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From Home Furnishing Business

Take a Break

By Sheila Long O'Mara

In the last week, two magazines featuring cover stories dedicated to the importance of taking time off and taking a break from all things work have been delivered to my mailbox.

One publication—Time—questions who killed the summer vacation. The other—Inc.—zeroes in on the importance of shutting down and getting away from it all. I’m sure if we subscribed to Psychology Today that publication would also have a number of dedicated pages about how employees and managers are much more productive when they’ve had time to recharge their batteries.

And, just now, an e-mail with the subject line “you need a vacation” pinged. Oh, how very true that is.

The headlines captured my attention because this is the time of the year when schools are winding down for the summer, families are making travel plans and everyone is dreaming of long days out of the office. While the calendar says it’s still spring for a few more weeks, the unofficial start of summer is here for most of us.

But what does that mean for a business? How do we keep the wheels still turning while so many associates and partners want (and need) to take time away?

According to the Bureau of Labor Statistics, the average American worker had 4.9 unused vacation days in 2013. During that same year, the average number of vacation days that weren’t carried over was 1.6 days. Want another staggering statistic? The average employee did $504 worth of work because of unused vacation days. Some folks did much more and some did much less.

Here in the U.S., we are the only economy that doesn’t require employers to provide paid holidays or time off. The ONLY one. How can that be?

Study upon study reveals that employees are much more productive when they’re allowed to unwind and recharge. However, in today’s hurry-up, ping-filled world, it’s more challenging to escape.

I suppose we could blame the first-generation BlackBerry. Those black, Pop-Tart sized phones we all toted around 15 years ago. Today, iPhones and Android devices are so ubiquitous and allow us to check e-mail and voicemail with an easy swipe of the finger. Toss in texting and very few of us can truly shutdown.

As we dive into the summer months, keep in mind that you’re more likely to get the best out of your employees if they’re given time away. Most will return with a new zest for what they do, which in turn will be better for your business.

Happy summer!

Fit For a King

By Sheila Long O'Mara

Father’s Day is just around the corner and the television airwaves and newspaper circulars are already touting the big day and Dad’s Chair as the perfect gift.

A fitting crown for the king of the household, recliners make for a great promotion during this time of the year. In fact, the kickoff to football season, Thanksgiving and the holidays seem to put the recliner front and center in promotions.

It’s an easy category for retailers to promote and a relatively easy category for consumers to understand and gravitate toward.

Recliner sales for 2014 increased slightly—2.87 percent—over recliner sales in 2013. Category sales last year were $4.51 billion; in 2013, recliner sales were $4.39 billion. Recliners remained steady accounting for slightly more than 5 percent of sales for total industry sales of $87.53 billion last year.

Today’s top-selling recliners seem to be generating a higher price point than those of year’s past when $299 and $399 were the sweet spot. No fear, those marks are still pulling in some volume—and they make for great promotions—but there is a slight trend in a higher price point.

Much of that swing can be attributed to consumers’ penchant toward the abundance of creature comforts and features available, including heat and massage, charging ports for electronics, better leathers and plusher fabrics.

In Home Furnishings Business’ most recent consumer survey, consumers ranked their top-wanted features they’d like to have in their reclining chairs. We asked them to pick their top four features they were most interested in for their recliner. An adjustable headrest and lumbar support landed at the top of the list of wanted features. Those support features were followed by heat and massage, hidden tables, storage drawer and a docking station for a smartphone.

While the majority of the consumers were pleased with their recliner shopping experience, they did face a few challenges. At the top of the list, they were somewhat disappointed by the selection of recliners from which to choose.

As is typical, the consumers also had a bit of sticker shock with pricing, and they had a hard time in distinguishing the differences between recliners. Those few stumbling blocks leave the door open for retail sales associates to explain the different features available in the different styles, and possibly the opportunity to upsell consumers into a higher ticket.

