Monthly Issue
From Home Furnishing Business
June 11,
2015 by in Furniture Retailing, Industry 
Andy Counts has led the American Home Furnishings Alliance through a number of tumultuous years during his 17-year tenure. Now chief executive officer of the organization, Counts is overseeing a number of pending regulations on formaldehyde and flammability standards that could have significant impact on the furniture industry.
He took time recently to share his thoughts with Home Furnishings Business on what challenges and opportunities lie ahead.
Home Furnishings Business: This year has been busy for the furniture industry regarding pending regulation changes. Give us a mid-year update. Where do we stand on the key issues like formaldehyde, new labeling and other areas?
Andy Counts: FORMALDEHYDE AHFA’s work with the Environmental Protection Agency on the federal formaldehyde standard was already a priority for the Alliance when Lumber Liquidators made headlines in March and catapulted the formaldehyde issue to everyone’s front burner.
In early March, “60 Minutes” aired an investigative report that accused Lumber Liquidators of selling laminate flooring from China containing unhealthy levels of formaldehyde. But “60 Minutes” used deconstructive testing of the laminate flooring – an unreliable test method discounted by extensive industry research. Further, the show aired video of mill employees admitting to falsely labeling the laminate as compliant with California regulations.
This latter issue served to highlight some of AHFA’s concerns with both the California formaldehyde regulation and the proposed federal regulation. In a nutshell, AHFA has been working with California and federal regulators for more than a decade to help achieve effective and reliable formaldehyde emissions regulations. A few sticking points remain in the federal regulation, and this is where AHFA is currently focusing its advocacy efforts on behalf of the furniture industry. These include:
1) Strengthening the requirements for third-party certifiers to ensure accountability throughout the supply chain.
2) Improving the testing methods within the regulations. Presently, there are issues with consistency, accuracy and reliability of the specified test methods. AHFA maintains that the EPA should correct these deficiencies before finalizing the federal regulation.
3) Recognizing the reduced emission profile of finished goods. Many studies by world-class laboratories have shown that a finished piece of furniture provides a drastic reduction in formaldehyde emissions compared to a raw piece of engineered wood. In fact, when you take a composite panel that is already compliant with the current California standard, and then add a laminate top, the emissions from the finished product are reduced at least another 80 percent. California officials understood this and exempted finished products from additional testing. AHFA has been urging federal officials to do the same, since imposing additional testing on finished products adds expense with no added health or environmental benefit.
CALIFORNIA FLAMMABILITY STANDARD & FR CONTENT LABELING
Upholstery manufacturers around the world that sell products in California spent much of 2014 transitioning flammability testing to the requirements of the state’s revised Technical Bulletin 117-2013. Many manufacturers were in compliance with the new regulation well in advance of the January 1 compliance deadline.
However, the relatively smooth transition to TB 117-2013 for all California-bound upholstered products was derailed in September when the state legislature passed a supplemental measure altering the flammability compliance label. Senate Bill 1019 was intended to help consumers identify products with no added flame retardant chemicals. However, its murky definitions, sweeping documentation requirements and compressed implementation timeline sent companies into a tailspin – and sent AHFA into action. AHFA drafted guidance documents, designed sample labels and hosted a compliance webinar – all while continuing to seek clarification from California officials.
Because so much ambiguity remained in the law when it went into effect on January 1, California officials have focused their enforcement efforts on “education and outreach” this year.
FEDERAL FLAMMABILITY STANDARD
While California’s TB 117-2013 held the limelight throughout 2014, several groups were busy laying the groundwork for a renewed debate over open flame testing of upholstered furniture on the federal level. In 2013, UL, which provides testing and certification services for regulatory authorities, insurance companies, manufacturers and building owners, released results of a study claiming today’s homes are a “perfect storm” of fire hazards. “Contemporary” upholstered furniture, which contains “fast-burning, synthetic” materials, are a major contributor to this perfect storm, according to UL. Meanwhile, the National Fire Protection Association released its own study focused on the role of upholstered furniture in the spread and intensity of household fires, particularly when the upholstery is not the first item ignited but, rather, exposed to a fire already underway.
