Monthly Issue
From Home Furnishing Business
March 14,
2017 by Jane Chero in Advertising, Economic News, Industry 
Many home furnishings advertising and sales events throughout the year focus either on a national holiday or “end of season” promotion. National holidays presumably give consumers an extra day to get out and shop and “end of season” events help retailers clear inventory off floors to make room for new merchandise. Only recently taking form across all consumer products is a sales event that focuses on when consumers actually have extra money to spend – Tax Refund season.
Thanks to the proliferation of efiling and the increased sophistication of IRS processing, last year $318 billion in tax refund dollars poured into direct deposit accounts and home mailboxes of 111 million tax filers earlier than ever before (Figure 1).
The earliest the IRS begins direct deposits or mails returns is around February 1. About 45 percent of last year’s tax refunds arrived in the month of February and an additional 22 percent were received in March. In the last two months of the first quarter of the year, consumers had $202 billion dollars of extra cash in their bank accounts. For the furniture and home furnishings industry, the question becomes, are retailers doing the right kind of advertising to steer these tax refund dollars toward their stores and products?
The growth of efiling
Efiling has revolutionized the way people get refunds. In fact, mailing in tax forms is rapidly becoming a thing of the past. As shown in Table A, the percentage of tax filers efiling tax returns has grown from 30.7 percent in 2001 to 91.0% in 2016 - a climb of 60.3 percentage points. With the IRS currently issuing refunds within 9 to 14 days after receipt of a tax file, filers can receive direct deposits as early as the first week of February.
2016 Filing Season Statistics
In the 2016 tax filing season, over 111 million tax filers received refunds out of the 152 million tax returns processed. At 82.7 percent in 2016, the vast majority of people filing in February are receiving refunds. Table B shows that 41.9 percent of the year’s filers or 46.5 million returns received refunds in February. Another 21.8 percent of filers received refunds in March and 16.2 percent in April with the remaining 20 percent getting money between May and December.
Almost half of the money paid out in tax refunds (44.7 percent) for the entire year occurred in February – $142 billion out of $318 billion (Table C). March accounted for 19.1 percent and April for 13.2 percent of total refund dollars. Less than one-quarter of refund dollars were paid in months May through December.
With an average refund of $2,860 during 2016, those filing early in February received refunds 6.8 percent higher at an average of $3,053. Both March and April were less – averaging $2,506 and $2,327. Surprisingly, those waiting to file later (between May and December), received an average of $3,271 per refund (Table D).
How do Consumers plan to spend refunds?
In a study last year, GOBankingRates.com conducted a Google consumer survey asking consumers if they received a refund and if so, how they plan to spend it. Based on the survey, 70 percent of consumers expected to receive a refund. Table E shows how those 70 percent plan to spend their money. The majority plan to either pay off debts or put the refund into savings. Almost 13 percent want to use their extra money for a vacation and roughly 13 percent plan to either make a major purchase such as a car or home or splurge on smaller purchases.
Younger consumers are more likely to both receive refunds (Table F) and also spend those refunds on consumer purchases as opposed to paying off debt or sticking in a savings account (Table G). For the key target groups for the Furniture Industry, 81.0 percent of older Millennials (25 to 34) and 73.3 percent of 35 to 44 year olds expect to receive a refund.
While the 13 percent of tax filers receiving a refund expect to spend this money on major or splurge purchases, this number goes up significantly to 17.1 percent for younger Millennials and down to 7 percent or less for consumers ages 55 and over (Table G).
How do the 13 percent translate into possible dollars for the furniture industry? Combining IRS statistics with the survey, Table H shows that in 2016, $18.26 billion was available for use on major purchases and splurge spending in February alone – 44.7 percent of the $40.82 billion for the year. An additional $22.6 billion is spread out over the following months – 19.1 percent in March and 13.2 percent in April.
Based on the $26 billion plus dollars up for grabs each first quarter, is the Home Furnishings Industry advertising correctly and planning the best sales events to attract the dollars from tax refunds? With enticing deals and strategic advertising, can more dollars be lured away from vacation spending or other purchases and into home furnishings purchases? Now that efiling has streamlined income tax filing into an easy and fast turnaround for over 90 percent of consumers, a definitive purchasing season has emerged and advertisers should take notice.
March 14,
2017 by Jane Chero in Business Strategy, Industry
The movement of product from one geographic location to another has always been a critical, but often silent consideration in the structure of the furniture industry. Even from the beginning when the Mayflower landed in Plymouth there was a furniture maker on board. This person, responsible for making barrels, was called upon to make the most basic items that made a house more of a home. We have moved beyond the local craftsman.
Our focus in this issue is transportation; however, more broadly, it is about logistics. This involves the process of moving product on a timely basis from one geographic location to another satisfying the demands of each entity from the producer to the retailer to the consumer and, finally, to the landfill when its useful life has come to an end.
As transportation innovation and infrastructure improvement have revolutionized the movement between the raw material source and production, the distance between retailer and consumer has increased. Now products can be made in the Far East from raw materials that are harvested in the Appalachian Mountains. Then they are returned to the United States and, after being selected by the consumer from the Internet, these products are then shipped from a New England distribution center to Southern California.
Let’s start at the initial stage, the source of the raw materials. We will begin with the major premise that furniture is made from solid wood. For many years this translated into hardwood species that were mostly available in the United States. This included oak, maple, cherry, and pecan. There were also some of the more exotic imports, such as mahogany. As the availability of raw materials diminished in the North, producers were forced to haul raw materials further or establish plants closer to the raw material source. That is how North Carolina became the furniture capital of the world, supplanting Jamestown, New York and Grand Rapids, Michigan. The economics of moving raw materials north compared to finished products from the South dictated that strategic decision.
One hundred years later the attraction of cheaper labor with offshore manufacturing and a developing transportation system (container ships) led to the consideration of relocating the manufacturing to the Far East beginning in Asia and migrating to other countries driven by the fluctuation in labor costs and tariffs.
The retailer now has to cope with product shipped from thousands of miles instead of hundreds of miles and in transit times of weeks instead of days. The obvious motivation was lower prices which would translate into additional sales or improved margins. However, after thirty years the increased margins are questionable and the industry’s share of disposable income has shrunk. Maybe this was not a good move, but this is what we have.
Without a doubt the retailer must focus on the last mile in moving the product to the consumer. However, just as important are the thousand + miles that it must be moved before it can be delivered to the consumer.
Over the last thirty years the furniture industry has extended its supply chain from miles to thousands of miles. The local or even regional craftsmen who produced the product have all but disappeared. However, I often experience “deja vu” when I visit Amish country where a collective of small manufacturers, each with his own unique skill set, combine to produce an overall product collection. There was a time when there were manufacturers who were producing only fine chairs. However, back to reality – or should we dwell a moment?
