Monthly Issue
From Home Furnishing Business
November 13,
2015 by in Business Strategy, Industry 
Connecting and selling furniture requires an understanding of how and why consumers shop they way they shop.
By Lee Brown
It’s no secret that age, income and gender provide a demographic profile of consumers. However, in order to understand consumers more precisely, we add another layer by using Home Furnishings Business’ parent Impact Consulting’s proprietary Lifestyle Cluster designations to define the buying attitudes of consumers.
They deal with internal attributes focusing on how the consumer feels about the home, including such as areas as concern with decorating, how formal or informal the home is, and feelings about shopping for furniture. Income constraints do tend to guide the consumer. There are times, however, when digging into the consumer data of a high-end furniture product, we find a consumer presence in one of the lower-income cells. This happens because the less affluent consumer may allocate more of his or her disposable income to home furnishings driven by a stronger attitude toward the home environment.
In order to codify the attitudes, Impact Consulting uses a ratings scale based on the consumer’s extent of agreement with specific statements. Using the data, Impact has developed a profile of the home furnishings consumer and assigned a proprietary lifestyle profile to each respondent.
There are six frequently found clusters among home furnishings consumers—Style Aware, Prestige Seeker, Self Possessed, Follower, Just Me and Comfort Seeker. Each of the clusters is defined in more detailed in following pages.
Here, however, let’s examine responses from the Style Aware cluster. This group tends to be the most forward thinking in regard to all things regarding trends and style. In most cases, the design trends this group favors will set the pace in the market.
Quickly defined, the Style Aware group is trendy and stylish. Those in the herd tend to be comfortable with their design decisions, and frequently, but not always, consumers in this segment are among the more affluent consumers.
Why Buy?
When survey participants were asked the primary reasons for their most recent furniture purchase, Style Awares had the largest presence in the Desire for New Furniture and the Redecoration segments. As can be seen in Table A, this segment of consumers is motivated less by need and more by want.
While there were similar percentages among all of the lifestyle segments in the Desire for New Furniture factor, the Style Awares had a higher population in the Redecoration category. These are consumers who enjoy the prospect of decorating and are also knowledgeable about the process.
Chart A
Once the decision to buy furniture is made, what steps do consumers take to make a purchase?
When comparing the Style Aware group with the Prestige Seeker group, we see that the shopping process for each follows the same schedule to purchase even though the scoring numbers are not the same.
Examining store displays is the first step of the consumer’s purchase process. It is key that retailers understand that, with the exception of the Self Possessed cluster, survey respondents first wanted to see product in the store. This is the touch it, sit in it factor that remains so important to consumers.
Once the store visit has been completed, shoppers are likely then to conduct Internet research. Online, consumers typically gather a range of information about products, further educating themselves. The next step usually an over-the-fence conversation with a friend or relative for an endorsement of the consumer’s furniture choice. During these steps, consumers see the furniture purchase as a personal journey. The first two shopping actions are ones that are basically fact finding while the third is the act of reaching out to others for guidance and validation.
At this point the consumer turns to outside sources. This is where advertising takes the lead in connecting with consumers. Newspapers, magazines, radio and television are the key media sources for such information. At this stage, consumers have already done the research and will tend to visit stores with a more serious direction in mind. See Chart B.
Chart B
Getting into the Stores
After the decision to purchase is made, consumers can move swiftly. Consumers usually don’t include research time as shopping time; hence, the period of time a consumer considers actual shopping time is usually relatively short. The highest percentage of our Style Aware shoppers—29.8 percent—said they shopped two weeks to one month while another 46 percent indicated shopping from one to two weeks (25.1 percent) or from one to three months (20.9 percent). We can compare this with the 79 percent of Comfort Seekers who shopped and purchased in a month or less. The highest percentage of this lifestyle cluster—34 percent shopped one to two weeks for their furniture purchase. These relatively short shopping processes should be should be important information for furniture retailers. It indicates the importance of having a relatively broad range of product when the consumer walks into the store. See Chart C.
Today, most consumers visit only a small number of stores when shopping for furniture. The majority of all consumers shopped three stores before making their furniture purchase. This percentage ranged from 44.3 percent (Followers), 41 percent (Prestige Seekers), 37.7 percent (Comfort Seekers), 37.7 percent (Style Awards) to 30.8 percent (Self Possessed). The Just Me’s remain faithful to their definition of being consumers who see furniture as purely functional and have little interest in the shopping process. The highest percentage of this group shopped one (31.3 percent) or two stores (31.3 percent). It is important for sales personnel to connect quickly and offer guidance on the sales floor with this segment. See Chart D.
Surprisingly, shoppers are not hindered by mileage when shopping for furniture. More than 90 percent—93.3 percent of the Style Aware segment had no problem traveling from 10 to 50-plus miles. That breaks down as 34.6 percent saying 10 to 24 miles; 37.2 percent opting for 25 to 49 miles; and 21.5 percent reported a willingness to travel more than 50 miles to visit furniture retailers.
The group with the highest willingness to travel 10 to 50-plus miles was the Self Possessed, 96.1 percent followed by Style Awares; Comfort Seekers, 90.6 percent; Prestige Seekers, 87.5 percent; Just Mes, 81.3 percent; and, the Followers, 80.3 percent.
