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From Home Furnishing Business

Select Comfort Posts Income, Sales Gains

Minneapolis-based specialty bedding retailer Select Comfort posted net income of $15.8 million for the fourth quarter ended Dec. 31, a 52 percent increase over net income posted in the same period last year.

Sales for the quarter were up 26 percent to $187.9 million, compared to $148.6 million during the same quarter of 2004.

Net income for the year hit $43.8 million compared to $31.6 million during fiscal 2004. Sales for the year totaled $691.1 million, a 24 percent increase compared to $557.6 in the previous year.

The retailer attributed its quarterly sales growth to growing same-store sales, the opening of 40 new Comfort Select stores and 219 partner retail sites, and growth in its Internet and direct marketing sales increases.

"Earnings benefited from the inherent leverage in our vertically integrated, direct-to-consumer business model," said Bill McLaughlin, chairman and chief executive officer. "In 2006, we believe we will continue to improve operating margins while accelerating our investments in longer term opportunities, expanding our R&D expenditures for new product innovation and investing in technology and physical infrastructure designed to support business expansion, including the first stages of our international expansion."

The company believes that full year 2006 revenues will be at the high end of its long-term growth range of between 15 percent and 20 percent and believes it will exceed its long-term earnings growth rate of between 20 percent and 25 percent.

Plans for this year call for adding between 40 and 45 new stores and remodeling about 30 existing stores. Select Comfort also plans to increase its retail partner program by more than 100 percent and will expand its partnership with Sleep Country Canada.

Robb and Stucky Adds Two to Management

Robb and Stucky announced two new additions to its corporate team this week.

Brian Crowley joins the Fort Myers, Fla.-based high-end retailer as its senior vice president and chief financial officer after his most recent stint with Macy's Central in Atlanta. Crowley brings with him more than 20 years of retail experience with Federated Department Stores. 

J. Robert Gould, who recently worked for Wayne Homes by Centex, joins the company as its new vice president of human resources. With 30 years of experience in employee relations, training and development, Gould has worked at Carlson Wagonlit Travel, World Travel BTI and Walt Disney World Co.

Hot Wire

Online Furniture Sales March on. Are You Part of the Parade?


By Powell Slaughter

Whether brick-and-mortar retailers like it or not, e-commerce is serious business in furniture these days. And it will only get bigger.

While still less than 10 percent of total home furnishings sales, the growth of online purchases continues to outstrip more traditional channels as consumers grow more confident in buying via the Net; and as vendors and retailers adapt to serving a consumer goods category that’s quite a bit trickier to deliver than books or apparel.

Pure-play Internet retailers such as Wayfair and Hayneedle come to mind when talking furniture and e-commerce, but Manoj Nigam , president and CEO of Charlotte, N.C.-based online marketing specialist MicroD, believes brick-and-mortar retailers need to embrace the channel, at least to some extent.

MicroD went live with several furniture stores on its new ePiphany Commerce platform during August, starting with Walter E. Smithe in Chicago. The program integrates with MicroD’s ePiphany platform and its Exim electronic data interchange server. A full-fledged launch is set for October High Point Market.

“We think every retailer needs to be ready for e-commerce,” Nigam said. “There’s a fallacy: If I’m selling locally, I don’t need to be in e-commerce. Let’s say I came into your store and saw a product I’m interested in. I go home and do research on line, decide I want it, and then I find I can’t buy it online from you. If I see that Wayfair or another online dealer sells it, I’m not going to worry about returning to your store.

“E-commerce isn’t necessarily an offensive strategy, it can be a defensive strategy against your becoming a showroom for consumers who buy somewhere else if you’re not even in the game.”

IN ITS INFANCY
Selling furniture online is still in its “infancy,” according to Carl Prindle, president and CEO of Furniture.com, and the online furniture site’s Blueport Commerce platform. He said it’s one of the last major consumer categories to go online in a meaningful way.