When it comes to shelling out dollars for recliners, the largest segment—41.2 percent—said they’d expect to pay between $300 and $599 for a recliner dressed in fabric. Another 35.3 percent said they’d pay between $600 and $999 for a fabric recliner. On the low end of the pricing scale, 17.7 percent said they’d expect to pay less than $300 for a fabric recliner.

Stepping up to leather posed a bit of a challenge in pricing for the surveyed consumers. More than 36 percent said they would be willing to pay only $50 more for a leather recliner, and 27.3 percent said they’d be willing to pay $100 more for a leather recliner.

When it comes to recliners, more than half of our consumers—53.6 percent—were most interested in traditionally styled chairs. Just over a quarter (28.6 percent) gravitated toward a more contemporary styled recliner.

Despite all the fancy bells and whistles consumers are demanding, they still like to go old school with the recliner mechanism. Nearly 68 percent chose lever-operated mechanisms as their preferred method for reclining their easy chair. Push-back mechanisms garnered 17.9 percent and power mechanisms took 14.3 percent as the preferred method to recline.

When asked about pricing and how much more they would be willing to pay for a power recline mechanism, 85.8 percent said they would only pay $100 more, and most of those—67.9 percent—said they would only pay $50 more.

When it comes to product warranties, most recliner consumers agree they matter. When asked whether or not they had a warranty on their chair, 64.3 percent said yes.

Overall, the consumers were satisfied with their recliner purchase. On a scale of one to seven with seven being “very satisfied” and one being “not at all satisfied”, more than 67 percent selected five or above.

 

Want More?

A more in-depth report on recliners is available for purchase by calling Natalia Hurd at (404) 390-1535 or via e-mail at NataliaHurd@ImpactConsultingServices.com


Take 5: Bruce Birnbach

Upholstery supplier American Leather turns 25 this year and the company remains solidly committed to its founding roots of domestic, just-in-time manufacturing that turns an order in 20 days. That said, Bruce Birnbach, president and CEO for the last nine years, is always looking to push toward innovation.

Key elements to the company’s future are remaining true to those founding principles along with operating with integrity in all aspects of the business, including employee relations, customer relations and supplier relations.

Respect begins at home, and American Leather’s Dallas home includes 496 diverse employees who are included in company celebrations, fun days and as Birnbach says, “are treated the way people should be treated.”

 

Home Furnishings Business: Founded in 1990, American Leather turns 25 this year. What has been the key to the company’s success over the years?

Bruce Birnbach: We continue to grow double digits every year by listening to our customers and operating with integrity in all that we do. That has truly been the keys to our success. We’re also always looking toward innovation and trying to be more innovative in every aspect of the business.

When I say operating with integrity that means respecting our employees and the people we work with. At the very core, we have to have a great foundation or the other parts won’t hold together. As an example, there’s a flag in our cafeteria for every nationality represented in our employee team. It’s about showing respect and being respectful to everyone.

Then, it’s about how you deal with your customers—keeping your word and listening to them. It’s about doing what you say you’re going to do.

Integrity is a big deal to us.

 

HFB: The company was founded on a speedy, just-in-time manufacturing model. How has that model been improved upon?

Birnbach: The model that we grew on was just in time. Today, it’s not so much about improving our speed as it is about executing the promise. We’re always looking to improve on all that we do, but it’s really important that our customers know we’re reliable. That we’ll do what we say we’re going to do and will meet our promises.

The company was built on speed, and it’s always that. Continuing to execute on our promise of a 20-day turnaround is at the forefront.

 

HFB: Domestic manufacturing is at the core of what makes American Leather who it is. In an industry that sees a lot of off-shore production, how have you guys continued to maintain that platform?

Birnbach: One of the most important things to us is being made in America and having a diverse workforce from all over the world. We have a true international flavor here in our diversity, and it makes us have fun. It’s invigorating.

Within our domestic platform we are unmatched in our speed and the breadth of customization that we offer. Everything can be customized from the leather, the fabrics, even COM covers. Each of our frames have an abundance of configurations to meet a variety of needs. There really is no limit.

 

HFB: Looking ahead, what innovations can we expect to see from the American Leather in the future?

