Monthly Issue
From Home Furnishing Business
November 13,
2015 by in Business Strategy, Industry 
Consumers regard furniture shopping in a variety of manners. The approach to furnishing their homes varies widely.
Like anything in this world, people come in all shapes and sizes, and of course, shopping preferences.
All consumers are not created equally; nor do they approach furniture shopping in the same manner. Impact Consulting Services, parent company of Home Furnishings Business, has created a proprietary model dubbed Lifestyle Clusters. The clusters provide furniture retailers a look at how consumers in different lifestyles tend to shop for their homes.
While psychographic profiles combine demographics of age and income with geo-demographic attributes, the Lifestyle Clusters add another layer. Lifestyle Clusters dig into the buying attitudes of specific consumers, the beliefs or expectations that cause consumers to choose products to buy.
The clusters are developed by giving consumers are list of statements that deal with internal attributes focused on consumers’ overall lifestyle, how consumers feel about the home, including concerns with decorating, how formal or informal a home is, and feelings about shopping for furniture.
The ratings are then tallied and the lifestyle profiles are assigned to the surveyed consumer.
Style Aware
These consumers are motivated by how things look. They read style magazines—fashion and home—and spend a good part of their leisure time shopping and surveying what is in the market place.
The consumers pride themselves on knowing the latest trends and want to be perceived as reflecting them. They have a heightened sense of style and are as comfortable with their decisions as they would be with those of a professional advisor.
If they do not have the income to allow purchasing as much as they would like, they will buy what they can afford and postpone further spending until they have the money to buy what they want. To this group, presentation is extremely important.
Frequently, but not always, consumers in this segment are among the population’s more affluent.
Here’s how to spot them:
· They have a sense of purpose and are at ease in furniture stores.
· They are stylish or trendy in appearance.
· They pay close attention to room vignettes and accessories.
· They may come in the store with fabric swatches, paint chips and pictures of rooms.
· They are well versed in furniture and interior design.
Prestige Seeker
Consumers in this cluster are often seen as status seekers. Image is all-important. Their fashion styling—whether clothing or home related—is a direct reflection on who they are, and they judge themselves by how others perceive them.
Prestige Seekers are not always the most confident about their sense of style and are often insecure about their ability to buy the right thing. It is not uncommon for them to seek advise from friends and professionals.
This group reads magazines, watches television programs and visits Internet sites with decorating and fashion advice. They are not trendsetters, rather trend adopters.
They are more likely than Style Awares to rely on a retail sales person for advice and to buy those items shown in a store display, whether it’s an outfit on a mannequin or a collection in a room vignette.
Here’s how to spot them:
· Stylish personal appearance
· They are less assured in their manner than Style Awares.
· They may carry fabric swatches, paint chips, pictures of rooms and rarely shop alone.
· They are very interested in store display, but more as a guide to purchase. This group studies vignettes for ideas and guidance.
Self Possessed
This consumer group reflects a sense of well-being and self-confidence, and members take great pride in their surroundings and their lives.
They have a high sense of style, but couple it with an adherence to the belief that function is as important as style. Members of the Self Possessed group tend to be are very creative, but it is a creativity that is intuitive. They gain as much personal satisfaction from the creative process as they do from the object produced.
Regarding the home, these consumers want beauty, but not at the expense of function and comfort.
Here’s how to spot them:
· These consumers may travel quickly through stores’ room displays editing in their mind.
· They may be dressed stylishly offbeat or stylishly upbeat or in a casual manner.
· Like Style Awares, these consumers are confident and at ease in furniture stores.
Follower
This consumer is a paradox. On one hand, we see a consumer who is somewhat disorganized in their daily habits. Members of this group tend to be forgetful, don’t adhere to schedules, and often are doubtful of personal choices.
In the area of home furnishings, they don’t enjoy shopping, care nothing for decorating, and think furniture is only functional. On the other hand, they would like to have a nice house, not necessarily a beautiful, wonderfully decorated one, but a tidy house.
Followers will use a decorator or the advice of a friend since they lack confidence in their choices.
Here’s how to spot them:
· They want a well-decorated home, but are often intimidated in furniture stores.
· Followers may enter a store and wander around aimlessly.
· Store displays are important, but this consumer often has the feeling that it’s too big of a job to handle.
· Lack of confidence is evident in the consumer’s body language—hurried, tentative and indecisive. They are a bit anxious in furniture stores.
· Reluctant to make a purchase without advice so they are often accompanied by a spouse, other family member or friend.
Just Me
Armed with a what-you-see-is-what-you-get attitude, the Just Me consumer doesn’t feel it’s necessary to present an image. They are polar opposite of Prestige Seekers.
They don’t spend their free time on things that don’t interest them, and this approach extends to their homes. They have no interest in the style and fashion of furniture. Furniture is purely functional, and they make no apologies for this sentiment.
Shopping for furniture can be an intimidating experience, and they rely heavily on retail sales associates for advice.
Here’s how to spot them:
· They probably will be dressed casually. Remember, they have no need to impress.
· They have little interest in furniture and will likely find shopping for it intimidating.
· Because of the discomfort, this customer will appear in a hurry on the sales floor.
· Keep in mind, furniture shopping can be uncomfortable for this group that is usually very confident about his/her self image and ideas.
Comfort Seeker
Family, friends, social gatherings and home crafts are at the center of these consumers’ lifestyle. Comfort is more important than style or status, and they are content with the lifestyle they have.
Even though they do not derive status from their home, they feel confident about making furniture purchases and find shopping enjoyable. Furniture, however, is primarily functional rather than fashionable.