AHFA has been contributing sound science and a voice of reason to the flammability debate for more than 40 years … and is continuing to do so in 2015. Specifically, the Alliance has opposed full-scale “build one-burn one” testing schemes that would create significant waste and a burden on manufacturers. AHFA also continues raising concerns about the use of barrier materials in upholstery construction. Although barriers have proven effective for the mattress industry, AHFA believes real world design and manufacturing issues create significant obstacles for barrier use in the upholstered furniture industry.
FEDERAL APPROACH TO FR CHEMICALS
The crusade against the use of FR chemicals in household products continues, with upholstered furniture garnering much of the media, political and even scientific attention. Currently, AHFA is keeping a wary eye on a trio of competing bills to upgrade the 38-year-old Toxic Substances Control Act (TSCA). Of interest to our industry is how the various bills approach states’ individual efforts to put chemical safeguards in place. Clamping down on state-by-state chemical laws would keep industry from having to monitor and comply with a patchwork of different rules.
Home Furnishings Business: What issues — good or bad — do you see on the horizon for the industry?
Counts: Addressing upholstered furniture flammability on the federal level is a primary area of focus. Several states and standard-setting bodies are working on the issue. This could result in multiple standards – another patchwork of inconsistent rules. AHFA favors a federal CPSC standard, ideally one modeled after TB 117-2013, to eliminate uncertainty.
Another issue that has not received much attention is the shortage in skilled labor – a particular issue within upholstery manufacturing right now. An aging workforce is creating a growing need for skilled workers – particularly upholsterers and sewers. The need is acute in North Carolina, but also growing in pockets of Indiana, Mississippi and California. Attracting and training young workers is a challenge AHFA’s Solution Partners division is beginning to tackle in 2015. The group is launching an initiative that will look for both short term and long-term solutions to the industry’s labor crisis.
HFB: Is there one standout issue for this year that needs to be managed?
Counts: The regulation of formaldehyde in composite wood products is the standout issue for 2015.
HFB: What’s your current assessment of the furniture industry? How is it faring?
Counts: All indications are that we are in for several positive years. Key indicators such as housing activity, credit availability, and consumer confidence are all trending in our favor. Visiting with members over the last several months has confirmed this. Let’s hope we can keep the momentum going.
HFB: Look into your crystal ball and share you outlook for 2016.
Counts: I do not need a crystal ball to know we are in for a busy remainder of 2015 and 2016. With the upcoming presidential election and a change in administration looming the regulatory agencies will be working overtime to implement their priority issues. We will need to be vigilant in making sure the home furnishings industry has voice at the table and our specific perspective is understood.
June 11,
2015 by in Furniture Retailing, Industry
By Sheila Long O’Mara
Family rooms and living rooms would be lost without them. The occasional table helps complete a room by offering a perch for lighting, a favorite book and family photographs.
Those occasional tables — cocktail, end and sofa tables — also often serve as places to dine and hold beverages during casual get-togethers. They are an important part of homes and this year, the category has done well for furniture retailers by posting an increase in overall sales.
Last year, occasional tables accounted for $3.18 billion in sales, a 3 percent increase when compared to occasional tables sales of $3.09 billion in 2013. In 2014, occasional tables accounted for 15.48 percent of the overall industry’s total sales of $87.56 billion.
Looking back further into 2012, occasional table sales reached $3.05 billion. The increase from 2012 sales to 2013 sales in the category was 1.1 percent.
Home Furnishings Business’ most recent consumer survey showed revealed end tables as the big seller within the occasional table category this year. Slightly more than half (50.8 percent) of the consumers participating in the survey bought end tables within the last 18 months. That number is up from the 32.1 percent who purchased end tables in last year. In our 2014 survey, cocktail tables were the big purchase with 39.3 percent saying they bought that piece.
Sofa and console tables held relatively steady at 18 percent between surveys, and the purchase of nesting tables fell from 10.7 percent to 6.6 percent.
