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From Home Furnishing Business

Build It and They Will Come

February 13, 2018 by Jane Chero in Business Strategy, Industry

That belief has sustained manufacturers and retailers for decades. Now for furniture store owners, confidence is failing with each year’s decline in traffic.

Furniture Stores, for the most part, merchandise the furniture consumer durables leaving the non-durables, such as top of bed and window coverings, to the Home Furnishings Stores. The consumer durables account for 39% of the total furnishing sales, a $305 billion market.

This was not always the case with furniture stores merchandising a full range of products for the home. However, over the years product categories have been abandoned as the “category killers” pursued a product with low service, low prices and sometimes quality. How could a furniture store compete with Bed Bath and Beyond?

Retailing has always been a situation of opportunity. The consumer doesn’t always make a destination purchase, but discovers something she cannot live without in the process of “shopping” commonly referred to as aimless wandering.

With the time strapped consumer, the concept of retail therapy has all but disappeared with Generation X and younger Baby Boomers. It is well documented that Millennials hate to shop except digitally. What does this mean to the small independent furniture store that presents product in a pleasant environment stocked with knowledgeable sales staff? It means “waiting for them to come.”

The quandary that the industry has is the growth of the home furnishing industry in total (8.1%) versus the growth of furniture stores (1.5%) in 2017. While home furnishing stores are increasing their share of furniture sold, furniture stores are not increasing or even participating in the sales of the non-durable product categories. While furniture and bedding has enjoyed a 21.8% increase over the last 5 years, many of the non-durable categories have achieved more growth.

It may not be just the opportunity to sell additional product categories but the opportunity for exposing the furniture product. The commitment to shop for new bed linen or even a rug is much less than the commitment to redecorate your home. The question is, how many consumers buy furniture while in the process of shopping for bed linens?

Many things can happen to the consumer on the way to redecorating their home. One of these may be discovering that great piece while shopping for something else in a Home Furnishings Store.

Do we need another reason(s) for consumers to visit other stores?

Advertising is a Journey, Not an Event

February 13, 2018 by Jane Chero in Business Strategy, Industry

In fairness, most of the advertising in the furniture sector is executed by the retailers which should be event oriented. Retailers allocate a percentage of their advertising dollars to building brand. However, the majority of the spend is to attract those consumers that are actively shopping. Therefore, the significant advertising expenditure is targeted to 11.45% of the consumers based upon FurnitureCore’s (the research arm of Home Furnishings Business) ongoing marketing intelligence.

The major challenge in furniture retailing today is the declining traffic. In 2017, traffic declined 5%. Even though sales increased 3.4% according to Impact Consulting, parent company of Home Furnishings Business). The decline in traffic doesn’t mean less consumers in the market but just less store shoppers. As has been documented by the research, the average number of stores visited by each shopper is just over two stores.

The accompanying table illustrates these findings by age group. Of significance is that older consumers (over 45) limit their shopping to even less stores.

This situation of less traffic raises an interesting question: What about be backs and personal trade? Typically, the sales associate closes the sale on the first visit 20-30% of the time and then on the second visit 60-70%. For a sales associate, the higher the ‘be backs,’ obviously the higher the close rate.

The percentage of ‘be backs’ is influenced by the merchandise price point. The higher, the more ‘be backs.’ The average for an upper/premium store would be in the 30% range and middle would be in the 20% range. It is a great KPI to measure a retailer’s “sales associate” to see how they are developing the client relationship. An interesting read is the Coach’s Corner article in HFB Dec., 2017 issue — So Why Else Do Customers Leave Without Buying?

The furniture purchase is triggered by a life event such as a move (27%) or a remodeling/addition (16.8%). The graphic presents the occurrence factors by generation

Therefore the conclusion is that we wait for the lifestyle event to occur and then we are ready with a “sale.”

Obviously, we can take that approach but what about those consumers that are interested by no specific plans (28.63%) and those that are beginning to shop (39.26%)? These consumers should be our prime target for advertising because when they start the shopping process it is just under 50% finished and done within two weeks as can been seen in the graphic.