Birnbach: You will see us continue to innovate and look to create more proprietary products in the future; things that the furniture industry hasn’t seen before. We really want to bring innovation into an industry that I think is starved for it. Leveraging our core competencies of of engineering and product design and brining them together. Looking at our future, we have a lot of great things to look forward to.

 

HFB: What would you say is the biggest challenge facing American Leather?

Birnbach: Growth. The challenge is how to manage our growth and how to hire the people we need to help us grow. Our business is good. We’re growing a much more rapid pace than the industry.

Finding the right people to fit in with our culture is key. Then, training, training and more training will remain at the forefront to help us move into the coming years.

Internet Makes Furniture Gains

In 2002, furniture and home furnishings stores were by far the primary channels for furniture distribution—accounting for almost three-fourths of furniture purchases.

In the last 12 years, distribution channels have shifted and while furniture and home furnishings stores continue to lead the pack in furniture sales, electronic shopping—e-commerce—has gained momentum and many consumers are turning toward the Internet to meet their furniture needs.

General merchandise stores and warehouse clubs and supercenters like Sam’s and Costco have also increased their share of furniture distribution while other smaller furniture distributers, department stores, discount department stores, and building material stores, have decreased in furniture sales since 2002.  


 

Note: Figures reflect data from the U.S. Census of Retail Trade issued every five years—2002, 2007 and 2012. Figures for 2014 have been estimated by Impact Consulting Services’ furniture industry model. These Census estimates capture only sales from retail establishments, exclusive of sales taxes, and do not include any additional sales hand-to-hand or furniture resales. Internet sales from online retailers are also included. These channels are summarized based on the NAICS code issued by the Department of Commerce. For example, furniture stores include all retailers “primarily engaged in retailing new furniture, such as household furniture and outdoor furniture …” Examples include traditional furniture stores, mattress stores, specialty stores like Pottery Barn, and other establishments where furniture is the primary source of sales. Business models range from manufacturing and retail verticals, national and regional chains, and mom-and-pop dealers. Sales of furniture within home furnishings stores are included in the broad distribution channel and represent 6 percent of the category.

 

As shown in Table A, furniture and home furnishings stores are at the heart of furniture distribution, accounting for more than two-thirds of the industry. This channel includes traditional furniture stores, specialty furniture retailers, mattress stores, and other retail outlets where furniture is the primary source of sales. Of course, many different business models drive this category, including manufacturing and retail verticals—national and regional—national chains and mom-and-pop dealers.

This broad channel reflects the ups and downs of the economy from 2002 to 2014 with performance varying among the store types. From 2002 to 2007, furniture and home furnishings stores rose 13.6 percent in sales before falling 10.6 percent—followed by an overall increase of 1.5 percent in 2014.

The most noteworthy changes occur in electronic shopping as the online distribution of furniture has made great strides despite the most recent recession. Over the course of 12 years, electronic shopping has jumped 627.2 percent—increasing 201.3 percent the first five years during the peak furniture industry sales years and 141.3 percent the latter seven years. Internet retail furniture sales grew from $1.8 billion in 2002 to $13.0 billion in 2014.

Both general merchandise stores and warehouse club and supercenters grew in importance from 2002 to 2014. General merchandise stores increased by 27.3 percent from 2002 to 2007 and 47.5 percent from 2007 to 2014—with a total growth of 87.8 percent. While warehouse club and supercenters had just a slight increase of 2.9 percent from 2007 to 2014, they posted an overall jump of 24.3 percent over 12 years.

All other distribution channels showed substantial declines through the 12-year span. With the exception of discount department stores showing growth of 8.8 percent from 2007 to 2014 after a drop in the first five years, the remaining channels decreased both time increments.

 

Electronic Shopping Grows Share

Online shopping has increased its share of furniture sales as furniture and home furnishings stores have decreased its share of the furniture sales pie.

Table B explores the changes of the percent of total distribution by each channel during the selected years of 2002, 2007 and 2014. A more detailed look at each channel follows.


