From Home Furnishing Business
There are many advantages that come along with solid wood products, like each product’s unique character or ease of maintenance to name a few. But most notably, wood is known for its longevity, which alone is a point of product differentiation from engineered wood alternative furniture, and places solid wood products in the high or premium quality category. Consumers have begun to rediscover their taste for these durable products and appreciate the quality and fine craftmanship. “Demand for American made hardwood furniture is on the rise,” says Ivan Keim, of Abner Henry Fine Furniture. “We enjoy providing designers with options to give their clients what they want. High end consumers want it the American way, which is quality that will last and is a one of a kind piece.”
Many solid wood manufacturers are quick to note another point that is ever important to today’s consumer: a fresh update. “Over the last few years,” says Luke Simpson, president and CEO of Durham Furniture, “our dealers have resoundingly shared with us that consumers are looking for solid wood furniture that has traditional bones, yet is updated for today.” Speaking on his featured product for the category, he notes that, “The Prominence [collection] hits the mark with its sophisticated silhouettes which are updated with contemporized finishes and hardware for today’s consumers.”
The thought is echoed by Charles Curry, vice president of sales and strategy for Simply Amish, “One of the biggest challenges of having the name Simply Amish is being stereotyped stylistically.” He says, “It’s fun to offer a collection [Elroy Bedroom] that hit a little design groove, that makes consumers smile, and that sells!”
With the rising demand for solid wood pieces, consumers were happy to chime in on their preferred tastes for a FurnitureCore survey (developed by Impact Consulting Services, parent company to Home Furnishings Business). When asked, “Based on your most recent bedroom purchase, why did you choose a wood bed over an upholstered bed?” an overwhelming majority (62.75%) of the consumers polled reported that they simply preferred the look of wood. This was followed by 21.57% noting their concern that an upholstered bed would become dated quickly, and 9.8% were concerned about the quality of an upholstered bed. These concerns are answered directly by what solid wood manufacturers have been offering all along— timeless, durable classics designed with the consumer in mind.
As a result, when Neil MacKenzie, vice president of marketing, arrived at Universal four years ago, it was a company that was already very much in transition. His role since coming on board has been to help define the emerging Universal reputation and experience.
"They had already done a lot under Jeff Scheffer direction to really up their game from a product standpoint, but there were just a couple more dots that needed to be connected," he said. "I think now, we're pushing the envelope in redefining the experience for everyone—designers, retailers and the end consumer. We want to be the brand that inspires."
MacKenzie recently sat down with Home Furnishings Business to discuss the transformation of Universal Furniture. Read further as he share's his thoughts on Universal's key marketing strategies and partnerships—including the debut of the Nina Magon collection.
Q: How is Universal Furniture using marketing as a competitive advantage in the marketplace?
A: We're obviously promoting and supporting our brand in the marketplace to a number of different customers, whether that be the end consumers, designers or our No. 1 customer—the retailer. So there are a number of different audiences, and my belief is that if you treat everybody like the end user, I think that's a better way of getting your message across. Because at the end of the day, I think everybody is a consumer of things. But then there are little components of that messaging that would be more tailored to who we're talking to. They can have very different needs, even though they're similar at the end of the day.
Email marketing and social media are probably the two strongest tools we have right now. And we have a defined content strategy. We're planning six to eight months out, as if we were running a magazine. This way we can lead into the Market launch and the marketplace launch.
We're also heavily invested in photography. Of course everyone in the industry relies on photography, but we've refocused to be more on brand with who we are. And, ultimately, we revamped our approach to who Universal is. It was previously very B-to-B centric. When I was getting started here, the concept was "good, affordable, smart design;" my wife said to me, "Why is it just good?" I thought that was smart. And while that slogan is still at the ethos of what we do as a manufacturer, we've also surpassed that.
We have gone from just offering casegoods to now offering upholstery—so now it's more of a whole-home approach. So we kind of rebranded and under this mantra of "explore home." We were making a lot of changes on the back end, so for us it was how do we change the front-end story. It was through marketing that that facelift occurred.
