From Home Furnishing Business
It’s not that he lacked mattress industry experience when he was hired last year for the top job at Englander – he spearheaded marketing efforts for Leggett & Platt’s bedding group for five years – but he hardly followed the traditional path to the CEO suite.
After his successful stints in television and radio in Joplin, Missouri, he progressed through a series of marketing, advertising and public relations agency posts, and then was hired by Leggett & Platt in early 2014. He was named president of Englander in January 2019, and the CEO title was added six months later following the retirement of veteran industry executive Kevin Toman.
The 38-year-old Kinsley has been putting all of his marketing and product development skills to good use for the past several months planning the re-launch of the Englander brand at this month’s Las Vegas Market – the mattress industry’s most important trade show. He recently spoke with Home Furnishings Business about Englander’s reboot, the disruption caused by online mattress sales, and the popular Dos Marcos podcast he does with Mark Quinn, his friend and former boss at Leggett & Platt. (Quinn left Leggett in 2016 to become co-founder of highend mattress brand Spink & Co.)
HOME FURNISHINGS BUSINESS: What is Englander’s strategy to stay competitive with direct-to-consumer brands such as Casper and Purple, as well as legacy brands such as Simmons, Serta and Sealy?
MARK KINSLEY: One of the major things we’re doing is taking the brand up-market. The online marketplace is very commodity-oriented, which is driving unit growth, but when people are making a more considered purchase, they still want to touch it and feel it. So, we decided to take Englander up-market with retail price points of $1,000 to $2,000 and above. At this time, we’re not going to try to play in that mosh pit (of lower price points).
The Las Vegas Market – where we have completely remodeled our showroom -- will also mark the launch of Englander’s first true national line in over two decades. That gives us consistent product across the country. So, if you love it, and you live in New York, you can recommend it to your Mom who lives in California.
From a retail standpoint -- and this is a huge issue -- we haven’t had the same product on our website that you can see in stores. But by developing a national line, all those products will be represented on our website, along with all the selling materials you will see at retail. We know that has been a very big friction point in the selling process.
HFB: Are your licensees fully supportive of this change?
KINSLEY: Yes. Operationally, we are very sound. It is the foundation for us to really grow our business. We’re a little different than the other licensing organizations in that our factories own the Englander brand. We have three owners, and among those three owners, we have 12 factories. We can cover the entire United States. We have all of our territories defined, so we’re truly set up well from an operational standpoint to cover the U.S. Our distribution does not overlap. We keep it very clean.
HFB: Brick and mortar retailers get about 15% of their total sales from mattresses, but that figure may be trending down. What are you doing to get back some of that market share?
KINSLEY: We surveyed retailers to get an idea of what they needed to be successful, and overwhelmingly, they said they need imagery, video and digital assets in the social and digital marketplace. So, we’re going to provide those assets for them. We want to provide them with creative ideas and become a hub of creative activity that inspires their thinking.
We have a real connection with our retail partners. We listen to them. Consumers are often confused. They don’t know if they’re getting a good deal. They don’t know what mattress is really good for them.
We also have to emphasize what makes us uniquely Englander. We were the first company of any size to launch latex. We did it way back when we were owned by Goodyear Tire and Rubber Company, and we’re still known for latex in the marketplace.
When I talk to friends in the industry, they overwhelmingly tell me they sleep on some combination of latex. So we’re going to tell people they can sleep on the same material that mattress industry insiders sleep on. And here’s why: It feels phenomenal, and the mattresses are very durable.
I talk to a lot of people who have made an online mattress purchase, and 100 percent of the time they say, “It’s all right.” Nobody has ever said, “It changed my life.” So we’re going to create product that gives people that life-changing experience. We want them to say, “I didn’t know there was anything this good.” We want to attract people to come back into the marketplace, including people who have purchased an online mattress but are wondering if there’s something better. Our overall objective is to simplify the product, simplify the selling process, and make a product that (our retail partners) are not going to get a phone call from an angry customer.
HFB: So it’s safe to say we won’t be seeing any Englander bed-in-a-box product anytime soon?
KINSLEY: Not anytime soon. But if the marketplace pushes us in that direction, we’re going to have to respond. For now, we’re firmly committed to growing our retailers’ business -- local, regional and national accounts. We’re not really focused on online sales now, but we’re realistic, and we realize what is happening in the online space.