A willingness to drive greater distances to shop is most likely a result of the reality of today’s hectic lives. Many people have lengthy commutes to their workplace. Family sports and other activities may also require frequent travel. Therefore, time in the car is today’s new normal. See Chart E.
Once a shopper enters a furniture store, he or she is typically earnest about buying furniture. Training that teaches sales associates how to distinguish customers by lifestyle cluster can be an important part of an overall sales program. At the end of the day, a sales team that can apply the knowledge can impact a furniture retailer’s sales.
October 16,
2015 by in Business Strategy, Industry
Furniture retailers continue their march to expand into new markets. Are any bold enough to make a push for a national presence?
Since the furniture industry’s emergence from the recession, retailers have been on the move plotting expansion plans, opening stores in new markets and gobbling up real estate in popular power centers.
The industry is back, and retailers are making bold moves to capture consumer dollars.
Analyzing the growth strategies of some of the industry’s larger regional chains, begs the question as to whether or not a multi-line, national furniture retailer could emerge on the U.S. landscape.
Not since Heilig-Meyers has the industry seen a national furniture chain. Prior to its bankruptcy filing in 2000 and eventual liquidation, the retailer had more than 1,000 stores across the country. The chain’s overexpansion could have been the proverbial straw that broke the business.
Is there a retailer amongst the industry ranks who could make such a power play by rolling out a successful plan that incorporates smart marketing, spot-on merchandising that translates across regions and a logistics plan to hold it all together? Could it work? What would such an animal even look like?
“The typical reason for a national chain is the economy of scale to allow efficiencies in product procurement, advertising and other functional areas,” said Bob George, managing partner of Impact Consulting Services, parent company of Home Furnishings Business. “With furniture retailing there may be a point of diminishing returns well before national distribution.”
George points out that while vendors always want to minimize, regional taste differences abound for product styles and designs. “This is quite evident in our consumer product testing,” he said.
Last year, the industry witnessed a number of regional players set plans in motion to expand, broadening their reach into neighboring markets. Notably, Nebraska Furniture Mart made the daring move to jump across market lines into the Dallas market with its fourth superstore located in The Colony, Texas. The 1.85 million-square-foot complex continues to generate buzz and consumers are still showing up in droves five months after the May grand opening.
This year is shaping up a bit differently, and we note a number of powerhouse regional players inching into other markets.
Each of the movers could cause a bit of disruption in each of their targeted new markets.
“The impact of a larger national player entering a market that has a dominant regional player is typically a loss of 10 percent to 15 percent market share to that retailer,” George said. “This is not enough to remove a regional retailer’s dominance, but it is enough to weaken the regional retailer’s financial performance.
“The major question is: At what pace can a larger retailer expand without overloading its infrastructure,” he added. “The desire is there, but reality sets in.”
Four major retailers are marching forward with full force expansion plans. Two of them—Rooms To Go and Bob’s Discount Furniture—operate in the promotional and middle price points. The other two—Havertys Furniture Co. and Raymour & Flanigan—deal in the upper middle to upper price points.
These four retailers—the ones we see as having the greatest potential for a national presence—should have their sites set on the markets with more than $100 million in sales. According to George, these markets represent 65 percent of the overall market.
Examining the promotional to middle price point market first, Rooms To Go and Bob’s Discount Furniture collectively own about 10 percent market share in those price ranges in their respective markets, George points out. Looking at the middle to upper price ranges, Havertys and Raymour & Flanigan control about 6 percent market share.
“Each of those percentage marks are within the sweet spot for profitability,” George said.
The map above shows the markets in which Rooms To Go and Bob’s Discount Furniture currently operate. It also outlines the markets ripe for the plucking and ready for expansion.
Rooms On the Move
Seffner, Fla.-based Rooms To Go currently operates 132 stores in 60 markets across 10 states, but the retailer has ambitious plans for growth in current markets and beyond that are tied to the expansion of its network of distribution hubs.
The retailer’s 1.45 million-square-foot distribution center and showroom on Interstate 95 in Dunn, N.C., is nothing less than impressive in its presence. Product started flowing into the center last month and is expected to be ready for shipping by the end of the year.
The compound includes a 60,000-square-foot store set to open during High Point Market.
Earlier this summer, privately held Rooms To Go expanded its Lakeland, Fla., distribution center and also built out its distribution center located in Katy, Texas, outside of Houston. Consideration is being given to expanding a Dallas-area center, as well.
Over the next year and a half, Rooms To Go plans to open 11 stores in its current markets. Cities on the list include Atlanta (a replacement store), Nashville, Tenn., Orlando and Fort Lauderdale, Fla. Texas stands to gain Rooms To Go units in San Antonio, Austin, Dallas and Houston during that time frame, too.
New stores are in the planning stage for South Carolina and Virginia.
My Kind of Town
Bob’s Discount Furniture continues its march into the Mid-Atlantic and Midwest by recently opening its 63rd store as it pushes into Pennsylvania. Located in Reading, Pa., it is one of three stores the retailer has opened in Pennsylvania and New Jersey this summer and fall. The retailer currently operates 63 stores in 27 markets throughout 11 states.
