difficult to see how that would work. However, he says there is potential for the use of artificial intelligence and augmented reality to be used on websites to suggest colors and patterns and how furniture might look in the home.
Brian Woods, CEO of San Diego-based Jerome’s, says online sales will eventually plateau, but that plateau could be much higher than some think. “Online sales will continue to grow to a point of plateauing,” he says. “But what is that plateau? It could go as high as 60-40 online or 70-30 retail. It will take years to get to that point.” Woods says, “Technology is evolving exponentially and more and more people are figuring out how to adapt those technologies. My adoption of those tools is totally dependent on whether customers tell me that technology is a driver in their decision-making. Something can be really cool and give customers a different perspective, but if it’s not leading to conversion…if you give customers too much information, they start second guessing themselves.”
Woods says there is an incredible amount of ecommerce technology available, providing options to present a retailer’s products and experience, but it comes down to selection for which ones move the needle in terms of sales. Woods says his estimate of where ecommerce might plateau is about 30%. He based that on his study of data points and watching year-over-year trends in different categories. “The question is does that take five years or 30 years,” he says.
A MANUFACTURER’S PERSPECTIVE
Johne Albanese, marketing director for Martinsville, Va.-based Hooker Furniture says ecommerce continues to grow, but the overall pace is slowing. The biggest potential for growth continues to be with omnichannel retailers serving local markets. “Ultimately, the consumer is driving the process,” Albanese says. “Consumers still like to go to stores as long as it is an experience they enjoy. About 85% of them are still doing it that way, and the idea of the store declining is faulty logic.” Albanese says Hooker assists its retail customers by providing various types of data to make the process of getting products uploaded on multiple platforms easier. “Trying to get data in a managed way is the difficult part. We work to make that easier for our brands for our brick-and-mortar retailers. We can help with them consulting on the process with suppliers and digital advertising.”
Albanese believes there is a lot of “noise” in the technology space with retailers facing decisions about which providers to use, which ones not to use, and deciding if and how distribution should be limited. “We are of the belief that a locally-focused retailer has a true advantage if they have a store that people like to visit. Over the past few years, technology has gotten much more robust, and there are several good platforms available out there for people to add ecommerce to the mix, particularly if they are on some type of ERP system that has a module for it already. It’s definitely an investment, like adding another location.” He thinks that furniture ecommerce will probably top out at a plateau of 20 to 25% of overall sales, with the majority of that coming from omnichannel retailers rather than the pure play variety. “Ecommerce is another way for retailers to execute sales, but it’s a way that allows consumers to choose how they want to transact business.” According to Albanese, Hooker has been aggressively supporting its retailers in their ecommerce efforts for about six years. The greatest potential for ecommerce is in supporting local markets, he says. “We were pretty early adopters of what we thought was coming,” he says. “We have a staff of people who are experts at helping retailers doing that. The technology has gotten better over time.”
MicroD’s chief product officer Richard Sexton says distribution issues are the primary impediments for ecommerce growth. He says marginal brickand- mortar retailers go out of business and pure play online will gain market share, but they will still have to solve the logistics issue. Sexton believes there will be incremental technological advances that will make online shopping a faster and easier experience. Perhaps farther down the road will be visualization advances as websites move to 3-D experiences with augmented reality. “That experiential technology will evolve, and other things will be different. There will be advances that facilitate convenience. It will be easier to purchase products with fewer clicks. The experience will be faster and device agnostic. There is still a problem moving between an Apple and an Android device, but we are seeing some convergence there. No one can absolutely say the difference maker will be artificial intelligence. It will help. A 3-D experience will also help, and standardization of browsers will help. What’s the next big thing? It could be a combination of those, but the changes will be subtle over time.”