With this extended supply chain comes increased risk. The memory of the 2015 dock strike is just that – a memory with all the resolves of not having all vendors as direct importers. This falls into the category of New Year’s resolutions – made with conviction, but soon forgotten. (See Home Furnishings Business, April 2015 for a refresher at: hfbusiness.com/Magazine/Past-Issues/April-2015.)
Freight has traditionally been a cost incurred by the retailer, with contracts rendered FOB the plant. This means the retailer is absorbing the cost for moving the product as well as the responsibility for in-transit damage. While some manufacturers experimented with quoting delivered prices, the confusion caused by the keystone pricing (2X wholesale) rendered the concept impractical.
Historically the concentration of manufacturers in North Carolina for case goods and in Mississippi for upholstery placed West Coast retailers at a distinct disadvantage over their East Coast counterparts. Today the tables have turned with West Coast retailers enjoying a 30 to 40% advantage over East Coast retailers. However, Midwest retailers incur even more of a disadvantage - 70% to 90% - when compared to both coasts. Besides transportation being a substantial cost factor adding 35% to 40% to the off the production line cost (first cost), there is substantial variance driven by the instability of the container pricing. While Table 1 illustrates a period just prior to a particularly volatile period (Chinese New Year), it demonstrates the point that importing is not for the faint of heart.
“The warehousing and inventory challenges can be especially daunting for small and mid-sized retailers who sell imports because they don’t have the staff or the expertise to monitor inventory levels and product flow”, said Peter Giorgio Jr., president of Global Logistic Solutions.
“With some of my clients, the person who oversees the imports is also the buyer, which kind of makes sense, but they’re busy buying too, and they may not have time to manage the flow and things like that,” Giorgio said. “It’s not that people don’t want to pay attention to it. I’m not sure they have enough time to pay attention to it.”
He said his company targets small and mid-sized retailers because few other logistics providers pay attention to them.
“It’s a double-edge sword because they don’t have the staff; they don’t have the expertise. And because they’re on the smaller side, they’re kind of off the radar of the service providers. So no one is calling on them,” said Giorgio. “Many retailers (who don’t import directly) probably could do some importing, but it’s easier for them to order from the manufacturer’s U.S. warehouse. They pay more, but they can also take it in the quantities that they want.”
Monitoring product flow is especially important in the weeks leading up to Chinese New Year, a two-week period in February where virtually all factories in China and some other parts of Asia shut down so workers can celebrate with family and friends.
But it’s not just that two-week period where production is halted. Giorgio said as many as 20% of factory workers leave a week or two before Chinese New Year, which disrupts production, and another 20% to 30% don’t come back when the holiday period ends. That means up to eight weeks of abnormal production levels.
“It’s a challenge for buyers just to try and get product earlier and earlier every year to protect against production hiccups,” he said. “You probably end up carrying more inventory, especially on your best groups, just to protect yourself. Depending on when the cuttings occur, you may have to start taking that (extra) inventory in early December in some cases.”
Manufacturers can help, he said, by providing realistic lead times, regardless of the season. “If your lead times are wrong, that really messes up your whole situation,” said Giorgio.
Imports, however, are here to stay having more than doubled in the past fifteen years. The pricing element that adds more than 35% to the product cost that converts to a 70% at the retail level greatly influences the retail strategy. (Table 2)
From a retailer’s perspective, getting the product to the warehouse needs to be addressed before the last mile. No matter how well the product sells, if it is continually out of stock the results are lost revenue and poor customer service. (Table 3)
Retailers and suppliers enter into a relationship with the best of intentions. However, many factors can inhibit fulfilling the commitment. To avoid a breakdown requires a measure of performance against a predetermined goal. Many retailers actively use a vendor performance system.
The first step in the buying process at Market is a review of current vendor performance. Nothing emphasizes the requirement more than this barrier before committing to the next buying cycle.
From the consumer’s perspective it is only natural to want to receive that new furniture that is anticipated to make their home environment change. However, on a scale of 1 to 5 only slightly more than 20% consider it extremely important while over 50% rank it 4 to 5. Having the stock and being ready to deliver is a strategic advantage. (Table 4)
Traditional retailers with fully stocked warehouses and well equipped delivery teams should have a strategic advantage when compared to Etailers that must rely on a third party delivery service or lifestyle stores that must wait for delivery from centralized distribution centers.
The consumer’s expectation is that furniture, when delivered, is ready to use (fully assembled) with a truck and company delivery personnel extending the experience that they had when they made the purchase. Is it important? Certainly, with only 13% saying it is not important. The key word is “expectation.” The consumer never focuses on how their delivery will occur unless the retailer tells him or her. Again this should be a strategic advantage for the traditional retailer. (Table 5)
Providing a first class delivery service is not inexpensive. As can be seen from Table 6, for the top quartile performers, the cost for all retailers is 3.19%, but, as would be expected, this would decline as the retailer’s volume increases leveling out at the high 2%.
The good news is that with an efficient delivery operation, two thirds of the expenses can be recouped with delivery charges. For larger retailers a small profit can be generated. It should be pointed out that these are top quartile performers and many retailers lose a significant amount of their potential profit from inefficient delivery operations. In addition many of the larger retailers use outside delivery services thus achieving that positive contribution to profitability. The old adage of sticking to what you are good at (retailing) and leaving the rest to the experts rings true.
What are the key performance indicators in judging a retailer’s performance beyond finances? As a retailer grows the addition of another delivery crew is a critical decision. Trading the additional fixed cost against deterioration in customer satisfaction is a difficult trade-off. The question is how much can a delivery crew accomplish. On average, each handling employee can deliver $75,000 each month. The size of the retailer does not create much of an advantage. (Table 7)
As important as personnel is equipment – how many trucks and what size? An interesting metric is sales per square foot of truck space. (Table 8)
Moving out with a full load is the key and every warehouse manager has his own solution. However, every month that square foot of truck bed must average $1,500 out the door. But whatever you move out the door must delight the customer. How do you know? You ask. Many third party providers execute an outstanding consumer package. (Table 9)
The challenge of moving product from the distant manufacturing plant back to the retailer and ultimately to the consumer is significant. What was at one time a relatively simple process has become fraught with opportunities for increased cost and disappointed customers.
What About the Other Direction?