Up next—the Chicago market, the retailer’s most western reach yet.
Earlier this year, Bob’s Discount Furniture expanded to the Midwest area by leasing a 751,966-square-foot distribution center near Chicago in the Heartland Corporate Center in Shorewood, Ill. It is Bob’s Discount Furniture first Midwestern distribution center and the retailer expects to occupy it by the fourth quarter of this year.
“We’re delighted to secure this much first-class space in such a desirable location,” Kaufman said. “The facility will support our exciting expansion plans into the greater Chicago market.”
Bob’s Discount Furniture will expand into the Chicago area with five stores in the first half of 2016. The Shorewood, Ill., center will service the new stores.
“This is an exciting time for us,” said Bob Kaufman, co-founder of Bob’s Discount Furniture. “We’ve been embraced whenever we enter a new market and success breeds success. People like value and we’re a value store.”
George points out that moving beyond a 200-to-400-mile radius from a home base location calls for an additional warehousing and delivery module. “Once established, the future geographic area can be absorbed,” he said. “Bob’s large warehouse signals more than just Chicago’s five planned stores.”
Boston-based private equity firm Bain Capital purchased Bob’s Discount Furniture in 2013 in a $350 million deal with plans to expand the business into new markets. The retailer, known for its odd but effective television commercials that pin the Bob-O-Pedic against brand name Tempur-Pedic, had grown by about two stores per year since Kaufman co-founded it in 1991 with his cousin, Gene Rosenberg, in Newington, Conn., but it has quickly seen expansion into the Chicago, Philadelphia, Pittsburgh and Baltimore markets.
Kaufman sold a majority stake to private equity firm Saunders, Karp & Megrue, which was later acquired by Apax, in 2005. It was KarpReily/Apax that later sold the majority stake to Bain Capital.
The Bain Capital deal was about a growth strategy. Bob’s Discount Furniture had 47 stores when Bain Capital acquired majority ownership, and has expanded by 16 stores in the past two years.
“There’s a real opportunity to grow this business substantially,” said Tricia Patrick, a principal at Bain Capital. “We believe in Bob’s Discount Furniture’s quality furniture at deep value fills an important need in the market. With strong growth prospects, we see no reason why Bob’s could not grow to be a nationwide chain.”
However, the next frontier for Bob’s still remains unmentioned.
The private equity firm has vast experience purchasing well-known retail companies.
“Bain’s been investing in the retail business for decades,” said Ted English, Bob’s CEO. “Their expertise coupled with our expertise makes a great marriage as we grow the business and take it to new places. Bain brings the experience and resources we need to support our continued expansion to serve more customers in more places, and provide opportunities for advancement for our people.”
Kaufman has remained the face of the company since Bain Capital’s acquisition and English remained as CEO. The retailer hired William Bracker as vice president of marketing in July to help guide the brand as it grows and expands into new markets. Bracker was hired at the time of this rapid expansion for Bob’s Discount Furniture, which opened four stores Memorial Day weekend in the greater Pittsburgh and Baltimore areas.
“We continue to be very excited about the long-term growth prospects for Bob’s and have been thrilled with our partnership with Ted and the entire Bob’s team thus far,” Patrick said.
According to the Motley Fool, Bob’s Discount Furniture will most likely remain under private equity ownership for the near future, as the typical holding period for a private equity firm is five to seven years. Bain Capital hasn’t disclosed its exit strategy, whether it will be to IPO Bob’s Discount Furniture or sell it to a rival furniture retailer, but the possibility remains that Bain Capital will choose to IPO Bob’s Discount Furniture as it did with Dunkin’ Brands Group and Michaels Stores.
Southern Ways
Havertys Furniture Co. has opened two stores in the new markets of Rogers, Ark., and Waco, Texas, and one in Southeast Florida in Coconut Creek, Fla., during the first six months of this year. Its store count was 122 at the end of the second quarter of this year, compared to 118 during the same period last year. The retailer operates in 72 markets in 16 states.
“We are encouraged by the improvements in the macro environment in both housing and wages, key drivers of our business,” said Clarence Smith, chairman, president and CEO of Atlanta-based Havertys. “We have strengthened our brand in existing markets and have expanded into new communities.”
Smith explains Havertys is having consistent success in its custom upholstery business and it has increased by double-digits for eight of the past 10 quarters.
“Our free in-home designers’ consultations are generating business in the near term and establishing relationships for future sales,” Smith said. “As we further separate ourselves from the promotional furniture stores, we believe the on-trend customer will continue to identify Havertys as their preferred store.”
Havertys expects to increase its selling square footage approximately 3.2 percent this year based on increasing its store count by a net three locations. Its total capital expenditures are estimated to be in the $32-to-$33 million range this year depending on the timing of spending for new projects.
The publicly traded retailer opened its first Fort Lauderdale, Fla., store in late August after investing approximately $3 million while converting 50,000 square feet of a former Carls Furniture building into a newly designed store.
Havertys signed two leases to take over two former Carls Furniture stores in Fort Lauderdale, Fla., and Coconut Creek, Fla. Carls Furniture closed the last three of its regional stores in June 2014 after 73 years as a South Florida furniture mainstay.