HFB: Has being the youngest CEO in the mattress industry – by far – worked against you?
KINSLEY: No, it hasn’t worked against me. People have been encouraging and welcoming. What I bring to the table is being more plugged into what is happening in the digital world. But the real test of any person in a new position is results. We’re getting ready to relaunch the brand with products, new logos, new marketing materials and a new showroom. Our ability to push those into the retail environment will be the real test.
HFB: What led you to start a podcast?
KINSLEY: I told my friend Mark Quinn (my boss at the time) that we should do a podcast. It’s the medium for the modern age. People can listen while they’re working out or cleaning the house or driving to work. And they can do it on demand.
His reaction was “a Podcast? What it is going to be about?” And I said it will be about the mattress industry, but we’ll have a little fun with it. With my broadcasting background, I was familiar with the technical side of things, so he said “whatever” (laughter), and we ran with it. Now we look up and we have recorded 135 episodes over the past four years. And we actually have sponsors now -- PureCare and Nationwide Marketing Group. Nationwide is very much in line with the goals we have and Englander, since both Nationwide and Englander are focused on independent retailers.
We now have about 1,000 subscribers per episode. It’s not a huge audience compared to a lot of other podcasts, but it’s the right sets of ears. It’s high impact.
HFB: Since you and Mark Quinn are now competitors, has that changed the dynamics of the podcast?
KINSLEY: Although we both head up mattress brands, we compete in different segments of the marketplace. His product line at Spink & Company is basically $3,500 and up, so even though Englander is moving up-market, we don’t step on each other’s toes. And we even try to promote each other when it makes sense.
Mark was actually my boss at Leggett & Platt. He was the one who got me into the mattress industry. He introduced me to everybody, and it just took off from there. So when he left the company to start the Spink brand in the U.S. market, I took over his position at Leggett.
In my March 2018 issue article entitled, “Words Matter, So Be Careful Which Ones You Choose to Use”, I talked about using stronger words, with a more positive meaning in our selling process to help customers better understand or visualize your message. A good part of the column was spent presenting alternatives to words we commonly use that actually have negative connotations for many of our target customers. One paragraph briefly touched on the concept of using words that help you “romance” your products, to get the customer connected emotionally with them and as a result, desire to own them. Here is what I said:
Sales people historically spend too much time and effort talking about the nuts and bolts of a product as opposed to the things a consumer really wants to know. Most often it is the aesthetics and function of an item that are their main priority. The proof is that the vast majority of people will not buy a product for their home, that they do not like the look or feel of no matter how much you discount it! Therefore, we need to “romance” the product and discuss what it does for the emotional wants of the customer, along with satisfying the practical needs they have. Words like gentle flowing lines, softly contoured back, generously padded arms and luxurious pleated English arm, make you sound professional and add value to the product. In addition, we do not recommend you use the words “special order” or “custom order” when referring to pieces you order specifically for a customer. While we understand what they mean, those are not necessarily positive terms for them. We suggest that you tell customers you will “have one made for them”. This creates emotional ownership of it when you write the order and is much more positive as a concept to most consumers.
While trying to determine what my message to you should be for this issue, which is devoted to Merchandising, I remembered this previous reference to finding better words to use during the selling process. I also recalled how much fun I had and the positive results I experienced during the retail training sessions when the group dove into this concept and tried to come up with glorious ways to describe products and vignettes in the client’s store. Back then we mainly used the staff’s experience as well as shelter/design magazines or books to find better words to use. What I realized, is that today we have much more available to us, including HGTV-type design focused programs, well over one hundred lifestyle centered magazines devoted to the home and of course the biggest reference library ever on the Internet. All of these can help us discover new, more colorful and emotionally powerful words to use in any conversation.
As a result, I decided to offer some ideas to improve your selling vocabulary with more romantic words. Here are some activities that salespeople and store employees can do that will help them find examples of words that will enhance their product presentations to customers.
What the store can do to help staff learn to romance the products they sell:
- Each store vignette should have a name that describes it in colorful, design- relative terms, so the sales staff has a good starting point. These should be created by the buying team with input from staff designers and the rest of the sales team. Many online sites are great at using names to get their style message across. Be descriptive and fun, using phrases like Modern Minimalist, Vintage Elegance or Vivid City Vibes.
