From Home Furnishing Business
What follows is a list of the top twenty articles from 2015–2019, based on input from readers and clients. You can find them in the Home Furnishing Business archive of past issues at http://hfbusiness.com/Magazine/ Past-Issues. I hope you’ll read each of them in full as they contain valuable information.
1. February 2015 —“Missed Opportunities” — How well do you understand and manage the number of opportunities each of your staff members takes? Most salespeople will take all the Ups you can throw at them, but where is each one’s “point of diminishing returns”? How many potential clients are not getting properly served during your busy times? Fix this and you will find lost sales!
2. March 2015 —“Team Coach or Waterboy?” — Is your sales manager really leading your sales effort or is he/she mostly a support person for them, handling service issues and pricing questions? Is your manager coaching in the game or merely reviewing the results with the staff? Make sure your sales manager understands their role of driving sales improvement and is performing it consistently.
3. June 2015 — “Sketch to Build Sales” — There is no better tool for building sales and satisfying customers than the simple sketch. Most “big” writers sketch and none of the weaker ones waste their time doing it – perhaps there is a connection?
4. January 2016 — “Blueprint for Success” — Product knowledge and display are absolutely critical elements in the selling process for your staff. Do they have all the information they need to maximize their sales? When, by whom, and how are new products being introduced to them? Improve communication among your team as to why something is on the floor and who would buy it. This is a great way to increase sales without spending a dime.
5. April 2016 — “WOW ‘Em” — The in-store consumer experience is an area where retailers can differentiate themselves and become a true competitor in their market. You have already done something right by enticing the customer into the store. They believe you have what they want, or they would not waste their time coming in. This article highlights a few critical considerations that could help you stand out from your competitors.
6. June 2016 — “What is not measured cannot be changed” — We all tend to focus our goals and coaching efforts on total sales volume. However, the major problem with focusing on total revenue is that it is the end result of our efforts in so many areas within our business. Unfortunately, it is virtually impossible to improve a result if that is all you focus on. You just cannot “coach” a result! You need to break it down into the individual factors that deliver what you want. This article presents some ideas about that process.
7. February 2017 — “Average Ticket Delivers Sales and Profit Growth, How to Drive It in 2017” — As managers you can do a fantastic job of bringing in the right customers and having the right product for them, but in the end, it is the sales person that CONTROLS your average sale! They and they alone are ultimately responsible for this result because it is their skill and desire to maximize the sale that delivers higher tickets. Therefore, you must do all you can to hire, train, and coach your staff on how to increase their tickets with each and every customer.
8. May 2017 — “Is Your Sales Management Effort Leading Performance Growth or Merely Providing Adult Day Care?” — The title of this article is based on what is meant to be a humorous commentary about what a sales manager ends up doing much of the time in most retail stores. Unfortunately, it is often a more accurate depiction of the situation than any business owner would want it to be. The reason is that many mangers get so wrapped up in solving the daily issues of their staff that they lose sight of their real role, which is to provide performance leadership that consistently improves the team’s results and actually makes all of their lives better.
9. July/August 2017 — “Our Mission Represents a Higher Calling Than We Think” — We all know that a successful salesperson on the floor can make a very good income. In most cases better than they can in other industries after spending more time and money on additional education. However, even when we show today’s younger applicants what they can earn, many of the ones we really want, turn up their noses and go elsewhere. Why is that? Perhaps it is centered on the fact that they are more interested in “making a great living” rather than just a good income.
10. November 2017 — “Why Many Customers Leave Our Stores Without Buying” — Recent research indicates that as many as 50% of those consumers who shopped a store and left without buying, stated that it was because the store “did not have what I was looking for.” Wow! That is an awfully big number. Isn’t it our sales peoples’ job to help our customers find what they are looking for? Let’s take a look at what could be causing this to happen.
