Monthly Issue
From Home Furnishing Business
January 16,
2019 by HFBusiness Staff in Business Strategy, Industry 
With consumers making frequent mattress replacement purchases, no wonder the category has maintained its profitability. Much of the category growth has been pushed forward by specialty bedding mattresses that have moved beyond the basic innerspring model — though according to the study more than 52% of consumers report that the latest mattress purchase was for an innerspring model. This was followed by nearly 41% purchasing a memory foam mattress with air mattresses (i.e. Sleep Number) at 4.55% and latex mattresses trailing at just 2%.
Manufacturers are now focused on finding a niche that will be a sticking point with the consumer as a way to drive sales. According to Nick Bates, president of Spring Air International, one way is to appeal to consumers’ need to change their seasonal sleeping arrangements. With Spring Air’s dual sided mattress, one side is designed for when the temperatures drop for a warmer night’s sleep and a cooling fabric on the flip side that keeps the consumer cooler longer in warmer temperatures. Bates says, “Mattress companies like to solve the cooling aspects of sleep, but they often forget consumers who like a warmer sleep experience. By solving the warming side, we’ve given retail sales associates the ability to sell both consumers with one collection at competitive price points.”
With market share being usurped by e-commerce, many retailers are getting ahead of the curve by anticipating the need to catch the consumer’s eye when they make their way into the brick and mortar stores. “As store traffic continues to dwindle, retailers are working harder to make more margin per sale. We’re providing them a bed that they can sell at $2,799 in queen to capture a better margin,” said Bryan Smith, president and CEO of Southerland of their Onyx Plush model. “This mattress is backed up by strong website support to drive consumers into the store and is constructed with quality components.” Classic Brands takes the approach of helping RSAs demonstrate their mattress’ performance on the retail sales floor with ticking that darkens when touched to show consumers the benefits of a cooler night’s sleep.
The makeup of the mattress category is vast, but retailers know that what belongs on the sales floor is driven less by aesthetics and more by the various sleep solutions consumers require. When asked, 52.27% of consumers reported that mattress coverings have no impact on their mattress purchase. Of the consumers polled, 84.09% also reported that their purchased was intended for the master bedroom with only 13.6% of the purchased mattresses going in a guest room and 2.27% in a kid’s room. Clearly most consumers are looking to truly revolutionize their personal sleep experience, though they are missing out on a test drive of the mattress before the purchase. According to the same study, a surprising 15.91% of consumers did not try their mattress before their purchase, and only 36.36% report testing the mattress for 15 minutes or longer.
With most consumers shopping for their master bedroom, it comes as no surprise that king size mattresses are performing well with 45.45% of consumers making a purchase in this size, followed by the queen sized mattresses at 36.36%, full mattresses at 11.36%, and twin trailing at 6.82%.
January 16,
2019 by HFBusiness Staff in Business Strategy, Industry
"Ultimately, we want to be known as a family business," said Rafieha. "And as a family business, our reputation means everything to us. We also see our customers and retailers as extended family—that's why we focus so hard on quality and service."
Thirty years of success means that the Rafiehas also place a premium on innovations that drive the Abbyson brand forward. These days, that means focusing on e-commerce, and investing in digital, supply chain and manufacturing assets.
The long-term goal of this strategy is to transform Abbyson into one of the major players in the industry. They are already well on their way. The company has put significant effort into creating the ideal infrastructure needed to be a good supplier partner to many distribution channels, e-commerce retailers, Top 100 retailers, and designers. Through video technology, state-of-the-art packaging, expansion into multiple categories, diversification of sourcing, and a strategic limited distribution model, Abbyson is already top ranking among e-commerce retailers, and has a long waiting list of retailers eager to carry their products.
Rafieha recently spoke with Home Furnishings Business to talk more about the future of Abbyson, including the company's efforts to transform their brand into a household name.
From its start in 1989, Abbyson has grown, not only in terms of revenue, but also in the breadth of its product offerings. Is your long-term goal to create a lifestyle brand recognized by consumers?
We've seen significant growth over the past several years, which has been unprecedented. Our goal as a company is to continue to expand our product line across all categories and to develop a brand that becomes a household name. We are currently in the highest rankings among the largest retailers in the e-commerce sector, and we were one of the first brands to begin using video technology to showcase furniture. Ultimately, we want the Abbyson brand to be synonymous with family values and quality furniture.
Our whole family is behind our name, and our organization is filled with employees working hard every day to provide our customers with the style and quality they're looking for—while getting products to them as soon as possible. We believe this kind of dedication will be recognizable and long lasting. I imagine one day that the Abbyson name will be synonymous with brands like Starbucks or Apple and people might be sitting around their home with family and friends and say, “You like my new sofa? It’s from Abbyson!” And the other would say, “Oh I love Abbyson products! They are just so beautiful.”
