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Monthly Issue

From Home Furnishing Business

Editor's Note: The Evolving Consumer

By: Sheila Long O'Mara

Over the last several Years, the team here at Home Furnishings Business has written much about the consumer and her hot-and-cold relationship with shopping for furniture. We’ve delved into her psyche; we’ve explored her disposable income; we’ve looked at how and where she likes to shop; and, how she wants her home to look, feel and smell.

 

We’ve dug into how retailers communicate with the consumer, and how manufacturers try to connect and help her create the perfect environment for her family and friends through beautiful home furnishings. We’ve connected with her through surveys to find out how she’ll use her newly purchased sofa or dining table or bedroom furniture. We’ve shared in family celebrations of babies and vacation homes.

 

We’ve gathered intelligence into her way of thinking and her way of shopping. We’ve examined her social media preferences and her exploration of furniture on the Internet.

We’ve watched the life stage shift from a one-person, single household to a double-income-no-kids home to a  busy working mother of 2.1 to an empty nester  ready to downsize into a zero-lot-line home. 

 

We’ve seen her adapt with technology and use it to her advantage in uncovering the best deal on a Surya rug or Restonic mattress or Cresent bedroom.

 

The gist is that she (or he — it’s just much less complicated to use one pronoun) is constantly evolving. The life stages are not stagnant; they never have been, and they never will be.

 

The furniture she needs for her first apartment is — and should be — different than what she needs in her late 20s or early 30s. And, that furniture is different than she needs in her 40s and 50s and beyond.

 

That folks, is what we should all continue to hope for. That our target consumer continues to evolve and her tastes and needs change along with her. For that is what keeps this industry churning.

 

Inside this month’s issue, you’ll find detailed information about how retailers are connecting with consumers, data on income shifts and a look at retail models and which ones are faring well.

 

Publisher's Letter: Slowing Down

By: Bob George

A common lament today is the rapid pace of our lives. In our 24/7 world with the multiple ways we have to communicate and keep in touch, life becomes a blur.

Today, a text message substitutes for a phone call; an e-mail, for a conversation; a PowerPoint presentation, for a detailed study. And the pace continues to accelerate. A recent news clip presented research that Millennials are rejecting voice mails, refusing to listen to them, much less return the call.

Our paradigm in the traditional furniture channel is centered on the concept of an up. In this scenario, consumers visit a store excited about the prospect of redecorating their home. They establish a relationship with an experienced sales associate who provides them with decorating ideas taking into account style preferences and current home furnishings trends. The relationship strengthens as consumers make subsequent return visits to create an amazing room. Thus a satisfied consumer becomes a long-term store customer who will return for future home furnishings purchases.

Unfortunately, that model is disappearing. Seventy-six percent of consumers are doing research on the Internet before visiting the store or simply buying from the Internet. We now find a significantly shorter shopping period. For 45 percent of consumers the shopping process is completed in two weeks or less. What constitutes an up today is like a conversation I have with my kids. We exchange words via text or e-mail, but is it really a conversation?

So what’s the problem with the pace of today’s purchasing process?

Simply put, it changes our product into a commodity. One can drink a glass of wine in a gulp or leisurely savor the experience appreciating the bouquet. How do we slow down the consumer enough to appreciate our product?

I can go back to a memory of conducting focus groups for Henredon with Mike Dugan, who was president at the time. As we led consumers through the product groupings, we watched their reactions. We knew the product was a winner within the first minutes by observing how they caressed the products. Later they shared statements like “I enjoy my furniture every day when I walk through my room.” We find these consumer sentiments not only in upper-end brands, but also for brands like Broyhill and Hooker.

What can we do to slow down the process?

Give the consumer something to read – not an e-mail or a 20-second TV spot that flickers quickly by only to disappear from the surface of their minds. You may counter with “no one ever reads”. That may be so, but have we stopped giving them the opportunity to dream about their homes? Look at the latest 600 plus-page Restoration Hardware catalog or Art Van’s inspiring fall catalog or even the magalogs that retailers are producing with our sister company, FurnitureCore.

The consumer still appreciates a well-designed environment. Just go on a delivery and watch the excitement the customer has about the new furniture. At one time, sales associates took the time to visit after the delivery to share in the consumer’s excitement.

Are we too busy to do anything more than send an e-mail, much less a hand-written note? Our challenge at retail is to do something in the store that consumers cannot do online. And what is the manufacturer’s role in this? It is to create product the consumer can appreciate, product based on design, not on bargain pricing.

Charging the Internet

By Powell Slaughter

The growth of online home furnishings sales has more vendors looking to partner with e-retailers to service that business through drop shipping to consumers’ homes.