- Saturday morning sales meetings should include a floor walkthrough to present new merchandise and discuss which customers it is targeted to and how to talk about it in the best way possible. Often, I see these presentations being done by staff members or teams that have been assigned by the sales manager. This is a great way to get new products launched and also improve the sales of specialty products and even slower selling vignettes. Sometimes products don’t sell on a floor because salespeople don’t know what to say about them, so give them the right words to use!
- Train and coach the staff to use the right words to describe products and never to use manufacturer’s model numbers when referring to them. Teach them instead to use the name the manufacturer or store has given each product. I often hear salespeople start a presentation with something like: “this is the 99367, it is one of our best sellers”. The number provides no positive energy for the customer and calling everything you present a “best seller” is not good either. While that used to provide positive feelings for a product to generations past, it no longer carries much weight and can be a negative to some customers. It is just a lazy habit we tend to develop over time just to have something to say. Try something like “many of my more discerning clients have found this exquisite chair to be just what they want”, but only if it is actually true.
- Bring in outside design trainers to improve your staffs design knowledge and learn new ways to talk about your products. Then have the sales manager follow up by coaching them and making sure they are using what they learned. Set up teams in the store to get inexperienced people working with the more design focused staff members in your store. Have them role play presentations together. Have contests to determine who does the best job each month and celebrate their success. This is a great way to help move your culture from just sales centered to design and sales focused. What the Individual can do to improve their ability to romance the products they sell:
- There is no doubt that most accredited designers have learned how to use the right words to make a product exciting and memorable for their clients. But I have also seen many regular salespeople who have taken design courses either in person or online, who can also make a product dance in the customers’ eyes with the way they talk about it. It is not where you get the knowledge that matters it is how you use it to help potential clients get emotionally involved with your products and room layout solutions. No doubt, the best way to improve your ability to help customers find answers to their needs and wants for their home, is by gaining design skills and knowledge any way you can. You do not have to be a certified designer to be successful, but it sure doesn’t hurt!
- Watch HGTV type programs focused on the home. I know you are probably already doing this, but are you really listening and learning or just being entertained? It may seem like a distraction, but I have found that many top salespeople actually take notes while viewing these programs and then work to apply what they heard in the store. It sure seems to work for them, so I recommend you give it a try.
- Purchase and study books like: The Dictionary of Furniture by Charles Boyce and Furniture Facts by Annette Wagoner. Both of these great reference books are must haves for any furniture professional and are available on Amazon.
- Review vendor catalogs and websites during your downtime at the store. Most manufacturers today put a good deal of effort into telling you what you need to know about their products. Since their websites are also aimed at your consumers, most do a pretty good job of using words you should study and incorporate into your presentations.
- The role of the manufactures rep has changed greatly in the last few decades, but the best ones are still a wonderful source of information about their products and how to sell them. Pick their brains for insight into each product and what words they hear people using to describe them.
- Read and study magazines for the home. These have always been a wonderful resource for learning about up-to-date design terms and trends. Keep them in the store, pass them around and see what catches other people’s attention. Chances are it will grab your customer’s attention too.
- Visit other stores and websites to learn from the way they present products and how they describe them. Restoration Hardware, Pottery Barn, Wayfair and most of the niche online sites are great at finding new and exciting words to describe their products.
- Do research online to find new, more colorful and exciting words to use. All I did was Google “words to describe furniture” and I was provided with hundreds of interesting links to try. Many like MyVocabulary.com and describingwords.io gave me great word lists and ones like fieldstonehilldesign.com delivered not only great words, but also basic design education. One thing I have found is that words that indicate what feeling or visual sensation a product or vignette delivers, are the most meaningful for the consumer. So, take some time to expand your vocabulary and upgrade your ability to paint a verbal picture for your customers when talking about your products. It will most certainly improve your sales performance and you may even have a little fun doing it, I know I did!
The Chinese trade war has caused many companies to become hesitant and cautious during 2019 with many consumers sharing the same concerns. At press time rumblings of a possible trade war truce could ease some future fears. Forecasters surveyed in November by the National Association of Business Economics put the odds of recession this year at 47%, down from 60% in the spring. This month’s Statistically Speaking will highlight 2019 yearend economic indicators and point to a hopeful 2020.