Furniture.com will relaunch this fall with new ownership investment from retailers Schottenstein Stores (owner of American Signature and Value <st1:placetype w:st="on">City); and Rooms to Go. The venture will rely heavily on fulfillment by local “anchors,” which as of press time include RC Willey, Leon’s and Sleepy’s, along with those retailers with an ownership stake.

 

“Furniture today reminds me a lot of shoes online, pre-Zappos,” Prindle said. “For years, no one thought anyone would buy shoes online. Then, Zappos delivered a customer experience that wowed consumers.  The rest is history.

“Furniture shoppers are no different than other online shoppers—they’re waiting for a ‘wow’ experience that makes furniture shopping meaningfully easier and better,” he said. “They’ve come to expect great selection, expert advice, fast and inexpensive delivery, and the ability to return something if it goes wrong.”

Prindle believes that to date, the online furniture shopping experience hasn’t met that standard.
“A lot of the furniture sold online to date has been through ‘pure plays’—companies looking to be the Amazon of furniture,” he said. “Unlike Amazon, however, there’s no UPS for furniture. As a result, delivery experiences are slow, expensive and problematic, returns are even worse. Shoppers are underwhelmed, except maybe for smaller, UPSable pieces like accents and occasional.”
He added that this is good news for traditional furniture retailers, not because furniture sales won’t keep growing online, but because they know how to provide the service and ‘wow’ factor.

ON THE OTHER HAND
While furniture e-commerce certainly faces unique logistical challenges, some of those pure-play companies might take issue with the above, and can point to big strides in terms of the shopping experience and service during and after the sale.
Boston-based Wayfair, for example, which is tracking 50 percent-plus growth this year on the way to a projected $1 billion in sales, makes a huge investment in providing detailed product information and inspiring ideas as part of its creation of a rich online shopping experience.
“We’re doing a few things particularly appealing to customers,” said CEO Niraj Shah. “First, we continue to offer the right product with the biggest selection, competitive pricing, better images and information.
“In the last year we’re offering a lot more online help to the shopping process, both things we’ve done in-house and through partners, sections like Room Inspirations, Shop by Color. All those things make the online experience richer and richer.”
He noted that there’s room for online customers to have better tools to visualize product in their space, things like 3-D imaging tools.
“There are 10 to 12 companies out there with different approaches to that, and we’re watching all those very closely,” Shah said. “One of the reasons we’ve succeeded is having best-in-class techonology, and if you’re not providing the best experience (shoppers) will go somewhere else.”
Sara Shikhman, president of BedroomFurnitureDiscounts.com, said her company used to get a lot of customers calling to say they were a bit wary about making big-ticket purchases on the Internet.
“Now consumers are becoming more comfortable with doing a lot of their own research online and are quickly able to find reviews, prices, and offers from several different merchants,” she said. “We are based in New York and have great partnerships with the top white-glove delivery companies around the country, but I would like to see the furniture home delivery industry expand their efforts to service all areas of the country well.
“For example, a customer living in North Carolina could potentially receive an order in just a couple days because many vendors’ warehouses are located there.”
To get there, more vendors need to use electronic data interchange and ship orders quickly.
“Online consumers need to get their products as quickly as possible and we as an industry need to meet that demand,” she said. “We built a custom cloud-based software to handle our orders all over the country that allows our vendors, partners, customers, salespeople and customer service staff to login from anywhere and manage their own orders. This helps fulfill the online customers expectation of having accurate real time information about their orders 24/7.”

