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From Home Furnishing Business

Take 5: Steve Stagner

Welcome to the first installment of Home Furnishings Business’ new feature, Take 5.

Each month, we’ll pose five questions to a mover and shaker in home furnishings. We kick things off with Steve Stagner, President and CEO of Houston-based Mattress Firm, who discusses the bedding retailer’s acquisition strategy during its eight-year growth spurt.

Home Furnishings Business: Mattress Firm has made 18 acquisitions since 2006. What’s the driving strategy behind the acquisition mode?

Competitors have entered our markets, and some have done well, but as we develop a fortress position it enables us to drive profitability. Those 18 acquisitions since 2006 enabled us to build that fortress position faster.

(Acquisitions) help us leverage scale for several advantages: increasing advertising at a more efficient rate; increasing our presence in the marketplace; and increasing our ability to educate consumers in those markets about the benefits of better sleep.

HFB: Mattress Firm will be up to 2,030-plus stores with the latest acquisition of Sleep Train. Is there still an appetite for more?

Stagner: We have a long history of doing acquisitions, and right now we have a lot going on with Sleep Train (311 stores), and concurrently Back to Bed (135 stores).

Our primary focus right now is on digesting these acquisitions. We want to ensure a smooth transition and success in the long term. That said, there is an appetite for more. We could do some smaller ones where it makes sense in the near term--our stated goal is to go coast-to-coast and build a national presence.

(Digesting) is our preference right now, but we do have a fantastic organization that's demonstrated a capacity to handle a lot of activity.

HFB: Do you plan to convert any of the new brands to the Mattress Firm name, or will they continue operating under their own banner?

Stagner: Our first focus is to expand the Mattress Firm brand across the country to leverage the benefits of advertising, so yes, we will convert some locations to Mattress Firm.

That said, many locations, particularly with Sleep Train, have done a fantastic job building brand equity in their markets. We'll examine that over time. Sleep Train currently has a multi-brand approach on the West Coast, and we're comfortable with their experience operating a multi-brand company.

We feel the market can sustain multiple brands.

HFB: Something about the companies you’ve acquired obviously caught your eye. What criteria do you consider when looking at an acquisition?

Stagner: We look at a variety of things such as the quality of the real estate, the quality of the culture.

One of the most important things is what their position in the marketplace is. What share do they have? How does that fit our goals in that particular marketplace where they operate?

HFB: Moving ahead, what challenges do you see for the bedding retail segment? What indicators are most important to ensure Mattress Firm remains successful?

Stagner: The largest challenge we have is battling an apathetic consumer. There are a lot of consumers, based on our research, who have mattresses that are more than 8-years-old.

We believe that, both as retailers collectively and the wholesalers, the opportunity to provide in our advertising the benefits of better sleep. We can unlock a lot of consumers who, candidly, are sitting on the sidelines.

We look to strategic indicators such as what is our relative market share?

We also measure our turnover rates. We have lower turnover rates than most of our peers and retailers in general. We focus on our culture and our people. We focus on our customer care and response time.

Those are the leading indicators--the overall effectiveness of our people and culture, and our customer service. If we take care of those, the lagging indicator of profitability will be fine.

 



 



 

 

Publisher's Letter: Who is the Real Enemy?

By Bob George

In this issue, we have focused first on the war between the alternative distribution channels and the traditional furniture retailers whose share over the past 25 years has been depleted to less than 40 percent of the total revenue of furniture sales. Our next level of focus is the war erupting between traditional furniture retailers.

As the larger retailers begin to expand within their home states and adjoining states, they compete with other traditional retailers. One of the driving forces behind this expansion is the need to replace the volume lost to the alternative channels. The option is to reduce fixed costs and not allocate resources to invest in needed changes to compete for the consumer’s dollars. All of this is explored in depth in the later pages of this issue.

The challenge for retailers is to recognize the real enemy, all of the other products that fight for the consumer’s discretionary spending. Obviously, we are losing the war when Apple’s latest release captures worldwide attention, the imagination of the consumer, and first-day, skyrocketing sales. 

Has there ever been anything close to that amount of hullabaloo for a furniture introduction?

The closest the furniture industry comes to the excitement of the iPhone is within the mattress category where we’ve had an upsurge in premium bedding. However, we’re now to the saturation point and have overexposed our “innovations” with the offering of a myriad of materials.

Now, we’re in the race to the bottom. 

Even with that brief spark, the furniture industry’s slice of the personal consumption pie has fallen 24 percent since 2006. The accompanying chart shows this decline. It’s time for the industry to refocus.

Stopping this erosion is a cause that all retailers, whether traditional or alternative, can join. 

 

Editor's Note: All Grown Up

By Sheila Long O'Mara

Welcome to our 106th issue in all its redesigned splendor.

