Statistically Speaking: Does Severe Winter Weather Impact a Retailer’s Bottom Line?

January 16, 2019   by HFBusiness Staff in Business Strategy, Industry   

It has long been assumed that when it comes to winter weather and retail sales, it all evens out in the weeks or months to come. And often it does.  But periods of extended winter weather can also impact profit in unexpected ways. The location of a winter storm, strength, duration and timing, are all factors that determine its impact on store traffic.  Winter storms over weekends are especially adept at killing consumer shopping. And a winter storm in Buffalo is not the same as a winter storm in Charlotte.

All winter snowfall impacts retail sales and major cities in the northeast, especially, are equipped to clear roads and keep commerce moving. In preparation for this article, however, Statistically Speaking chose FEMA data to distinguish when a winter event is severe enough to impact local commerce in a major way. The Federal Emergency Management Agency examines each severe weather event and determines if it warrants Federal assistance. If so that event becomes either an “Emergency Declaration” or a “Major Disaster Declaration”. Often Emergency Declarations later become Major Disaster Declarations.

Since the winter of 2000-2001 through 2017-2018, FEMA has declared almost 90 broad weather events as major winter disasters impacting over 800 cumulative Metropolitan Statistical Areas during the period. (Table A and Table B). 

The winter of 2002-2003 is in the record books as the worst snow storm season over the last 18 years with seven major storms, including the Blizzard of 2003 in February, impacting 22 states and 92 MSAs. While 2009-2010 only had five major winter storms, they were spread out over 22 states and 69 MSAs. The winter 2013-2014 was one of the coldest on record in the Midwest and February 2015 set records as one of the coldest Februarys in many major Midwest and Northeastern cities.  The January 2016 blizzard was a crippling and historic blizzard that produced up to 3 feet of snow in parts of the Mid-Atlantic and Northeast. Finally things began to warm up with the winter of 2015-2016 recorded as the warmest winter on record by the National Oceanic and Atmospheric Administration. Last year recorded only three major winter storms, impacting three states and 11 MSAs.

The economic impact of winter storms is often judged by how many storms hit a retailer in a given winter.  Table C shows that in the winters of 2004-2005 and 2009-2010, 16 and 19 markets respectively were hit by more than one storm strong enough for a FEMA declaration.

As expected, the Northeast is generally the hardest hit area with major winter storms that have been declared disasters by FEMA. As shown in Figure 1, the top seven markets with the most frequent and harshest winters occur in Massachusetts, New Hampshire, and Maine. The Worcester market, covering Massachusetts and Connecticut, and the Rockingham County-Strafford market in New Hampshire have both had nine years of major winter storms with 10 total storms since 2000.

Surprisingly, multiple markets in Oklahoma have been pummeled by winter storms over the past 17 years. Oklahoma City, Lawton, Tulsa, and Enid have all had seven years of major winter storms qualifying for FEMA aid, along with the Fort Smith, AR-OK market.

January and February are generally thought to be the strongest winter months, but Table D shows that actually December leads the way since 2000 with the highest occurrence of major winter storms at 29, followed by January with 22 and February with 16.

As Table E shows, 205 MSAs were impacted by major winter storms in December from 2000 to 2017.

Do Furniture Stores Recover Lost Winter Sales in the Second Quarter?

Are we able to estimate the actual dollar impact of disastrous winter weather on furniture sales? FurnitureCore, Inc., the research arm of Home Furnishings Business summarized proprietary furniture store sales data from retailers participating in its FurnitureCore.com portal. The FurnitureCore study looked only at retailers located in a FEMA declared winter storm disaster area since 2000 concentrating on storms in the first quarter of the year. The final study included data from 44 furniture stores representing 764 store locations and $13 billion in retail sales 2001 to 2017. From this study, two questions emerged:  (1) Were retailers able to recoup sales declines from severe winter weather in a short period of time, and (2) was there evidence of any long term effect on annual sales?

According to this study, on average, first quarter sales in markets with harsh winters were 4 percent less than years where winter weather was less severe. In addition, for the most part those sales were recouped that year, but it took two quarters to do so. By the fourth quarter sales were stable.

This build up in sales from the loss of revenue in the first quarter during harsh winters is also illustrated in the changes in percent of sales by quarter comparing markets in FEMA declared disaster years versus normal winter weather years. In harsh winters, the first quarter takes on about 1.1 percent less annual revenue than other less severe winters. (Table F).