11. December 2017 — “So Why Else Do Customers Leave Without Buying?” — Once we get the consumer talking to us about why they came in, we need to properly analyze their needs and wants, then develop a solution that fulfills their dream for the room within whatever physical or financial limitations they may have or they will walk out. This column presents the essence of the needs analysis and development process we train our clients to provide for their customers.
12. March 2018 — “Words Matter, So Be Careful Which Ones You Choose to Use!” — The highly successful retailer Art Van Furniture is investing a lot of money to convert all of their clearance areas into outlets, all because of the Millennials’ negative perception of that one word. This made me think about how important the words we choose to use are in everything we do, both personally and professionally. That reminded me of the famous standup comedy routine the late George Carlin performed in 1972. As a result, I put together my “Seven Word Choices You Should Say in a Home Furnishing Store,” when talking with targeted consumers and staff members.
13. April 2018 — “Are You Winning or Losing Your Market War?” — Are you winning or losing your competitive battle for share of the business conducted in your market? Every business needs to determine and understand this critical number because it is indeed the only true indicator of how you are performing in your market war. However, market share is heavily influenced by “share of traffic”. This article presents some ways to better understand and improve something even more important, our “share of customers”.
14. June 2018 — “Building the Perfect Beast. How to Develop Future Leaders” — Without training, including exposure to new ideas, processes and cutting-edge thinking, how can we hope to develop well rounded, professionals to take over our businesses and guide our industry? My best boss sent his direct reports to a great event featuring presentations from General Norman Schwarzkopf and other famous leaders. This article presents some notes I jotted down from what one of our great military figures said about being a leader.
15. November 2018 — “Where Have All the Shoppers Gone? Long Time Passing?” — Our very existence is based on the process of attracting shoppers and turning them into buyers. We like to talk about how to get more of them to visit, however, since in recent memory most furniture stores (particularly smaller ones) are getting fewer shoppers than the year before, an important question might be, where have all the shoppers gone? This made me recall the folk song Where Have All the Flowers Gone? written by Pete Seeger. Follow my rewrite of this great song to find out my opinion about where the shoppers have gone.
16. February 2019 — “Do Your Customers Know More Than Your Salespeople?” — Have you ever heard of a customer saying, “It felt like I knew more about what the store offered than the salesperson did?” That is a very scary thought, but unfortunately, if you are not consistently communicating with your staff about your products, promotions and website, it is probably happening in your store every day. Here are some thoughts about making sure your customers are not saying this about you.
17. March 2019 — “Are You Harvesting All the Low Hanging Fruit You Can?” — Low Hanging Fruit is used to describe those things that are perceived as being easier to acquire than others. It also can refer to those items that give a greater return than others for the same or less effort. Here is a short list of some of the places a home furnishings retailer could look to find some low hanging fruit they might be missing or at least not maximizing.
18. June 2019 — “What Do Top Sales Professionals Think About? The Numbers” — Do your salespeople ignore, fear or totally reject the performance metrics you use to coach their selling efforts? If so, perhaps you need to revisit the importance of these numbers with them to gain their buy in and help them be more successful running their “personal business” within your store.
19. September 2019 — “Selling WITH the Internet Instead of AGAINST It” — Has our fear of competition from the Internet caused us to miss an opportunity to use it as a tool to help our customers find what they are looking for? If most consumers start their search online, how can we incorporate it into our process to help them find what they want and get it? Here are some thoughts about where the Web is going and how it might be a good sales process asset for us.
20. October 2019 — “Turning Staff Downtime into Sales Uptime!” — What are your staff members doing when they are not working with customers on the selling floor? Making personal calls? Shopping on the Internet? Surfing the Web? Napping? Chatting? Arguing with each other? The fact is that some or all of these staff activities go on daily in most stores. It is the old cliché about idle hands. Here are some thoughts and a recommended activities list to help you turn unproductive staff downtime into productive sales uptime!
Hopefully some of these ideas and recommendations will help you improve your business in the months to come. This year has been a tough for all of us in ways that no one could have ever imagined last year. Let’s hope 2021 will be a vast improvement over 2020 and get us all back to a better “normal” than the one we have just been through!