Without a doubt the furniture industry has a trade deficiency when it comes to furniture. Although almost doubling in the past fifteen years in terms of total volume, it is just over 10% of imports. While in the United States many style categories are in demand, much of this production is shipped directly from the offshore plants of American companies. (Table 10)
The real winner in the export game has been the raw material harvested in the Appalachians. In 2016 exports of hardwoods grew 9.3% in terms of revenue and 11.1%in terms of board foot. The major growth countries have been, as would be expected, in China, but surprisingly the United Kingdom and Germany showed increases. (Table 11)
In terms of species growth, cherry and birch lead the way. It should be noted that the United States enjoys an abundance of healthy hardwoods protected by a significant environmental policy. In comparison, many countries suffer from deforestation and unhealthy forests. (Table 12)
These facts present an interesting strategic consideration. As the percentage of solid wood sold in the United States declines, the consumer preference continues to increase. Would the demand for specific species dictate the relocation of production closer to the raw material source? Do the math. We have.
Recycling for Furniture and Mattress? Don’t Bet Against It
One of the thorniest after-the-sale issues has little to do with the availability of qualified drivers, the efficiency of delivery routes or the increased demand for same day and next day delivery. It’s how to get rid of the old furniture or bedding that is being replaced by the merchandise on the delivery truck.
Some retailers will pick up the used stuff – especially if it’s a mattress -- when the new merchandise is delivered, while others urge consumers to arrange for pickup by a non-profit group that sells used furniture such as the Salvation Army, Goodwill Inds., or Habitat for Humanity. And other consumers will give the used goods to a friend or relative, or try to sell it themselves using methods ranging from consignment stores to yard sales to Craigslist ads.
But sadly, those techniques move a relatively small portion of the used furniture and mattresses that consumers replace every year. The rest can be found alongside a lightly traveled street or highway -- illegally dumped there, of course -- or even worse, wind up in a landfill.
Susan Inglis, executive director of the Sustainable Furnishings Council, hopes to see that pattern change someday. She would like nothing better than to see furniture recycling programs established in order to keep the products out of landfills and create jobs for people who would repurpose or reuse them. Plus, it might help industry sales by giving consumers an easier way get rid of their old furniture.
She said she’s keeping an eye on a Scandinavian company that is making MDF out of recycled wood furniture, for example, to see if a similar program would work in the U.S. And she also would like to see the rejuvenation of the re-upholstery business, which would allow consumers to inexpensively re-decorate and re-use existing furniture.
“Something like that could become a profit center for designers,” Inglis said. “We would just need to encourage manufacturers to make more product that could be re-upholstered.”
Statistics compiled by the U.S. Environmental Protection Agency show that 11.1 million tons of furniture and furnishings (including mattresses) were dumped in
municipal landfills in 2011, the latest year for which data is available. That represented 4.4% of all municipal solid waste that year –
a much larger percentage than major
appliances (1.6%), small appliances (0.7%),
or carpet and rugs (1.5%).
The EPA data showed that essentially no furniture was recycled that year, and only 10,000 tons of mattresses – a tiny portion of the total.
But in the past two years, the mattress industry’s own recycling program, dubbed Bye Bye Mattress, has been launched by the Mattress Recycling Council, an arm of the industry trade group, the International Sleep Products Assn.
With only three states participating in the program thus far – California, Connecticut and Rhode Island – Bye Bye Mattress already has diverted one million mattresses weighing nearly 25,000 tons from landfills since May 2015, when Connecticut became the first state to launch the program. California joined in December 2015 and Rhode Island began in May 2016.
“During the initial year of its program, Bye Bye Mattress has significantly increased mattress recycling for communities across the states served. Having surpassed one million units shows that the mattress industry has created a practical solution that is showing real promise,” said Ryan Trainer, president of the Mattress Recycling Council and ISPA. “It is a major milestone, but is also just the beginning. We are still committed to making mattress collection and recycling in these states easier and more efficient for everyone.”
Each participating state passed a mattress recycling law that established a program that’s overseen by the MRC and funded through a recycling fee added to each piece of bedding sold in the state. The fee is used to operate the program by providing containers for collection sites and transportation of mattresses to contracted recyclers for deconstruction.
In Connecticut, consumers pay $9 per piece of bedding, while the fee is $10 per piece in Rhode Island and $11 per piece in California.
The fee is assessed on all mattress purchases in the state, regardless of its size, price or brand name, and regardless of whether the consumer is replacing an existing mattress.
In the participating states, there are 11 recycling facilities that deconstruct mattresses and box springs under contract with the MRC, separating the steel, foam, fiber and wood and selling it to scrap dealers. MRC officials said several of the recycling facilities are run by non-profit organizations who provide jobs for veterans, ex-offenders, homeless people and others who have had difficulty finding work. It enables them to gain skills in areas such as logistics, transportation, deconstruction and administration.
The used bedding is gathered at hundreds of collection points in each state, and in many cases, retailers bring the mattresses to the collection sites. However, Connecticut and Rhode Island retailers can arrange to have it picked up as long as they have at least 50 pieces to discard.
MRC officials said they don’t have a pickup program established yet in California – the logistics are much more complex in such a large state – but one is in the works and will be announced soon.
Consumers also are encouraged to bring used bedding to the collection sites themselves – and the participating state will pay them from $1 to $3 per piece for their trouble.
MRC’s website, ByeByeMattress.com has detailed information about the collection sites and recycling centers in the three participating states, as well as numerous mattress recycling facilities in other states.
Officials said the MRC is trying to urge other states to pass mattress recycling laws, using programs in the three initial participants as a model.
And Now for the Last Mile
There it is! The perfect sofa for the living room she is redecorating.
After long hours of shopping online and/or in retail stores, she’s ready to whip out the credit card or complete the financing application and make a purchase. With any luck, she also will buy a matching loveseat or possibly some occasional tables, lamps or other accessories to go with it.
Then, in a few days -- a little longer if the sofa is a special order, or a little quicker if the retailer offers ultra-fast delivery – her new furniture arrives at her home.
She has only a vague idea what happened between the time she paid for the order and the merchandise appeared at her home – and she may not care – but its arguably the most important part of the sale process. Because if something does go wrong during that time, she will really care what happened, and it could have long-term, negative consequences for the retailer and possibly the manufacturer.
It’s often called final-mile delivery, but that may be a misnomer. The product could easily have traveled thousands of miles before it ever reached the distribution center where it was loaded onto the delivery truck.
And all of it virtually invisible to the consumer.
“Today’s consumers expect an effortless experience with flawless execution,” said Bob Elkins, senior vice president and general manager of Schneider Dedicated Services, the final-mile delivery division of Schneider Transportation. “Retailers and manufacturers oftentimes do not have a second chance to provide a great buying experience.”
In other words, get the delivery right, or be prepared to get torched on social media.
“Home delivery is certainly a big component of the buying experience,” said Elkins. “Just check the online reviews provided by consumers.”
