Monthly Issue
From Home Furnishing Business
January 19,
2018 by Jane Chero in Business Strategy, Industry 
Since the end of the Great Recession, mattresses have been Old Reliable for just about anyone selling home furnishings.
Quarter after quarter, the category has registered comfortable single-digit sales increases while continuing its strong track record of profitability. Aided by the souped-up marketing budgets of many vendors, and financial incentives that include everything from local advertising rebates to special sales commissions, it consistently has produced healthy retail margins.
There are no signs that pattern is going to change anytime soon, but that doesn’t mean the category has been free from drama.
Last year began with Tempur Sealy International parting ways with its largest customer, Mattress Firm, in a classic he said/she said divorce. And it ended with Mattress Firm’s parent company, South Africa-based Steinhoff International, facing scrutiny over “accounting irregularities” that led to the resignations of its longtime CEO and board chairman.
And in between, traditional vendors and retailers got worked up about the rapid rise of so-called “bed in a box” producers who sell mattresses online and don’t mind tweaking the noses of traditional players. Mattress Firm got its nose so bent out of shape, in fact, that it sued one of the largest online players, Tuft & Needle, accusing the company of making false and disparaging statements about them in its advertising.
Another big online player, Purple, is about to become a public company (and may already be one by the time you read this). That’s important because, amid charges by traditional vendors that the sales figures tossed around by some online players are wildly exaggerated, it will give everyone a more accurate picture of the company’s finances.
(In presentations to potential investors last fall, Purple has claimed it had sales of more than $50 million in 2016 and was on a “run rate” to hit almost $200 million for 2017.)
But regardless of who’s right, the market share battle is not going to end soon, because a new online player emerges seemingly every week to challenge traditional vendors and retailers. And of course, many traditional vendors have developed their own bed-in-a-box programs, and a few online players are getting their products placed in brick-and-mortar retailers.
That’s a lot of drama for a category marked by slow, steady growth.
According to a proprietary industry model developed by Impact Consulting Services, parent company of Home Furnishings Business, bedding sales in the third quarter of 2017 were 4.8% ahead of the third quarter of 2016. That pushed the industry over the $4 billion mark in the quarter.
The 4.8% third-quarter growth was better than the first two quarters of last year, however. The industry model showed that the second quarter was 3% ahead of the same quarter in 2016, while the first quarter was 3.4% above the opening quarter of 2016.
For the first nine months of 2017, industry sales totaled $11.34 billion, a 3.8% increase from the first nine months of 2016.
Much of the growth for the past decade has been driven by specialty bedding, which essentially is any mattress that’s not an innerspring model. That point was driven home by an Impact Consulting survey of recent mattress buyers, in which roughly 48% of them said their most recent mattress purchase was not an innerspring model.
According to the survey, 40.9% of respondents said they purchased a memory foam mattress, while 4.55% bought an air mattress such as those produced and sold by Sleep Number, and 2.27% said they bought a latex foam model.
And since no respondents admitted to purchasing a waterbed -- yes, a few vendors still make them – that meant the remaining 52.3% bought an innerspring mattress.
While that may seem like bad news for producers of innerspring bedding, it’s not as horrible as it appears since many models classified as “innerspring” now have a combination of specialty foams – some of which are gel infused to help keep the sleeping surface cool -- and innersprings. These hybrid models are some of the top sellers today, despite the difficulty deciding how to label them.
Retailers and manufacturers will be happy to know that a plurality of respondents – 45.5% -- said they bought a king-size mattress. A queen mattress – the size leader in most surveys – finished second in this one with 36.4%. Another 11.4% said they bought a full-size model, and just 6.8% said they bought twin size.
Not surprisingly, bedding specialty stores were the most popular retail locations for a mattress purchase. Some 36.4% said that’s where their most recent purchase was made, while 29.6% said they used a traditional furniture store. In addition, 11.36% each said they bought their mattress at a mass merchant and on the internet, while 6.8% said they used a wholesale club.
Department stores trailed the field with only 4.55%.
And the industry’s long-running message of urging consumers to replace their mattress every eight to 10 years seems to be having an impact, as more than half the respondents (54.6%) said a mattress should be replaced every six to 10 years. Another 27.3% said it should be replaced 11 to 15 years after the purchase, and 11.4% said it should be within five years of the purchase. Only 6.8% said replacement should be in 16 to 20 years.
December 18,
2017 by Jane Chero in Business Strategy, Industry
With this issue, we celebrate those retailers that have achieved a significant presence within the markets they serve (market share). Some of these retailers have maintained their position while expanding their market footprint. Others, with just their sheer volume, have a significant national presence without dominating a single market. At the same time, some retailers with revenue under $50 million are dominant in their own markets.
Without a doubt, traditional furniture retailing is under assault from other distribution channels, yet this has always been the case. I am sure that the Sears and Roebuck mail order catalog was a threat to all retailers. More recently, the “1-800” number segment was thought to be the demise of furniture retailing as we knew it. Yes, we will need to change some of our practices and improve our productivity and I am confident we will do so. As I write this, I am leaving for one of our Performance Groups. This group of furniture store owners will share their best ideas and what is working for them. All members will leave with pages of notes to execute when they return home. These retailers will be here in the future.