While many of those emphasize that they’re only helping to fulfill orders—it’s in their interest to support a channel that will only grow in the future.

Not surprisingly, we found that some vendors currently serving a drop-ship model for online retailers didn’t want to talk about the subject. If you are a sharp retailer and they’re part of your supply chain, you know who they are. If you don’t, good luck.

 

OBJECT LESSON It ain’t breaking news, but e-commerce is a channel more vendors are finding they can’t ignore. Take Cymax. In 2004, Cymax started as a small audio video furniture e-tailer. Today, the Burnaby, British Columbia-based company is among the fastest growing online furniture retailers with 2014 sales projected at above $140 million, more than 35 percent compared with last year. With more than 50,000 furniture SKUs, Cymax sells products to consumers across North America.

Cymax recently launched a more responsive, fully optimized Web site and expanded into new categories. That takes advantage of the multiple ways customers access information and buy online.

“Mobile and tablet traffic has grown to nearly 50 percent of all Web site visitors, putting the ever-growing Cymax catalog of over 50,000 product SKUs in the hands of every consumer in the U.S.,” said Scott Fullerton, director of marketing at Cymax on the company’s growth. “Further sales have been driven by Cymax’s advances in consumer payment options, including the addition of Amazon Payments and Visa Checkout.”

Pure-play Internet retailers like Cymax, Wayfair and Hayneedle, are making it easier for shoppers to buy, whichever screen they’re using. They’re also investing in telling vendors’ stories online with detailed product information that is breaking down consumers’ perceived reluctance for big-ticket purchases via the Internet. And vendors are supporting those efforts.

Brick-and-mortar retailers like Nebraska Furniture Mart also are doing growing business online beyond their traditional markets.

 

PARTICULAR CHALLENGES Vendors serving retail customers via drop ship often find themselves using a third-party carrier of the retailer’s choosing, and that can create challenges.

Cresent Fine Furniture started sending goods to delivery companies for drop shipment to customers’ homes about five years ago, at first with brick-and-mortar retailers who also sold merchandise online.

“We were very selective with those dealers because we wanted to make sure they’d provide the customer service necessary to support Internet sales,” said Taylor Condra, vice president of operations. “We’re very protective of our brand—whoever sells the product, it’s our name on the box.

“In our case, we are adamant that white glove service is the standard of delivery service. Case goods do not lend themselves to traditional drop shipping.”

The action picked up two years ago when Cresent began selling larger Internet retailers.

The devil is in the details of setting up the SKUs and product descriptions in the retailers’ system.

“That helps us protect our pricing,” Condra said. “Retailers don’t like showrooming, and vendors don’t either. You can’t underestimate the importance of enforcing your minimum pricing, we work to keep the playing field level.”

Pricing is also important to Magnussen’s  e-commerce.

“We have a strict IMAP policy and work hard to ensure this is being met and we only partner with those that hold to the IMAP pricing,” said Christa Albrecht, senior vice president of sales at Magnussen. “Magnussen Home selects their e-commerce partners that have infrastructure to truly service the end consumer and are not just operating a business out of their home.”

Magnussen Home also leaves ultimate responsibility for fulfillment in the hands of its retail customers when it comes to home delivery.

“We do not get involved with white glove delivery or drop ship to consumers,” said Albrecht. “We service our retail partners and work closely with them to maintain high levels of on-time, on-quality delivery so that they can meet the consumers needs.”

 

DEDICATED DIVISION Home Meridian is into drop shipping in a more direct way than many vendors. After leaving the crib business a couple of years ago, the company turned to freed-up resources to launch Right2Home.com, the full-line vendor’s e-commerce drop-ship division. Right2Home started in October 2012 with 1,500 items available for white glove delivery, including goods from Home Meridian divisions Samuel Lawrence Furniture, Prime Resources International and Pulaski Furniture—all with a strict IMAP policy.

Retail customers using Right2Home’s services include Macy’s, Bed, Bath & Beyond, Nebraska Furniture Mart, Wayfair, Cymax, Hayneedle, Costco and Sam’s.

Drop-shipped goods should represent around 10 percent of Home Meridian’s business this year, according to Kevin Walker, president the Right2Home division.

“In 2014 it grew 124 percent, and we expect it will grow another 100 percent next year,” Walker said.

Sixty percent of Right2Home’s goods travelson specialized furniture carriers with the balance on Fedex or UPS.

“Right2Home wants customers to use a specialized furniture carrier on larger items,” Walker said. “Fedex and UPS shipments are constrained by those services’ requirements on sizes, dimensions and weights.

“We have a few customers still trying to chase a (low) freight rate, but we are showing them that it’s worth it” to have the product handled correctly, Walker said.