But before any piece of furniture is loaded onto a delivery truck, it probably has been loaded onto the trailer of one or more long-distance carriers and/or cross-docking specialists who hand it from one shipping route to another.
And if it’s an imported piece (which applies to about 75% of all the wood furniture sold in the U.S., but less than half of the upholstery) it was loaded into an ocean cargo vessel in Asia or Europe long before it was ever touched by a domestic furniture carrier. And the domestic carrier may have received it from a drayage company whose trucks pick up merchandise as soon as it is unloaded at the port.
Sound complicated? Yes, it can be. But don’t try to explain it to the consumer, unless she happens to work in the field of logistics. She merely wants her furniture when she wants it, and the retailer will feel the brunt of her wrath if it doesn’t get done.
The challenge is especially being felt in the ultra-competitive long-distance carrier market, whose participants increasingly find themselves squeezed by increasing federal regulations and a decreasing number of qualified drivers.
“Carrier capacity levels have been tightened with the new Hours of Service rules, the shortage of new drivers entering the field, as well as the upcoming federal mandate for electronic logs,” said Stan Froneberger, vice president and general manager of SunBelt Xpress.
SunBelt, which offers both long-distance hauling and last-mile delivery, already has equipped its fleet with electronic logs – well in advance of the government’s December deadline – but the Hours of Service rules have only exacerbated the driver shortage, Froneberger said.
The complex rules, in essence, prevent a trucker from driving more than 11 hours after 10 consecutive hours off-duty. Plus, there are mandatory rest breaks, and after a driver has been on duty 60 hours in a seven-day period or 70 hours in an eight-day period, he must be off duty for at least 34 consecutive hours.
The bottom line, said Froneberger, is that it now requires more drivers and better scheduling – not to mention more time -- to get the furniture from the port or the factory to the retailer’s warehouse.
“Better service always is a goal for shippers and carriers. However, the impact of the Hours of Service regulations as well as driver hiring challenges for carriers are becoming more recognized (by furniture manufacturers),” he said.
Interestingly, he said these challenges give a modest advantage to domestic manufacturers, since their goods simply don’t have to be handled by as many entities as an imported product.
“Some of our leading growth accounts over the past couple of years are those with domestic production, especially in upholstery,” Froneberger said. “The domestic producers are some of the most innovative and customer-driven shippers we have.”
Froneberger and other logistics executives say retailers also are being forced to be more customer-driven as consumer expectations for shipping and delivery have risen right along with the fortunes of Amazon.com, and more recently, home furnishings e-tailers such as Wayfair.
That has led to the widespread practice of next-day delivery, and in some cases, same-day delivery by furniture retailers.
But Rob Davis, national sales manager of last-mile delivery provider Diakon said even Amazon can’t execute next-day delivery of most large furniture pieces, unless the consumer happens to live very close to one of its distribution centers.
“As long as (the furniture retailer) is carrying the inventory, they’re doing pretty much everything next day,” Davis said. “Next day and further out is pretty much the same in terms of the delivery process. You can maximize space on the trucks with no problem.”
Same-day delivery, on the other hand, poses an entirely different set of challenges that only a small number of Diakon clients want to tackle. “The productivity changes dramatically,” Davis said. “No matter what, we have to send a truck and a couple of guys out there to make the delivery. If we can get 15 stops, then we can charge less (per delivery) than if we only have four stops.”
Plus, same-day delivery requires essentially a 24-hour warehouse operation, which also increases the retailer’s costs, he said.
“I think retailers have to ask themselves, ‘Does my customer really want to come into the store at 4 p.m. and then stay up until 12:30 at night to take delivery?’ I don’t think there are many people who do,” said Davis.
He also said there’s usually not the same sense of urgency for the consumer who purchases furniture as the one buying a major appliance, for which Diakon also provides last-mile delivery services.
“If your freezer breaks down and you’re facing a loss of frozen food, you need to replace it right away. But if you’re couch breaks, I’m not sure there’s that same urgency,” said Davis.
But regardless of how quickly the furniture is delivered, Davis and other executives say retailers increasingly are turning to third-party logistics providers to handle last-mile delivery.
“There is a growing realization that experts in delivery of goods – particularly furniture – make a difference,” said Schneider’s Elkins. “Final-mile delivery is an extension of the retailers’ or manufacturers’ brand. We compliment the delivery gap in the consumer’s buying experience and ensure we represent the brand of our customers to their customers.”
Schneider became a major player in furniture transportation last summer when the company acquired Watkins & Shepard and Lodeso, two of the industry’s best-known furniture logistics providers. That deal instantly gave Schneider a huge footprint in the truckload and less-than-truckload transportation of furniture, as well as last-mile delivery of furniture and other oversized goods that can’t go through the UPS and FedEx delivery systems.
“Watkins & Shepard know this market well and have built a strong reputation for providing high-quality, claims-free service,” said Elkins “When combined with the scale and financial resources … Schneider brings, this creates an integrated capability that takes the complexity out of the supply chain for omnichannel retailers and manufacturers. It also provides a superior home delivery experience for consumers of high-value, over-dimensional goods.”
And not only are carriers such as Schneider and SunBelt challenged to find qualified drivers, they’re starting to encounter similar difficulties finding qualified people to operate distribution centers and fill other key logistics posts.
“It’s not the same old ‘warehouse manager’ position that is was a few years ago,” said Bill O’Malley, chief recruiting officer at Connector Team Recruiting, a search firm that targets clients in the furniture, bedding and appliance industries. “Today, you have to have skills in areas like industrial engineering and process improvement.”
O’Malley, who has a background in logistics himself, said positions such as distribution center manager and vice president of logistics have been in high demand in the past four to five years as retailers have evolved into omnichannel operations trying to survive and thrive while butting heads with the likes of Amazon.
“The final mile (delivery) component now makes the distribution center practically a 24/7 operation,” he said. “Next day delivery is a fact of life. At the very least, there are multiple shifts … and other challenges that the old ‘warehouse manager’ never faced.”
He said today’s logistics professionals don’t necessarily need an engineering degree, but some exposure to the subject – including training in Six Sigma principals – would be very valuable to a job candidate.
“The second largest (capital expenditure) in our company – next to rolling stock – is technology such as bar code scanning, on-board computers and other IT areas,” added Froneberger of Sunbelt Xpress. “The associates we are hiring today in operations needs to have a comfort level with these new technologies.”
February 21,
2017 by Jane Chero in Advertising, Industry
Developing furniture and bedding advertising was a relatively simple process for decades. For retailers, it meant getting material for the upcoming weekend’s newspaper advertisement submitted on time, and possibly taping another radio or television spot to go with it. Yes, there were direct-mail pieces and the occasional billboard to deal with, but for the most part, the biggest concern was what other newspaper ad or news story would get placed adjacent to the space purchased by the furniture or mattress retailer.