Traditional styling took the lead with consumers this year with 38.3 percent saying their purchase fell into the traditional family. Last year’s survey revealed that traditional styling garnered 27.5 percent of the dollars spent. Contemporary styling slipped a bit between surveys. This year, more streamlined, contemporary designs were purchased by 42.5 percent of those surveyed compared to 27.7 percent this year.
Country designs were in third place among styles that consumers bought this year with 14.9 percent opting for a more rustic feel for their homes.
Today’s tables on the market offer a variety of options including lift tops that can function as computer or tablet desks, as well as making for easy dinners in front of the television. Storage and seating are other available options.
Surveyed consumers crave the function, and the desire for tables that solve storage or other needs will continue to grow. According to the survey, function continues to trump styling in how consumers shop the category.
This year’s survey showed 68.1 percent of respondents put function first. Last year, function first garnered 57.5 percent of the responses ahead of styling.
When it comes to pricing, this year’s consumers were willing to pay a bit more for their table purchases. Thirty-four percent said they would pay between $250 and $499 for a grouping of occasional tables.
That’s up from last year’s survey that showed only 30 percent fell into that price bracket. Last year, 42.5 percent said they would be willing to pay $250 or less for a table group.
Bump up the pricing to between $500 and $999, and 31.9 percent remain willing to pay. Only 4.3 percent think an occasional table grouping should cost $1,000 or more.
Callouts
$3.18 billion
2014 total sales of occasional tables
3%
Increase in occasional sales from 2013 to 2014
15.48%
Percentage of 2014 industry sales for occasional tables
Want More?
A more in-depth report on occasional tables is available for purchase by calling Natalia Hurd at (404) 390-1535 or via e-mail at NataliaHurd@ImpactConsultingServices.com
What Suppliers Say
Legacy Classic’s 3100-466 Console
This multi-use console from Legacy Classic transitions easily for use in a variety of ways—an entry console, a sofa table or even in a dining room as a serving console. The piece features a drawer for storage, a bottom shelf and a touch lighting feature. Suggested retail is $1,499.
Ashley Furniture’s Norcastle
Traditional styling and a dark rich finish, give Ashley’s Norcastle a sophisticated look and feel. A cast filigree design is displayed under beveled glass. Suggested retail is $349.
Universal Furniture’s Put Your Feet Up Table from Paula Deen Home
Casual and comfortable, the Paula Deen Home Put Your Feet Up by Universal is warm and inviting. It offers great functionality with its versatile lift-top.
Suggested retail is $599.
The Egerton Cocktail from A.R.T. Furniture
A.R.T. Furniture’s Egerton cocktail offers a unique sliding top that provides additional storage, as well as a leaf extension for versatility in scale and function.
Suggested retail is $729.
Hollywood Swank table from Aico
Part of the Michael Amini and Jane Seymour Design collaboration from Aico the table features a scalloped-edge, polished stone top sitting atop a metallic painted finish apron and legs. Both the cocktail and end tables have smoked inlay glass tops. Cocktail retails between $999 and $1,199.
What Retailers Say
Harvey Ellis Storage Cocktail from Stickley’s
“I think it is so popular because it has storage capability and is a good medium scale so it works well with sectionals or sofas in television viewing areas.” Retail is $3,882.
Kelly Von Hemert
von Hemert Interiors
Costa Mesa, Calif.
Flexsteel’s Chateau Chair-side Table
“The size and color of this table” is perfect. The casual feel of the table works in a number of environments, and the two-tone finish adds a nice contrast. Retail is $249.95.
Dianne Ray
Garden City Furniture
Garden City Beach, S.C.
Ashley's T719 Cross Island Lift Top Cocktail Table Group
"It has a great oak finish with a blend of Mission and vintage casual styling … We show it on our floor three times—once each with motion, leather and with stationary (upholstery)."
Randy Coconis
Coconis Furniture
South Zanesville, Ohio
June 11,
2015 by in Furniture Retailing, Industry
By Bob George
The traditional furniture retailer appears to be stuck in No Man’s Land since the Great Recession. The industry has been slow-go trying to reach sales levels seen seven years ago.