This doesn’t sound too significant on paper, but to add relevance, if the seven Northeastern states were the only ones impacted, the region would be down around $53 million dollars in furniture and bedding sales during the first three months of the year.

Less clear in the FurnitureCore analysis is statistically sound results on whether demand for furniture is made up over time. But according to research by the National Retail Federation in conjunction with Planalytics, a business weather intelligence firm, if severe weather keeps people indoors for a considerable time, profit lost in some product categories is never recouped. In the case of home furnishings, the weather delay sometimes gives the consumer time to reconsider the purchase or divert funds to a different purchase.

Slower sales in the winter season can also often lead to discounted sales in the spring, further impacting profitability. The flip side of the coin is that it is often easy to blame the weather for a winter of slower sales rather than focusing on the key marketing and operational issues.

But there are other opportunities some retailers miss as a direct result of slow winter sales, one of the most important being an increase in a retailer’s website traffic. Often the consumer stuck at home in an extended weather situation spends time visiting the retailer’s website and electronically perusing the store’s products. When this occurs, the use of web analytics to collect, measure, and analyze this increased traffic can give a retailer specific insight into the consumer’s product interests.

Coach's Corner: Creating Your Retail Resolutions for 2019

January 16, 2019   by HFBusiness Staff in Business Strategy, Industry   

I recommend you review those that look interesting to you and select at least three ideas to include in your sales improvement plan for 2019. They are presented in the order they were published, but that might not be how you need to approach them. Best to select those that are most important, then prioritize them based on urgency.

You can find the Home Furnishing Business archive of past issues at:

http://hfbusiness.com/Magazine/Past-Issues

• January 2018 – “Retail Resolutions” – Just like this column, last year’s initial issue listed the previous 12 Coach’s Corner topics. If you have not already gone back and reviewed the 2017 offerings to create your Retail Resolutions for last year, you now have twice as many potential game changing ideas you can look at for this year’s planning process!

• February 2018 – “Maybe It’s Time to Take the Gloves Off?” – Historically, good retailers have always known how to fight new competitors who come to their town and try to steal potential customers from them. They would analyze the things they are doing and counteract them with targeted advertising, merchandising and selling efforts. However, now we have an entirely different type of enemy to contend with, but perhaps the same approach will work if it is properly aimed at them. I am talking about the fastest growing and toughest competitors we have had in a long time, the online retailers. Most of these entities offer great selection at what appears to be competitive pricing, the two biggest concerns for most consumers. So how do we fight them and win back customers or keep from losing future ones? One of the best places to start is to look at what they are doing to hurt us.

• 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 caused me to remember the famous standup routine the late George Carlin did in 1972. Yes, I am talking about his “7 Words You Can’t Say on TV” bit. As a result, I have put together my “Seven Words Choices You Should Say in a Home Furnishing Store” when talking with targeted consumers and staff members.

• April 2018 – “Are You Winning or Losing Your Market War?” – Are you winning or losing your competitive battle for share of the business done 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”. In fact, to a great extent, it has been the shifts in traffic that have caused the distribution channel share changes we have seen. To survive, you still must do all you can to drive people in your doors, but in most markets, traffic is going to be static or slightly down for most furniture stores. Therefore, let’s go back to the basics and determine what we need to focus on to drive performance improvement in our stores that will deliver a higher share of the most important asset every retailer has – their customers. This article presents some ways to better understand and improve our “share of customers”.

• May 2018 – “Coaching the Coach – A Sales Management Training Overview” –Have your Sales Managers actually been trained or are they self-taught? Is their focus on providing the best customer experience possible or on putting out fires? Do they have the right systems and procedures in place or are they flying by the seat of their pants? Do they understand the role of sales metrics in the coaching process or do they just use them to punish low performers? If the answer to the first part of each of these questions isn’t yes, then there may be room for improvement in your sales management effort and as a result, your staff’s performance. This article will give you some insight into the elements we think you should have in any sales management program you either provide in-house or receive from an outside supplier.