Keystone Media International manages ad programs for home furnishings brands and retailers. Rick Harrison, sales director for home furnishings, says the firm’s banner ad technology offers a cost-effective method for firms to get their message out. He says the systems of running interactive banner ads across a network of designer sites offers an effective way of getting in front of highly desirable consumers. “What makes the ad technology special is that you can accomplish all of your brand’s goals at the point of contact and begin working a consumer through to the purchase funnel while they are still in the ad,” Harrison says. “It’s a much more efficient method of driving a consumer through to the purchase funnel.”Harrison says these types of banner ads allow the retailer or brand to tell their entire story and accomplish all of their ecommerce goals while the consumer is still in the ad. “We get more interaction with our ads, and it’s a much more efficient ad buy in terms of engagement levels. Consumers are being delivered through the product or purchase opportunity they already care about as opposed to clicking on the home page and starting the purchase funnel.”
As a result, the Internet has become a central part of most people’s lives and many of us, particularly those that have grown up with it, would have a very hard time adjusting to life without it. We quickly learned to turn to it for all our information, entertainment and communication needs, so it was only a matter of time before it took over providing for our physical needs too.
Indeed, over the past decade or two we have watched with amazement how fast the Internet has become a leading sales channel for most products and services U.S. consumers are looking for. From cars to homes to medical care, most shopping trips begin on the Web with an ever-increasing number also ending there. As proof of the Web’s growing retail dominance, in May of this year, Forbes announced that Amazon had surpassed Walmart as the largest retailer in the world. When you consider that all the largest retailers following behind them do a substantial chunk of their volume on the internet, it becomes apparent that online purchases represent a huge share of total retail sales.
Our focus here at Home Furnishings Business of course is only the Home Furnishings industry, therefore the question we need to address is “How does this affect us and what can we do about it?” The answer as usual is not that simple, since the Web has impacted various elements and product categories of our business differently. As an example, stores that sell flat pack, ready to assemble products for the home, which are a main part of internet sales, have a much harder battle to fight than high end stores that provide design services and custom ordered goods. So, while the online monsters are a threat to everyone, the severity of danger involved differs from store to store. As a result, while click only retailers have put many brick and mortar companies in other industries out of business, they have not really done that to us – wounded us yes, but not mortally in most cases.
When we look at market share for a client, we normally do not consider them to be a “dominant” player until they get to roughly 25% or 30%. The most recent Furniture and Bedding sales share I have seen for the internet distribution channel is somewhere between 16% to 18% and its growth has slowed substantially from what it was in the first decade of this century. In fact, it is quite possible that a large part of its most recent growth was driven by one product - Mattresses. Therefore, while online business has certainly become an important, perhaps even a major channel very quickly, it cannot yet be considered a dominant one, like it is in so many other product categories for the home like Consumer Electronics, Small Appliances and Kitchen/Dining Accessories.
In my opinion, the potential share of US furniture purchases for online businesses is limited and will peak somewhere between 20% to 25%. This is only a hunch, but it might be a good one. The slowing of this channel’s growth over the past few years is a sign, but we have long discussed the fact that many consumers just do not want to buy larger ticket merchandise without seeing, feeling and touching it. This is particularly true for items whose selection is based on style, color and comfort. When the look and feel of a desired product is critical to the purchase decision, brick and mortar stores will be the winner. A recent study concluded that most consumers looking for a large furniture product began their search online, with the ultimate goal of testing out the furniture in a physical location before buying. It has also been estimated that as many as 23% of these shoppers begin their search on Amazon.
Of course, we have all heard the term “showrooming” which describes how consumers often visit a physical store to interact with a product, then go online to make the purchase. While I am certain that happens in our stores, I do not see it as being a dominant purchase method for the majority of our shoppers. If we get a chance to meet the customer in our store and help them solve their furniture problem, I think we will win most of the time.
There has also been some consumer research done that supports this conclusion. A March 2018 survey by Morning Consult, indicated that only 11% of US Internet users polled preferred to buy furniture digitally. Another report by Bizrate Insights in May of 2018 determined that only about 18% of its respondents preferred shopping for home goods via digital channels. Either way that means that somewhere between 72% and almost 90% of consumers felt they want to buy their furniture in a physical location. Interestingly, younger respondents like Millennials where more likely to choose the in-store purchase path than older ones. Given these numbers, a very large majority of people looking for furniture will visit our stores, so we still have a huge potential to do business, if we play our cards right.