U.S. Economic Indicators
As shown in Table A, GDP growth continues to be slow but stable – showing increases every quarter in 2019 through Q3, the most recent data at press time. Many indicators slowed in the second quarter of 2019 and declined, most notably U.S. imports and exports, as companies began to grapple with the longer-term repercussions of the tariff wars. Imports slowed in the Q2 2019 – decreasing 2.8%, while exports took a downturn in the third quarter – dropping 5.9%.
But the consumer shrugged off the negative economic news with slow but steady spending, up 2.9% in Q3 2019. Private residential investment, which has consistently fallen in 2018 and through the first half of 2019 found its footing in the third quarter, growing 5.1% Additional economic indicators from the Bureau of Labor Statistics (Figure 1) show the unemployment rate remaining low – fluctuating around 3.6 for most of 2019 and finishing November at 3.5. Average hourly earnings continued to slowly rise each month – increasing from $27.82 in May to $28.29 in November. Prices indexes, both consumer and producer showed virtually no growth. And not surprisingly the U.S. Import Index has showed negative fluctuations due to the ongoing trade war with China, but finished November at 0.2.
Personal Consumer Expenditures
Personal consumption expenditures have maintained growth throughout 2019, despite business’ pulling back over trade war concerns and a slowing global economy. Spending on both services and durable goods have propelled positive growth (Table B). Consumer spending on healthcare and housing increased above 4% every quarter in 2019 compared to 2018. Among the biggest losers in the battle for the consumer dollar are motor vehicles and gasoline which dropped dramatically from 2018, along with clothing and footwear that showed only slight growth.
After a disappointing first quarter in 2019, the second quarter posted good growth in all major spending categories before slowing in the third quarter and through October of Q4 (Table C). At press time, data from Adobe Analytics estimates that the sales for the full weekend (Thanksgiving through Cyber Monday) topped $29 billion, or 20% of total revenue for the full holiday season, up from 19% last year. Many retail tracking analysts reported brick and mortar traffic down and mobile phone shopping significantly up.
As shown in Table D, spending on furniture increased each quarter in 2019 over the same period in 2018. All categories of furnishings and durable household equipment maintained positive growth with the exception of carpets and other floor covering – dropping 0.6% in 2019 Q2 and major household appliances down 0.1% in the first month of Q4 2019.
Furniture and furniture accessories (clocks, lamps, lighting fixtures, and other household decorative items) both outperformed all U.S. durable goods in 2019 (yearto-date through October) with strong growth in the second quarter (Table E). Retail Sales by Home Furnishings Outlet Total U.S. retail sales, including brick and mortar stores and Internet shopping, were up each quarter in 2019 over the previous year’s quarter. Starting out 2019 with just 1.8% growth in the first quarter over 2018, each quarter followed with increases over 3% (Table F).
After increasing by 6.3% in 2018, furniture store sales were down 2.4% in the first quarter of 2019 compared to Q1 2018, while home furnishings store sales also declined 0.9%. Furniture store sales were the first to pick up – increasing 0.4% in Q2 2019. Home furnishings store sales began to show a positive change over 2018 in the third quarter of 2019 – increasing 0.9%. October sales were up 3.9% for furniture stores and 0.6% for home furnishings stores (Table F).
The much higher reported increases in personal consumption expenditures for furniture products and home furnishings emphasize the pinch retail furniture and home furnishings stores are feeling from online retailers and big box stores. E-commerce shopping for all products, including furniture and home furnishings continued double digit growth throughout 2019. Meanwhile, the biggest home furnishings retail loser, electronics and appliances stores, saw sales drop 2.9% to 5.2% every quarter in 2019 compared to 2018.
Table G details the other major types of retail sales categories. Retail sales of electronic shopping and mail-order houses continue to skyrocket as more consumers turn to online shopping. On the flip side, department stores (excluding discount department stores) continue to plummet – down 12.1% in 2019 Q2 and 10.9% in 2019 Q3. Although discount department stores also show negative growth, warehouse clubs and superstores have posted slow growth each quarter in 2019 over the same quarters in 2018.
Consumer Price Index
The Consumer Price Index (CPI) rose last November by 2.1% compared to November 2018, but was down 0.1% versus October of 2019. Many Furniture and Home Furnishings product categories increased their year-overyear prices from Nov. 2018 to Nov. 2019 with the exception of Floor Coverings, Window Coverings and Major Appliances. Exactly how much of this increase is associated with the Chinese tariff trade war is unknown, but portions of the tariff increases have been passed along to the consumer. However, compared to October, month-to-month November CPI growth declined less than 1% in all home furnishings categories, except for Window Coverings which increased slightly and Major Appliances which fell 2.9%. (Table H).