 

FURNITURE ISN’T EASY Whether or not they’re responsible for lining up the “last mile” of delivering furniture to consumers, vendors still have to do everything they can to make sure their brand doesn’t get associated with problems.

Large furniture pieces like case goods are inherently subject to snags when it comes to drop shipments: they are not palletized, they’re heavy and they can be difficult to handle.

Cresent started putting V-boards for extra cushioning on every furniture edge for drop shipment about a year ago.

“It also helps that big retailers doing business on the Web are using more specialized furniture carriers than in the past,” Condra said. “Drop shipping (for large pieces) only works when the retailer uses a specialized furniture carrier. We’ve seen good results with that.”

Quality issues with delivered merchandised are handled on Cresent’s end.

 

 

“That’s because my people looked at it before it went out,” Condra said. “If it’s damaged (in shipping), it’s more the retailer’s problem, since they’re telling us which carrier to use.

“We also add extra padding on all our merchandise that’s scheduled for drop shipping.”

 

 

 

Magnussen’s drop-ship support for e-commerce accounts is limited to items that meet the weight and size restrictions of FedEx direct shipments to consumers.

“These items are have an external second pack that is completed by item at our North American distribution center,” Albrecht said. “Items that exceed the FedEx standards ship to specialty delivery services that special in white glove delivery as specified by our e-commerce partner.”

The keys for fulfillment at Right2Home are International Safe Transit Association 3a-certified packaging, shipping within 24 hours from receipt of order, and a strong IT department.

“For larger items that must ship via LTL it is imperative to work closely with the e-tailer and a well-run white glove furniture freight carrier,” Walker said. “The product must arrive to the consumer’s home in excellent condition.”

He added that retailers looking to drop ship goods at consumers’ door should not chase the lowest freight rates because they will pay far more in high damages and free replacements.

Walker believes inventory and data management are the biggest challenges to supporting drop shipments.

“This business is a heavy inventory driven business,” he noted. “HMI/Right2Home has made and will continue to make substantial investments into inventory and new product development.  You cannot be successful in the e-commerce space if you are not in stock all the time with the correct products that turn fast.”

Technology systems are challenging. Right2 Home invested in systems that communicate with retailers in real time for functions such as receiving purchase orders, providing inventory feeds to the retailer and invoicing, with the ability to automate the process to receive, ship and invoice within 24 hours.

“Every retailer is different in what they require for onboarding and launching our brands, so we have to be flexible, fast and accurate,” Walker said. “Data is challenging.  Housing, organizing and updating all the data necessary to offer you product line online can feel overwhelming. HMI runs on SAP and within this powerhouse of an operating system we have developed a customized setup process that easily and quickly delivers all the necessary data to the retailer with every image, specification, dimension, romance copy, weights, cubes, preferred shipping method, etc.”

 

THE PLUSES FOR VENDORS The positive aspect for vendors of working with Internet retailers is that they don’t have to fight for floor space with an online retailer.

“It costs nothing to list four bedrooms on their site instead of one,” said Condra at Cresent. “We can also serve areas of the country not serviced by our dealer base. We’ve determined that we want a very small group of very capable Internet retailers. They must have the infrastructure in place to deal with failed deliveries, and in our experience most of those are shipping damage. It’s the age-old question—is it damage, or is it a defect?”

That is an area where vendors are able to leverage domestic warehousing.

“In our Tennessee warehouse, we run a full quality control center,” Condra said. “We’re opening and inspecting furniture every day prior to shipment. This helps us prevent defective product getting to all of our customers, not just Internet retailers.”

It also helps that specialized furniture carriers have adapted quickly and are now offering white glove delivery options.

“Drop shipping works best when the retailer uses a specialized furniture carrier for both the line haul and the final mile delivery,” Condra said. “We are glad to see the carriers get that infrastructure in place.”

Along with increased use of specialized carriers, Condra credits several Internet retailers with effective use of analytics to improve drop shipping outcomes.

“They have so many analytics that they track, and they use and share their data with us to analyze the business and make improvements,” he said.

 

A GROWING BUSINESS Drop shipping furniture items will only continue to grow.

Vendors such as Cresent are tied into their Internet retailers’ systems, so they know when a product is ordered as soon as the retailer. Preparation for shipment begins immediately.

“We’ve determined that we just want a very small group of very capable Internet retailers,” Condra said. Drop shipping “is only growing. We all have to make sure the procedures are in place to provide the consumer with the product they want quickly. We’re usually ready to ship the same day.”

He expects more specialists in third-party drop-shipping fulfillment. Overstock.com, for example, developed an entire third-party logistics division.

“If I want to service my Internet business, they’ll rent me space for same-day fulfillment,” Condra said.

