Monthly Issue
From Home Furnishing Business
June 9,
2019 by HFBusiness Staff in Business Strategy, Industry 
“When critical Measurements and tracking/reporting systems are not in place or are not properly maintained, the entire coaching effort is at risk. If your numbers are not accurate and consistently reported in a way the coach can use to drive performance improvement, all the training and other efforts are wasted. Knowing how they are doing and believing in the numbers, is key to getting your people to buy into training and any other help offered to them by the sales manager!”
While tracking and properly reporting all the important measurements is certainly a major element of every successful performance-oriented team effort, just having the numbers is not what gets the job done. Certainly, what the coach does with the information and how he or she uses it to drive sales growth is very critical, but I have encountered an obstacle that gets in the way of even a very solid coaching effort. In fact, I might even say that this is the most common impediment to sales management success in stores today.
I am talking about the fact that many, if not most, sales associates on our retail floors do not understand the importance of the metrics we use, and as a result, they do not put the faith or belief in them that makes them the most powerful tool in the sales manager’s box. Without this “buy in”, they see the numbers as being there only for management’s use in finding things to complain to them about. As a result, this valuable performance data is looked at by the very people that need it the most, as being a negative element in their business life instead of the positive, success driving instrument it should be. Therefore, something that they should use to help them grow and prosper in their chosen field of endeavor, becomes worthless as both a performance driver and motivational tool. Worse than that, it can become a negative force that actually inhibits progress and reduces or eliminates the sales manager’s ability to help staff members succeed.
Does this sound familiar? Do you have salespeople that resent the fact that you track their performance and have the audacity to discuss it with them or worse yet post it for all to see? If the answer is yes, then this is a cancer that must be eliminated, or your store will never achieve its potential. With all the competition in most markets today, eventually it could become difficult for it to even survive. In many cases it only takes one negative person on a staff to bring the entire group down. If that is the case, a simple “amputation” of the infected limb can solve the problem. But what if that person is your top writer? Will the body live on long enough to grow back the missing part and prosper? Perhaps this is a bit of a dramatic way to look at the situation, but getting your people to buy into the performance data you track and then use it to drive the growth of their individual businesses, is the only way most retail businesses who rely on their staff members sales efforts, will win the battle for consumer dollars in their markets. So, let’s look at some thoughts about ways we can turn this situation around and get our people onboard with using sales performance metrics to help them develop into highly motivated professionals, who wake up each morning eager and excited to find new ways to please more customers in order to grow their individual businesses.
The key is to get salespeople to understand that in a very real way, they are actually in business for themselves with the help and support of the store. The store provides people for them to work with and products to sell, plus an office and after the sale support. Basically, two of the main ingredients in each salesperson’s personal business, opportunities to sell (Ups) and product to sell, come from the store.
Since Total Sales Revenue = Ups X Close Rate X Average Sale, it is obviously that how they do with the people they see is what separates the successful sales professionals from the also rans. Because of this, it is really our sales metrics that provide insight into each person’s ability to perform. Keep in mind that all the staff performs in the same arena, selling the same customers the same products, so comparatives to store averages are very valid as a performance benchmark. Therefore, in order to really know how they are doing and where they can improve, each staff member needs to have access to this information.
This means that a key aspect of your sales management program, and your entire management effort, must be dedicated to making certain that each of your sales staff members understand how important these numbers are and how to use them to be as successful as they can be, thus maximizing their rewards from their job, both in money and personal achievement. Let’s look at some ways we may better define the main metrics we use in language a salesperson might better understand and as a result take more personal ownership of the numbers.