Northeastern Powerhouse
Liverpool, N.Y.-based Raymour & Flanigan is the quiet giant in the Northeast who continues to methodically plot its expansion. The retailer has 110 stores, including clearance centers, in seven states covering 30 markets. The state of New York is home to 52 locations; Pennsylvania has 20 and New Jersey has 19 Raymour & Flanigan stores. Other outlets are in Connecticut, Rhode Island, Massachusetts and Delaware.
The retailer’s growth historically has come through a combination of acquisitions and store openings. In the 1990s, the company expanded out of its home state into New England, New Jersey and Pennsylvania when it bought the Furniture Unlimited stores.
Between 2000 and 2006, the retailer opened more than 50 stores in six states.
By 2007, Raymour & Flanigan’s appetite for acquisitions was back, and the company bought Alpert’s Furniture. The following year—2008 just as the recession was hitting—Raymour & Flanigan opened 12 stores and two clearance centers along with a customer care center to meet the expansion needs in New Jersey and metro New York.
Also in 2008, the retailer picked up Levitz Furniture leases while that giant liquidated, and Raymour & Flanigan opened 10 stores in the New York City area.
Four years ago in 2011, the retailer added to its online presence and currently has an e-commerce platform. To support the e-commerce function, Raymour & Flanigan has partnered with a delivery service to expand its delivery capability to all Eastern Seaboard states.
This spring, Raymour & Flanigan signed a lease for a 40,000-square-foot store in New York’s Harlem. The store will be part of a 200,000-square-foot, six-story retail complex that will also include an Olive Garden, Whole Foods and American Eagle Outfitters.
Throughout Raymour & Flanigan’s expansion, the retailer has chosen to remain relatively close to home in its heavily populated cluster of seven states.
The Holes
When studying the location maps, it’s curious to note the skipped markets in the western expansion. In the Midwest, Bob’s leap frogged right over the states of Ohio, Indiana and Michigan. Perhaps the regional players there—Morris Home Furnishings, Kittle’s Furniture and Art Van Furniture—are viewed as having a stronghold in their respective markets.
Art Van has made its on move into the Chicago market. The retailer opened its eighth and largest store in Downers Grove, Ill., in August. The industry should be prepared for a head-to-head showdown once Bob’s stores are opened in the market.
Moving south, both Rooms To Go and Havertys bypassed a wide swath through the center of Mississippi.
While Rooms To Go currently has one store in the state, it’s located in Gulfport, Miss., down south. Jackson, Miss.-based Miskelly Furniture currently has six stores in its home market. Havertys has two stores in the Memphis, Tenn., market, but none in Mississippi.
Is it Worth It?
Retail expansion isn’t for the faint of heart. It takes strategic planning, a whole lot of capital and a big dose of fortitude to turn it into a success.
At the core of the planning stage for an expansion is a consideration of how much it costs to steal market share as compared to the cost to hold onto market share.
While the emerging national retailers are looking to feed their growth appetite, regional retailers who are already entrenched in an enticing market should be exploring means to remain competitive and hold onto their turf.
The following graph illustrates a perspective of performance maximization for regional retailers to consider.
“The major unspoken question for a regional chain is: How much market share must I have in order to deter one of the emerging nationals from moving into my market,” George said. “When faced with an emerging national, at what point would the home-base retailer consider acquiring versus taking? Taking share is an expensive venture.”
Next on the horizon, George suspects more venture capitalists to jump in with two feet to boost the emerging nationals along. “Bain Capital (with its Bob’s investment) is already in it,” George said. “It won’t be long before others follow. We can only hope that the retail furniture sector fares better with financial engineering that the manufacturing sector has.”
October 16,
2015 by in Business Strategy, Industry
Bedding specialists are marching faster and farther with their expansion plans that furniture retailers.
No question that the mattress segment is one of the industry’s most profitable beasts.
It makes sense that bedding retail would continue to grow, and the powerhouse bedding retailers have been busy over the last couple of years.
In addition to the giant movers and shakers in the category, keep in mind, traditional furniture retailers are looking to hold tight to this prime bit of business by opening dedicated bedding stores. Think Art Van Furniture’s PureSleep model. Others are bolstering their sleep departments in their current footprint.
The freestanding bedding store concept has exploded satisfying consumers who want quick service. Often they perceive the specialty store format as the place to find selection, expertise, and, by the way, a location within 10 miles of their homes, according to Bob George, managing partner of Impact Consulting Services.
Unlike the emerging national furniture retailers, bedding specialists are focused on all markets—large and small.
When maps showing store locations for four key bedding retailers are examined, this segment of retailing seems to be outpacing furniture retailers in the race for U.S. domination. Three of the four examined have a presence in the majority of key markets across the U.S.
Out in front by store count, Houston-based Mattress Firm operates more than 2,000 stores dotted across much of the U.S. landscape in 279 markets. Sleepy’s, the privately held sleep chain based in Hicksville, N.Y., falls in line behind Mattress Firm and holds more than 1,050 stores in 97 different U.S. markets.