Basically, the three ways the Internet has impacted our industry are: eliminated roughly 20% of our available sales; lowered our potential traffic by reducing the number of stores consumers visit; and completely changing how most people shop for and purchase furniture. We can’t do too much about the first two, but if we study the consumer’s new shopping/buying process, then adapt our marketing and selling processes to their needs, we should be able to do a much better job at pleasing those that do choose to visit our stores.
Much of what we need to do has been discussed in this and other publications over the past few years. My focus has been mainly on the selling process and what we can do to better connect with the new, better educated, more confident shoppers we are seeing in our stores. Most of our recommendations have dealt with making sure your staff is properly welcoming potential customers to the store and making a concerted, professional effort to connect with them instead of merely greeting them and letting them browse.
I strongly believe that the turning point in any sales associate interaction comes when the customer develops enough trust in the person they are talking with, to tell them what they are looking for and why they came to the store. Without reaching that point and getting that information, the relationship is that of a salesperson trying to sell something that may or may not create the desired results for a customer. With that information it becomes possible for a “salesperson” to become a “person” who is there to help the customer find what they are looking for and solve whatever problem it was that brought them to the store. Therefore, the initial goal of your selling process is to make the customer feel comfortable enough to share the reason they came in, the product they seek or the room they want to redo.
It hit me recently that we might be missing a great opportunity to improve this process in our stores by creating a better connection with how our consumers are now shopping. Consider this: if most consumers are shopping and doing research on the Web before visiting our store, chances are they have seen something they are interested in testing out in our store. While it may be difficult for them to describe it to us in words, if we made it easy for them to show it to us and trained our staff how to make that happen, how many more customers could we satisfy?
My recommendation is that we need to equip our sales staff with tablets, give them easy access to Internet connected PCs on the floor and let them use their smart phones to help customers show them what they found on the Internet that brought them into your store. This sounds so simple, but it is something that I have not seen being done in the majority of stores I visited over the past few years. In fact, I have seen many that do not want salespeople or customers accessing the internet in the store, which is crazy! At the very least you need to provide quality Wi-Fi in your store so that your salespeople can have potential clients show them what they are seeking on their phones. Trust me, most customers can and will if they trust the person they are working with enough. They want to finish the process and move on; we need to be better at helping them do that.
This also means you need to adjust your selling process to include an effort to get each visitor to go online and share what they have found. As an example, instead of the widely used question “So where have you been shopping?”, I would change it to “So have you visited our Website? What did you see that interested you? Could you please show me, so I can help you find it in the store?” Most will have visited your Website and found something of interest that spurred them to visit the store. Make sure your staff is intimately aware of what is on your site and how to use it to look for goods, so they can work with the customer and guide them through the process. Obviously if they haven’t been on your site you can ask them which ones they have visited and bring them up. Chances are that Amazon and Wayfair will come up often, along with your main local competition. Keep a record of who your customers are looking at so you know who to be watching yourself.
I know this sounds so basic and if you have been doing it, congratulations to you! However, my experience has been that many furniture retailers are running from the Internet on the sales floor instead of embracing it and using it to help customers find what they are looking for. After all, that is the main reason consumers used it at home, why not make them comfortable using it in your store with your salespeople?
Though the growth of outdoor furniture has slowed from the avalanche of sales in the first two quarters of 2018, don’t be disheartened - it has grown 2.5% year to date - in line with overall furniture sales as we come into the category’s prime purchasing season.
According to Rory Rehmert, senior VP of sales for Castelle, “The importance of outdoor living nationwide continues to expand year after year. The options for outdoor living areas including furnishings and accessories subsequently continues to grow. This growth is exhibited in the fact that outdoor living areas are being included in a greater percentage of new home constructions than ever before. As an extension of the home, outdoor areas also are considered the largest room in the home; often encompassing multiple rooms in one including kitchens, dining and lounge areas. With this, for retailers, the furnishings for the outdoor room can often result in a much higher ticket than that of an interior project.”