Total Sales Volume is one metric that we all understand. Whether we value the impact it has on our financial success or use it as a motivational goal, this is where much of the story begins and ends for many of us. However, the major problem with only focusing on total revenue is that it is the end result of all our efforts in so many areas within our business. Unfortunately, it is virtually impossible to improve a result if that is all we focus on. We need to break it down into all of the individual factors that deliver what we want, then improve those that are deficient and maintain/maximize those that are sufficient. Selling has a number of facets that greatly influence our end results. Breaking our individual performance down to the basic metrics that contribute to the sale, is the best way to know where to focus our attention. Here are the prime numbers:
Traffic is defined as the number of the store’s potential customers (or family groups) with whom the salesperson works and is singularly the main driver of your business. Most retailers call these “Ups”, which derives from the colloquial use meaning that a salesperson is up to bat for this customer opportunity. All opportunities must be counted because each one requires that you make personal contact with the customer or prospect. Traffic counts also provide the base measurement for determining close ratios and revenue per Up, two important indicators of salesperson effectiveness discussed below.
Close Ratio is defined as: Number of sales made divided by number of Ups taken, expressed as a percentage. It is a huge number because it indicates if you are connecting with the people you see. If you cannot connect, then it is impossible to help people find what they are looking for in your store. Your performance in this area is mainly driven by your selling skills, which can be trained and coached, plus your interpersonal or “people skills”, which are harder to train and coach, but can be improved over time. Knowing if you are not connecting as well as others on the staff is a critical factor in helping you find ways to be more successful on the floor.
Average Sale is defined as: Total sales volume divided by the number of sales made, expressed in dollars. Are you maximizing your opportunity with each Up? A lot goes into creating high average sales, including; selling skills, product knowledge, design skills and relationship building skills. All of these can be improved with training, coaching and mentoring. This number is normally provided by the store’s business system and is one of the most accurate metrics we track. It also normally contributes the most to your sales volume and ability to build a client base. It is extremely helpful for you to know where you stand on the team so you can watch and learn from others how to drive this critical metric higher.
Revenue per Up is defined as: Total sales volume divided by the number of customers seen (UPs), however it can also be calculated by multiplying Close Rate X Average Sale. Revenue per Up is a critical measurement you can use to understand your true effectiveness and efficiency with the potential customers you see. This measurement takes into account the effects of both close rate and average sale by combining their effects into one comparative number that indicates how many dollars of revenue are generated each time you greet a customer. This is a key metric in your business.
The above four measurements are the most important numbers you should use to analyze your sales performance and thus the success of your personal business. In the simplest sense, closing rate is how many customers you gained a commitment from and average sale is how much of a commitment you gained from each one. If you don’t pay attention to and understand the metrics involved in measuring how you are performing, then your business will fail. As I have said before, the best salespeople we see, working for the best managers, always understand that these numbers are key to their success. Without this understanding, most people resist being coached and therefore do not improve their numbers. As a result they fail to grow.
June 9,
2019 by HFBusiness Staff in Business Strategy, Industry
Across Distribution Channels
As expected, in major distribution channels that market furniture and home furnishings, retail management occupations carry the higher salary positions. Within management occupations, electronic shopping and mail-order houses pay the highest wages – both sales managers and purchasing managers -- earning a median annual salary above $115,000 (Table A). In general, purchasing managers earn the most among the management occupations – all above $100K, regardless of the distribution channel. Among administrative services managers, home furnishings stores paid the greatest median annual wage of $112,570. Furniture stores were near the bottom at $77,240.
Non-managerial occupations have been divided into two charts for clarity – Table B (Part 1) and Table B (Part 2). As a whole non-managerial positions among furniture and home furnishings retailers carry much lower wages than managerial positions. As shown in Table B (Part 1), by far both business and financial operations and computer and analytical jobs have the highest earnings in the non-managerial category – all earning over a $26 median hourly wage with the exception of building material and supplies dealers paying computer and analytical positions $19.42 an hour. Furniture Stores and Home Furnishings Stores are near the bottom at hourly wages of $27.24 and $26.92 respectively for business and financial operations occupations, compared to $29.54 for the top paying pure e-commerce companies. In computer occupations, Furniture Stores at $31.68 an hour are near the top, only exceeded again by pure e-commerce retailers at $40.76.