From Sleepy’s, the next chain with the most stores is publicly traded, Minneapolis-based Select Comfort with its more than 470 stores across 212 markets. The specialty sleep surface retailer sells its proprietary Sleep Number line in its sleep shops most often found in heavily trafficked retail centers. American’s Mattress, the franchised bedding retailer by Serta International, has more than 238 stores in 123 key markets.
Impact’s George points out that Mattress Firm has the largest market share—in excess of 50 percent in its market footprint of more than 60 percent of the total market. Meanwhile, Select Comfort has a presence in more than 75 percent of the total market, but holds less than 10 percent market share, George said.
Another observation: While Mattress Firm has used acquisitions to fuel its expansion, Sleepy’s, for the most part, has relied on opening new stores to grow its footprint to more than 25 percent of the total U.S. market, George said.
Overall, all the giants’ stores combined command slightly more than 30 percent of the total market share, George said.
While the giants come into a market carrying with them heavy marketing budgets with which to roar, local retailers can be giant slayers if they place their bets wisely, George said.
“Combining the retail experience of the bedding specialty store with the reputation of a regional furniture store, such as Steinhafel’s or Cardi’s, makes for a formidable competitor to the large retail chains,” he said.
Be mindful of the manufacturer-direct channel of bedding retailers. Those companies, like California-based Banner Mattress and Murmaid Mattress, based in Chattanooga, Tenn., offer national bedding brands along with their own, homegrown product, George said.
Each of the four chains mentioned specifically has plans to grow either by adding to its store mix through acquisitions or good, old-fashioned store openings.
Here’s a look at where each of the chains stands to gain and a bit about how they could get to U.S. domination in the bedding retail segment.
Leader of the Pack
Mattress Firm has been on an acquisition tear, gobbling up smaller regional chains, like Sleep Train on the West Coast and Back to Bed in Indiana, Illinois and Wisconsin on its way to becoming a national mattress retailing brand.
With more than $2.2 billion in sales during the last 12 months, and 2,300 company-operated and franchised stores in 41 states, the retailer is a force with which to be reckoned. Mattress Firm currently has stores under the Mattress Firm moniker, of course, but it also held onto the Sleep Train name following the acquisition of that well-established and well-branded West Coast chain.
The retailer has aggressively built up its sales base in recent years through nationwide acquisitions, including the Sleep Train acquisition. The Sleep Train buy caused a shuffle of the Mattress Firm executive deck, giving the retailer a boost to its management team.
Rob Killgore, who had been with Sleep Train since 1986, has been promoted COO of Mattress Firm as Ken Murphy was promoted to president.
Murphy is now responsibility for all sales functions of the company, including store operations and distribution, marketing, merchandising and e-commerce.
“Ken has been instrumental in driving the growth of Mattress Firm into the nation’s largest specialty mattress retailer,” said Steve Stagner, CEO of Mattress Firm. “I’m equally excited to leverage Rob Killgore’s vast industry experience, strategic thinking and analytical mind by expanding his role as sole chief operating officer.”
Killgore joined Mattress Firm last year as part of the Sleep Train acquisition. He held various positions prior to COO of Sleep Train, including senior executive vice president.
“These management transitions represent a natural evolution as part of the plan we put in place at the time of the transformational acquisitions we completed last year, and are designed to position our organization for continued growth,” Stagner said.
Despite Mattress Firms fairly recent acquisitions of Sleep Train and Back to Bed, Stagner has said the retailer has an appetite for more albeit perhaps smaller ones.
The company’s overall goal is to build a national presence from coast to coast.
While some acquisitions will be transformed to the Mattress Firm brand, Stagner reminds us that Sleep Train has a strong brand on the West Coast.
“We’re comfortable with their experience operating a multi-brand company,” Stagner said. “We feel the market can sustain multiple brands.”
The company acquired Back to Bed, M World Mattress, MCStores and TBE Orlando, which collectively operate Back to Bed and Bedding Experts retail stores in Illinois, Indiana and Wisconsin and Bedding Experts and Mattress Barn retail stores in Florida. It included approximately 131 mattress specialty retail stores primarily in the Chicago and Orlando, Fla., metropolitan areas, for an aggregate purchase price of approximately $64.5 million. The rebranding of the acquired retail stores in the Chicago market was substantially completed in May.
Mattress Firm delivered net sales growth for its eighth consecutive quarter in the second quarter of 2015.
Mattress Firm opened 71 new stores and closed 11 stores in the second quarter of 2015, bringing the total number of company-operated stores to 2,223 as of the end of the second fiscal quarter.
Anything But Sleepy
Family owned Sleepy’s has been moving south opening stores in North Carolina and has moved into South Carolina, too. Its expansion has gotten as far west as Chicago.
Relatively quiet, the bedding chain offers nationwide delivery to consumers who buy via phone or online. The retailer’s network of 10 distribution centers, six of which are corporately owned. The other four—Dallas, Oakland, Calif., Pompano Beach, Fla., and Santa Fe, California— provide the retailer with coast-to-coast reach.
Sleepy’s digital commerce strategy is its way for furthering its geographical reach. Through its planned omni-channel strategy, the chain is creating a more personalized shopping experience for consumers.