 

Nine years ago this month, I took a leap of faith and joined a small team of smart, creative women eager to change the way the furniture industry viewed trade publishing.  We banded together, and set our sights on creating a fresh, retail-centric magazine.

 

In the fall of 2005, the concept of Home Furnishings Business was born, and then, in January 2006, we published our first issue. As we approach our 10th publishing year, we thought it was only fitting that we freshen things up a bit. And, freshen we have.

Surely you noticed our revamped, sophisticated logo on the cover. You may not have recognized  us at first, and while that was a concern, we know nothing remains the same; nor should it.

 

So now, after 105 issues, I’m pleased to unveil our new look and re-introduce you to Home Furnishings Business. We’ve dressed the magazine in a cleaner, more sophisticated manner to better present our content.

 

In short, we’ve grown up.

 

Have no fear. Inside and out, the pages may look quite different, but the content you’ve come to expect and love is all here—with a few enhancements.

 

Let me introduce you to two new features that will appear each month. First up is our monthly, compelling Q&A—Take 5. We kicked off the feature with Mattress Firm’s Steve Stagner, who has a lot to talk about with all of the retailer’s recent acquisitions. You’ll find it on page 40 inside.

 

Next, you’ll find Numerology. One page filled with juicy nuggets and factoids that are relevant to furniture retailing, consumer insights and generally anything else we find intriguing and cool. This month, the snippets are customer service related just by happenstance. You’ll find them on page 74.

 

The very creative soul Wes Kennedy, our senior art director, gets all the credit for our new look. His steady hand and keen eye for design has been a welcome addition to our team. All compliments go to him; while I’ll gladly field any complaints and furiously defend our changes. You know where to find me!

 

The double-digit years are special and worthy of grand celebration. Here’s to a year filled with celebrations.

 

One last note—welcome to High Point Market. I look forward to seeing many of you there.

 

Enjoy!

 

 

Forecast: Cloudy

You’ve probably been hearing for several years about this thing called “the cloud.” The term gets tossed around a lot, but a lot of folks don’t really know what it means in the context of store technology and operating systems.

Basically, the cloud is a network of servers accessed via the Internet that can provide the same sort of operating functions that are housed in the physical servers running in any business.

Here’s an example from digital innovation news source Mashable.

If you take a picture on your smartphone, that picture resides in that physical device. If you upload it to Instagram, it’s going onto the cloud, where you can access it at any time, anywhere from your laptop, tablet or phone. If you delete the photo from your phone’s internal memory, it still exists on a server located elsewhere—along with information from thousands, even millions of other users.

Some service providers are moving entire operations to the cloud. Take Adobe, which has transitioned its creative services to the cloud. You can’t buy the software for yourself any more, but pay a subscription fee to use “Adobe Creative Cloud” online. Home Furnishings Business recently moved its editorial production to this service.

IMPLICATIONS FOR FURNITURE STORES

Retail automation vendor STORIS has offered its operating system on the cloud for 10 years, said Don Surdoval, president and CEO. He believes the cloud is a big part of furniture retailing's future. Already, at least 125 of STORIS' retail customers have migrated to the cloud, representing north of 1,500 users.

"We feel that, for the bulk of the industry, it's more cost-effective for us to provide the infrastructure" for running the software, he said.

The cloud even is attracting the attention of some of STORIS' largest furniture retailing clients, companies that have the volume and complexity to run their own servers.

"Even the top 100 (retailers) are talking about using it now," Surdoval said.

The best thing about the cloud is that you can access it from anywhere, any time, said Myriad Software Principal Carolyn Crowley. Myriad made its store operations software available on the cloud in 2008.

“For a furniture retailer who doesn’t want to be heavily involved in information technology, it’s perfect,” she said. “You don’t have to worry about an infrastructure.”

The cloud is gaining momentum at Myriad. In 2012, a lot of its larger clients began to move that way.

“Close to 25 percent of our clients are on the cloud,” Crowley said. “In the last couple of years, the majority of new systems we’ve sold have been cloud-based. “We go either way—server or the cloud.”

Profitsystems developed Retailvantage on the Cloud, the cloud application of its point-of-sale and inventory management system, seven years ago, said Guadalupe Pagalday, product marketing manager at the company’s Denver, Colo.-based parent company Highjump Software. Clients began signing on soon after.

"Serving their customers and growing their business: That should be the focus of retailers," Pagalday said. "Profitsystems developed RETAILvantage on the Cloud to allow home furnishings retailers to focus on what they do best and solve two significant obstacles retailers face when adopting a retail management system: limitations of cash and technical expertise."

 

WHY THEY SHIFTED Crowley said maintenance issues and expense have pushed more of Myriads retail customers
“cloudward.”

“They had an ‘event’—a server crash or hardware program and they didn’t have a back up,” she noted. “What made it an easy sell with single stores, was the ‘I don’t want to buy another server and worry about maintenance and upgrades.’