• 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? This statement got me thinking about my career and what happened in it that had the most impact on my growth, both as a person and a business professional. The biggest factor was the amount of effort my direct supervisor put into training me and providing me with opportunities to learn even more through additional educational activities outside of the company itself. The best boss took all of his direct reports to the “Success 1993 Seminar” which featured the top motivational speakers of the era, including: Zig Ziglar, Peter Lowe, Mary Lou Retton, General Norman Schwarzkopf and others. They were all excellent, but the one that really blew me away was General Schwarzkopf. His topic was “Picture a Leader” and he spoke with a clear passion that you could feel throughout the hall. This article presents some notes I jotted down from what one of our great military leaders said about being a leader.

• July 2018 – “Leaving a Legacy of Leadership in Your Company” – Our column last month presented some ideas about what it takes to be a leader and how to help them grow within your organization. The point being that without creating the right environment and opportunities in our companies, we will not attract, develop and retain the individuals who will evolve into the movers and shakers of the future. The recognition of the Scott Brothers as future leaders of our industry gave me an idea to help drive home this message. So, with their help, I put together a list of some important things a leader must do to be successful in their business and leave a legacy of leadership for future generations to follow.

• August 2018 – “What Opportunities for Innovation Might We Be Missing?” –Innovation can result from many different processes and activities. It can come from trying new things or finding different ways to use things that we already have. It can be a new way of thinking about something or a totally revolutionary idea or product. We can innovate in all facets of our lives and our businesses, which to a great extent is how we evolve and move forward in whatever we are doing and how we are living. That makes this month’s theme of “Retail Innovation”, a pretty important one. So, for this column, I thought I would provide you with a simple list of some of the “little things” I have seen people doing in our industry that have helped their businesses.

• September 2018 – “How to Create the Best Strategies for Your Business” – What is the difference between companies that consistently created great strategic plans and those that did not? To be honest, there were a lot of factors, but by and large, the bigger companies were able to be more organized and focused in their approach. They also had the distinct advantage of being able to put more heads around the table when brainstorming, developing and finalizing the plans. They could create multiple teams to focus on each area and aspect of the plan, so nothing got missed. The larger corporations usually had an even bigger advantage over smaller ones. They had a board of directors, made up of successful executives from other companies who could provide a critical element to the process – an expert final analysis of the plan using experience and insight not present within the company. This article includes some ideas about how a smaller company can get this kind of assistance with their decision making and planning processes.

• October 2018 – “What Is the State of YOUR Industry?” – Much of what we see in big picture state of the industry data does indeed trickle down to the local level and knowing about it can give us a nice heads up about what we can be doing in our marketing, merchandising, sales and service efforts to give our potential customers what they want. However, while it is very helpful stuff to know, it is not the be-all, end-all. This type of information should influence what you do, but in order to properly plan your strategy to maximize your results, you must dig much deeper to gain a thorough understanding of what is happening much closer to home, in your backyard – your local market. That is what I call “The State of YOUR Industry”! This article walks the reader through some steps and processes they can use to determine the state of their industry, so they can create better, more effective strategic plans.

• 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. They are the most critical ingredient in our business because without enough of this raw material, we cannot produce the sales we need to survive and prosper. 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 of them then they got the year before, a very pertinent question might be: Where have all the shoppers gone? Since I have been a musician and played guitar almost all my life, when this question popped into my mind, it was quite natural for the title of a very popular folk song from my youth to join it there. Where Have All the Flowers Gone? was written by Pete Seeger and made a hit by many others, including Peter, Paul and Mary, and The Kingston Trio in the early sixties. Follow my rewrite of this great song to find out my opinion about where the shoppers have gone.

• December 2018 – “Proactive Planning Produces Power 50 Performances” – The big question I often get is: why do some organizations tend to always be at or near the pinnacle of their area of endeavor and others always lag behind? The answer boils down to the fact they are great at studying how they did and figuring out ways to do better in every aspect of their game or business. The best sports teams analyze each area of their game, grade every player’s performance and set targets for improvement in the next game and at the end of the year, for the next season. What training needs to take place, which players or coaches need to be replaced and how can they improve their preparation for each game, are all examined and as a result, they create plans for performance improvement. The best companies do the same thing. This article contains some thoughts that may help you move the needle next year by starting off with solid plan for what you want to accomplish.

If you need any further advice or help with your plan or these “projects”, please feel free to contact me at: tomzollar@impactconsultingservices.com

What Sells: Take Mattress into Your Own Hands

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%.

Take 5—Yavar Rafieha, Abbyson

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.

Editors Letter: Standing Out From the Competition

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

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.