Coinciding with the slow growth, profitability for furniture retailers has been remained stuck. No new merchandising strategies, like the gallery concept of the 1990s, have been implemented, and the Internet is becoming more firmly entrenched especially in some product areas. The cost of goods sold as a percent of revenue has varied little.
All of those things combined require retailers to pay attention to of all elements of business operation that contribute to cost and expense.
Last year Home Furnishings Business published its first Retail Metrics for Furniture Retailing.
With this issue comes the second comprehensive look at financial performance in the home furnishings industry via data collected throughout the year by Home Furnishings Business’ parent company, Impact Consulting Services.
This data is collected through Impact’s FurnitureCore application Best Practices, which provides an ongoing monthly measure of a retailer’s performance. This subscription-based online application allows retailers to compare themselves to other home furnishings retailers and devise a plan to better manage store operations. No individual retailers’ numbers are shared; only composite percentage results.
Retailers participating in FurnitureCore’s Best Practices submit financial information. That information is then matched to a standard chart of accounts to insure all expense categories are compatible. The study has been confined to traditional furniture retailers. Excluded are mass merchants, e-commerce retailers, vertical manufacturers like Ashley HomeStores or La-Z-Boy Furniture Galleries, and vertical retailers like Crate & Barrel. To insure a comparable evaluation, a balanced sample was selected to reflect a geographic mix, volume range and merchandise price points.
The focus of the financial comparisons is three-fold. Results are provided for all participants and reflect the performance of the entire sample.
Two additional retailer segments are featured for performance comparisons based on revenues—$5 million to $25 million and the larger $25-million-to-$100-million sales group. The groups were selected because they represent more traditional accounting practices and are consistent sources for evaluating pure financial performance.
Excluded are the mom-and-pop retailers with under $5 million in revenues as well as operations with more than $100 million revenue whose accounting practices are often driven by other objectives.
Retailers with sales between $5 million and $25 million have often grown from mom-and-pop stores and are usually very owner-focused in operations.
The larger retailers with sales between $25 million and $100 million may also reflect similar ownership, but have also developed more tiered management operations adding professional managers, for example, in warehousing and delivery functions. For these two revenue segments two best practices groups are featured—the top quartile includes the top 25 percent in performance and the best performers represent the elite top 10 percent.
The overall financial performance of All Participants is shown in Table 1.
Overview of Key Performance Indicators
While the industry has continued to grow, the profitability of all furniture retailers has declined compared to last year by 0.48 points. Gross profit tends to be slightly higher among the best performing smaller firms with sales between $5 million and $25 million, about 2 percentage points greater than all retailers.
This has always been the case with a fragmented industry consisting of a substantial number of retailers with less than $5 million in sales, which minimizes taxes. Figure A provides an overview of key indicators—gross profit, sales expense, general and administrative expense, net operating income, and credit expense.
Selling expense is consistent across the board with little variation. This category is comprised mostly of sales force compensation, advertising, and warehouse and delivery expenses. The variables are general and administrative expenses, which are better contained by the larger best performing retailers. The biggest chunks of general and administrative costs are occupancy rates of leases and administrative costs, primarily administrative and managerial salaries.
Each segment of financial performance is presented in more detail below.
Above the Line Income
Total revenue encompasses merchandise sales as well as returns, sales of product protection, and delivery income.
Returns: The thorn of merchandise returns represents about 3 percent of revenue. On paper it appears the best performing small retailers with between $5 million to $25 million in sales have fewer returns (Figure B). Many of those handle their returns outside of the tracking system with voided tickets and even exchanges. Meanwhile, larger firms are more likely to document these transactions negatively reflecting on their performance.
Merchandise Protection: Merchandise protection (Figure B) is an important profitability component for traditional retailers, with the exception of upper-to-premium dealers, who often consider it a negative. This income represents more than 3 percent of total revenue.