And research proves he’s right! Based on a FurnitureCore, Inc. industry model developed by Impact Consulting Services, parent company to Home Furnishings Business, of consumers polled on why they made their most recent outdoor purchase, 21.05% added a new outdoor area to an existing home, and 19.30% moved to a new home with an outdoor area. 35.09% of those polled were simply replacing old, worn, or outdated outdoor furniture and 9.82% did so to add to existing outdoor furniture.
The same consumers reported a high usage of their outdoor spaces, proving the area to be a true extension of the home. 35.09% of consumers report using these spaces daily! Another 45.61% utilize the space on a weekly basis, followed by 2-3 times per month at 14.04%, and less than once a month at 5.26%.
Consumer confidence in product durability is high based on the same FurnitureCore study. When asked how long shoppers plan to use their outdoor furniture, a surprising 36.84% reported plans to utilize products for 8 years or more. This expectation is made possible by key product innovations in performance fabrics and simulated wood looks.
Take Polywood for example, whose story began 30 years ago when the flood of plastics became problematic. “From the recycled milk jug, the first Adirondack was born using genuine Polywood lumber,” states Lindsay Schleis, VP of business development. “We manufacture all categories of outdoor furniture, from dining to deep seating, with the Adirondack chair being most iconic for our company. The durability is second to none with a 20 year residential warranty and 3 year commercial warranty.”
With confidence in quality purchases comes purchases in quantity as consumers are looking to add more than just a couple seats to an outdoor area and call it complete. Instead, they want to curate a room by adding season-extending features with lighting and temperature control aids. When asked which additional pieces they would like to add to their outdoor room, lighting lead the way with consumers at 28.07%, followed by fire pits at 24.56%, and umbrellas at 15.79%. Accessories, a great way to complete any room, were also high on the list at 15.8%. If you have not already, consider adding this category to your merchandise mix on your sales floor. The opportunity to increase your average ticket and close rate is on the horizon.
This month’s Statistically Speaking studies a March 2019 report from the U.S. Census Bureau’s Statistics of U.S. Business. Although data collected ends in 2016, the report shines the light on challenges furniture and home furnishings stores have faced over the last 10+ years and continue to face going forward.
As shown in Table A, the disparity between furniture store openings and closings was the highest from 2007 to 2012. The ratio of furniture store closings as a percent of total stores averaged 11% in the five years during and immediately following the recession. Despite a boom of store openings from 2011 to 2012, the ratio of furniture store openings averaged only 8.3% in the same five years. From 2012 to 2016, the net change in stores has stayed relatively flat – never showing a positive net change for furniture store openings.
The disparity between store openings and closings has reached even wider for home furnishings stores – closing an average of 11.6% of stores per year from 2007 to 2012 and only opening a yearly average of 6.5% (Table B). Since 2012, the number of store closings has exceeded openings with the net change a negative 1.4%.
The heaviest decline in both furniture and home furnishings stores occurred between 2007 and 2012 (Table C). Furniture store locations dropped 18.8% during that period from 27,386 stores to 22,201. Meanwhile home furnishings stores fell 22.5% from 33,787 stores in 2007 to 26,184 in 2012. Furniture stores declined another 0.9% from 2012 to 2016, while home furnishings stores lost 5.3% more stores. Overall, from 2007 to 2016, the number of furniture store locations decreased by 19.6% and 26.5% for home furnishings stores.
Partnered with store closings is loss of store employees. For both furniture and home furnishings stores, the largest decline in the number of employees occurred in 2009 – a drop of 13.1% and 17.9%, respectively. Decreasing the number of employees steadily from 2007 to 2012, employees in furniture stores diminished by 28.4%, while home furnishings stores cut employees by 29.8%. Both furniture and home furnishings stores had employee growth from 2012 to 2016 as furniture stores increased employees by 7.9% and home furnishings stores by 5.7% (Table D). And though employment continues to slowly increase, it is still well below 2007 levels, 20% less than for furniture stores and almost 24% less for home furnishings stores.
Although hit hard by the Great Recession, furniture and home furnishings stores had a surge in new store openings from 2011 to 2012 (Table E). New furniture store openings jumped by 64.6%, while new home furnishings store openings increased by 20.9%. Unfortunately, as shown in Table F, 2012 also had the highest number of new furniture and home furnishings store clos-ings – new stores dropping by 75.6% and 33.8% respectively.