Has your commitment to quality, service, and innovation differentiated Abbyson from suppliers competing solely on price?
What differentiates us is the balance we offer. We combine stylish products and top-selling designs with great value and mass volume. We not only stay ahead of the trend curve, we also keep operational prices down. This allows us to develop high-quality products at affordable prices. We want our customers to see the incredible value of Abbyson products from the moment they receive them, so we design long-lasting furniture that is stylish and trendy—all at an incredible price point.
We all fell in love with this industry because of our passion for design and being able to create furniture that brings peoples’ homes to life. We know that a piece of furniture can be the center of one’s home, and that so many life memories are created on and around those products. If we competed solely on price, we wouldn't be providing those critical elements—comfort, quality and style—that customers are looking for and that, ultimately, give us a competitive edge.
Would becoming a retail vertical such as Ashley Home be a potential strategy for the future?
Abbyson is focused on being the best manufacturer and partner for our retailers and e-commerce partners. We are experts in e-commerce, and we have become known as major players in that arena. Therefore, our plan is to continue developing the best products, distribution, and customer service for our partners—ultimately providing the best experience for our customers. We do not have any plans in the immediate future to move into the retail sector ourselves.
The emerging generation, of which you are among the oldest, is reminiscent of the American Furniture dynasties. Is Abbyson one of the next generation of international furniture dynasties?
As a family business, we also have deep respect for any other family business. It is a factor that adds a whole other dynamic to a business model, and it also brings customers a sense of trust and relatability. Therefore it is good to see family businesses come to the forefront.
At Abbyson, family is everything to us, and our customers are an extended part of that family. Our family fell in love with this industry and plans to remain in it for many, many years to come. From very young ages, my brothers and I gained experience in the home furnishings industry, travelling with and observing our father. It was quite an experience, and it instilled in us passion and excitement for home furnishings. Although my brothers and I grew up around this business, we each made the decision to climb on board. We hope that one day this family business of ours will even extend into the fourth generation, and maybe well beyond that. That is yet to be seen, but we have seen that our family has a natural passion for product development and design in this industry.
With you and your brothers as three motivated executives, the next generation of Abbyson is in good hands—but how do you contain the energy of three passionate leaders within the bounds of practical growth?
At Abbyson we have clearly established our roles and responsibilities for each member of the family. Each of our roles really came quite naturally, with me utilizing my leadership skills and eye for the big picture to develop into president and CEO. Doddy is the analytical one, so his role in finance and operations was a perfect fit for him. And Rodd has always been a go-getter with an eye for fashion and design, which made him a shoo-in for SVP of Sales and Design. Each brother is responsible for a large area of business and focuses on how to improve that area for the benefit of the company. When those roles come together, it is powerful.
We’ve created a special department called “Team Abby” which is a group of employees who report to Abby, our father and founder of Abbyson. He is still very active in the company and oversees our manufacturing, sourcing, and quality control. He loves seeing the company continue to grow and staying an active partner within the company.
Fortunately, we are not only family, but also we are very close friends. We use that powerful synergy to create great working relationships among the three of us. At the end of the day, we have a common goal. This synergy has led to very positive and strong outcomes for Abbyson.
Is there an Abbyson “look”? And what research, formal or informal, ensures that cohesion across a brand product assortment?
The Abbyson look is Modern Traditional. It is a very clean style that allows consumers to experiment with, mix and match, and blend different looks in their homes, creating their own unique styles.
We have spent a lot of time researching consumer demographics and identifying the key buying categories. We have entire teams who dedicate themselves to development and product analysis, and we are working on diversifying and expanding our product lines going forward.
The industry as a whole is in transition. Baby Boomers comprised the top percentage of consumers for so many years, but we are now seeing a shift in consumer demographics as buying power transitions to the Millennial generation. Our goal has been to be well-prepared for that transition, while ensuring that our product line is accessible across all generations and suits the needs of all of our customers. This is why we are focusing our product line on the Modern Traditional design. It is designer-friendly for each generation.
December 11,
2018 by HFBusiness Staff in Business Strategy, Industry
Our industry well understands competition. What was local, friendly competition where owners knew each other has expanded geographically. The major factors, such as selection, price, quality, and service are still the areas in which to differentiate. The weighting of these factors has changed. Many retailers believe that price is the dominant factor, totally eliminating selection and quality. Service often defined as delivery / availability is being challenged. Next day delivery, the foundation of traditional retailers, may not be as important as consumers accept 2-4 weeks from other distribution channels executed by delivery services. Traditional retailers find it hard to change, even though it could have a significant impact on inventory turns and delivery expense.