Q: What kinds of marketing tools are you currently providing dealers, and which are they finding most successful?
A: We do a lot of educational forums during market. So we have probably six or seven talks, and we'll bring in and partner with different designers, bloggers—you know, media people, if you will. We also put together toolkits for retailers to tap into and leverage our imagery and video footage. We want to make it super easy for them, and we've been trying to get more involved at the store level to make it easier for them.
The other thing that has been helpful is designing the spots more for social media and relying less on TV spots. So we have these 15-, 30- and 60-second spots where they can just drop their logo in at the end and have something they can use as easily on Instagram as in the store.
Q: What is your vision for your licensed collection initiatives? And how would you say licensed collections are helping you extend your brand?
A: I think it's a fine line when you're doing these. You don't want to erode your brand equity in the process, which we've done a lot of work to build up. These partnerships need to support our brand, not take over what we're doing. Our goal isn't to become the house of brands, were it's like we're renting all these partnerships. But there's certainly some more room for these initiatives, and really each one is unique and presents different opportunities. Certain things pop up that make sense and create a niche for us and our retailers. So really, it's how they fit into our overall vision.
Q: What is your process for selecting licensing partners? For example, what made you choose to partner with Coastal Living and Nina Magon?
A: When considering a partnership, the first thing we always ask ourselves is, "will it bring with it a lifestyle that somebody wants to live?" If it's just name, that's not necessarily bad, but that's not what we want. We think the lifestyle approach is an easier way for us to go because it fits in with who we are as an approachable, livable brand. But we do address a spectrum of lifestyles, as you can see with our Costal Living and Nina Magon collections.
With these two collections, we have two very different entities. Costal Living is a magazine entity that has millions of followers and consumers at many different levels. So being able to partner with a company like Meredith with a brand like Costal Living is a very unique opportunity for us, and we've tried to leverage that a number of different ways, on behalf of the retailer, to drive people into stores.
With the Nina Magon project, we think of it as more of a design collaboration, and the scale of it is much different. She has a very strong point of view, and it's very fashion-forward, aspirational living. Plus, she has an expanding audience, which is exciting. I think with both partners, we have approaches that are authentic to who the partner is, and each brings us a much different look.
Jeff [Schaeffer?], our president, always says, "We'll listen to everyone, because you just never know." And we've met with some people where first we were like, "oh, that will never happen," but then we started talking with them and thought, "hey, this could actually be a very big deal."
Q: In recent years you've developed a number of programs at Market and throughout the year to cultivate your business with interior designers. Can you tell us more about your vision for this segment and how these marketing initiatives are going?
A: I think for us, our first big initiative was moving this showroom downtown. That was our way of literally being on the map for designers to know that we're here to do business. We also launched a program for interior designers. That's when they began to see this very wide spectrum of options, whether it be for, you know, the different rooms of the home or, frankly, just the different style categories we execute. And then supporting that is that when they work with us, they can get it all pretty quickly from one resource.
We also have no order minimum, so it's very easy for them to get started with us and not feel like it has to be a massive, upfront investment. Our goal is to be the easiest company they can transact with.
Then, at Market, we have a learning center initiative to engage designers. They can come over here and listen to a particular speaker or take a CE course. We also have a designer-only lounge for them. We're partnering with Krypton and Moore & Giles to design a space that includes WiFi, a bar, food and smoothies, an "unplugged" area, a beauty lounge for touchups, pop-up stores, and probably much more. We hope they'll see it as a hub for them during Market, so we're letting them know they can use us as their basecamp throughout the week. We certainly understand that they'll be shopping other places as well, but our hope is that they will want to start and end their days here with us.