No matter the age or income, it’s a fast process.

When the consumer begins the process, they start with a list of retailers that they will consider. Often referred to as brand awareness, it is a perspective in the consumer’s mind of who they want to consider. The accompanying graphic illustrates a very competitive market with several long time retailers along with several new entrants (less than two years). Shown with the traditional retailers are the other distribution channels. Yes, they are in the consumer’s considerations.

Just because the retailer is considered doesn’t mean that they make the short list. An Important measure is considered, not shopped, which indicates the impact of the most recent messaging.

The advertising challenge for retailers is to create that ongoing awareness in the consumer’s perception.

There are many media choices available to the retailer to influence the consumer. Choosing the correct media to influence the consumer in the various stages of the buying process is the challenge. The table below presents the influence of each media type by generation.

But before we discuss how to influence the consumer that is committed to purchasing, what about those that are considering a purchase? At the beginning of each year, Impact Consulting surveys consumers on a national basis (demographically balanced sample) about their intention to purchase furniture. This is one of the factors used in their forecasting model. The response is typically an affirmative plan to purchase in the 65-85% range dependent upon the economy and consumer confidence at the time of the survey. As a follow up, a year later they ask the same consumers if they acted on that intention. Unfortunately, less than a third act on their plans to purchase furniture.

Furniture is a major purchase and daily occurrences can impact consumer’s purchasing plans. As we write, I am sure that many sofas lost out to that replacement snow blower. However, that is not the only problem. The industry has not made our product a priority. The table below provides some input by generation.

This is where the manufacturer/supplier comes into the picture. We have discussed at length the absence of branding in the industry currently.

Shelter Magazines at one time communicated the prestige/quality of iconic brands like Henderson, Drexel, and many others. The potential for Stickley, Brown Jordan, and others to excite the consumer exists. Retailers respond to those vendors that encourage the consumer to walk through the door and ask for a specific brand.

It has been fixed in the industry mind that over 70% of consumers visit the internet to conduct research during the shopping process according to FurnitureCore research. Interestingly, almost 40% go to the store first. The table illustrates that first stop in the buying process by generation.

Interestingly Generation X, the current prime target for furniture retailers, do research in the magazines (10.8%). This is the rationale behind the magalogs that Home Furnishings Business produces for retailers, which last year resulted in 9%+ of all recipients visiting and making a purchase.

The cost of advertising is a major part of the traditional furniture industry expense structure. While the overall industry is above 7%, there are many retailers expending 8-9%, a level that is not sustainable. High performance retailers achieve a 6-6.5% range as illustrated below for those retailers.

As can be seen from the table, the breakdown by media type still favors television. As can been seen from table D, only 12.9% is influenced by this media type. Long term, this media type will lose influence as can be seen from the response of the millennials (8.5%).

With advertising cost increasing as a percentage of sales and the cost per opportunity (up) accelerating to $30/up or $100/sale at 8% of the average sale ($1,250) the bottom line is challenged.

Additionally, adding the 3-4% of the cost for the financing — the offers that many believe critical for traffic — even though on average less than 35% avail themselves of the offer.

On top of this is the ever increasing cost to attract and retain good sales associates which can easily reach 7%.

With the above, the furniture retailer is running out of runway for profitability.

The answer is to measure the results and target your customer. If your market is in Columbus, Ohio, there are 738k households headed by consumers over 25. A middle/upper retailer targets 476 households. When the analysis is done of the psychographics (lifestyle), focus of the retailer number goes below 250. Let’s shoot a rifle instead of a shotgun.

Maybe It’s Time to Take the Gloves Off?

February 13, 2018 by Jane Chero in Business Strategy, Industry

Obviously, any of the newer channels that sell furniture can be considered our direct competitors who try to steal customers. Just like another store in town we need to analyze what they are doing and counteract it with our advertising, merchandising and selling efforts. Successful retailers have historically done this, but our experience has been mainly with local or national stores, just like us. Now we have a different enemy to contend with and perhaps the same approach will work if it is properly aimed at them.