Shown in Table B (Part 2) are non-managerial occupations -- design, sales, office and administrative, and various warehouse and delivery positions. General merchandise stores is the lowest paying channel for non-managerial occupations, while electronic shopping and mail-order houses are the highest. Sales, office, and transportation occupations earn the lowest in non-managerial jobs – many below $15 an hour. Design/arts/media positions in furniture stores are the second highest earnings among the select distribution channels at $19.09 per hour, second to pure e-commerce and mail order retailers at $24.26. In sales and related occupations, furniture stores pay a median of $14.49 per hour while home furnishings stores are lower at $12.07. Interestingly, qualified installation, maintenance and repair occupations are among the highest paid non-managerial occupations across all of the selected distribution channels, with furniture stores averaging $17.83 per hour and home furnishings stores $18.59. As a group, transportation and material moving occupations are the lowest paying positions.
Number of Employees
With the exception of electronic shopping and mail-order houses, all the major furniture and home furnishings distribution channels have cut the number of employees since 2006 (Table C). The greatest loss occurred between 2006 and 2012 when furniture stores reduced employees by (-25.2) percent and home furnishings stores by (-11.9) percent. Since then, the distribution channels (except for electronics and appliance stores) have hired employees to fill the stores that survived the recession but amounts are still shy of pre-recession levels. Last year, the furniture industry employment totaled 224,390 and home furnishings store another 255,910.
Furniture and Home Furnishings Stores:
Management Occupations
Drilling down from the broad management occupation categories into more detail for furniture stores and home furnishing stores, with the exception of administrative service managers, wages in furniture stores are generally higher. In 2018, administrative service managers in home furnishings stores were the highest paid management positions, earning a median annual wage of $112,570 compared to the same occupation earning $77,240 in furniture stores (Table D). This represents a 42.4 percent increase from 2012 to 2018 for home furnishings stores administrative service managers compared to a 21.4 percent increase in furniture stores (Figure 2). In furniture stores, financial managers are the highest paid management positions averaging $114,600 annually. Purchasing managers are the second highest management position in furniture stores at $107,180, similar to wages of $107,400 in home furnishings stores. Purchasing managers earnings increased 2012 to 2018 by 45.3 percent and 20.6 percent, respectively (Figure 1).
On average, neither general managers, sales managers nor transportation, storage, and distribution managers have broken the $100,000 ceiling. In addition, the earning of GMs in furniture stores and home furnishings stores have had the lowest increase of all management positions over the last five years, growing only 1.6 percent and 0.9 percent respectively 2012 to 2018. GMs in furniture stores earned over $5,000 more annually than those in home furnishings stores – sales managers more than $13,000 and $15,000 for transportation and distribution managers (Table D and Figure 1).
Non-Managerial Occupations
Art and Design Occupations
Non-management wages are reported in hourly wages. Interior designers in furniture stores have shown consistent median hourly wage growth (14.1 percent) from 2012 to 2018, compared to the much slower growth pace in home furnishings from 2012 to 2018 of 3.9 percent. (Table E and Figure 2). In 2018, Interior designers earned a higher median hourly wage in furniture stores ($21.90) than in home furnishings stores ($19.75).
Median hourly wages of merchandise displayer and window treatment occupations are consistent between both channels – earning between $15 and $16 an hour in 2018 (Table E).
Sales and Related Occupations
As shown in Table F, sales and related occupations are among the lowest paying jobs in furniture stores and home furnishings stores. These have also been the slowest in earnings growth. In both distribution channels, cashiers earn a median hourly rate below $12. Wages continually dropped for cashiers through 2012 to 2015 (Figure 3), before growing in recent years – most likely due to minimum wages going up in many cities and states. Retail salespersons make more in furniture stores with a median hourly wage of $13.94, compared to $12.40 in home furnishings stores. The most startling statistic is that between 2012 and 2018, earning for retail salespersons in furniture stores grew only 6.5 percent and 5.9 percent in home furnishings stores (Figure 3).