Delivery Income: Delivery income (Figure B) is getting harder to come by for smaller retailers, and, in general, the consumer is placing more free delivery demands on all consumer goods retail outlets. For now, many high performance retailers are able to offset delivery expense with this income which varies from 1.7 percent at best performing smaller retailers with sales of between $5 million and $25 million to more than 2 percent for larger retailers.
Cost of Goods Sold
Doubling the cost of the merchandise has been the mainstay pricing strategy for traditional furniture retailers. But to say the larger retailers “buy better” is debunked by the data. Regardless of performance, cost of goods sold accounts for about 54 percent of revenue (Figure C).
Gross Profit
The best performers in the $5-million-to-$25-million sales category maintain an additional margin point. However, the best performers among the larger retailers forego that point, recouping it in operations.
The 47 percent gross margin in the furniture industry (Figure D) is envied by many other retail sectors. Some vertical furniture retailers enjoy higher margins due to the direct sourcing models while electronics and appliance margins can run in the teens. With such healthy margins, why does the industry makes so little profit? Insight can be gained in the financials detailing how much the industry spends selling the product and running the business.
Selling Expenses
The advertising cost of attracting the consumer to the store, converting that consumer to a purchaser by trained personnel through sales, and successfully delivering that product to the consumer’s home through warehousing and delivery represents a significant 23 percent to 25 percent of revenue (Figure E).
Advertising Expense: All retail segments are spending slightly more than average on advertising with the exception of best performers in the larger $25-million-to-$100 million sales segment where advertising costs fall slightly (Figure E).
While advertising channels may differ by size of retailer, the total percent of revenue varies only slightly. Larger retailers will use more broadcast or air channels while smaller retailers rely heavily on print mediums, but the cost results are similar. Advertising represents a significant expense of about 5.5 percent to 6 percent of sales among the size segments. It is imperative that advertising’s effectiveness be measured on a weekly basis and the only measure is number of visits—or ups—to the store or the website.
Sales Expense: The largest component of selling expenses is the compensation cost of sales associates, as well as the cost of managing and motivating of them. Included in sales expense (Figure E) is sales associates’ commission, as well as sales management, bonuses, contests and similar activities. Overall, sales expenses run about 8.6 percent of sales. However, smaller best performing companies tend to have lower sales expenses than larger companies with sales between $25 million to $100 million that have additional layers of personnel.
Warehouse, Delivery and Service: The after-the-sale cost of warehouse, delivery and service is an advantage for retailers with sales of $5 million to $25 million. Moving beyond the $25 million sales volume requires a different level of expectation that is just now emerging in the furniture retail industry. Overall warehouse and delivery is a significant 8.1 percent of revenue (Figure E).
Often a retailer’s upfront performance is negated by the backend if a retailer is unable to manage it correctly. As reported earlier, merchandise returns can total more than 3 percent of sales. Warehouse and delivery must be effective and if not, outsourcing should be considered.
Advertising Expense: All retail segments are spending slightly more than average on advertising with the exception of best performers in the larger $25-million-to-$100 million sales segment where advertising costs fall slightly (Figure E).
While advertising channels may differ by size of retailer, the total percent of revenue varies only slightly. Larger retailers will use more broadcast or air channels while smaller retailers rely heavily on print mediums, but the cost results are similar. Advertising represents a significant expense of about 5.5 percent to 6 percent of sales among the size segments. It is imperative that advertising’s effectiveness be measured on a weekly basis and the only measure is number of visits—or ups—to the store or the website.
Sales Expense: The largest component of selling expenses is the compensation cost of sales associates, as well as the cost of managing and motivating of them. Included in sales expense (Figure E) is sales associates’ commission, as well as sales management, bonuses, contests and similar activities. Overall, sales expenses run about 8.6 percent of sales. However, smaller best performing companies tend to have lower sales expenses than larger companies with sales between $25 million to $100 million that have additional layers of personnel.
Warehouse, Delivery and Service: The after-the-sale cost of warehouse, delivery and service is an advantage for retailers with sales of $5 million to $25 million. Moving beyond the $25 million sales volume requires a different level of expectation that is just now emerging in the furniture retail industry. Overall warehouse and delivery is a significant 8.1 percent of revenue (Figure E).