For manufacturers, it meant checking insertion deadlines for their favorite shelter magazine, and touching base with key retail customers to do a deal on getting them co-op advertising dollars (that means the manufacturer foots some or all of the bill).
But a few years ago – way back in the early 2000’s – consumers started yelping about late furniture deliveries, tweeting about their comfy new mattress, and pinning pictures of that cool living room makeover they saw on HGTV. So much for those meetings with the ad salesman for the local newspaper.
“What has happened is that the amount spent on print – except for circulars – has dropped significantly.” Said Steve Rotman, president and CEO of Rotmans Furniture in Worchester, MA. “Radio and TV has dropped from what it used to be. And the amount spent on (direct-mail) circulars has dropped, although we still do them.”
No, Rotman and other furniture and bedding retailers like him haven’t cut back on advertising. But their dollars are being re-directed in a big way to the digital realm, which includes everything from social media sites such as Facebook and Pinterest to paid search programs such as Google AdWords to YouTube videos.
What use to be simple in terms of communication has exploded into a multiplicity of ways to communicate with perspective furniture consumers. Let’s start the discussion with how retailers are allocating their advertising budget.
Print is definitely trending down with some larger retailers in larger markets moving entirely away from the medium even with substantial discounts and value added. The fact is the consumer has moved away from the newspaper as a source for news reducing the impact of advertising.
Television which exploded on the scene more than a decade ago as the workhorse to attract potential customers to furniture retailers, is slowing. The fact is that consumers are viewing less television and when they are viewing, they are doing so on devices that exclude advertising.
Even in instances where television is the centerpiece of a marketing and branding strategy, digital media plays a key supplemental role. This is especially true with brand-building strategies by well-known manufacturers who advertise nationally such as La-Z-Boy, Ethan Allen and Tempur-Pedic.
Internet is either the first or second step when the consumer decides to make a furniture purchase.
As can been seen from Graphic B, 46.3% of consumers first visit the internet shopping various sites before selecting those 2-3 stores they will visit. This is a devastating blow to the less dominant retailers in the market. More retailers today have a web presence of some degree. However, the challenge is the site management, populating the site with new products and current advertising are the basics.
The other 38.8% visit the store first to scout out the retailers shopping environment. This is a critical visit influenced by the retailers branding effort as well as the reputation in the market. An important note is how the sales associate treats the scouting consumer. A lack of interest by the sales associate because of a perceived “tire kicker” can result in no return visit.
Of late, however, Rotman said his store’s most effective ads have been videos used as so-called “pre-rolls”, or short ads that run before a user can watch a selected video. He acknowledged that the click-through rate on such is small, but those who do click on the ad and visit Rotman’s website are much more likely to visit the store.
“It has a positive effect on store traffic and sales because it drives people to the website”, he said of the pre-rolls. “And, we’re finding that when website traffic goes up, store traffic goes up. And there’s a direct relationship between store traffic and store sales.”
He said that makes it critical to keep the website fresh and engaging so it accurately reflects what the in-store shopping experience is like.
“We want to create value for each web visitor,” said Rotman. “It has been very effective for us in terms of (an improved) closing rate and in terms of store sales.”
Social Media still has the buzz to be the solution to the furniture retailers advertising problems. Anecdotal research is the most often cited as reasons for pursuing this medium.
As can be seen from Graphic C from the consumer research, social media is not the most effective method to inform the consumer.
Rotman and Julia Rosien, brand manager to bedding producer Restonic, agreed that the measure of social media and digital programs is very important, but they noted that the traditional advertising measure of gross ratings points is only a small part of the measurement puzzle.
“At Restonic, we measure a wide variety of things – impressions, reach, engagement, and especially sentiment, which is very difficult to measure in traditional advertising,” Rosien said. “There’s a misconception that a social media strategy is easy to develop and implement. You can spend hours on social sites gathering and creating content, commenting on others content and sharing it all, and measuring the wrong thing. Valuable resources could be wasted on a vehicle that is not driving toward your goals.”
Rotman likes to call it “web-oriented advertising.” And he said, it now takes up about 40% of his annual advertising budget, and by next year, it probably will be 50% of the total. Five years ago, it was barely 10%. “I don’t see that trend reversing itself,” Rotman said.
Neither does Rosien who is an early proponent of a digital-heavy advertising and marketing strategy. “The goal of any well-conceived digital campaign should be to improve the connection between the brand and its consumers – turning fans into ambassadors,” she explained. “In this way, the sale becomes the by-product, but the community that drives engagement and love for the brand, that’s the sweet spot.”
She said Restonic’s digital media strategy has become important for both a business-to-business and business-to-consumer standpoint. Restonic dealers, for example, have access to a library of blog content they can incorporate on their own social media pages, while the company’s Facebook page now has more than 30,000 “likes” from consumers.
“Brand awareness and growth have been phenomenal in the past few years,” Rosien said. “Our blogger outreach campaigns have allowed us entry into groups and communities on social media that we wouldn’t have reached otherwise.”
She said the B2B side is important because retailers, especially smaller independent operations, often lack the time or staff expertise to execute the strategy. “We know retailers struggle to produce content and our digital publishing program takes the burden from them,” she said. “Social media is no longer a nice-to-have. It’s a must have.”
Rotman agreed, but said social media can be the classic double-edged sword if a retailer’s customer service or product quality consistently falls short of expectations. That can result in numerous negative comments and harsh reviews on sites such as Yelp, which a retailer generally has no ability to remove.
“If you have a lot of customer service issues, then it’s not a positive thing,” Rotman said. “But, if you have good customer services, there’s no reason to be afraid of it.”
Direct Mail, with the advent of computer graphics and digital printing, has evolved to the next level. This process allows small-run quantities with the ability to change product shots to match the targeted consumer. From the consumer’s perspective using more information/product shots makes the message more effective. Graphic D illustrates.
Over the past two years the concept of magalogs has been introduced to the traditional retailer. A combination of editorial content and product presentation devoid of a “sales pitch” has produced substantial results with 9%+ of existing customers and 4%+ of targeted potential customers visiting the store to make a purchase. Lifestyle stores, such as Pottery Barn and Restoration Hardware have used this approach instead of television advertising.
The introduction of targeting the consumer “most likely to purchase” has more than doubled the response rate of direct mail. The same targeting concept is now being applied to email transmissions. This involves moving away from the weekly total emails to numerous emails to specific consumer targets with products that most likely would appeal to them in terms of style and purchase cycle.
The focus going forward will be to direct a specific message to a potential customer incorporating a feedback loop for performance.