I am talking about the fastest growing and toughest to fight of these channels — the online retailers. Most of these entities offer great selection at what appears to be competitive pricing, the two biggest concerns for most consumers. Some offer slick technology to help the shopper quickly find what they are looking for, another key point for today’s customers. As we have discussed in the last three columns, they do not feature traditional sales people to assist in the buying process, which again, may be attractive to a large group of people. Chances are that we are not going to beat them consistently on price and selection, two areas we may use to compete against other local retailers.

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. In fact, that is what got me thinking about this subject in the first place. A few months ago, my wife sent me a link to an ad that Overstock.com was running. Since I do not watch much TV, I had not seen it and when I did I was blown away. At first I was kind of ticked off because it was a “low blow” type of approach that played on the targeted consumer’s main fears about doing business with a local furniture store.

After further thought I had to hand it to them! They had definitely done their research and knew how to make their competition look bad in the eyes of their potential customers. True or not, the preconceived notions that they presented probably ring true with many in their target audience. Based on the numbers I have seen, it must have been a very successful spot for them.

Let’s take some time to analyze what they did and then see if there is any way we can counteract it with our marketing efforts. To begin the process, if you have not seen it, I highly recommend you follow the link provided below to view what is very appropriately entitled: “Furniture Store Battle”.

Basically, Overstock.com is attacking their competition by playing on the fears and negative stereotypes that many customers have about visiting a local furniture store. They present several horror stories in a relatively light-hearted attempt to make them look bad and I think they succeed rather nicely.

The theme, which is carried by the music track throughout, centers on the statement: “Anything you can do, I can do better, I can do anything better than you”. The obvious point is that the consumer’s experience doing business online with Overstock.com will be much more successful and pleasant because they are so much better at taking care of the customer’s needs and have eliminated all the negatives of doing business with a typical furniture store.

It starts with a female consumer sitting comfortably at home with a tablet scrolling through products she is interested in buying. Next to that we then see a couple approaching a store and entering to have the following negative experiences happen:

Sleepy, sleazy looking male salespeople (one dressed in 70’s leisure suit) lounging at the door, then accosting them as they walk into the store, shaking hands, giving out cards and hugging the wife.
The couple’s confusion with the many sales tags/signs and a sea of sofas before them is made obvious, as is the salesperson’s inability to make sense of it for them.
Once they finally find a sofa to buy, they are pictured pushing it through an endless checkout line.
Next, we see the hapless couple in a crowded parking lot trying to load the sofa into their small SUV and ending up tying it onto the roof.
When they finally arrive home the sofa falls off the car and the exhausted looking couple is shown crying and disgusted.
Each of these disaster scenarios is interspersed with scenes of the online buyer calmly accomplishing each task with a swipe of her finger on the tablet.
The song also changes periodically into a verbal exchange between the female Overstock and male furniture store voices arguing over whether or not Overstock can indeed do it better – “Yes I can, No you can’t”.

As stated, this is all done with humor, but as with much advertising today, it presents more misperceptions than it does reality. In truth, any store that treated its customers like the one the couple visited, deserves to lose them. On the other side, if every customer interaction at Overstock goes as smoothly as it did for the at home consumer presented in the ad, they deserve to take them away. The problem is neither picture is completely accurate, but the result is that the viewer comes away feeling that it would certainly be in their best interest to shop online than waste their time visiting a furniture store. Therefore, it is a very powerful piece of advertising because it does what it was intended to do.

Overstock certainly did their homework and targeted some of the core fears our mutual target customers have about their local competitors. They have played on those fears and made themselves look like the consumer’s savior. Providing a simple and easy solution to every problem anyone could possibly bring into a furniture store. No local store can touch them! Of course, I have yet to see a store as bad as the one they presented, and I really don’t think that Overstock is as perfect as they pretend to be either.