Office and Administrative Support Occupations
By far, executive secretaries and executive administrative assistants are the highest paid among office and admin support jobs – earning a median hourly rate of $29.20 in furniture stores and $26.68 in home furnishings stores (Table G and Figure 4). The executive admin jobs also had the largest increases from 2012 to 2018 – jumping 32.5 percent in furniture stores and 29.8 percent in home furnishings stores.
Lowest paid among these positions are customer service reps, receptionists and information clerks, and stock clerks and order fillers – all earning less than a $14 median hourly wage.
Transportation and Delivery
Among transportation and delivery occupations in furniture and home furnishings stores, installation, maintenance, and repair workers are among the highest paid non-managerial positions, earning a median hourly wage of $17.83 in furniture stores and $18.59 in home furnishings stores (Table H). Although light truck or delivery services and drivers earn considerably less at $13.10 and $15.47 respectively, their wages have increased by 17.5 percent and 21 percent since 2012.
No doubt furniture and home furnishings stores are feeling the pinch of increasing wages. With salaries going up nationwide, furniture and home furnishings retailers should be focusing on where to place their bucks so they can get the most bang in terms of competent employees that will add to the bottom line.
June 9,
2019 by HFBusiness Staff in Business Strategy, Industry
“The updated styling of our Costner Luxury Motion sofa demonstrates that motion furniture can be as fashionable as stationary furniture,” said Cheryl Sigmon, director of merchandising at Bradington-Young. “Luxury Motion has grown to be a significant portion of our overall business and our attention to detail on the perfect ‘style and comfort’ balance is what makes Bradington-Young a key player in this product category.”
Other manufacturers are honing in on offering premium quality with a made in the USA guarantee, like Jackson Catnapper. Says Anthony A. Teague, senior vice president of sales and merchandising, “Offering our customers a domestic alternative in the leather motion category with “American scale” and an Italian Leather story has been a great formula for success for Catnapper. We have a dozen top grain leather frames with sofas ranging from the ‘import-busting’ $999 retail to the more feature-laden at $1,499 retail. When compared to much smaller-sized import products and cheap Chinese leathers, our leather motion category simply out-performs others on retail floors. Couple that with the ability to offer our customers an alternative to the pain of flowing containers, and it’s easy to understand why this category is booming for us.”
As manufacturers continue to integrate motion and technology in more product designs, retailers want to know what consumers expect for their future motion category purchases to optimize their product assortment on the sales floor. Based on a FurnitureCore, Inc. industry model developed by Impact Consulting Services, parent company to Home Furnishings Business, when asked to rank their top four feature preferences in reclining furniture products, the clear leader of feature options at 55% was ‘automated adjustable headrest and lumbar support’. For a tie in second at 45% were ‘heat and massage’ and ‘docking station for a mobile device’ features. Closely behind at 35% was a ‘storage drawer’ and ‘hidden tabletop’ at 32.5%. Other comfort and convenience features rated are shown in the graph below.
More important, the same study polled consumers on their satisfaction rate of their most recent reclining furniture on a scale of 1-7. With all the added features to the category, it was no surprise that 87.5% of consumers rated their satisfaction with a 5+ rating (average response 5.58%). It is worth noting that the same survey polled consumers on their most recent upholstery purchases. Only 35.29% of consumers reported that the retail sales associate made them aware of reclining and power options available in upholstered products! This leaves a chance to increase average ticket behind as the same study indicated that 15% of consumers are willing to pay upwards of $200 more for power recliners. The motion products tell their own stories and practically sell themselves as long as the consumer is aware of the expanded options and customization that manufactures offer their retail partners.
This category will continue to evolve with new, exciting features to keep up with consumer expectations by incorporating comfort features and technology without surrendering style for many years to come.
June 9,
2019 by HFBusiness Staff in Business Strategy, Industry
Alex Bernhardt, Sr., the company’s chairman, acknowledges that Lenoir and Caldwell County have had a difficult transition over the last 20 years, but they have emerged strong because the overall economy is much more diverse. Furniture remains a vital part of the region’s economy.