Many of my discussions with retailers are around the lack of traffic and resulting lack of customers. There is a search for the best way to advertise, best way to present the merchandise, best selection, and best on and on. Are we making it too complicated? What happened to the times when you sold Mr. and Mrs. Consumer just like you sold their parents and sometimes their parents? What caused this commitment to purchase?
I realize that as the industry moved from mom & pop stores with the owner at the front door to multiple stores with professional sales managers there had to be a loss of that connection. We have lost the merchant class that prided themselves on maintaining that relationship.
In presentations, social media is touted as opening up communications connecting the world, but what about the furniture retailer and their customers?
But back to my discussions with retailers—the first step is to simplify the discussion. For example, let’s take Virginia Beach. How many households? 650,000. What price points do you sell? Upper/Premium. Primary customers? 35-65+ / $75-250k = 195,000 households. What psychographic clusters (lifestyles) have you best attracted? About 80,000? How many of them are your customers? Do you sell at least every eight quarters? 16,000. Now, how do you touch everyone of these consumers, 3x per year—without “selling” them—to remind them that you can assist them in creating a beautiful home? It’s fairly easy to get down to one on one, isn’t it?
Why bother? Simply put, this consumer household represents a revenue stream of $45,000 over their lifetime. For every $1.0m in revenue, you need 1,000 customers that consistently buy from you. The following are the statistics.
Thoughts of the aftermath of the wave of acquisitions in the manufacturing sector that saw the transfer of ownership from family to nameless equity firms that had better ideas to wake up the stodgy furniture makers caused trepidation.
In the past year, the industry has watched as Bob’s Discount defied industry norms and skipped over the nation from Chicago to Los Angeles, opening multiple stores in the same week. And Art Van reorganized with significant personnel shifts and exits. At the same time, cornerstones of furniture retail such as Rooms To Go, Raymour & Flanigan, and Haverty’s keep their powder dry. What is in the wind?
In the business press, not just the industry press, the performance of the furniture retail sector has been the topic of much discussion. While the “pending” purchase explosion of the millennials will fuel the home furnishings industry, that is after they begin to furnish their first homes, and after they actually make that decision in light of college debt. The decisions may be ten years later than generations before.
But for now, Baby Boomers still have the highest number of households representing 34.4 percent of consumer units compared to 26.8 percent for Generation X and 25.1 percent for Millennials. While the Millennials are inching closer to Generation X in the percentage of consumer units, the percentage of consumer spending for furniture/bedding is still over eight percentage points (7.7 percent) higher for Gen Xers and almost ten points higher for Baby Boomers.
But even with this delayed race to purchase by both generations, the industry in 2018 totaled $106.33b- an increase of 6.8 percent over 2017. Furniture excluding bedding grew a healthy 7.6 percent to $90.2b and bedding increased 2.6 percent to $15.51b.
The generational terminology is tossed around much like our style trends. The table provides the commerce department definition unaltered from marketers that “bend” the definition to match their marketing campaigns.
At the end of 2017, the most current year of consumer expenditure data by generation, Millennials’ total $71.9m and range in age from 21-36 with an average age of 28.5.
The next, older Gen Xers at an average age of 44.3 are smaller in population at 65.7 million but will have the most current impact on the furniture industry.
Baby Boomers at the average age of 61.1 are rapidly retiring but are not showing signs of lessening their influence on the industry.
Why the discussion of demographic trends in an article about retail competition in the furniture industry? Simply put, it is the consumer that will influence the type of retailer that will prosper into the future, and therefore what the market demand will be for retail distribution types into the future. There have always been changes in distribution channels in the furniture retail landscape. Fifty years ago, over 50 percent of the furniture volume was delivered by national chains such as Montgomery Ward, Sears, and JC Penny with the balance of the market controlled by department stores and small mom & pop stores often specializing in weekly finance payments.