How to spot them:
· The Comfort Seeker will most likely be dressed comfortably and possibly informally.
· Furniture shopping is not a chore for this consumer. He or she will take time to wander a retail floor.
· This consumer is influenced by store display.
· Expect a relatively laid back approach to the purchase. This is the group that will likely shop the longest for their purchase.
November 13,
2015 by in Business Strategy, Industry
Has the disappearance of furniture brands left consumers confused when shopping for home furnishings?
by Bob George
From the perspective of my age viewing the current environment requires differentiating between nostalgia for the good old days and the current consumer trends. With that said, it is true that the simple decision regarding what to wear is a challenge.
Is it appropriate or will I be overdressed? A suit or a sport coat? Is anything OK as long as it portrays your personal brand? Clothing is only one of the traditional ways people portray their success, whether it be wealth or position in the community. One’s home, home furnishings, and transportation mode also communicate one’s position in society.
Our interest, however, is home furnishings. The first question is “When portraying one’s position in the community, where does home furnishings stand?”
In this month’s cover story, we discuss Style Aware consumers. These are consumers who use home furnishings as an important way of communicating who they are. Interestingly, they represent a significant percentage of our furniture purchasers at 44.75 percent.
Why are consumers confused?
Could it be because of the loss of consumer brands? This is a loss that is seen not only in the premium brands of Kittinger and Pennsylvania House, but also in what was once considered the more middle market of Cochrane and Virginia House. It is true that there are still brands that survived, for instance Harden and Stickley. I admire their commitment to the standards of quality and design even if they existed today. Where are retailers that prominently display and communicate the value that these premium brands represent?
Is it in the designs we produce that we have embraced the concept of the eclectic or transitional to the point that the consumer feels no need to ask what’s new? Home decorating television and shelter magazines are promoting the concept of treasure hunts as the way to shop for furniture even so far as collecting discards on the sidewalk. In this setting what is the future and where are the manufacturers’ brand advertising?
Is it the myopic focus on price? I won’t rant and rave on current prices of furniture when compared to other consumer products. If requested, I will send the Consumer Price Index for furniture compared to other consumer durables. However, why do we need to sell price? Trust me, the majority of consumers, if properly informed, will not let price be the No. 1 purchase factor.
Are there signs that the consumer will believe having the latest phone is not as important as what their guests see when they walk through the front door? Yes, I believe so; right after they get over the boom in the automobile sector.
Most important, however, is the most recent High Point Market with Thomasville producing the first 100-plus piece introduction in many years overcoming what I am sure were serious concerns of the supply chain guys. Another example is the new interpretation of traditional with A.R.T. Furniture’s Continental collection. It is cleaner with some exciting finishes. This, along with flashes of design in other lines, indicated the tendency to take the path of risk instead of the same old same old.
If the consumer is confused, it is our fault. I see advertising from across the country. The sameness of this advertising is frightening. If you can, find on YouTube the video message the CEO of Restoration Hardware sent to shareholders. E-mail me and I will send this to you. We should consider this as we reflect on the fact that traditional furniture channels’ market share is now below 40 percent.
Let’s excite the consumer.
November 13,
2015 by in Business Strategy, Industry
Disasters bring into focus the importance of home, friends and kindness.
by Sheila Long O’mara
Home. Just saying the word conjures up all sorts of connotations for people.
No matter if home is a one bedroom, basement apartment or a $5 million home on the perfect ocean-front lot, home is, well, were the proverbial heart is.
During the time since we published the last issue of Home Furnishings Business, my adopted home of Columbia, S.C., has had some troubles.
We found our way into the national weather spotlight the first weekend of October—the same weekend Hurricane Joaquin trailed off the eastern shoreline of the Carolinas. The tropical weather from the hurricane teamed up with a wicked non-tropical system to serve up a heavy dose of rain on our already saturated ground.
The 18 inches of rain that fell in 24 hours followed on the heels of nearly two weeks of straight rain. Columbia seemed like ground zero. The rains fell, and dams in the area were breached or gave way, sending waves of water into homes and stores and wiping out bridges and roads. Seventeen people died as a result of the flood or weather-related automobile accidents.
The O’Mara home was safe and dry, but as is the case in many weather disasters, those with the least to lose lost the most during the historic flood.
Schools were closed for a week, and then delayed for two additional weeks while bus routes were redrawn and schools used as shelters for those displaced.
The three youngest O’Maras, possibly bored from hanging out at home or perhaps, out of the goodness of their hearts, started asking what now. Loaded with water, work gloves and boots, we headed out. We weren’t sure where we were going only that we needed to go do something.
I learned that in such times of need, it doesn’t take long to find someone, somewhere that could use a helping hand. For us, it was neighborhood that had been underwater. With the water receded, demoliton was underway. My guys are really good at tearing up stuff, so a rainy day ripping out soggy sheetrock was pitch perfect. Stories were swapped about the rain, the flood and the kindness of strangers from all over and what happens next.
The next is well underway here as families continue to rebuild and recover from the damage and loss. Organizations throughout the state continue to provide much needed supplies and assistance to those in need.
Looking to help? The American Red Cross is a great organization in such disasters.
On a completely unrelated but much happier note —Amy Kyle, the former publisher and my co-founder of this magazine, had a celebration of monumental proportions Oct. 3. Her daughter Sidney Sikes, now Sidney Sikes Wolfe, married her high school sweetheart, Gray Wolfe, in the most perfect of ceremonies in Trinity, N.C.
Congratulations and best wishes for a beautiful life together!
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.”