The Power 50 list we compiled for this issue focused on the traditional furniture stores. How did they perform as a group? In total, these best performers increased sales by 7.2%, in line with the overall industry. Of the Power 50, 23 were Regional Chains, 22 were Large Independents (over $50M revenue / one state) and 5 were Independent. This group captured 8.1% market share in their markets served. Compared to the previous year, store count increased 10.1%. Revenue for Large Independents increased 6.4%, behind Regional Chains at 7.1%. Independents increased 3.1%, struggling to cope with the outside competition.
The Retail-Verticals (Pottery Barn, Crate & Barrel, etc.) struggled with revenue growth of 3.1%, a significant comparison to their counterpart Manufacturer-Verticals (Ashley Homestore, Arhaus, etc.) at 8.3%.
In summary, it’s a battle out there. No matter the classification, it is important to define your strategic advantage. The list below begins the process — add to it.
Strategic Advantage
| Independent |
Large Independents |
Regional Chains |
| Local Connection |
Price |
Price |
| Service |
Proximity of Stores |
Proximity of Stores |
| Focused Merchandise |
Employee Benefits |
Employee Benefits
Available Capital |
Oh, and by the way, after you define your strategy to cope with furniture retailers that are similar to you, it is time to focus on the home furnishing stores, such as Target, Home Goods, etc. which find our margin levels very attractive. That is a subject for later discussions.
December 11,
2018 by HFBusiness Staff in Business Strategy, Industry
Interestingly, while the story appears to be the expansion of the regional chains, the fact is that what used to be referred to as “alternative channels” are fast becoming the channels. While most of the noise in the press has been around e-commerce and its growth, the fact is the growth of the retail verticals, such as Restoration Hardware, and the manufacturing vertical, such as Ashley Home Stores, are making significant gains.
The future will see the blending of channels. Many of the e-commerce players are venturing into brick and mortar, experimenting first with pop-up stores and retailer partnerships.
Many traditional furniture retailers have hedged their bet by incorporating Ashley Lifestyle stores with their own brands to better serve their markets. Several of the large independents (multiple markets in the same states) have significant Ashley lifestyle stores in their footprint.
Will other manufacturers venture again into the manufacturing direct model in partnership with larger retailers? The model of the hospitality industry should be considered with its multiple franchise brands operated by experienced hoteliers.
But Power 50 is not all about sales and sales growth, but incorporates other measures, such as market share- which measures how well the retailer did compared to the opportunity. Additionally, today the expansion into additional markets must be a factor considered. While decreasing the retailers’ market share because of expanded footprint, the opportunity for future market share must be a factor. Social engagement with the consumer is also an important measure of the retailer’ market presences.
Market share is the most heavily weighted factor determining who makes the list, accounting for 46 percent of the total score. It is determined by dividing the retailer’s estimated sales by the estimated retail sales of furniture and bedding in each of the markets in which the company participates, whether it’s a metropolitan statistical area, micro statistical area, or a rural area. Sales of electronics, appliances, and housewares are not included.
To arrive at a list of home furnishings retailers with the strongest online engagement, we measure by 14 separate metrics. Sources include Alexa, Facebook, MOZ, OpenSEO, Twitter, and Pinterest. On Facebook, for example, the number of “check-ins” and “likes” were among the metrics, as were the number of Twitter followers, Pinterest “pins” and Google Page Rank, just to name a few.
From that data, we used a basic ranking methodology, assigning a numerical value to the ranked list of each metric. (For example, the retailer with the highest number of Twitter followers received a “1,” and so on.)
Then, we arrived at 14 individual scores calculated for each metric. After dropping the two highest scores to eliminate any outliers, the statistical average of the 12 remaining scores was used to calculate the final social engagement score.
The final factor in the Power 50 ranking is retail expansion, which accounts for 15 percent of the total score. Using public records, it measured store expansion and expansion into new markets.
In addition to the Power 50, HFB compiled separate lists that ranked regional chains, large independents, vertically integrated retailers, and independents with sales of less than $50 million in a single state.
December 11,
2018 by HFBusiness Staff in Business Strategy, Industry
In 2017, Baby Boomers still had the highest number of households representing 34.4 percent of consumer units, compared to 26.8 percent for Generation X, and 25.1 percent for Millennials (Table A). Although Millennials are inching closer to Generation X in consumer units, the percent of all consumer spending is still over 10 percentage points higher for Gen Xers and almost 15 higher for Baby Boomers. After years of Baby Boomers controlling the majority of furniture and bedding spending, the market has now spread to Generation X and Millennials, who combined account for 56.9 percent.
As shown in Table B, Millennials have entered into adulthood and continued to form households – growing their share of consumer units. At 25.1 percent in 2017, Millennials percent of consumer units has jumped 2.2 points in just one year, while the older generations (including Generation X) decrease.