The retailer has said despite its brick-and-mortar heritage, it realizes that consumers are more connected now than ever and are shopping through different outlets. Staying connected and accessible to those consumers is key.
Site Selection
Dedicated Sleep Number retailer Select Comfort has stores in all 47 states in the contiguous U.S. Back in 2004, the company forged a strategic alliance with both C.S. Wo & Sons in Hawaii and Furniture Enterprises of Alaska for those retail operations to sell the Sleep Number beds. Both retailers still sell the line in their stores giving the Sleep Number brand distribution in all 50 states.
With its more than 470 branded stores, e-commerce site, direct marketing and through its telephone sales, the company’s name holds cachet and brand recognition with consumers. The company’s plan for 2015 included capital expenditures of about $80 million, including investments in information technology and new, relocated and remodeled stores.
Earlier this year, a corporate shareholder kicked off a proxy battle prior to the company’s annual meeting. The shareholder later backed down, but not before some serious accusations were lobbed against management.
Shelly Ibach, president and CEO of Select Comfort, outlined the company’s in-progress growth strategy in an open letter to shareholders that pointed out plans to build the Sleep Number brand into a consumer lifestyle brand, grow its consumer base by four times, and advance its national footprint while keeping markets locally focused and profitable.
The company plans to stick to its consistent annual new store growth of 5 percent to 7 percent while keeping from cannibalizing its existing sales in key markets. Select Comfort’s formula targets one store per trading area with a population between 35,000 and 500,000 people. Its target consumer is between 30 and 54 years old with a household income of more than $75,000.
The company’s strategy appears to be working.
In its latest financial report for the second quarter of its fiscal year, Select Comfort sales increased 17 percent to $275 million and same-store sales were up 13 percent. Net income climbed more than 29 percent to $11 million in the quarter from $8.5 million in the second quarter of last year.
The retailer is big into having its national footprint while maintaining its local market development. The local market development requires it to be on pointe with its site selection process to ensure the stores are visible, convenient and economically priced. Site selection includes mall and off-mall placements depending on a market’s consumer traffic flow.
America’s Brand
Serta’s America’s Mattress retail franchise program says nearly 400 stores in 123 U.S. markets in 39 states, including Alaska. The retailer sells all of the Serta and iComfort brands, and puts ownership in the hands of local, community-minded people.
The America’s Mattress concept creates a network of independently owned mattress stores. According to the retailer’s website, the company is looking for franchisees who have a successful business management background. For a single-store, the retailer recommends a minimum of $75,000 in liquid capital.
Impact’s George said the manufacturer franchise, once a super hot concept, remains viable.
“The America’s Mattress franchise has a market footprint of more than 30 percent of the total market,” he said. “Combining buying power with local ownership can be a winner. Bed Mart of Portland (featured in the August issue of Home Furnishings Business) is a strong, successful example.”
October 16,
2015 by in Business Strategy, Industry
China’s devaluation of the yuan earlier this year was done in hopes of stabilizing the country’s shaky economy. The impact such a move could have on the U.S. furniture industry remains unclear and opinions vary from expert to expert.
Although economists differ on the depth of the impact, China hopes to prevent its economy from slowing further by making its exports less expensive. China currently dominates 60.8 percent of household furniture imports to the U.S. and cheaper imports could strengthen that hold.
The world totals of both U.S. imports and exports in the household furniture industry have been on the rise since the recession (Table A). In 2014 imports totaled $23.8 billion at wholesale or about 74 percent of U.S. furniture and bedding consumption. This compares to 62 percent in 2007, as reported in the April issue of Home Furnishings Business.
Imports to the U.S. experienced high growth of 53.6 percent from 2002 to 2007 before plummeting 24.3 percent by 2009. Since 2009, furniture imports increased to 53.1 percent in 2014—growing an additional 10.9 percent from the second quarter of 2014 to the second quarter of this year to date. While U.S. exports total just a fraction of imports, exports of furniture have been steadily increasing since the peak of the recession in 2009. Up 50.1 percent since dropping 5.9 percent in 2009, the furniture export industry has increased from $1.5 billion in 2002 to $3.5 billion in 2014—a jump of 141 percent.
Imports by Country
China’s exports to the U.S. have grown to more than 60 percent of total U.S. imports—up 20.6 points from 2002 to the second quarter of this year (Table B). Since the peak of the recession in 2009, the value of imports from China has grown 52.4 percent to $14 billion.
Canada’s decline alongside Vietnam’s rise is quite noticeable. Vietnam jumped from a half percent to more than 10 percent of U.S. imports in the past 13 years while Canada has dropped from 18.3 percent in 2002 down to 5.5 percent in the second quarter of thie year—a decline of 12.8 points. As the fourth largest importer, Mexico accounted for 4.8 percent of total imports in the second quarter of this year— 0.8 points shy of 2002.
Major Furniture Imports
Wood household furniture is the largest imported furniture product, but in 2014 the category had not yet reached pre-recession import levels. Conversely both upholstery and metal have been increasing at a high rate, and combined, now account for more than 50 percent of total furniture imports (Table C).