I understand “essential” when it comes to groceries and maybe a washer/dryer in a household of multiple kids, but a new sofa? Furniture retailers have been begging consumers to redecorate their homes for years, luring them with major discounts and long term fi nancing, and now they decide to fi nally buy in the midst of a pandemic? Don’t misunderstand – I am glad the consumer’s att ention is now directed to the home. And, many retailers believe this will be a long term trend. Consumer research has yet to bear that out. As you can see from the forecast, 2020 will end up growing only 3.7%, signifi cantly down from the previous year. What was disturbing was who the consumers went to when the local furniture store was closed. The e-commerce channel was the benefi ciary along with the home improvement stores and general retailers, such as Big Lots. As has been reported, Wayfair’s sales increased 86% from the same period last year, adding 46,000 new customers. The graphic below presents some statistics.
I realize it has been a while since consumers qualifi ed their purchase with a testimonial like, “My parents and grandparents bought their furniture here.” I know today we look to social media for our feedback. But, how real is a 4.5 ranking when the consumer easily goes to another distribution channel for a postponable purchase? In every market, furniture retailers have their local charitable events that have been repeated for years; Jordan’s, Bernie & Phyl’s, Morris Home, Walker Furniture & Matt ress LV, and so on, for pages. As an industry, each year we provide City of Hope millions in support. I know charity should be without expectation of return, but it should be recognized.
As an industry, we must redefi ne loyalty and recognize our most loyal customers in a proactive way with tangible rewards. For those that still have access to the older generation, ask what they did to instill loyalty. And then we could look at newcomers, such as RH, formerly Restoration Hardware. We are all envious of their growth and profi tability. They charge an annual membership fee to be a prime customer – just a thought.
As can be seen from Graphic 1, with all the turmoil, the result was a dismal 1.8% down in the second quarter. However, with the conversion of the substantial backlog at the end of June, for some more than 30%, the industry soared in the third quarter to what we believe will be a growth of 10.1%. Unfortunately, this irrational exuberance will not continue and the industry will decline, we believe, to a 2.0% growth for the fourth quarter for the end of the year. After all the angst, a meager 3.7% growth year over year for 2021 and a slight rebound to 4.0% in 2020. What caused this irrational exuberance? Simply put, the consumers were encouraged to stay at home and not spend. And the nation sent significant stimulus in the form of checks and enhanced unemployment.
This created a major increase in DISPOSABLE INCOME never before experienced. Graphic 2 illustrates. But the party may be over. At this point, no more stimulus is forthcoming from the federal government. The job losses thought to be temporary now appear to be permanent with small business support (PPP Loans) seemingly exhausted. As with other downturns, now the best predictors will be CONSUMER CONFIDENCE and UNEMPLOYMENT.
Consumer confidence fell 40% from its near-term peak in 2018 with the corresponding decrease in furniture consumer spending. At this point, consumer confidence has not reached the level of the Great Recession; however, the consumer has not fully absorbed the impact of the job loss. Graphic 3 presents the trends.
What is real is the unemployment. In one short period of time, 30 million jobs were gone. While many believed it would be short term, it has seen a third of the loss return to work. However, each month another million jobs lost is added to the rolls. Graphic 4 illustrates. This time, furniture spending held back— there are many theories as to why, such as people being forced to “shelter in place” or work at home becoming a permanent condition. The future trends are not clear. The following sections present the analytics behind our forecasts. This forecast will be modified and adjusted as we move through the year. This is followed by the insight of three of the recognized experts in the industry.
With all of our perspective, we may find our way through the fog of the new normal.
Based on a FurnitureCore, Inc. Industry Model developed by Impact Consulting Services, parent company to Home Furnishings Business, the broad upholstery category has maintained its 34% of total furniture and bedding sales compared to the same quarter last year (Q2/2019). Manufacturers have certainly noted the sustained demand bolstered by the current reality of increased time at home and have weighed in on what consumers are searching for.