In 2017, U.S. households spent $7.8 trillion in the U.S. economy with Baby Boomers controlling 36.1 percent of all total consumer expenditures, followed by Generation X at 32.3 percent. While Millennials still control only 21.4 percent due to lower average household incomes and still smaller numbers, this generation increased its share of total spending by 3.9 percentage points 2014 to 2017 – up from 17.5 percent in 2014. On the flip side, both Generation X and Baby Boomers have decreased share as numbers rise for Millennials (Table C).
For furniture and bedding expenditures, Millennials continue to step up to spend more of their income on home furnishings than any other generation. While they still control only 24.6 percent of industry sales, the share has increased each year from 20.1 percent in 2014. Gen Xers have slipped in control down to 32.3 percent, most likely due to the smaller size of the generation, but remain close to Baby Boomers’ 34.3 percent (Table D). As Baby Boomers age out of the furniture industry, the influence of Gen Xers and Millennials will continue to grow.
The Consumer Expenditure Survey estimates mean/average consumer unit income per generation, as opposed to median income. As shown in Table E, Gen Xers have experienced the highest average income (before taxes) over the last four years – topping at $95,168 per household in 2016, the highest mean household income of any generation in history. Even with a slight dip from 2016 to $95,032 in 2017, average income for Generation X has increased 12.8 percent since 2014. Although Millennial households earned, on average, 54.2 percent less than Generation X and 28.1 percent less than Baby Boomers in 2017, average income among Millennials has increased 21.1 percent over the last four years and will continue to increase as younger Millennials enter the workforce and form households.
While mean (average) income, which differs from median income and is usually more affected by unequal distribution and tilts toward the top, shows a downturn for all generations from 2016 to 2017, the median income (middle point) from the government’s sister survey, the Current Population Survey, paints a different picture. During the same year, median household income increased 4.0 percent – from $59,039 to $61,372 per household but only 1.8 percent in real dollars. Median income estimates are not yet available at the generational level.
Although the Baby Boomer and Generation X households still earn considerably more than Millennials, the percent of total U.S. income is shifting each year in a positive direction for Millennials compared to older generations. Since 2015, Generation X has decreased its share of total income alongside Baby Boomers, while Millennials continue to grow. Income from Millennials now account for 21 percent of total U.S. income compared to 16.2 percent in 2014 (Table F).
With the highest income and an average age of 44.3, Gen Xers are the industry’s prime consumers (Table G). Now an average age of 60.2, many Baby Boomers have retired or are preparing to retire, while the average Millennial is yet to reach 30 with many earning years ahead. In fact, Millennials have now surpassed Gen Xers in the number of individuals in the U.S. workforce.
The data continues to confirm that Millennials are the most educated generation. In 2017, 73 percent of Millennials were college educated versus 70 percent of Gen Xers and 65 percent of Baby Boomers (Table H).
With higher wages and more disposable income, Generation X has consistently spent more money per household on furniture expenditures in the last four years. Mapping the CEX to the government’s national accounts through Personal Consumption Expenditures shows Generation X spent on average of $993 in 2017 on furniture and bedding which is 21 percent higher than Baby Boomers and 23 percent higher than Millennials. However, Millennial households have rapidly increased their spending – jumping an average of 6 percent a year from 2014 to 2017 (Table I).
Where do different Generations spend money?
Age and generation greatly affect what consumer items people buy and the share of a consumer’s total expenditures allotted for those items. Figure 3 illustrates a few major consumer items bought by each generation and which ones spend a higher percentage of its expenditures on those items.
As housing is a major expenditure for all consumers, Millennials are spending the most (22.5 percent) of their income on rent or mortgage payments. However, as a whole, consumers spent a smaller percentage of their total expenditures on home mortgages in 2017 compared to 2016. As they age, many Baby Boomers are paying off mortgages and simultaneously becoming the largest consumers of home maintenance, repairs and insurance.
Millennials spent more of their income eating out (6.3 percent) than any other generation, while a family-oriented Generation X spends a higher share of their dollars on entertainment compared to other generations (5.8 percent).
Vehicles and apparel were bigger ticket items in 2017 for Millennials and both Gen Xers and Millennials spent the same percentage (2.1 percent) on cellular phones and services. Not surprisingly, Baby Boomers control much of the healthcare spending, averaging 9.4 percent of their consumer spending. Down from 3.4 percent in 2016, Millennials spent less of their money on education in 2017, possibly due to an increasing availability of jobs.
Furniture spending among Millennials in 2017 bodes well for the future of the furniture industry. While each year, Millennials control a greater percentage of industry sales, they also spend a higher percentage (0.9 percent) of income on furniture than any other generation. Paired with the growing wealth of Gen Xers, the furniture industry should continue to thrive. For example, as Millennials continue to find jobs, form households, and increase wages, a 10 percent increase in spending on furniture would add another $2.6 billion to the industry.