So, what can we learn from their advertising effort? First of all, if these consumer perceptions are what their research says is our Achilles heel, then that it is something we definitely need to fix. As stated, they have taken the gloves off and presented a relatively twisted vision of what it would be like shopping with us. To counteract their self-serving propaganda, we need to aggressively position our stores as what they are or at least can be — the solution to every customer’s home furnishings problems in their home.

We need to take each of the weaknesses they presented in their ad and continually work to turn them into strengths in our target customers minds. Our advertising and marketing efforts need to reinforce our abilities to make our customers shopping experiences simple, exciting, successful and fun! We must present the advantages of working with our professional sales/design staff and the fact that customers can actually see, feel, and touch what they might want to buy before committing. They need to understand that we can customize items to their needs and provide professional help making all the tough decisions needed for putting a room together. In addition, we must educate them and enhance their perception of our white glove delivery services, including the in-home set up process. We should consistently stress the fact that we have been around awhile and will be here to help our clients with any issues or needs they have in the future. We need to consistently remind our market that we participate in community activities and help fulfill its needs, by contributing to charities, creating jobs, paying taxes and adding to the stability of the area. All things distant companies normally don’t do.

The list of the positive things local furniture stores make happen for both their customers and their community goes on and on. We need to accentuate the positive outcomes we provide as part of the huge package of advantages we have over the far away online retailers.

Who are you? What is your story? Why are you different? Why should customers visit you instead of shopping online or at other channels? Take your gloves off and make sure your target customers have the answers to these questions and you stand a chance of winning more bouts than you are now, maybe even becoming a retail champion!

Take 5: RUSSELL TOWNER

February 13, 2018 by Jane Chero in Business Strategy, Industry

Samson Holding Company, which has built a reputation as a solid operator of furniture manufacturers in the middle and upper-middle price points, leaped into the design-driven and mostly domestically produced luxury segment of the market a year ago with the purchase of the tradition-steeped Baker, Milling Road and McGuire brands from Wisconsin-based Kohler Company.

At first blush, those ultra-high-end lines don’t appear to be a good fit for their new owner, but Baker President Russell Towner couldn’t be happier. He has the full backing of Samson to maintain their luxury positioning, and he believes they’re poised to grow and thrive now that the ownership transition is largely complete.

And having spent essentially his entire 24-year furniture industry career working in the high end of the market, it’s what Towner knows best. He spent 15 years in a variety of sales and marketing posts at Henredon, and then was president of Theodore Alexander USA for five years before taking the helm at Baker in March 2016.

He says the company will keep its corporate office in Hickory, N.C., a secondary office in Chicago where its visual merchandising and showroom staffs are based, as well as its network of 18 corporately-owned trade showrooms.

Towner recently spoke with Larry Thomas, senior business editor at Home Furnishings Business, about the ownership change and the growth prospects for the luxury furniture segment.

Home Furnishings Business: How has the Samson acquisition changed the way you do business?

Russell Towner: Very little has changed from an outward appearance. If you’re an interior designer or a dealer, there’s very little that you’re going to see in terms of change. Most of the changes have been in what I call ‘back of house’ areas. Under Kohler, we operated under a shared services model, so things like finance and IT were all corporate departments that were based in Kohler, Wisconsin. So we’ve had to develop and hire and fill those departments here.

Our new ownership has been great. They understand the furniture industry. They have a keen appreciation for Baker and McGuire. They have a desire to maintain our luxury positioning. And for the most part, they have bought into the strategic plan we have developed to move the company forward. It has been really exciting to have their support.

But what’s really exciting for me is to have the sale process behind us. We were effectively operating in a holding pattern in terms of implementing key strategic initiatives.

HFB: Do you still see good growth opportunities for the luxury segment?