The ensuing fifty years has seen almost the final demise of the national chains and the growth of many mom & pop stores, losing the tag of “dirty window stores.” Emerging in the same period was the lifestyle stores, such as Restoration Hardware (RH) and Pottery Barn, and the verticals, dominated by Ashley Home that both produces and sells their own product. But most notable has been the internet or e-commerce retailers which began as entrepreneurial “pesks” policed by manufacturers that vowed not to sell them to major purchasers such as Wayfair that are pursued by manufacturers.
Traditional furniture retailing now controls 24.4 percent of the industry with sales on the uptick with regional chains but declines of 11.4 points with independents. The internet’s beginning with rogue retailers in the late 90’s captured 10.5 percent by 2011 and slowed to 15.6 percent in 2016- but has settled in at 18 percent plus today. Mass merchants (warehouse clubs and superstores) have grown only slightly in share 20.1 percent in 2011 to 20.4 percent in 2016. Everyone can remember the Costco scare that has faded into the past.
While each of these channels could be (and have been) the subject of a significant report we will focus on only the independents and the regional chains.
The consolidation of the industry continues after a cumulative loss of 19.8 percent of stores from its peak in 2007. The trend reversed in 2018 with a gain of 1.8 percent in store count.
As can be seen from the chart, there are almost 5,500 fewer furniture stores and an additional 500 stores in 2018.
Before getting excited, this does not mean a surge of new mom & pop stores. It is more a reflection of a trend that has been around in other retail segments that furniture retailing has avoided — a retail location on every corner. Furniture retailing has long been a destination location. However, with the time starved consumer, the need for a more convenient retail experience has lead retailers to more stores to serve the same markets. According to FurnitureCore, the sister company of Home Furnishings Business, the average household per store location for the Top 300 traditional furniture retailers is $212k households, down 10 percent in the last 5 years. The Top 300 retailers covered a range of $9m-$2.5b.
The demise of the mom & pop stores has been accelerated by the growth of regional chains.
Total furniture retailer sales of all products are estimated at $65.5b for last year. However, these retailers include retailers not classified as traditional furniture retailers. They also include lifestyle stores, such as Pottery Barn.
The Top 100 represented only traditional independents, large independent, and regional chains through consolidation and attribution. These retailers have increased sales by 66.1% percent since 2013 compared to the broader classification, which grew 10.6 percent.
Now, what should your strategy be if you are a traditional furniture retailer? No matter small independent, large independent (sales over $50m – one state), or regional chain with expansion of the mind, changes are coming.
First, let’s start with the “elephant in the room” or maybe we should say the large fish in the ocean. Specifically, those regional chains with national on their mind. Nothing motivates a furniture retailer to expand more than outside capital. With the acquisition of Bob’s Discount by Bain Capital and Art Van by HD Lee Partners, excitement was created in 2016/2017 that resulted in a 5.3 percent increase in market footprint for Art Van and 6.4% for Bob’s Discount. While Bob has expanded by opening new stores, Art Van has combined acquisitions with opening new stores.
Much more entrepreneurial has been Furniture Factory Outlet (FFO Home) with seven additional markets, and typically, in markets under $50min furniture/bedding sales. However, recently larger markets have been targeted.
American Freight, a quiet retailer out of Ohio with the low overhead but high value consumer experiences, continued to expand their market footprint into an additional eleven markets.
Anticipating an acquisition proposal or at least a deterrent to entering the markets, well managed regional chains are filling in their existing markets and moving into adjacent markets. No matter the motive, regional chains are taking advantage of the good market. Also stimulating this expansion is the availability of great real estate deals — catnip to furniture retailers.
Moving into a new environment, Big Sandy expanded into the Columbus market, joining Morris Home, the large independent.
Room Place expanded outside of the Chicago market into Peoria.
Steinhafels expanded its footprint into the outskirts of Chicago-Naperville-Arlington Heights market with a new store in Crystal Lake.
Living Spaces has continued its expansion strategy after San Diego into Austin and now into Las Vegas.
Cardi’s Furniture quietly expanded into New Hampshire in competition with Bob’s Discount.