“Our collections are rooted in uncomplicated luxury, designed for spaces that are real, relaxed, and refined,” said Jay Peters, vice president of merchandising at Standard Furniture. “And, now more than ever, we find consumers are asking for easy, comfortable pieces that provide a sense of home, creating a space that the whole family can enjoy.” Suzanne Henson, vice president of merchandising and marketing at Craftmaster Furniture, expands on how home life has been impacted and how product demand has been reshaped, saying, “The COVID situation is definitely bringing a greater focus to life at home.
Along with a huge increase in overall demand, we’re seeing a few distinct trends emerging. First, the demand for fast delivery is so important. Because of the rising tide in business, retailers are having issues keeping stock on their floor, and manufacturers are scrambling to keep their delivery times from going out too far. So any product we can deliver quickly to a retailer is a hot commodity and means the retailer can keep their floors refreshed. Second, we see even more demand for customizable sectional groups. Consumers have fewer distractions right now and are able to spend some time creating custom pieces that work specifically for their room.” Again, a keystone to the success of this category— the sectional— is magnified.
“Nothing seems to be more compelling at retail right now than sectionals,” says Anthony A. Teague, senior vice president of sales and merchandising at Jackson Catnapper. “In stationary seating, sectionals represent four of our top six selling items and we wanted to translate that success to the motion category. We believe by using fabric combinations that are more commonly associated with stationary, we are bringing a new customer to the motion category and the proof has been evident in the numbers.”
Whether the consumer is looking for a stationary or motion solution for their new reality, a survey conducted by FurnitureCore helps define additional factors related to consumer purchases in the category. Shoppers were polled on their preferred style of upholstered furniture and found that a vast majority (56.25%) preferred traditional stylings. Second was contemporary at 28.13%, followed by rustic at 6.25%. Mission/shaker, cottage, and transitional tied with each at 3.13%. Additionally, the survey analyzed which look the consumer finds preferable in upholstered furniture. 59.38% favors plump, overstuffed deep seating while the remaining 40.63% prefer a sleek, tight body cover following the lines of furniture.
Most importantly as we face delays in today’s COVID-world, the survey polled consumers on how long they would be willing to wait for a custom order sofa. This survey pre-dates the pandemic, but may lend some insight into wait times for more standard SKUs as the industry gains momentum following mandatory shutdowns across the country and abroad. The survey found that most consumers (40.63%) are willing to wait two weeks to a month for a custom sofa, 15.63% are willing to wait 1-3 months, 6.25% are willing to wait 3-6 months, and 3.13% are able to wait more than 6 months. The remaining 34.38% are only willing to wait less than 2 weeks. The demand is there. The following products are sure to help uplift the consumer’s spirits and satisfy their need for a comfy family area.
U.S. furniture imports peaked at $31.8 billion wholesale in 2018 before dropping 6.1% to $29.9 billion in 2019. (Table A and B). Furniture imports have continued to fall from 2019 Q2 to 2020 Q2 – decreasing 13.6% from $14.9 billion to $12.9 billion and an additional 12.4% from the first quarter of 2020 to the second quarter.
Furniture exports have wavered over the past 6 years and were on the rise before declining 3.9% 2018 to 2019 from $3.6 billion $3.5 billion. Over the past year (2019Q2 to 2020Q2), U.S. furniture exports have plummeted 21.4%. And during the pandemic between Q1 and Q2 they fell 17.2%.
It wasn’t until the end of 2018 when the U.S. and China entered into the famous “Tariff Wars” that duties on imported furniture, bedding and other home furnishings goods to the U.S. totaled more than 1.1% of the import value. Since that time, duties have risen to 8.4% of the total import value with 90% of the revenue coming from China (Table C).