Purchases of upholstery and metal household furniture from around the world have increased more than 29 percent since 2007. The smallest imported product category is bedding. At $464 million in 2014, the category is a small fraction the total. However, bedding has increased by 140 percent from 2009 to 2014 and more than 20 percent in the first six months of 2015 compared to the same period last year.
Current 2015 second quarter year-to-date performance for all broad categories shows that Metal is the only category not experiencing double-digit growth this year (Table D).
Wood household furniture imports totaled $9.8 billion in 2014 and are up 10 percent in the second quarter of this year compared to 2014 (Table E). China still owns the wood category at $3.7 billion wholesale in 2014, but has lost significant share over the last 10 years to Vietnam.
Vietnam’s 2014 imports have increased to $2.2 billion, up from $60 million in 2002. Through the second quarter of this year, China’s wood imports have grown 7 percent compared to Vietnam’s 23.9 percent, closing the gap even further. Malaysia and Indonesia continue their steady wood niches but control less than 6 percent of wood imports each.
Unlike the wood category, China has virtually no competitors in upholstered goods in the U.S. marketplace (Table F).
In the early 2000s, China began to make its move with upholstery imports of only $543 million in 2002 and grew to $3.9 billion by 2014. Essentially, China has taken market share from U.S. producers as the secondary countries—Mexico and Canada—have struggled to maintain shipment levels. Through the second quarter of this year, China upholstery imports are up another 15.2 percent over the same period last year. Vietnam has slowly tried to enter the U.S. upholstery market, but only grew to $293 million in 2014.
Even more so than upholstery, China has a stronghold on metal furniture—accounting for 78 percent of all metal furniture imported into the U.S. in 2015 at mid-year (Table G).
China increased from $1.7 billion in 2002 to $4.7 billion in 2014—a jump of 172 percent in 12 years. While imports from Canada, Taiwan and Mexico have grown since the bottom of the recession in 2009, they continue to lose U.S. market share to China.
Exports by Country
Although the U.S. exports a fraction of furniture compared to imported goods, exports have continued to rise since 2009 and surpass the peak highs of 2007 (Table H). More than half of the $3.4 billion in U.S. exports are to Canada.
Although exports have been growing, they are not approaching the growth in imports being fueled by China. While the furniture industry in China has been threatened over the last few years due to rising labor costs and labor shortages, U.S imports continue to increase from China alongside a growing Vietnam Wwood manufacturing presence. The recent devaluing of the yuan could go a long way to strengthen China’s hold on U.S.
Methodology: Household furniture imports and exports are compiled by the U.S. Census Bureau, Foreign Trade Division from more than 200 countries by product type and material.
October 16,
2015 by in Business Strategy, Industry
Dunk & Bright builds on its long-storied foundation to secure its future.
By Daniel Beaird
When Bill Dunk and Bill Bright founded Dunk & Bright in 1927 on South Salina Street in the Brighton neighborhood of Syracuse, N.Y., they likely didn’t imagine the furniture showroom growing into New York State’s largest 88 years later. But today it’s considered just that at nearly 100,000 square feet, according to Jim Bright, grandson of Bill Bright and current owner of Dunk & Bright.
A furniture salesman from Bridgeport, Conn., co-founder Bill Bright moved to Syracuse with the dream of opening his own business. That’s where he met and served co-founder Bill Dunk and his wife on the floor of Brown, Curtis & Brown, a furniture store in downtown Syracuse.
Dunk, an Englishman who moved to the United States as a teenager and worked up to production manager at H.H. Franklin, a car company in Syracuse, was so impressed with Bright that he encouraged him to go into business for himself and agreed to back the furniture store.
And Dunk & Bright was born.
Bright ultimately paid Dunk $5,000 for his share of the business, and owned and operated the store until his death in 1939. Bright’s brother-in-law John Monahan took over the business until his death in 1952, and Bright’s son, Pat Bright, then became president, running the store for 41 years.
A New Generation
Pat’s son, Jim Bright, returned from a successful business career in Washington, D.C., and New York City, worked for his father for three years and in 1993, purchased Dunk & Bright from him. He still operates the store today.
“I went to the bank, borrowed money and purchased it from him,” Bright said. “There are four other siblings, and he wanted it to be a fair transaction for the rest of the family.”
The store now encompasses the entire corner of South Salina Street and Brighton Avenue in Syracuse after a total of 50,000 square feet of additions from 1991 to 2006. Dunk & Bright also operates a 1 million-cubic-foot distribution center in Liverpool, N.Y.
The South Side Innovation Center (SSIC) was also born and sponsored by Syracuse University in 2006 in Dunk & Bright’s building across the parking lot from its main store.
“It is supporting an entrepreneurial renaissance in a neighborhood with untapped potential,” Bright said. “It holds more than 13,000 square feet of usable space for shared business services, the WISE Center and a large classroom for training and teaching.”
Community Outreach
SSIC was created by the nationally ranked Entrepreneurship and Emerging Enterprises (EEE) Program at the Syracuse University’s Whitman School of Management, and it aims to accomplish its mission through its resident programs.