Between 2007 and 2011, the rate of loss of store employees was higher than the decline in store locations as shown in Figure 1. In 2007 furniture stores averaged 9.9 employees per store and home furnishings stores 9.6. By 2011 this ratio had fallen over a full person per store. There are many reasons for the decline in store employees and the fact that the number has not yet entirely recovered. During the recession the decline in sales was the driving force for employee losses. But since that time, especially for furniture stores, many stores have downsized store size and outsourced functions, especially warehouse and delivery. Of equal importance is the loss of store traffic. According to studies by Impact Consulting Services, the parent of Home Furnishings Business, where once a customer shopped several brick and mortar stores, online research prior to entering a store has helped reduce the average number of stores shopped per purchase to two.
As shown in Table G, small independent stores with under 10 employees make up the greatest share of total furniture stores in the U.S., roughly 44% in 2016. That share has diminished since 2006 – falling 5.7 percentage points from 49.7%. The largest furniture stores (corporate) with the highest number of employees (500+) grew their share of furniture store locations from 18.1% to 27.4% in nine years – a jump of 9.3 percentage points. Overall furniture retailers with less than 100 employees all lost share to larger corporate furniture stores.
The majority of furniture store employees (52.4%) worked in stores owned by corporations with more than 100 employees in 2016 and 41.3% of those were employed in furniture stores with 500+ employees. The largest retailers (500+) were the only employee range to gain a greater percentage share 2017 to 2016 – increasing by 9.5 percentage points. The shifts in store percentage and employee size were not as great for home furnishings stores (Table H). While home furnishings stores with 500+ employees did increase as a percent of total stores by 1.9%, stores with under 10 employees remained just under 60% of total home furnishings stores. Home furnishings stores with the most employees were also the only employee range to gain in size – increasing 4.2 percentage points to 55.7% in 2016.
Although the shakeout continues, the stores left standing (existing stores) are showing signs of some stabilization. Tables I and J track employment growth for a full year comparing 2007 to 2016. Progress is tracked in terms of whether existing stores grew employment, lost workers, had stable employment, or closed their doors by yearend. There are two important positive outcomes from this comparison. First, the number of stores increasing employees or with stable employment increased from 54.7% of the total existing stores at the beginning of 2007 to 70.9% by 2016. Also, the percent of existing stores that closed was almost cut in half in 2016 versus 2007, 6.6% closed (2016) compared to 12.8% (2007) (Table I).
The percentage of existing home furnishings stores that closed by year-end has decreased from 11.5% in 2007 to 7.7% in 2016 (Table J). While the percent of existing home furnishings stores open at year-end decreasing in employee size has fallen 5.2 points to 25.6% in 2016, the percent of existing stores open at year-end increasing in employee size has grown slightly by 0.6 points to 24.8%.
The percentage of existing home furnishings stores that closed by year-end has decreased from 11.5% in 2007 to 7.7% in 2016 (Table J). While the percent of existing home furnishings stores open at year-end decreasing in employee size has fallen 5.2 points to 25.6% in 2016, the percent of existing stores open at year-end increasing in employee size has grown slightly by 0.6 points to 24.8%.
Big-name store closings, like Mattress Firm, make the headlines, but the stark reality of the furniture industry is in the smaller headlines in hometown newspapers. These are seasoned retailers closing after decades of successful operation. Here are a few excerpts from local stories in 2017 that gave us pause. We selected a cross section from around the country: n Dearden’s, serving Southern California shoppers for 108 years, closing all eight of its stores n Montclair will bid farewell to one of its oldest-running businesses when Hampton House Furniture closes (NJ)
- All six Rothman Furniture stores closing – serving St. Louis homes since 1927
- Louis Shanks cites ‘dramatic’ retail shift in departure from Houston
- After 112 years in business, doors closed for the final time at Lee’s Furniture in Montrose (PA)
- Gray’s Furniture closing doors after 57 years on Broad Street (Selma, AL)