As I close this annual exercise of determining this year’s Power 50, rest assured the numbers define who is selected- no thumbs on the scale. I look at the 300+ that made the first cut. I know that some of those just below the cut will make it to the cutoff next year. But most importantly, these 300+ represent over $30 billion in sales or approximately 30% of the market share.
Let’s continue into the future- history is on our side.
December 18,
2017 by Jane Chero in Business Strategy, Economic News, Industry
Even though furniture industry sales are projected to grow by a modest 4.1% in 2018, retailers who made the prestigious Power 50 list compiled by Home Furnishings Business undoubtedly will be disappointed if they don’t exceed that growth rate by a wide margin.
It will take an aggressive, play-to-win strategy to beat those industry projections, but that mindset is one of the factors that landed members of the latest Power 50 on the list in the first place.
But the list is not simply based on annual revenue – that’s why a handful of smaller independents made the cut. Instead, it takes into account factors such as market share, expansion, and social engagement.
Market share, in fact, 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.
The list gives revenue the second most weight, accounting for 20 percent of the score. Revenues are compiled using publicly-available information or HFB estimates.
The factor getting the third most weight – social engagement – is the most complicated, but accounts for 19 percent of the score. It considers social signals, website metrics, and third-party scoring platforms to arrive at a list of home furnishings retailers with the strongest online engagement, as measured 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 measures 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 18,
2017 by Jane Chero in Business Strategy, Industry
The October issue presented the numbers and offered the observation that the faster growing retail options tend to offer a shopping experience that did not include a traditional sales person. It presented the opinion that many of today’s consumers do not feel the need for one and may actually fear having someone sell them something they don’t want, or interfere with their shopping experience. The solution presented was to make sure we are properly communicating the benefits of working with our staff and promoting our services to the consumer, not just our products. Don’t assume they understand the process, because they do not.
In the November issue, we addressed the fact that even though we know how important our staff can be to the customer, over 40% of those that do choose to shop at a traditional retail store end up leaving without buying because they “did not see what they wanted”. Since it is primarily the sales person’s role to help them find what they want, this is a very concerning number. So, we presented some ideas about the fact that many customers don’t even allow our staff to help them when they enter our store by telling them “I’m just looking”. If you can’t properly open the sale and build trust with the customer, then you have little or no chance to close the sale.
The main issue discussed last month was the fact that so many customers leave our stores saying they did not see what they were looking for. While the greeting is indeed the most important element, there is another critical step in the process that perhaps is not being handled as well as it could be by our sales team. 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. Therefore, to complete this trilogy, we will present some of the elements in the needs analysis and development process we use to train our clients to provide for their customers.
This great observation from Stephen Covey summarizes our approach:
“An effective salesperson first seeks to understand the needs, the concerns and the situation of the customer. The amateur salesperson sells products.”
Defining Needs Analysis
Needs analysis is not qualifying. Qualifying customers is a concept of the past. The idea that there are a few questions whose answers can tell us all we need to know to help a customer has been largely responsible for the dismal performance of our industry for decades. There are no such questions and few of us are trained to qualify anyone. Needs analysis and development, by nature of the very words, is a far more expansive process. The goal of needs analysis and development is to satisfy our primary mission to help our customers understand how to use our products to enhance their quality of life and not just how to buy them. Needs analysis is a mission-driven process and lies at the very heart of being a professional salesperson.
Let’s consider how other professionals work with their clients. For example, how does a good doctor, lawyer or dentist do their job? Their business is referred to as a Practice because it is based on a group of clients that they develop over time by providing successful results to them. These people rely on them for advice, recommendations and results that fit their individual needs/wants. However, the steps they go through are exactly the same as the ones sales professionals must go through.
Certainly they have to greet and establish trust with their prospective clients. Next, they proceed to the critical phase of needs analysis and development to determine what treatments or actions will deliver the best result for their clients. To do that they ask a great deal of questions and do tests or research to make certain that they understand the situation and determine the real needs. Would you become a client of one of these professionals if they merely gave you a quick answer before understanding your problem? It would be like a doctor saying “Take two aspirin and call me if you don’t feel better tomorrow.”
Retail customers need to give a professional sales consultant a lot of information in order to help them solve the issues the consumer brings to the store. In most cases, just like with a doctor, most customers do not know what information the sales person needs to have. So, as with these other professionals, our sales staff must have a method of discovering the real truths. A doctor asks questions about symptoms to determine the root cause of the problem. We also have to ask questions to find out the real needs and wants of our customer.
Our business is driven by the needs of our customers to create beautiful homes. Therefore, the need lies in the home, not in the store. Solutions can be found in the store, but if your staff is ever tempted to think of a customers’ need for some item or a thing in your store – have them STOP and THINK of this basic principle. The need is in the home. In order to understand the need and offer a solution, you must deal with the home first.