Towner: I’m very optimistic about the luxury segment. I’m not sure I’d say one segment is growing faster than another. I happen to think there are winners and losers in each. I like our opportunities for success where we’re positioned today. We’ve got a rich heritage spanning 125 years in the case of Baker and 70 years in the case of McGuire, and they were founded on the principles of design leadership and superior craftsmanship. We remain committed to those things today.

As a team, we talk all the time about how we’re effectively laying the foundation for the next 125 years or the next 70 years. That has always been who we are. It’s not high-end one day and moderate price the next day.

HFB: What growth opportunities do you see for your brands specifically?

Towner: We’re focused on growth across all of our distribution channels, and within each of our brands. That growth is going to be driven from a number of different initiatives. From a product perspective, we’ve had a really good series of launches over the past 18 months. But beyond making sure our product offering is relevant, we’re also doing a lot of work … to make sure we’re offering an experience that is commensurate with our brand.

As an example, our team has developed a new showroom concept that we’ve started rolling out across our trade showroom platform. I think there are really two choices. It’s either price or experience. I think it’s much more difficult to operate in the middle of that.

The thing I like about experience is that everybody plays a role in it, whether you’re customer service, whether you’re shipping, whether you’re quality control, whether you’re the sales associate, whether you’re in the marketing department, or whether you’re in the merchandising department. Every facet of the business has to align to offer the experience. If you have any one of those that is out of whack, the whole thing beaks down. I like to be on the experience side of the game, and we’re working hard to make sure all of our departments are aligned around that.

HFB: Do each of your brands cater to a different demographic?

Towner: Yes and no. They each have their own niche. In broad terms, I would characterize Baker as being a more formal offering. It’s not traditional. It’s just a more formal offering that covers a broad style spectrum from modern to traditional. Milling Road is a more casual expression, but also runs that same spectrum of design styles. You could loosely say Milling Road is more youthful in its spirit.

McGuire, on the other hand, is rooted in a true California lifestyle because of that indoor/outdoor mix. I describe it in terms like casual luxury and unpretentious.

They do have their own niches. But a key point is that we see today’s world of design as being about mixing all of these things together. That’s how people live. People think (the popularity of eclecticism) makes life easier, but from a design standpoint, it’s much more difficult to execute properly. You have to have a real understanding of scale, proportion, and line to make it all work.

HFB: Have you adjusted your business model because of the furniture industry’s increased focus on the interior design channel?

Towner: It’s fair to say there are a lot more people in our sandbox today. (Laughs) But we have always been focused around the interior designer. I don’t have the exact number, but I believe that 90-plus percent of our product is a placed product. That means there’s an interior designer involved, whether they’re buying through one of our trade showrooms, whether they’re buying through one of our dealer partners, or whether they happen to be an interior designer on staff at one of our dealer partners. Very little of our product is sold as a regular retail transaction. So our focus hasn’t changed at all. We’re entirely focused on the interior designer as our key customer.

I think where we have had to change is acknowledging that (interior designers) may operate differently today than they did before. That goes from how they purchase to where they purchase to the tools necessary to interact with them.

HFB: Is most of your production still domestic?

Towner: Yes. About 85 percent of our product is domestically produced. We have a factory in Hickory that produces case goods and some upholstery. We have an upholstery factory in High Point. We also have a factory in Indonesia that does most of the McGuire line.

We had another factory in Indonesia that produced some of our Milling Road line, but we recently closed that facility and moved much of the work back to North Carolina. So for those who thought we were going to close factories (in the U.S.) and move production offshore because we were purchased by an Asian company, I would say we’ve done quite the opposite.

Coach's Corner: Setting Up Your Retail Resolutions for 2018

January 25, 2018 by Jane Chero in Business Strategy, Industry

Most big-time sports teams have an offseason to reflect on what happened last year. Owners evaluate their players, coaches and management based on the results they achieved. They study their game planning and personnel moves to determine how it helped deal with the challenges of the last season. Upon completion they create a plan and set goals within the organization that will help drive positive change and performance improvement! Year-in, year-out, the winningest teams are the ones that do the best job performing this process.