THE FUTURE IS NOW
For years, brick-and-mortar retailers said consumers won’t buy “real” furniture, that is bedrooms, sofas, dining rooms, etc., on line, but companies such as Wayfair and BedroomFurnitureDiscounts.com—not to mention more and more retailers with a foot in both brick-and-mortar and online channels—keep proving them wrong. That said, some keys to online business remain remarkably similar to those in the store.
“You want a company you can trust for product, service, selection and competitive pricing; and you need them to help you,” Shah said. “There are two reasons people buy online: access to more selection; and the convenience to do it where and whenever they want.”
Interestingly, Wayfair is finding some synergy with brick-and-mortar stores through its Get It Near Me program, which continues to grow. The program lets a brick-and-mortar retailer advertise on Wayfair’s site next to the product and brands of their choice want. There are currently 170 active advertisers in the Get It Near Me program, up 70 percent from 100 at this time year ago. Those include American Furniture Warehouse, Jerome’s, Leader’s Furniture and Nebraska Furniture Warehouse. Five or more advertisers are in each of the top 25 <st1:country-region w:st="on">U.S. metro areas; and 17 of the Top 100 furniture retailers, up from 4 a year ago.
“They’ve been talking about how its very high-ROI for them because they’re getting in front of a motivated consumer who wants to buy,” Shah said. “Only 8 percent of the market is online, but our view is the majority of our traffic is people researching. It helps us pay for providing all the information that we put online.”
Shikhman said that BedroomFurnitureDiscounts.com keeps looking for ways to make its buying experience more customer-focused, with quicker, more reliable service.
“As our service gets better, sales improve,” she said. “This is the balance that we strive to achieve each and every day.”
In the past 12 months, for example, the company added an entire section for children’s furniture.
“It was very exciting, and the site has been getting a lot of attention,” Shikhman said. “I think it works so well because it adds a nice, whimsical touch to the experience, and allows children to shop with their parents for the bedroom of their dreams.
BedroomFurnitureDiscounts.com also have implemented a Q&A section to give customers an opportunity to ask other customers questions about products.
“They can ask us or other customers anything about a product and usually get a response within a day,” she said. “We have also begun to advertise much more on social media sites and get more involved with online interaction with our customers whether it be through online chat, Facebook, Twitter, Houzz, or other platforms.”
Some things, though, storefront or online, never change.
“Reputation is key,” Shikhman said. “We have been able to achieve top ratings on Google for our service and customers come to us because they know they will get great service.” HFB</st1:country-region>

 


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Furniture.com Sets for Re-Launch

An Online Furniture Retailing Pioneer Gets a Makeover.
This summer, one of online furniture retailing’s original names, Furniture.com, announced it would re-launch in the fall.
In addition to a new ownership stake taken by furniture retailers Schottenstein Stores and Rooms to Go, the revamped site is developing a network of regional retail heavyweights to handle order fulfillment nationwide.
Carl Prindle, CEO of Furniture.com and e-commerce platform Blueport Commerce, shared some thoughts about the relaunch.
Furniture.com originally began back in the 1990s, when online retailing was just getting started. The logistical and service issues associated with a bulky product, plus the fact that the whole concept of buying furniture online was brand new, had the company losing money.
Under the new version, the site looks to rely on brick-and-mortar retailers’ traditional strengths in customer service to avoid those issues.
So what’s going to be different about the consumer experience on Furniture.com?
“Where most furniture e-commerce sites are weak—delivery and set up of real furniture—we’ll be great,” Prindle said. “We’ll be able to get 70 percent of the population a sofa in a few days, for a very low delivery fee, set it up in their home, and if it’s not right, take it back. Thanks to the distribution muscle of our retail partners, we’ll be able create the wow delivery experience that unlocks furniture online.”
On the product side, Furniture.com will offer a selection of participating retailers’ best merchandise, as well items they may not carry in the stores.
“Across rooms, styles and price points, we’ll offer a broad but curated selection of products, all delivered with same level of care and expertise,” Prindle said. Finally, we have some new technologies around matching consumers to the right pieces and visualizing them in their home that will complete our offering over the next year or so.
“All in all, we feel like we have the opportunity to transform furniture shopping online, by marrying what our retail partners do best, our technology and expertise and the best URL in in the business.”