Bernhardt is now the largest furniture manufacturing employer in Caldwell County, with about 1,500 people. That operation comprises about half of the company’s total output, with the other half coming via imports.
Bernhardt, a member of the third generation of the Bernhardt family to lead the venerable company, is also the company’s self-described chief cheerleader. He is an occasional advisor and “top admiration giver” for the next generation, which includes his son, Alex Bernhardt, Jr. and his two nephews, Rountree and William Collett.
“I try to give advice only when requested, but I am still active in an advisory role on a fulltime basis with the company,” Bernhardt says.
Bernhardt sees his company as committed to its employees and to Caldwell County. He is proud of the fact that the company has no debt and operates globally with its brand while still keeping its community focus and commitment.
“Our headquarters is still in Lenoir and that helps in many ways because over the last two decades many of the managers of other industries, particularly furniture, have left Lenoir through buyouts, sellouts and mergers,” he says. “I am proud that we have survived and have touched as many lives as we have. But I don’t enjoy the fact that many of our other local good, strong, friendly competitors have exited Lenoir, because over the past 100 years, furniture has been important in our community.”
Bernhardt recently spoke with Home Furnishings Business to discuss his company’s current direction and how it has navigated the furniture industry’s constant change.
Home Furnishings Business: At a consumer level, brand recognition for furniture manufacturers has deteriorated over the last 20 years. Is consumer branding a viable strategy for Bernhardt?
Alex Bernhardt, Sr.: Consumer branding is very important to us and is something to which we are totally committed. We started this in 1982, so it has been 37 years that we have been advertising our brand. This year, with our national advertising, we targeted 140 million consumer impressions, which is No. 1 in shelter magazine spending in our competitive set. In addition, the internet has become so important and we are very active on the web. Our website has more than 7,000 visits a day, which I find pretty astounding. Also, we have almost 100,000 consumers who have opted into our database to receive updates. The more recent thing is social media. We are active on Facebook and Pinterest, but Instagram comes to mind. We have almost 140,000 followers, which I believe makes us one of the leading furniture brands. We are trying to have a consistent brand image across all of our platforms with photography, advertising, our internet presence and all of our graphics, including our trucks. We still believe in brands and we’re still committed to investing in it.
HFB: What is Bernhardt’s strategy to fill the void caused by the decline in numbers of independent furniture retailers?
Bernhardt: There has been some decline. I would say it has been more about change than it has been about decline. Some of the fine, old retail names that I grew up with when I started 50 years ago have disappeared, but others have emerged. A number of the good retailers we do business with have more stores and more floor space. Companies such as Baers, Robb & Stucky and Mathis Brothers have all seen internal expansion that has helped us.
Another major recent change is the demise of the store programs at Thomasville, Drexel and Henredon. Many of the owners of those operations have added Bernhardt to replace some or all of those previous high end suppliers. We are aware of the change and we are aware there is some decline, but we don’t see a precipitous loss of upper-end ability to present our products.
All of that notwithstanding, the biggest change for us in the last decade has been the addition of the design trade. By actively courting both the retail store and the local design trade, we have seen steady growth. An example of that would be our attendance at the High Point semi-annual furniture markets. We have approximately twice as many people coming through our showroom as we did a decade ago. The landscape is changing for sure and we are looking for, and finding, different channels to fill the void when we lost a higher-end retailer.
Another example of how we have found growth outside of traditional furniture stores is exports. While exports are not a major part of our business, it is an important and growing part. Ironically, our largest export country is China, which has just imposed tariffs on the products we ship to China, resulting in a decline in demand for our products there. We are feeling the effect of the tariffs, both on incoming parts, which we import from China, and also on our ability to export. We have also done private label manufacturing for specialty retailers for many years and will continue to do that quietly in the background.
HFB: What is Bernhardt’s e-tailing strategy?