“For us, if our client is growing the business and add more memory and additional users, it’s very easy to add new user licenses, and you don’t have to pay labor for installation.”

She added that it’s not just the hardware that a retailer purchases if they want their own in-house server.

“It’s the labor—if there are problems, you pay to fix them,” Crowley said. “The contractor must maintain it. You have to add this to the cost.”

Does your system need an upgrade? That’s a lot easier on the cloud. Cloud providers often offer selections that are upgradeable in the future.

The cloud solution has proven to be stable and reliable, with an up time of 99.9 percent, state-of-the-art anti-virus and firewall protection

"Our retail cloud solution eliminates the burden of maintaining a computer network,” Pagalday said. “There is no file server to purchase, no backup hardware to worry about, and no expensive outside technical help needed."

 

CHALLENGES Crowley said the biggest block for retailers considering the cloud is that they’re nervous not having their data housed in their store or warehouse.

It’s an issue of security, and hackers have shown plenty of skill when it comes to infiltrating the Internet.

“Any cloud provider is very on top of security,” Crowley said. “That’s improved a lot over the past 10 years.”

In late 2008, a coalition of industry practitioners, corporations, associations and other key stakeholders formed the Cloud Security Alliance. The association’s mission is to promote the use of best practices for providing security assurance within cloud computing, and to provide education on its uses to help secure all other forms of computing.

The organization’s Web site (CloudSecurityAlliance.org) contains a wealth of information on security issues related to cloud computing, and the establishment of standards to help ensure the protection of data and services on the cloud.

The cloud is a strong bet for a number of large, everyday-name technology companies like Microsoft, Apple, Google and Yahoo.

“The Cloud is here to stay, and the Cloud is where business operations have moved or will move,” Crowley said.

For those with security concerns about cloud security, network administration specialists monitor and maintain the cloud network.

Other benefits include remote access that allows retailers to connect to their business from anywhere in the world via the Internet; rapid deployment and scalability.

"Managing the business from the cloud allows retailers to be nimble and react quickly to changing needs,” she said. “During short term events like annual holiday sales where traffic patterns increase and additional sales help is required, it is a straightforward and simple process to simply 'turn on' additional user applications and have them available only for the duration of the event."

The only potential disadvantage to the cloud Highjump sees are local Internet-service interruptions, but there's a fairly easy fix for that. Most companies would opt for cable Internet access for more reliable service with less downtown than satellite, DSL or other broadband options.

Cloud computing is gaining popularity as businesses face the prospect of replacing aging servers and networks, which can be costly and time consuming, Pagalday noted.

"Making the move to the cloud is attractive for three primary reasons: cost savings, flexibility, and security," she said. "We have seen our clients increase efficiencies, improve cash flow, and be able to meet business demands more quickly by moving their computing system to the Cloud."

Editor's Note: Marketing Magic

Here in the steamy South, our schools are back in session. Summer vacation, teamed with the furniture industry’s various events, makes for quite a hectic, crazy few weeks. Some weeks, I can’t wait for that school bell to ring. Other weeks, I think I may dread the school house openings more than the youngsters in my house.


I’m pretty certain the kids were barely drip dried from their first dip in the ocean this magical summer before an onslaught of commercials touting back-to-school sales starting playing in loop. As sick as I was to hear the constant din of the magic of the latest fashions for kids, the buy-eight-get-two-free composition book promotion and the Microsoft Surface tablet, it started my marketing mind to churning.


The Staples and Office Depots, the discounters like Target and Walmart, and the youth clothing chains like American Eagle and the Gap are marketing machines. Those guys are on the radio, on the television, in the newspaper and popping up in my mail box AND inbox with ads and promotions to outfit missy and junior with everything they could possibly need. It’s a constant, seemingly never-ending message targeting parents with kids headed back to school from pre-kindergarten through college.


Then, take a look at Bed Bath & Beyond, Pier 1 Imports and The Container Store. Those guys are beating the marketing drum in hopes of furnishing and outfitting those cramped dorm rooms. Come to think of it though, I hear from friends who are sending kids off as fresh-faced freshman that the cramped dorms of my college days have changed dramatically, which means more goods to be sold by those home stores.

 

So, while we often hear complaints of summer selling and the slowdown the industry undergoes, there’s money out there to be had. The question becomes whether or not furniture is top-of-mind for her as she’s going about her normal schedule. Shout it loud and proud, frequently and throughout a variety of media and chances are that replacing the tired, worn-out sofa will become much higher on her priority list.


By the way, because I know you’re dying to know, I took advantage of the composition book deal. Three young O’Maras just plunged back into school for the 2014-2015 year. A lot of paper will be used, and I’m pretty certain come second semester in January, we’ll need more paper, pens, pencils and stuff.


Happy back to school for each of you affected, and here’s wishing all a boisterous fall selling season bolstered by smart marketing.

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