--------------------
WHO DOES THE TALKING?
Advertising is the communication from suppliers and retailers to persuade a consumer to purchase their product. It is a simple statement but a difficult objective to accomplish, especially to quantify success.
The starting point must be what influences the consumer purchase. According to the latest buying process study conducted by Impact Consulting Services, parent company of Home Furnishings Business, price was obviously number one well down the list. The graphic to the right illustrates all of the purchase motivators.
Manufacturing Role to
Attract the Consumer
In the past decade, the industry has lost many of its major brands or, of those that remain have muffled their voices. The traditional role of the manufacturer was to create, in the minds of the consumer, an aspirational desire for the product. The chief purveyor of this message was the “shelter” magazine. Starting at the upper end with Architectural Digest and Elle Décor and moving down stream to Southern Living and Good Housekeeping. If they still exist, there is little furniture advertising. Interestingly, there are rugs and accessories advertising which could explain the increase in the consumer price index for these product categories (index at 93.8 compared to furniture/bedding at 71.9).
There are brands that are the exception. In our discussions with Eli Winkler, Vice-President of Digital Customer Experience and e-commerce, he shared the La-Z-Boy approach to advertising to the consumer.
“La-Z-Boy’s hugely successful “Live Life Comfortably” effort, featuring actress Brooke Shields, wouldn’t be as effective without the benefit of digital media, despite the presence of her high-profile television and print ads,” said Winkler.
“La-Z-Boy has an integrated media plan across numerous channels: print, TV, digital video, display, social and search engines,” Winkler said. “It has been incredibly successful for us, garnered attention, and shifted people’s perceptions and knowledge of the brand based on our research findings. And, we have seen unprecedented sales growth.”
He said a key goal of the branding strategy is to change the perception that La-Z-Boy only makes recliners – a view that persisted among consumers despite the company’s nearly 90-year history of making a variety of upholstery products.
“We addressed the outdated associations head-on”, Winkler said. “We used Brooke to capture consumer’s attention, and her welcoming personality and authentic charm helped communicate that La-Z-Boy offers a wide range of great looking furniture options that fit almost any lifestyle and home. And, with Brooke in the furniture, customers took notice of our variety of stylish offerings.”
In 2017, he said Shields’ (and La-Z-Boy’s) visibility will increase as her ads will be used more extensively online, and will move into prime time broadcast TV slots. That’s in addition to the usual mix of non-prime broadcast and cable TV.
“Our target is the woman who wants to create a great looking, comfortable home where she can relax and enjoy life; where both family and friend feel at home the second they walk in,” Winkler explained. “She looks for quality and style that will stand the test of time and provide the functionality of her family needs, and is never interested in just following the newest trend. Her home is a place she really lives, not just a showpiece meant to impress others.”
Another successful brand-building effort built around TV and digital is found at Palliser, a Canadian upholstery producer who is wrapping up a national campaign in Canada and is planning to extend into the U.S. later this year.
“The secret to our success is the Palliser brand reputation in the Canadian market,” said CEO Cary Benson. “Palliser believes everyone deserves to have their home furnished exactly how they want it and when they want it. Their home furnishings reflect their personal style, color, comfort and function that matches their taste and lifestyle.”
He said the most recent TV commercials aired during early morning and evening news shows, as well as several national entertainment and sports broadcasts.
“We included a large hockey buy because, in Canada, female buyers are avid watchers of hockey broadcasts with an almost 50-50 split with men,” Benson said. “In addition, we have been sponsoring nationally televised Winnipeg Jets games with signage on the rink boards” (Palliser is based in Winnipeg).
He said the company currently is evaluating the best way to spend its media dollars in the U.S. market, but said the campaign will probably focus on digital and social media because national TV buys in the U.S. are not as cost effective as Canada.
“Our goals with our advertising investments are to help educate consumers about our brand and attempt to develop brand preference for our products so a consumer will visit our website, learn about our products and visit one of our local retailer partners,” said Benson.
Manufacturers acknowledge that some retailers are reluctant to promote a particular furniture brand – preferring instead to promote the store as a brand. Rotman, however, said he’s fine with including both the store brand and the manufacturer’s brand in his advertising, since the combination can convey the message that the store carries quality products from reputable manufacturers.
“The store brand is effective when it’s placed with the manufacturer’s brand,” he said, pointing out that some of Rotmans ads promote a particular category of furniture, such as solid wood and don’t mention any specific brands. “In that case, it’s the store brand used with a phrase that signals quality to the consumer.”
Retailers Role to Attract Consumer
The retailer’s role is to communicate price/value, selection and service. However, this message has evolved to “you can afford it” a financing message. The costs of this message, in addition to the medium used, is a hefty sum. The following graphic compares traditional retailers to the lifestyle stores (retail verticals).
These expenditures are quite a bit out of the average gross margin 48.6% that can be achieved. We should carefully understand the comparison to other distribution models such as lifestyle (retail verticals) brands Crate and Barrel, Pottery Barn and others, as can be seen from the graphic. An expenditure of half that amount by these retailers can be used to reduce margin targets or increase advertising.
As traditional furniture retailing moves into the future, the role of the suppliers to this distribution channel must be better defined. Suppliers are now comfortably selling other distribution channels, such as Etailers and Lifestyle stores as private labels.
Likewise, many retailers are directly importing using their brand. However, the focus from the consumers perspective is not aspirational, but one of price.
Without branding to the consumer of a product’s attributes, quality, design, etc… the product category will become a commodity.
----------------------
WHO ARE YOU SELLING?
There is an old adage that says, “I know 50% of my advertising is not effective. I just don’t know which 50%!” This is the challenge that must be addressed in order to reduce the cost and to improve the effectiveness of advertising. The foundation must be to know who you are selling at the most basic level of age and income. This is accomplished by appending — on an ongoing basis — the consumer demographics down to a product category level. Impact Consulting Services/FurnitureCore, the parent company of Home Furnishings Business, provides a Consumer Segmentation application that delivers this ongoing service. It is shown in the graphic above.
Comparing these findings to the consumers in your individual markets allows you to better understand your primary consumer. This information, when compared to the consumer you should be selling based upon your merchandise mix, gives direction to the buyers.
----
TARGETING YOUR CUSTOMERS
One of your most valuable assets is your customer list complete with mailing addresses, email addresses, and telephone numbers. When this list is appended with basic demographic data and purchase history it allows you to use a “rifle approach” to targeting your consumers. Impact Consulting Services/FurnitureCore, the parent company of Home Furnishings Business, maintains a subscription-based application that maintains your databases. The targeting screen is shown in the the graphic above.