Getting Started
In order to get started, it is often helpful to ask some key questions about where the customer is in their buying journey. Getting an idea of what they have already done and seen will help the sales person catch up with them and be more of a partner as they go forward. It can also shorten the discussion time needed by determining if they have actually found something they like or at least have a good picture in their mind of what it could be. The following questions are examples of what has worked well for many such as; “Have you been shopping long?” and “What stores have you visited?” Or, “Have you been online?” “Whose sites have you visited?” and “Did you visit our website?” Other questions to ask are; “Have you seen anything you liked?“ “Where was it?” and “What did it look like? Do you have a picture or can we bring it up on the screen here in the store?”
These questions will help us determine not only where the customer is in the shopping/buying process, but how she is approaching the task of finding new furniture. Many customers already have a good idea of what they want when they enter the store. If we can determine this early in the process, it can make the rest easier, particularly if the customer can give us specific guidance about what she is looking for by showing pictures from a magazine or website. If not, they can often accurately describe it or even give us a brand, style name or number that can be researched. In fact, many may even have gone on your store’s website and selected products to look at prior to visiting your store. The quicker we can find that out, the better.
However, do not assume that they will tell us! Remember the fears and lack of trust they bring with them to the store. We will usually have to find a way to get this information from them, it will not automatically be volunteered until they trust us and we ask them these questions.
Making the Key Needs Analysis Request
After learning where they are in the process and determining if they have already found something they like, no matter what we learn, the best way to really dig into needs analysis is to ask the customer to tell you about their room.
This is the starting point of all product needs analysis. It can only happen after we have earned the right to ask for this information, by virtue of completing a successful greeting and earning a level of trust from the customer regarding not being sold something she doesn’t want or that isn’t right.
This is what is called a “high-gain question”, which means that it is one simple question, which will return a lot of important and useful information to us. In addition, it will reduce the total number of questions we have to ask to get all of the information needed to help this customer achieve her goal.
Sketch the Room
We feel very strongly that the most effective needs analysis tool we have at our disposal is the sketching process. Only by making a visual representation of the room can we share a common understanding of exactly what the problem is and what the customer wants to have happen. You have heard that “a picture is worth a thousand words” and that has certainly been proven true here.
Sketching is a very detailed process previously addressed in the June 2015 issue of HFB in an article titled “Sketch to Build Sales”. I highly recommend that you go to our website (www.hfbusiness.com) and click on the magazine tab and dropdown menu for past issues to review this information so you have a better understanding of this important element of the needs analysis process.
Summary
My intent here has been to give the reader some ideas about the importance of Needs Analysis and offer a few tips about the steps involved. This is by no means a complete dissertation on it, merely something to get you thinking about how it is currently being done in your store and what you might want to do to make it better. Your best solution will always be to bring in an outside, professional trainer that can help your staff improve in this critical area and take better care of your customer’s needs. By the way, if during the interview a trainer doesn’t ask you a lot of very pertinent questions about your situation and what you want to have happen, before they tell you what they will do - don’t hire them!
November 16,
2017 by Jane Chero in Business Strategy, Industry
When the much-discussed Baby Boomers started their household formation phase in the late 60s, we had turmoil as they began to reject the traditional styles which drove brands, such as Ethan Allen and Thomasville, to acceptance toward upstarts, such as Scan Design, Storehouse, and Crate & Barrel. Yes, with every generation, retailers and manufacturers must adapt their merchandise, value statement, and retail experience.
However, today the industry is in transition, reluctantly bidding goodbye to the Baby Boomers and also with reluctance greeting the Millennials.
This ambivalence is creating a lost opportunity – Generation X. While not as significant in terms of households (27.5%), Gen X represents as much of a force with furniture purchases (34%), as the Baby Boomers. Unlike the Baby Boomers, they will continue to increase in terms of percentage of furniture sold.
First, let’s find some reassurance that the Millennials are not that much different from all generations. Specifically, their home furnishings must communicate who they are and a sense of style.
Yes, there is a difference in what defines style in terms of product, but this is always the case, as society moves forward.
However, the industry must master how they want to communicate in terms of media and their dependence on the internet, as their first shopping stop. For now, they are focused on the non-traditional channels, but are willing to consider these channels, as well. It will be a challenge, but nothing the industry can’t overcome.
But, what the most immediate concern should be is Generation X. They are here now and they are purchasing 33% of all furniture/bedding and are growing. We need to concentrate on this forgotten generation. What makes them different from their parents?
The attitude toward furniture is the same, as is the reasons for purchasing. However, while depending upon the Internet, they are very much into magazines (10.8%), in fact, 5X greater than their parents.
The input of friends is more important, which accounts for the increased influence of social media.
Generation X is buying form the regional chains, moving from independents which the Baby Boomers prefer. However, they have embraced the mass merchants as well. They are still satisfied with their buying experience, but not as much as their parents.
The challenge is this generation. The retailers can focus on the Millennials later. For the next decade, this generation will determine our success.