NEW PARTNERS
Some mighty big names in furniture retailing have an ownership stake in the business now, and Prindle said he’s flattered by their commitment to the model.
“Most of the retailers that have invested were already clients, so for them to want to be a part of the business is something I’m very proud of and grateful for,” he said. “The investment was an outcome of a process that began with a well-known technology company offering to buy Blueport. That spurred a process that resulted in offers from technology companies, pure financial investors and the furniture players that ultimately invested.”
Furniture.com opted to partner with those retailers rather than financial or technology companies since they could provide the ability to deliver goods.  
“Not to be glib, but we had the technology, and money isn’t hard to come by,” Prindle said. “Partnering with Top 10 retailers with the distribution muscle to deliver the experience that today’s shoppers demand—that was a game changing opportunity for us, and it’s been everything we hoped.”
Any changes to the Blueport platform that were made to accommodate the retail alliance, both for those with ownership and the anchors?
“Our business has always been about enabling furniture retailers online, whether by helping them with their own e-commerce sites on our platform, or driving incremental sales on Furniture.com,” Prindle said. “Over the past decade, most everything we do has been geared to what we’re doing now for the retailers in our alliance.
“That said, the size and vision of the industry leaders we’re working with now takes it to a new level. As an example, for some time, we’ve been looking for a client to pioneer a seamless, omnichannel approach to our Blueport business. With our new partners, we’ve finally been able to build and deploy this system on our retailers’ Web sites.”
Let’s say a shopper visits a Value City store, works with a salesperson and puts aside merchandise. 
“After they’ve shopped around or checked with their spouse, they can complete their order on a phone, tablet or desktop, without having to go back to the store,” Prindle said. “Conversely, a shopper can start an order online, send it to the store, then stop by the store to touch and feel and quickly complete their sale.”
The patent-pending system “reflects the fact that in furniture, showrooms and salespeople play a real role in the sales process,” he said. “Instead of imagining we can circumvent either, we’ve enabled this shopping process, and seen phenomenal results.
“It takes a certain type of retailer to try something as revolutionary as this, and we’re lucky enough to have exactly these types of partners.”

Too Big to Ignore

Furniture Vendors Can’t Ignore Online Sales’ Potential for Future Growth.

By Powell Slaughter

Traditional furniture stores might not like it, but it’s hard for their vendors to ignore the business potential of selling furniture on the Internet.

With online channel growth in home furnishings chugging along at double-digit growth every year while the category overall is in the low-single digits, e-commerce gets an increasing amount of attention from manufacturers and distributors in our sector.

A lot of vendors weren’t willing to go on the record about their business with Internet retailers, but the channel is of increasing importance for many—one that declined to go on the record noted that it sold $200,000 worth of goods during a five-day flash sale at Joss & Main, part of home furnishings e-commerce giant Wayfair, which expects to hit the $1 billion mark this year.

That’s a hard potential customer to ignore.
Niraj Shah, CEO of Boston, Mass.-based Wayfair said traditional stores blaming the online trend for lost sales might want to look to their own business.

“What we hear from suppliers we work with … is that some retailers complain that the online business should belong to them,” he said. “The biggest group of complaints, though, are from brick-and-mortar retailers who aren’t doing well, and they blame online sales. The fact is they’re probably losing share to their brick-and-mortar competition.”

A CORE BUSINESS
While most vendors remain mum on the sales volume they conduct with Internet retailers, commenting was no problem for Abbyson Living. Online sales constitute the core of the Los Angeles-based supplier of lifestyle home furnishings’ business.

Since 2008, Abbyson has worked on a drop-ship model that’s tailor-made for e-commerce. The company has a strategic partnership with white-glove delivery service Ace Delivery that accounts for 70 percent or more of its transaction fulfillment, according to Homaira Shifa of Abbyson Living’s marketing department. Ace is growing, but in states not served yet, Abbyson contracts with other third-party delivery services.