The application has a feedback loop to measure the results of direct mail campaigns as well as email campaigns. This provides the opportunity for you to communicate directly with your millennial customers (25-35 years old) about the targeted merchandise just purchased at Market or a special offer to your customers with available credit line or even the customer who has recently bought a bed, but not a new mattress, etc. All of this allows a more targeted approach to advertising. But most important, did it work?
February 21,
2017 by Jane Chero in Advertising, Industry
By Larry Thomas
Continuing a pattern of slow, but steady growth, area rugs kept pace with nearly all other home furnishings categories last year amid the often turbulent election-year retail climate.
That wasn’t surprising since furniture and rug purchases often go hand-in-hand, but many rug company executives believe the bevy of products launched at January trade shows – particularly the Atlanta International Area Rug Market and the Las Vegas Market – could help send the category to new heights.
Executives say blues and neutrals remain the dominant colors – known as colorways in the rug world -- on most top-selling rugs, but rugs containing splashes of brighter colors have worked their way onto the best-seller lists of several vendors.
“Our hand-tufted and hand-knotted rugs continue to evolve with changing and modern color palettes, bringing an updated look and feel to traditional interiors and providing texture and sophistication to modern environments,” said Satya Tiwari, president of Surya.
However, he noted that modern color palettes are no longer limited to hand-made products, which typically carry a high retail price tag.
“With our new machine-made rugs, great ‘high-end’ design is within the reach of more people,” Tiwari said. “What’s possible in rug design continues to inspire us every day to create ever more relevant designs that are so well in tune with home design and color trends.”
Research by Impact Consulting Services, parent company of Home Furnishings Business, shows that retail sales of area rugs totaled an estimated $5.49 billion in 2016, a 3.7% increase from 2015. Furniture and bedding sales growth was slightly slower, rising 3.4% to an estimated $95.68 billion in 2016.
For the first three quarters of 2016, area rug sales growth outpaced furniture and bedding growth more significantly, rising 4.2% from the first three quarters of 2015. During that same period, furniture and bedding retail sales grew just 3.1%.
In fairness, the furniture and bedding figure was dragged down by bedding sales, which grew a meager 1.3% in the first three quarters of 2016, according to Impact Consulting research. When bedding is taken out of the mix, furniture retail sales were up 4.1%, just 0.1% below area rug growth in the first three quarters of 2016.
It’s Not All Blue and Neutral
Additional research by Impact Consulting, including a survey of consumers who recently purchased an area rug, bears out manufacturers’ focus on blue and neutral colorways – but indicates the door should be left open for some brighter hues. According to the survey, 36% said neutral was the dominant color of their new rug, while 24% said it was blue.
Interestingly, 24% also said red was the dominant color, but no other color was named by more than 8% of those surveyed.
The survey indicated design trends are not as clearly defined as color trends. Some 24% said geometric was the overall design element, but another 20% each said solid and contemporary print was the main element, and another 16% said it was a traditional print.
Florals and zig-zags garnered 8% each, while stripes were mentioned by just 4% of those surveyed.
If the increased interest in brighter colors and non-solid design patterns continues, executives say it wouldn’t be the first time for such an occurrence. Capel Rugs, for example, said they saw significant growth in those areas last year, and is celebrating its 100th anniversary this year by bringing out two colorful collections inspired by products that were popular in the 1970s and 1980s.
One is a collection of braided rugs that gives “the original colonial design a modern spin,” while the other is based on a design that was selected for the World Floor Covering Assn. Hall of Fame in 1978.
“Our theme for the centennial celebration is ‘100 years of heritage in every rug’,” said Cameron Capel, vice president of national accounts. “One hundred years in business is a major milestone, and it underscores our long tradition of providing the very best quality, service and customer satisfaction.”
Who Needs the Internet?
Unlike furniture, where internet research is king, 40% of the recent rug purchasers surveyed said they did no internet research before making their purchase. Some 20% said they did one to two hours of internet research, while another 32% said they spent two to four hours.
The relative lack of internet research suggests an area rug is often purchased as an add-on during or shortly after a furniture purchase. Some 84% of those surveyed said they bought their rug after buying furniture, and another 4% said they bought the two together. Only 12% said they bought furniture after their rug purchase.
Another casualty of the lack of internet research (and quite possibly a lack of retail sales training) is basic product knowledge, the survey also suggests. A whopping 88% of those surveyed said they did not know the country of origin of their most recent rug purchase, while 52% said they did not know what their rug was made of (wool, natural fibers, synthetic fibers, etc.).
And not surprisingly, 40% said they did not know if their rug was machine-made or hand-made.
But the interest isn’t being totally dissed by consumers buying area rugs. The survey showed that 24% of recent purchasers bought their rug on the internet, while a solid 48% said they bought it at a mass merchant such as Target or Wal-Mart. Another 12% found it at a home improvement store such as Home Depot, and only 8% made the purchase at a traditional furniture store. The final 8% used a rug specialty store, according to the survey.
Regarding price, lower price points ruled the day, as some 80% said they paid $399 or less for their rug – 40% paid less than $100 and 40% paid $100 to $399. The next-highest price category was $800 to $1,499, which was paid by 8% of those surveyed. Just 4% each reported paying $400 to $799; $1,500 to $1,999; and $2,000 and above.
Loloi’s Anastasia
Ornate distressed traditionals are modernized by illuminating colorways in this collection. Power loomed in Egypt of polypropylene and polyester, the rug is durable and easy to care for, plus it gives the appearance of being a fine rug made by hand. The intricate detail, luster of colors, and unbeatable price point establish its value.
Safavieh’s Florida Shag
Detailed tropical patterns in warm, neutral colors bring Key West flair to this collection. The high and low pile of this shag floor covering accentuates the sculpted damask vines, colored in sandy beige, for a visual display with flowing dimension. It is machine-made using plush, durable synthetic yarns for added comfort and long-lasting beauty.
Couristan’s Madera
Made of 100% linen, this best-seller features cut pile accents over a sumac weave. Hand-made in India, it features soft, contemporary geometric patterns blended in a series of fresh, modern neutral colorways. Available in five sizes, it is shown here in a design that utilizes space-dyed yarns.
Tufan Rugs’ Vintage
This rug features a carving design that mimics a wear-off antique rug creating a “vintage” look, which makes it suitable for modern or classic settings. This luxurious rug is a combination of cotton and polyester and is hand-made in India. The collection comes in a variety of styles, designs and colors.
Jaipur Living’s Fables
Constructed of machine-tufted viscose and chenille, the Tria design brings any space to life with a fashion-forward color palette and a sophisticated, boldly-scaled contemporary pattern. The soft texture highlights the gardenia and pumice stone colorways.