While other regional chains have expanded into adjacent markets, many have been content to add presences within their existing markets. Surprisingly, the sleeping giants Rooms To Go, Haverty’s, and Raymour & Flanigan have been content to grow their marketshare and improve their performance. Many question the strategy. However, Rooms To Go’s acquisition of Carl’s Patio venturing into the outdoor category and Raymour’s accumulation of leases could indicate surprises to come.
As formidable as the regional chains are the large independents, often with more revenue than some regional chains, have been content to remain within their states and grow. While there is no state strategy, the fact is that some states are larger than some of the regional markets.
The major strategy with the large independents has been to create a dominance in each market to prevent other regional chains form considering invasion.
The major story has been about the Stevens Point-based Appliance & Appliance Mart as it is in an additional market and adding stores, including some free standing Ashley stores.
Jerome’s continues with its market expansion entering El Centro with free standing bedding stores and expanding store coverage.
City Furniture added an additional market (Sebastian-Vero Beach), plus expanded its store complement by six.
Johnny Janosik expanded into a neighboring market with expansion into Wilmington.
The centerfold map provides a visual perspective.
But what about the independent stores below $50m in revenue? An answer could be a franchise. Slumberland and WS Badcock have long provided a solution. The map indicated their coverage in the Midwest and South. The franchise fees are more than offset by the increased buying power and almost elimination of inventory. Assistance with advertising and store operation support are an added benefit.
Art Van has also supplemented their distribution in smaller markets with franchise operations.
As always, furniture will be sold. Enterprises will continue to find ways to satisfy the consumers’ demands. To survive retailers must be open to change- are you ready for the battle?
That’s what I did to prepare for this column, and it was very eye-opening how consistent the research was and how similar the resulting recommendations were, no matter who was writing the article or what part of the retail industry was being studied. It was reassuring in a way to see that most of what I saw was very much in line with what we have been preaching for the last twenty years, but what really came out of it is that there is no new quick fix or secret recipe to how we can be more successful. It all boils down to consistently being the best you can be at what you do and understanding what that really is in the eyes of your potential customers, so you can maximize your advantages and minimize your disadvantages versus each of your different competitors.
Today the big, bad beasts most home furnishing stores believe impact their marketplace the most, are the online retailers like Amazon, Wayfair and Overstock.com. However, there is also a huge amount of business being taken out of our local markets by the online efforts from other primarily brick and mortar companies like Walmart, Target and others. Sometimes we are so overwhelmed by all we see and hear about the successes of these efforts, that we lose sight of the fact it is predicted that roughly 80 percent of total retail sales over the next few years will take place in a physical store. That number is even higher, more like 85 percent, for the home furnishings industry and probably above 90 percent for much of the better furniture business. Therefore, while we can certainly try to minimize the loss of those sales, we also still need to get our share of the huge majority of the volume that will be available to us in the store.
One of the best ways to keep from losing any more customers to the online monsters, is by developing strategies that take advantage of what you offer the customer that they can’t provide. In the process, we can also learn more about ways to improve our overall effort, so we capture even more of those that choose to buy locally. Before getting down to some specific areas to work on, let’s start with a few common-sense thoughts that I gleaned from all my reading. Nothing new, but some good things to keep in mind as you prepare your strategic plan.
- Don’t chase something you can’t catch — We often tend to get so focused on one competitor or something we see done that looks like a good idea that we spend a great deal of time and effort trying to duplicate or outdo it. In reality, that ground may already have been taken and nothing we do will get us even close to the result we want. Be careful trying to be what someone else already is and try to develop your own unique and exciting approach to anything you try to be or do.
- Don’t try to out-Google Google — This is really an example of the above point but bears mentioning separately to better understand the message. While you should not strive to become another entity, you can and should certainly try to be more like those that are better than you in specific areas. In this case, learning how to handle online sales and customer service from one of the best in the business is a good idea, just understand your limitations and be the best you can be within reason.