Walker expects HMI’s drop ship portion of business to grow significantly as e-commerce retailers hone their merchandising chops.

“Time was, e-retailing was about making masses of product available,” he said. “Now they’ve become curators and merchandisers of product.”

The number of ways and places for shoppers to find goods online will continue to bolster the drop shipping business.

“The consumer today is shopping for goods that meet their personal style using Internet searches, Pinterest, Houzz, etc., that they cannot buy at their local brick and mortar store,” Albrecht noted. 

 

 

 

 

What Sells: Piece by Piece

The growth in e-commerce has given the ready to assemble furniture category a boost of late as the flat packing allows for easier shipping than traditional furniture.

And no one can argue with the success of Swedish retailer Ikea—multiple floors of modular, ready-to-build furniture in a variety of categories.

Traditional retailers say the channel of distribution has shifted of late away from mainstream furniture retailers. They lament that many suppliers of RTA have turned to big box discounters, successful e-tailers and office superstores as alternative partners.

Some traditional retailers, who typically had been selling ready-to-assemble goods with the service of assembly, say the race to the bottom in pricing and lower overhead for online retailers makes it too hard to compete in the category.

 

Factoids

$2.77 billion

2014 YTD RTA sales

2.4%

Sales increase through first half of 2014 over same period last year

7.6%

RTA’s percentage of total industry sales through 2Q 2014

 

Retailers Say

Sauder's 411897 bookcase

"It is a great basic bookcase with flexibility on storage." Retail is $74.99.

Irv Blumkin

Nebraska Furniture Mart

Omaha, Neb.

 

Jesper’s Expandos

“Designed to offer a smaller footprint for multiple work settings, the Expandos shelves are available in three finish options.” Retail is $250 per L-shaped unit.

Andy Thornton

LaDIFF

Richmond, Va.

 

Suppliers Say

Naia by Tvilum

Tvilum’s Naia bedroom collection includes beds, nightstands, chests, sideboards and double dressers. Drawer fronts and doors are handle-free creating a stylish, timeless dimension.

The Cabot Collection from Bush Inds.

With a focus on function, durability and style, the Cabot collection is available in two finishes. The group offers storage with technology integration—both important features in the home office category. The L-shaped desk retails at around $400.

The Carson Forge Gourmet Cart from Sauder

As one of Sauder’s top sellers, the Gourmet Cart provides a versatile kitchen and dining piece. Crisscross storage, hanging hooks and wrought iron hardware offer sophisticated Mission styling. The piece is versatile enough to live in a variety of rooms.

Walker Edison’s Soreno L-shaped Desk

The Soreno L-shaped desk is a space-saving desk that can be used separately as two desks. The glass and metal construction blends with a variety of décors. A functional sliding tray allows for easy storage of bulky keyboards. Suggested retail is $119. 

 

 

 

 

Numerology

By: Sheila Long O'Mara

This month, the snippets are customer service related just by happenstance.  

 

66% 

  • Percentage of consumers who changed brands or business due to bad customer service.

—Accenture Global, Consumer Pulse Survey November 2013

 

$1.5 TRILLION

  • Total of global B2C e-commerce sales by year end

—EMarketer, February 2014

 

36% 

  • Percentage of consumers are willing to share their current location with retailers via GPS

­­—IBM, January 2014

 

54%

  • Percentage of New Yorkers consider it rude to text, tweet, e-mail or talk on a cellphone during a meal

—Zagat, October 2013

 

10x

  • Loyal customers are worth up to 10 times as much as their original purchase

—White House Office of Consumer Affairs

 

12

  • The number of positive experiences required to make up for 1 unresolved negative experience

Ruby Newell-Legner

 

3 in 5 

  • Ratio of Americans would try a new brand or company for a better service experience

American Express Survey

 

75% 

  • Percentage of consumers believe it takes too long to reach a live agent

Harris Interactive

 

80% 

  • Percentage of companies believe they deliver “superior” customer service

Lee Resources

 

8% 

  • Percentage of consumers think companies deliver “superior” customer service

Lee Resources 

 

$24.50 

  • E-commerce spending of new customers, compared to $52.50 for repeat customers

—McKinsey

 

2

  • Consumers tell 2 times as many people about a negative experience than they tell about a positive experience

American Express Survey

 

>1M

  • More than 1 million people view tweets about customer service EVERY WEEK. About 80% of those tweets are critical

—Touch Agency

 

42% 

  • Percentage of online shoppers contacted a retailer about an online purchase in the last 6 months

Jupiter Research/Forrester Research

 

60-70%—the probability of selling to an existing customer

5-20%—the probability of selling to a new prospect

Marketing Metrics

 

70% 

  • Percentage of buying experiences are based on how the customer feels they are being treated

McKinsey

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