Although housing inventory in 2019 has been slow to keep up with demand, both new single-family home sales and existing home sales increased from January to October. Existing home sales grew from 4.93 million to 5.46 million, while new single-family home sales increased from 644,000 to 733,000 (Table I).
Housing starts have fluctuated throughout the year – peaking at 1.38 million in August, while completions dipped in September down to 1.14 million before finishing October at 1.26 million. The most promising outlook for 2020 is building permits took a significant leap in October to 1.461 million permits, the highest of 2019 (Table J).
Imports and Exports
Partial import data from the fourth quarter of 2019 showed October imports of furniture and bedding posting the ninth straight year-overyear monthly decline falling 10.5% over October 2018. Compared to the previous September, October one-month imports increased 3.1% primarily due to the surge from Vietnam. Chinese imports of furniture and bedding fell 37.4% over October 2018 and a one-month September to October decline of 6.6%. Outsourcing to Vietnam, Malaysia, Taiwan, Indonesia, and Cambodia has been evident as these countries have increased imports.
Trump announced mid-December of 2019 a “Phase One” deal that shelved new tariffs on $160 billion of Chinese smartphones, electronics and other goods that had been set to take effect before Christmas. He also cut the tariff to 7.5% from 15% on another $120 billion in Chinese goods. As the trade deal moves further along, a future issue will look more closely into the impact this war has had on the furniture industry and what temporary and permanent steps U.S. companies have taken to protect themselves against future wars.
In the past year, the Power 50 increased sales by 4.4%, maintaining market share. Expansion occurred in new markets (91 markets) and within markets with new stores (147). What will 2020 bring?
The decision is whether to move forward with haste or is it time to “hunker down” and consolidate gains? The economy, at best, can be described as “choppy.”
We believe the next two years, while not signifi cant growth, will not be a signifi cant downturn either. History is our best guide as can be seen below.
Except for the second term of Barack Obama, election years have experienced growth in Real GDP over the last 20 years. Recessions occurred in 1990, 2001, and 2008-2009, but never in election years, except of 2009, which ended mid-year.
Growth in mass merchants/discount retailers, such as Target and Big Lots, have shown growth as they discover the contribution of gross margin per square foot of selling space that the furniture product category provides.
The emerging consumers that follow the Baby Boomers are choosing their preferred channel of distribution based upon retail experience off ered. A recent survey by FurnitureCore (the research arm of Home Furnishings Business) separated the choices by age group. As can be seen from the table at left, regional chains are emerging as a preference for the under 45 age group, showing less of a preference for the Internet. It should be stressed that this survey is for furniture purchases over $300. The younger consumer (25-44) was very satisfi ed on a scale of 1-5 with 5 being very positive. The table below divides the response by age group.
Both of these points are contrary to the noise around the decline of traditional retailing. POWER 50 — METHODOLOGY Market share is the most heavily weighted factor determining who makes the list, accounting for 46% of the total score. It is determined by dividing the retailer’s estimated sales by the estimated retail sales of furniture and bedding in each of the markets in which the company participates, whether it is a metropolitan statistical area, micro statistical area, or a rural area. Sales of electronics, appliances, and housewares are not included. To arrive at a list of home furnishings retailers with the strongest online engagement, we measure by 14 separate metrics. Sources include Alexa, Facebook, MOZ, Open SEO, Twitt er, and Pinterest. On Facebook, for example, the number of “check-ins” and “likes” were among the metrics, as were the number of Twitter followers, Pinterest “pins” and Google Page Rank, just to name a few.
From that data, we used a basic ranking methodology, assigning a numerical value to the ranked list of each metric. (For example, the retailer with the highest number of Twitt er followers received a “1,” and so on.)
Then, we arrived at 14 individual scores calculated for each metric. After dropping the two highest scores to eliminate any outliers, the statistical average of the 12 remaining scores was used to calculate the fi nal social engagement score.
The fi nal factor in the Power 50 ranking is retail expansion, which accounts for 15% of the total score. Using public records, it measured store expansion and expansion into new markets. In addition to the Power 50, HFB compiled separate lists that ranked regional chains, large independents, vertically integrated retailers, and independents with sales of less than $50 million in a single state.