 

Furniture and Home Furnishings Stores


As shown in Table C, furniture and home furnishings stores are still the primary source of furniture sales. This traditional distribution channel has decreased share of furniture and bedding sales by 8.1 percent from 2002 to 2014—down to 64.5 percent in 2014 from 72.6 percent in 2002.




Electronic Shopping


While furniture and home furnishing stores have decreased their hold on the furniture industry, electronic shopping—the Internet—(Table D) has steadily gained traction as a major distribution channel. Jumping from 2.8 percent in 2002 to 7.3 percent in 2007, online shopping finished out 2014 with 17.8 percent of the total distribution.




Warehouse Clubs and Supercenters


Table E shows how warehouse clubs and supercenters increased the share of total distribution slightly from 2002 to 2014—up from 3.6 percent to 3.8 percent in 2007 with an additional 0.2 percent gain in 2014.




General Merchandise Stores

 

After slightly increasing by 0.3 percent from 2002 to 2007, general merchandise stores (Table F) grew by 1.1 percent in 2014—accounting for 3.4 percent of total distribution.



Discount Department Stores

Discount Department Stores

 

Dropping the percent of total by 1.5 percent from 2002 to 2007, discount department stores (Table G) rebounded slightly with an increase of 0.2 percent in 2014—decreasing 3.8 percent to 2.5 percent over the 12-year span.



Home Centers and Building Materials

 

As shown in Table H, stores such as The Home Depot and Lowe’s as a group decreased share of total furniture and bedding sales from 3.1 percent in 2002 to 2.3 percent in 2007 with a minimal rise to 2.4 percent in 2014.



Department Stores

 

Decreasing share by 0.7 percent from 2002 to 2007 and dropping another 0.6 percent from 2007 to 2014, department stores, depicted in Table I, was 1.8 percent of distribution in 2014.



All other Furniture Retailers

 

In 2014, the remaining retailers (Table J) dropped to 3.7 percent of distribution, after a decline from 8.9 percent in 2002 to 7.9 percent in 2007.



Editor’s Note: Future articles will address the performance of the sub-channels within the furniture and home furnishings category as well as examine the channels associated with online purchases. Coming soon will also be a look at the major products’ shares of each distribution channel.



Employment Challenges

By Sheila Long O'Mara

While today’s unemployment rate isn’t at completely zero, the national rate is hovering around 5.5 percent—a mark that most economists consider full employment.


That’s great news for a recovering economy, but not such great news if your business happens to be in hiring mode. That search for employees who are skilled, mesh well with your current culture and meet your needs can be challenging. Make a poor choice in hiring and then comes the firing, which is never fun.


Once the dismissal has taken place, you’re often left with having to clean up the mess left in the wake of the misfit hire. Other employees may harbor bitterness because the colleague was a pal or perhaps, because the colleague was incompetent and created more work for others. Either way, it’s disruptive to the overall work flow.


 On the other side, if you take too long to hire someone, tasks that get delegated to other team members can become overwhelming and burdensome. All of that can make for stressed employees who then get wandering eyes, and begin a search for greener pastures. Hiring can become a vicious cycle if not managed properly.


Companies who only search for employees when they need to fill a slot, often lose out on the best hires. The experts in the business of hiring all say the best strategy is to always be in recruiting mode. Keep the pipeline filled with great candidates so that when the need arises you aren’t recruiting and hiring from crisis mode, which can lead to desperation in the search.


Hiring out of desperation rarely works  well for either the employee or employer.


I’m not encouraging you to go out and hire 10 new people that your business model won’t support. That would be foolish.  I am suggesting you stay atuned to what’s happening with your team. You’ll find out who’s happy and who’s somewhat disgruntled and may be considering a quick departure.


Maintain a strong file of résumés for various positions throughout the company. Yes, by the time you’re ready to hire, some of those folks will already have found jobs elsewhere. Some, however, will still be on the prowl.


By staying ahead of recruiting, hiring and other personnel issues, the task of filling  positions doesn’t become a long, painful process.

Good luck in recruiting. The terrain is a tricky one to navigate.


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