- Don’t run from something that’s not chasing you — Similar to the first point, you need to be careful about who or what you perceive as being a real threat to your business potential. As an example, I have seen many stores try to duplicate merchandising selections from Pottery Barn or Restoration Hardware, without realizing that they are possibly not what their current customers are seeking. Again, trying to be something you are not out of fear that a competitor is coming after you can be dangerous if it takes you away from your customer base or reputation in the market. Probably best never to run where you have not walked first!
- Look at what others have done to win their battles, like Best Buy, Lowe’s and Home Depot. It is always best to study those that have encountered similar threats to their business and found ways to capitalize on their differences to not only survive but prosper. In their first few years of heady growth, it was estimated that Amazon took almost 30% of Best Buy’s business in home electronics, computers and accessories, which put that company on the ropes. Many predicted its demise, but they remade themselves and came out stronger than ever. Lowe’s and Home Depot also surrendered a good deal of their business initially to the online retailers, but they too managed to survive and prosper. In all three cases a major part of the solution involved capitalizing on their biggest difference – face-to-face contact with real people that can actually help them in their search for solutions to their problems.
- Best question to ask yourself and your team — What would make a customer choose to come to our store when they could go elsewhere or easily buy online? This is really critical to fighting the battle against not only the online retailers but also the other stores in or near your market. Today’s key to success is knowing how to differentiate yourself and then getting the message out to your target customers so they will come in and give you a chance to please them.
So, what is a customer looking for in their shopping experience? For years Impact Consulting Services, parent company to Home Furnishings Business, has conducted what we call Retailer Effectiveness Studies for our clients. Through extensive research we have defined eleven areas that consumers recognize as critical to the store shopping process. Others have defined lists like this as the Value Proposition of the business, which is a great way to look at it. The order of importance that is given to each one varies a bit depending largely on the age of the consumer, but the overall order is relatively similar across most markets. Here are the top five factors you need to be aware of when you look at what you are offering a customer and compare it to your competitors, including online retailers.
- Selection – This always seems to be right up there at or near the top in all of our surveys. Obviously the larger the store the more choice they can offer and the biggest “store’ is perceived to be the Internet. So here you need to do the best job you can at getting your message out about exactly what you offer and targeting it to the customers most likely to be interested in what you carry, because you cannot “out selection” Amazon and be everything to everyone.
- Price – This is a slippery slope with the way product pricing is all over the board. The early perception seems to have been that the best price is always on the Internet, however the public has begun to realize that is not always the case and they still need to shop around. Originally, the two biggest advantages online retailers had concerned the lack of taxes, which is going away, and their offer of “Free Shipping”. It is imperative that you and your staff understand the true cost of buying online and can honestly communicate it with the consumer so they can make an informed decision based on what their comparative final cost will actually be.
- Display – This is one of the areas that your store should have a distinct advantage, since you actually have a display and your customers can see, feel and touch the product before buying it. Research has indicated that this step in the process is extremely important for most big-ticket products, but it is very critical with purchases for the home that involve style, color and texture. Be careful though that you do not get “showroomed” as Best Buy originally did. They turned it to an advantage with the next factor.
- Salesperson – This one is a double edge sword in that many customers do not feel they want a salesperson, but almost all of them really need one. The big advantage here is if you can get the message across that your staff is there to help customers find what they are looking for, to make their experience easier and the result much better. Offering design assistance and in-home services helps, but even though sales people are one of your biggest advantages over online retailers, this is a hard sell to some consumers.
- Service – This is another area where the local store has a distinct advantage over the online retailer. It involves delivery and after the sales support. You must work hard to get the message about the value you offer in this area out to potential customers. They do not understand all that delivery involves and while older customers still value after the sale service, younger ones do not.
There are no easy answers and you need to be vigilant about making sure the message of what advantages you offer your customers gets through to them. That has not changed in the last fifty years. It has just gotten harder to do with all the selection available to the consumer and the tidal wave of information they must process.