“Shoppers order through the Web site of our retail partners, and we ship the items from our Southern California distribution center,” Shifa said. “We have about 68 percent of the top 100 <st1:country-region w:st="on">U.S. retailers we partner with.”</st1:country-region>

Those include pure-play Internet retailers such as Wayfair and DirectBuy, as well as retailers with brick-and-mortar locations that also play on the e-commerce field. All Abbyson’s business is drop-ship and through the Internet.

Exclusivity is an issue in e-commerce, but Abbyson also has customized programs with retail programs to grant exclusives on certain products in its line.

At any rate, Abbyson is riding the growth of online furniture purchasing.
“The Inc. 500 has us as one of the fastest-growing private companies, and that’s because of our e-commerce,” Shifa said. “This is our business.”
In addition to ranking No. 159 on the 2012 overall list, the company received three Inc. 500 category achievements, as well: No. 15 in Top Consumer Products & Services Companies; No. 37 in Top 100 California Companies; and No. 14 in the Los Angeles Metro Area.
Traditional retailers really can’t fault vendors for wanting to get their products in front of consumers. With as many as 80 percent of shoppers using the Internet at least to research their purchases, an online presence is of particular interest to manufacturers and distributors.
Hooker Furniture has a presence with a limited number of pure-play e-commerce retailers. Those include Wayfair, Hayneedle and Cymax.
“E-commerce is by far the fastest-growing channel in our industry,” said Johne Albanese, vice president of corporate marketing for Hooker. “It remains very important for our brands that they are available where the consumer wants to shop. We recognize that the online business is very important to our future.”

A HYBRID APPROACH
Pure-play, national e-commerce sites for furniture appeal to those consumers who want a massive choice of products from which to choose. While Hooker has a presence there, its major e-commerce focus right now runs along more traditional retail lines.
“The big opportunity is local-based e-commerce,” Albanese said. “Imagine for a minute from the consumers’ perspective why they purchase online. The number one reason is convenience. If you add to that the ability to purchase locally, they know can get service after the sale.
“Second, in the omni-channel marketplace there’s significant influence in the e-commerce channel that’s transacted at the retail-store level. Say they’ve never bought a Hooker piece—if they see something online, and even if they want to buy it, they still want to check it out at the store. I start from the customer and work my way back. My opinion is the best model for the consumer, if the product she wants is available, is a local hybrid,” that is, a local retailer with the ability to sell online.
Such is the reasoning behind P3, the e-commerce platform Hooker launched earlier this year, in which Hooker is building out Web sites or “iStores” for retailers that offer the company’s brands for sale in the retailer’s local marketplace. Those brands include Hooker, Sam Moore, Bradington-Young and Seven Seas Seating. Retailers eventually may add other vendors to their iStore as desired.
The iStores are being built and serviced by Hooker’s partner, Channel Redefined of Green Bay, Wis., which has more than 15 years of e-commerce experience in the home décor arena.
“We have around 22 retailers live on the platform and another 30 we’re trying to get to,” Albanese said. “It comes down to finding a way to address an opportunity. For an individual retailer to engage in e-commerce from 0 to 60 is very difficult.
“We have a responsibility to our retailers to help them move into the omni-channel space,” he said. “It gets them started in the channel—it’s not the end of the road, just the beginning. We make it clear that to be successful in e-commerce they need to add additional brands.”
Retailers who’ve gone live on P3 include Toms-Price in Chicago; Belfort Furniture in the Washington, D.C., area; Interiors of Harrisburg, Pa.; Maynard’s of Belton, S.C.; Brownlee’s in Lawrenceville, Ga.; Bacon’s of Sarasota, Fla.; and Design Spree of Lawrenceville, N.J.
The P3 program also includes in-depth training by Hooker in online marketing and sales best practices; consumer trends and product knowledge through an ongoing P3 University Webinar program.