Kaleen’s Weathered
This collection of indoor/outdoor rugs is hand-made of 100% PET polyester using a unique cross-tufting to create a distressed appearance. It is shown here in the popular blue/gray colorway.
Rizzy Home’s Dimension
Utilizing an innovative construction that combines a looped background with cut pile, this collection features a textured, striation appearance and a seamless blend of traditional and contemporary design elements. It is made of hand-tufted wool with a cotton/latex backing and is available in blue, gray and ivory colorways.
Orian Rugs’ Skyline
From the Next Generation collection, Skyline brings a casual look into the home with its exquisite details. The faded colors of cream and blue switch off to make an ocean tide theme. It is soft and durable and machine-made domestically. Suggested retail for a 5 x 8 rug is $375.
Surya’s Zahra
Hand-knotted in India, this 100% wool rug features a low-pile construction and is available in 10 colors. It comes in four standard sizes (2 x 3, 3 x 6, 5 x 8 and 8 x 11), but custom sizes also are available.
Nourison’s Twilight
A supernova takes shape in this rug as a spectrum of neutrals expands from the nucleus of rich platinum tones into an effusion of taupe rays on an ivory ground. With a burst of light, it brings dynamic radiance into the room. The hand-washed, hand-finished collection is machine-made of 40% wool and 60% Luxcelle.
Capel Rugs’ Simply Gabbeh
A traditional variety of the Persian carpet, tribal designs and geometric patterns are combined to create this colorful collection. It is hand-loomed in India of 100% wool and comes in four sizes.
Suggested retail for a 5 x 8 rug is $599.
Tayse Rugs’ Dakota
Part of the Festival collection, this versatile rug can be used with rustic or modern décor. Rich hues of brown, green, tan, red and blue are paired with a simple brushstroke pattern to make it suitable for virtually any room. It is machine-made with soft polypropylene fibers and jute backing.
Feizy’s Fiona
The Fiona collection is a dramatic grouping that interprets transitional designs in a bold palette of contrasting neutrals. Power loomed in art silk, the luminous sheen lends each piece a modern edge, while erased patterns impart a hint of vintage. It is shown here in dark gray.
Kas Rugs’ Artisan
Marketed as “artwork for your floors,” rugs from this transitional collection are hand-tufted and add an element of dimension to any room. Featuring a half-inch pile height, the collection is made in India of wool and viscose.
February 21,
2017 by Jane Chero in Economic News, Industry
Many life events spur home furnishings purchases. But along with buying a new home, marriage, and having children, the time of the year plays an important part in overall furniture store sales (Figure 1). These sales are less important to other furniture distribution channels, for example, big box stores, but are the bread and butter of furniture stores. These event sales also serve the function of clearing out merchandise to make way for new styles.
Economic events can always alter consumer confidence, but the overall monthly ebb and flow of furniture store sales has changed through the years. Once the pinnacle of furniture purchases, the November/December holiday season has lost some of its sales glamour, not only for furniture but all consumer products as a total group. It is still the biggest season in total retail sales of consumer goods, but no doubt the 4th quarter has lost market share. For furniture stores, May and August have always been steady and strong, but March has emerged as a huge sales month. Online filing of income tax returns has resulted in quick returns for the end of February and especially throughout March.
Throughout the 1990’s and up until the mid 2000’s leading up to the Great Recession, November and December trended as the largest sales months for furniture stores, often combining to capture 18 percent to 19 percent of annual sales. The exception was in December 2002 and 2007 when economic downturns and uncertainty impacted furniture store performance in December. However, since coming out of the Great Recession, the entire 4th quarter has garnered less importance to the Furniture Industry. Table A tracks monthly indexed furniture store sales. Note that an index of 100 represents the average month (annual sales divided by 12 months). An index of 115, for example, indicates sales were 15 percent higher this month than the average.
Two decades ago in 1997, the 4th quarter far outreached the previous three quarters in furniture store sales (Table B). At 27.6 percent, the 4th quarter was 4.4 percent higher than the 1st quarter’s dismal 23.2 percent. Over the next 15 years, both quarter 1 and quarter 3 percentage of sales increased, while quarter 4 dropped below 25 percent. Although 2016’s holiday season performed better than 2012, quarter 3 rises as the year’s top-performing period.
Furniture store monthly sales center around calendar events and holidays. These events translate into the highest performing months in most cases.
1st Quarter
While the 1st quarter contributed less than 25 percent to furniture stores sales in 2016, tax refunds issued at the end of February and throughout March propelled sales upward impacting March significantly (Table C). January is negatively impacted especially in markets sensitive to winter weather. And with no big sales event to lure customers, it is the worst performing month of the year for furniture stores. February has the draw of big Presidents’ Day sales which helps the weather-sensitive markets recoup somewhat. However, consumers seem to be holding out until spring when income tax refunds arrive. In 2016, almost two-thirds of total annual refunds totaling $203 billion (out of $317 billion) were paid before March 25. March is the only month in the quarter that consistently out performs the average for all months, which is 8.3 percent of sales.
2nd Quarter
The 2nd quarter typically produces lower furniture store sales than the remainder of the year because of a historically poor performance in April. Memorial Day sales in May always produce excellent sales– an average of 8.4 percent throughout the past two decades. In recent years June has also performed above the average (Table D).
3rd Quarter
Since 2002, Quarter 3 has climbed to the best selling quarter of the year – mostly due to high August sales. The end of summer sales and the lead into Labor Day has kept the month of August percentage of sales at 8.8 percent until 2016 (Table E). Last year the Labor Day holiday weekend fell solidly in September which boosted it to the highest performing month of the 3rd quarter. Meanwhile July 4th events are producing average sales during a traditional consumer vacation period.
4th Quarter
Table F shows how market share of November and December combined has dropped from 19 percent in 1997 to 17.2 percent in 2016. While still commanding above average sales, the holiday season has lost some appeal as more consumers are choosing to take advantage of income tax refunds in the early spring and late summer sales. In addition, other consumer goods and electronics also compete for consumer dollars during the holiday season. Meanwhile, October has become the second worst performing month behind January averaging 8.0 percent of sales since 2002.
In a perfect world, furniture store retail sales would produce 8.33 percent of sales per month. And while all retail entities have seasonal variations based on consumer life events, which are beyond the retailer’s control, and holiday sales, which are within its control, every month that falls short of this mark potentially sends consumers to other product markets. If the 4th quarter of 2016 had generated the percent of sales as the average of the 1990’s, an additional $1.3 billion in furniture and bedding sales would have shifted to the holiday season. Is this loss a result of a shift to other seasonal sales and events, or is it a decline in the importance of furniture purchases to the consumer in the 4th quarter?