In our business we do not have the luxury of an “offseason” for reflection and planning, but that does not mean we do not need to go through the process as much as a sports team does! It is every bit as important for us as it is for them, since historically the most successful businesses are also the best ones at reflecting, correcting and planning! They are always the most prepared for whatever the economy, the consumers and their competitors can throw at them.

Therefore, sometime in the first few months of each year, after we have gone through the hustle, bustle and distractions of the holiday season, owners, managers and staff need to take time to look back at how they did last year and analyze what caused it to happen. Obviously, you want to replicate or repeat those things that gave you a positive result and replace or rethink those that did not.

Most of you probably take the time to review your sales performance and set goals for performance improvement in that critical area. But do we do enough? A goal is not a plan; it is the result you want the proper execution of your plan to deliver. Many times, we want growth and set targets for it without charting a new path to get to them. Einstein is credited with saying: “Insanity is doing the same thing over and over again and expecting different results.” Therefore, in order to get the desired improvement in results, we need to make changes. Selecting what changes to make is a very critical activity, so many just avoid it.

My hope is to help you with that process. Each month for the past year we have presented you with an opportunity for positive change that will impact the sales side of your business. Each column targeted an area or process that many stores can improve and provided a brief overview of what could be done to make it happen. Looking back at this year’s issues will give you many ideas that could help you grow your business. Therefore, they present a great starting point for your planning process.

I recommend you review those that look interesting to you and select at least three to include in your sales improvement plan for 2018. 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.

January 2017 – “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 2016 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 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! Ultimately, only they are responsible for this result - it is their skillset and desire to maximize the sale that deliver higher tickets. It is their attitude that influences what they do with each customer and when they stop trying to build the sale. 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.
March 2017 – “Building a Client Base with After the Sale Follow Up” - We feel strongly that creating and managing a professional clientele development process is easily the weakest aspect of most home furnishings retailers selling efforts. I am not talking only about follow-up or sending thank you notes -- many stores do that -- but about a more fundamental paradigm of building long-term relationships with customers through truly caring about them and their needs - then making this a fundamental part of the company culture.
April 2017 – “Making Friends in Your Market - Who are You and What Do You Stand For?” - Your ability to provide an exciting and helpful in-store shopping experience is certainly an advantage over the internet only retailers. But not every consumer realizes that they need or even want to have that face-to-face interaction. This column touches on some of the other areas of consideration you have that may help you define your store to the potential customers in your market and perhaps attract some of those that are on the fence about visiting a brick and mortar store.
May 2017 – “Is Your Sales Management Effort Leading Performance Growth or Merely Providing Adult Day-Care?” - The question the title of this article presents 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 managers 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.
June 2017 – “Using Retail Sales Metrics – Drilling for Dollars” - The ultimate sales performance metric is total sales, everything else rolls up into it. If life was simple, this would be all we need, since it is the main end result we all want to maximize. However, as with any result, in order to understand how we got it, we have to look at its main ingredients and analyze them. Only when the right things are being done in the right order and at the right time, do we generate the consistent, high-performance results we desire.
July/August 2017 – “Our Mission Represents a Higher Calling Than We Think” - We all know that a successful sales person on our floors 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” than just a good income.
September 2017 – “Is it Time for an Upgrade?” - Unlike much of the last century, it is not the manufacturers and suppliers pushing retailers to change. Today it is the need to better serve the customer that drives innovation and thus change for all consumer products industries. Why has this happened, what does it mean for us as business people? Let’s take a big picture look at the marketplace dynamics that have caused this to happen and perhaps gain some insight into how we might improve our planning process for the changes we face.
October 2017 - “Our Competitive Battlefield - the Enemies Are at Our Gate” - The very nature of who we are and what distribution channel we belong to can make our job either easier or harder! This column takes a look at the historic share data from a sales performance trend standpoint, so we can have a better understanding of who the players really are and how our market has evolved in the last couple of decades.
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.
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.