DEFINING ONLINE SALES
Albanese believes mobile technology is blurring the line between online and in-store sales.
“If someone’s in the store, sees a product and buys it on their phone, what kind of sale is that?” he said. “I’m convinced that as of today, nearly half the influence defining what consumers will do regarding furniture purchases takes place on your Web site. Our perspective is that the best solution for independent retailers is a locally focused e-commerce business that’s essentially a new location.”
It’s also closer to the heart of what traditional retailers do best. Selling furniture online on a national basis, relying on drop-shipping arrangements with vendors, and such, is an entirely different business than serving a local market.
“We discovered that that’s not a sales business, it’s a logistics business,” Albanese said.
Furniture stores, he added, must recognize how consumers’ shopping habits are challenging traditional ways of reaching furniture shoppers.
“The emerging young Millennial consumers have shopping preferences that are vastly different from our industry’s core Baby Boomer customer,” he said. “Simultaneously, we’ve seen a major shift in shopping activity to the Internet and an explosion of activity on smart phones and Web-enabled mobile devices.
“The purpose of the P3 Partnership Program is to help our retailers navigate these new paradigms in a way that will grow sales in both their brick and mortar and online channels.” HFB

 

Publisher's Letter : Change

By Bob George

This is not something many of us want to do. However, this is an inevitable condition in today’s fast-paced environment. And the Internet is a big part of that environment. We cannot slow its growth or lessen its influence even if we want to. It is hard to contemplate the fact that today 17.5 percent of all furniture is sold via the Internet. What happened to the age-old maxims of “They need to sit on it or see the quality or appreciate the finish”?

Before you dismiss these statistics as not believable, understand the fact that only one-third of this 17.5 percent is sold by direct e-tailers—the balance is sold by brick-and-mortar retailers who recognize that consumers want to shop online. There was a time when no one would have envisioned the owner of a fast food restaurant would cut a hole in the wall of the restaurant and sell food through it. However, today one expects this type of restaurant to have a drive-thru window.

This is not to compare furniture to fast food. Instead, it is to help us emphasize the fact that the retailer must conform to how the consumer wants to shop. In the research focusing on this subject (see “Hot Wire” on page 16), the Ease of Shopping was as important to the consumer as Price.

We also cannot ignore the consumer’s perception of Selection when shopping on the Internet (sharing first place with Price as the most important reason for consumers to shop the Internet). To understand this perception, observe the in-store interaction between the sales associate and the consumer. Notice your sales person as he or she goes through a “needs analysis” with a customer. Then, compare that with the efficiency of the Sort capabilities on the Internet. You can begin to understand why more than 50 percent of customers leave the store believing “I couldn’t find what I wanted.”

The Internet is here to stay. Its scope spans such a wide-ranging territory that it boggles the mind. Therefore, it is important for the furniture retailer to recognize the inevitability of change, be willing to make the leap, and embrace the ‘Net. 
The successful retailer must anticipate change, not wait until competitors have seized the advantage. This is true of major strategic shifts, such as the Internet. However, it is equally true of certain ongoing changes as well. Among the more important areas on which to focus are the strengthening or weakening of certain product categories, the effectiveness of advertising and the measurement of that effectiveness, and a careful consideration of price point migration. To anticipate change requires a measurement. Without a sundial, a watch, or a digital phone, you would not know what time it is. As pointed out in this issue’s section on motion upholstery, there has been significant growth in the category. However, there are still retailers with limited assortments of motion who wonder why their upholstery sales are down. 

From outside the industry there is a fear that furniture retailing is destined to move in the direction of apparel and footwear retailing with the concentration of the volume being in mass merchants or very focused specialty stores. The results are declining dollar volume with stable unit volume. We don’t believe this is true. However, retailers that meet this challenge need to embrace change and adopt the current business model to meet consumers’ demands. Or they will have to create a new retail model that satisfies a need they have yet to recognize.

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