Bernhardt: We are currently selling some limited parts of our line through e-tailers such as Wayfair and will continue to look at those opportunities while trying to create a level playing field for our traditional furniture retailers. One way in which we attempt to do that is by establishing minimum advertised pricing to give each outlet an opportunity for a reasonable profit margin. We do see continued growth in internet selling. It’s an inexorable tide that neither we, or anyone else is going to stop, so it’s best to find ways to participate constructively.
HFB: Bernhardt recently committed to entering the outdoor products category. Will this become an important category for Bernhardt?
Bernhardt: A number of our retail customers and friends have encouraged us for a while to enter the outdoor area and to bring our design leadership to that segment of the market. While there is no shortage of commodity products for outdoor, there is some shortage of fashion products with design and function becoming important. We see the growth not only of true outdoor, but also patios, enclosed glass porches, and other areas where the outdoor and indoor environment is blending together. So, we have been asked to take our indoor designs and replicate them for the outdoors. We will be launching our offerings this fall. We are excited about it and we do see it as an opportunity. Part of that will be manufactured in Lenoir and part
of that will be imported.
HFB: Bernhardt has always embraced design as a strategic strength. While achieving success in the commercial segment, the residential segment has been more of a challenge. Why does the consumer resist?
Bernhardt: We think with the consumer we target, which is an upper end consumer, fashion continues to be very important. They manifest that in the clothing they buy, the automobiles they buy, shoes and watches. They are very driven by brand and fashion. So, the emphasis on fashion may not be consistent across all levels of American consumer buying and all price levels of American furniture, but we believe in the niche that we target it is extremely important. That’s why our overall strategy is to be a leader in design backed up by a good brand.
May 13,
2019 by HFBusiness Staff in Business Strategy, Industry
Having spent almost fifty years trying to understand trends and how they will impact the Home Furnishing Industry, I have watched many changes that have impacted the industry, both positive and negative. This will not be a nostalgic trip down memory lane with commentary on the good old days however it will be a cautious commentary on the speed of change.
We are in a “disruptor” economy, whatever that means. But that has always been true in business. Entrepreneurs seize upon a concept and push forward to satisfy the perceived needs of the consumer. The industry has experienced “category killers,” blockbuster retailers that through volume reduced prices along with services, captured significant market share. The remnant of these retailers, such as Babies-R-Us, a division of Toys-R-Us, have been liquidated, leaving in its wake thousands of small independent retailers that help expectant parents create that special nursery. But beneath that disruption are the lives of many individuals who built those businesses over a lifetime. Disruption, but at what cost?
I know the reaction of many at this point is, “But that is ‘capitalism’.” Don’t take this wrong, I am not saying change is bad. Do the math. I am a product of the sixties (the ultimate disruptors) and an early business career in the heady days of the LBOs (Leverage Buy Out). In our industry, the cry to put that capital required on the balance sheet to work to create shareholder value resulted in the industry manufacturing sector, losing the capital to automating manufacturing. The consequence was the loss of production to offshore. Yes, this was disruption, but at what cost?
As a young business school graduate, it was hammered into my mind that the capitalist system was efficient and would “punish” new ideas with failure. However, it was always with the caveat that a company has to contend with a competitor’s bad strategy until they went out of business. Today, the environment is slow to correct. Weekly, retailers question how etailers continue to increase market share by continuing to accumulate substantial losses. When will there be a correction? In the interim, independent retailers will fail. The latest projection is that we will lose a third of the stores in the next downturn.
The pace of change is increasing. A test by Ikea to rent furniture has become the buzz that will be a disruptor. At times, I believe change is attempted just because we can. Give the consumer their “Big Mac” at any hour, delivered at any hour by Uber Eats at twice the price. Should we? When the cost of the service exceeds the cost of the product, should we take caution?
Venture capital should be a positive contributor to improving society. But with cash pursuing ideas (good or bad) what is the result? I realize I will get incoming flack on this article saying that I am negative on capitalism, but maybe we need an adjustment to more positive, not disruptive, capitalism. The graph below is real. I have experienced each of these cycles. Even though the consumer is confident, should we be cautious?