Traditional household and institutional furniture imports totaled $29.9 billion wholesale in 2019, down from $31.5 billion in 2018. Most imports of furniture products peaked in 2018 before the decline began in 2019, including upholstery, nonupholstered wood furniture, metal furniture, and mattresses (Table D).
As shown in Figure 1 and Table E, most furniture categories increased during 2017 and 2018 and once the tariffs hit, those numbers began to decline. With the introduction of bed in a box, Mattresses imports jumped dramatically in 2017, and this year 2019 Q2 to 2020 Q2 – increased 39% alongside decreases for all other categories. Once the pandemic arrived at the end of March, imports continued a downward trend from the first quarter this year to the second quarter with the exception of imports coded to all other “Household Furniture (except Wood and Metal)”.
The U.S. imported goods from 132 countries in the first half of 2020, totaling $12.9 billion dollars wholesale. This number is 13.6% less than 2019 Q2 YTD. In 2014 China exported over 5X the goods to the U.S. as Vietnam. That ratio has slowly closed over the last seven years to 1.9X the amount this year (2020 Q2 YTD). Shown in Figure 2 Chinese furniture imports dropped from $18.4 billion in 2018 to $14.2 billion in 2019. And this year from 2019 Q2 to 2020 Q2, the number decreased from $7.7 billion to $5.5 billion. On the flip side, imports from Vietnam increased from $4.3 billion in 2018 to $5.9 billion in 2019.
Vietnam was also the only country in the top 5% of U.S. importers to have positive growth between 2019 Q2 and 2020 Q2 – increasing from $2.6 billion to $3.0 billion. Although Chinese imports are down this year 2019 Q2 to 2020 Q2 YTD by 28.2%, as the pandemic took hold in the U.S., China’s growth jumped 11.2% between the first and second quarters (Figure 3). Meanwhile, imports from Vietnam, which had jumped 35.5% in 2019 and another 16.5% from 2019 Q2 to 2020 Q2, decreased 23.2% from 2020 Q1 to 2020 Q2. Furniture imports from Mexico have also increased steadily through 2019 before falling in 2020.
As a percent of total imports, China still leads the way at 47.6% in 2019 but that percentage has declined from 58% in 2014. In 2020 Q2 YTD, China accounted for 43% of total imports compared to Vietnam at 23.1%. Vietnam has also increased from 11.2% of total U.S. furniture imports in 2014 to 19.6% in 2019, while Mexico and Canada have both hovered around 5% (Figure 4).
As shown in Figure 5, Canada is the only major country importing significant amounts of U.S. furniture goods, with consistent annual imports around $1.7 billion. Over the past year (2019 Q2 to 2020 Q2), all the countries contributing over 1% to U.S. exports decreased, including Canada – down from $885 million to $736 million.
Canadian exports increased by 0.5% from 2018 to 2019, but then decreased by 16.8% from 2019 Q2 to 2020 Q2 and 10.7% from the first quarter of 2020 to the second quarter (Figure 6). This year Canada still represents over half of the U.S. export dollars (53.3%) – up from 50.6% in 2019. Mexico is the next highest contributor at 8% this year, followed by United Kingdom at 2% (Figure 7).
The U.S. has not had a positive foreign trade balance since the 1970s. In furniture, 2019 was the first year to show some improvement in foreign trade balance since 2009. The deficit fell from (-$28.2) billion to (-$26.4) billion in 2019 and has improved again this year (2020 Q2 YTD) despite falling exports. (Table F).
Of the 195 countries in which the U.S. conducted foreign trade, either exports or imports, the U.S. had a positive trade balance in 127 countries and a negative trade balance in 68. However, the major trading partners, China, Vietnam, and Mexico are still significantly upside down, with U.S. imports considerably larger than exports (Figure 8). The COVID-19 pandemic has definitely been disruptive to foreign trade, but if the virus can stabilize further worldwide in the months to come, the flow of international goods should improve slowly over time. Until then, supply chains to furniture stores and online retailers will continue to experience disruptions and the consumer will become more frustrated with wait times and smaller selections.