Access to these programs include the Entrepreneurial Assistance Program (EAP), supporting clients and tenants of SSIC; the WISE Women’s Business Center for women seeking to start or grow a business; the Syracuse Community Test Kitchen (COMTEK) to help food entrepreneurs launch businesses; and the Start-Up NY/Program for Investment in Micro-entrepreneurs (PRIME) supporting disabled and low-income entrepreneurs with training and assistance.
Dunk & Bright’s space accommodating SSIC includes reception and administration; 27 offices with furniture, computers, Internet and telephone access; two conference rooms with whiteboards and audio-visual setups; a large meeting event area; a 30-seat classroom and training room; a 500-square-foot kitchen; a resource room for mail, fax and copies; mail receipt; free parking; 24-hour availability and access; and 24-hour security and surveillance.
Dunk & Bright’s involvement in the Syracuse community helps it reach the 75-mile radius it uses to promote the store.
“We continue to use most media channels, deploying traditional media as well as digital advertising and social media,” Bright said. “Offline seems to drive online.”
Bright added that the furniture store’s new e-commerce division has contributed to its sales growth this year.
“We are willing to try any and all digital platforms to test their effectiveness,” Bright said. “These are changes that help us run our business better and reach new customers and geo-target and target certain demographics in a less expensive way. You can try things to create a new advertising campaign, and in the digital age it’s much less expensive than television where you have the cost of production.
“We want customers to know about us, even if they’re more than 10 to 15 miles away,” Bright said. “We can market to Ithaca (N.Y.), for example, with Google AdWords and it’s a pittance to opening a second store there.”
Bright says they want to enhance what it does without disturbing their core, however, which lies in its selection and interior design services.
Building on Bedding
Dunk & Bright has recently expanded that core in its bedding department. Its new, in-store Mattress Shoppe has its own identity, its own entrance, its own advertising and a stronger focus on the mattress category, working with key vendor Serta to feature iComfort, iSeries, and Perfect Sleeper.
Jim Bright was recognized for his leadership in supporting the creation of the Mattress Shoppe with an award from an industry publication earlier this year. Erin Donaghy, Dunk & Bright’s marketing director, was also honored at the conference for a music video saluting Serta’s adjustable bedding.
“Opening the Mattress Shoppe in store [this past] January has been a success,” Bright said. “Our market has been solid and stable the last few years, and this year we are enjoying a nice double-digit percentage growth bump.”
Bright added that the store’s breadth of product selection, both in store and online, and its in-home interior design and custom order expertise sets it apart from other home furnishings retailers in its market.
“Our large display and selection gives us the opportunity to merchandise ‘good, better, best,’ and generally, we have a goal of stocking everything that we display,” Bright said. “We have one store with a lot of selection.”
Dunk & Bright’s management team talks about its cost of inventory regularly given such a large store.
“There’s been an evolution in the furniture industry of imported furniture,” Bright said. “Because of our selection, we carry domestically made furniture that you can custom order. There’s a starting price point in furniture. There’s a median price point and there’s expensive. We try to have that range.”
The trend toward offshore sourcing during the past decade means buying containers of furniture for Dunk & Bright.
“They’re very good value,” Bright said. “But we need to purchase a whole container of bedrooms, for example. We give the consumer choices of super-value container imports and of domestically made furniture. So, that leads to very high inventory.”
Design at Your Service
Meanwhile, half of Dunk & Bright’s sales staff is comprised of experienced interior designers.
“We offer this complimentary service,” Bright said. “We go to the home. We do a floor plan. We help put fabrics and finishes together. We have the ancillary categories that complement a completed room, like window and wall treatments, blinds and floor coverings. It doesn’t cost the customer anything. The customer doesn’t have to purchase everything, or anything for that matter.”
Bright thinks the decision to focus the retailer’s attention and investment on interior design services approximately five years ago was a big one.
“A lot of furniture stores have abandoned those aspects of the business,” Bright said. “They might have had a carpet department and got out of it because it’s a different selling process. You need installers, and you need to go to the home and measure carpet. You can’t just sell it like a sofa in the store.”
Bright says the same thing happens with window treatments.
“Hiring interior designers and encouraging them to do in-home floor plans for customers,” Bright said. “There’s an investment associated with that. For one thing, they’re out of your store and you have staffing issues. You need to think of that. When designers are out of the store, you have to have coverage.”
But Bright adds that his management team is under one roof, so when there is a problem or an opportunity, they can bring in their buyer or their specific manager.
“We’re all on the floor,” Bright said. “We’re all communicating constantly with customers. It’s very important to make sure the customer has had a good experience, especially in today’s social media environment. It’s more important what your customer says about your business than what you say about your business.”
Dunk & Bright
Headquarters: Syracuse, N.Y.
Year Founded: 1927
Footprint: A nearly 100,000-square-foot store in Syracuse, N.Y., and a 1 million-cubic-foot, high-bay modern distribution center in Liverpool, N.Y.
Employees: 85
Key Vendors: Ashley Furniture, England, Flexsteel, Harden Furniture, Serta and Smith Brothers
Retail Revenue Range: $10 to $15 million
Key Management Personnel: Jim Bright, owner; Bill Flansburg, merchandising manager; Erin Donaghy, marketing director; Gary Cleveland, sales manager; and John Beaudry, distribution center manager
Website: DunkAndBright.com