Often a retailer’s upfront performance is negated by the backend if a retailer is unable to manage it correctly. As reported earlier, merchandise returns can total more than 3 percent of sales. Warehouse and delivery must be effective and if not, outsourcing should be considered.
Store Sales Expense: A small, albeit important selling cost, store sales expense, is a full percentage point lower by the best performing retailers with sales between $25 million and $100 million compared to the best performing smaller companies with sales between $5 million and $25 million (Figure E). Retail technologies exist to eliminate the sales counter, costing and additional 1 percent or more. Not using technology and requiring the consumer to check out can significantly impact the retail experience.
General and Administrative Costs
While not directly touching the selling process, the final piece to profitability is the control of general and administrative expenses. General and administrative expenses are, for the most part, fixed expenses and must be controlled relative to the potential volume.
Primary components include occupancy costs—the place to conduct business and the costs to keep it open; the cost of the management team that develops and executes a strategy, and finally the technology and information systems that are essential in controlling the process.
These expenses can be as much as the selling expense in some cases (see previous Table 2) and generally vary significantly by the size of the retailer, especially in terms of occupancy and administrative costs (Figure F).
Store Sales Expense: A small, albeit important selling cost, store sales expense, is a full percentage point lower by the best performing retailers with sales between $25 million and $100 million compared to the best performing smaller companies with sales between $5 million and $25 million (Figure E). Retail technologies exist to eliminate the sales counter, costing and additional 1 percent or more. Not using technology and requiring the consumer to check out can significantly impact the retail experience.
General and Administrative Costs
While not directly touching the selling process, the final piece to profitability is the control of general and administrative expenses. General and administrative expenses are, for the most part, fixed expenses and must be controlled relative to the potential volume.
Primary components include occupancy costs—the place to conduct business and the costs to keep it open; the cost of the management team that develops and executes a strategy, and finally the technology and information systems that are essential in controlling the process.
These expenses can be as much as the selling expense in some cases (see previous Table 2) and generally vary significantly by the size of the retailer, especially in terms of occupancy and administrative costs (Figure F).
Information Systems: Technology is a growing cost at 1 percent of revenue (Figure F) regardless of company size. The successful implementation and ongoing maintenance of systems necessary to run a business smoothly can be painful at times but are critical to profitability. The larger retailers investing more in information systems have achieved an advantage in processing the customer order after the sale, often by transferring the process to sales associates.
Occupancy: The best performing larger companies enjoy 4.7 percent occupancy costs, compared to 7 percent to 8 percent for all participants or smaller retailers (Figure F). Often these larger retailers have the upper hand with the ability to secure the best locations. Time-starved consumers are placing a priority on location wanting to shop closer to home or visit retailers along their normal shopping routes.
Administrative Expense: The largest chunk of administrative expense comes from management salaries along with bonuses, professional fees, and insurance. Overall administrative fees can total 8 percent to 10 percent of the business in the best performing companies. Larger companies do a better job of controlling these costs than the smaller retailers by 1 percent of total revenue or more. The decision to hire managerial positions is a hard one for many companies, but can produce big results with the proper personnel.
Credit Income and Expense
Retailers acting as credit houses are disappearing and what was once a key area of profitability is now a crucial place to control costs.
Net credit expense totals 3 percent of revenue for the best performers regardless of size and 3.5 percent for all participants (Figure G). From our perspective, credit is a selling expense that has emerged as a perceived necessity to generate consumer traffic. In our experience, less than 30 percent of consumers opt for offered credit promotions.
Net Income: Overall furniture retailers are struggling to make a profit. However, the larger best performing group with sales between $25 million and $100 million is achieving net incomes above 6 percent (Figure H), almost double the best performing smaller retailers with sales between $5 million and $25 million.
In Summary
Keep in mind our numbers are only guidelines to stimulate thought and discussion of how to profitably run a retail operation.
We caution any specific retail figures, to be comparable, must be compiled to conform to these classifications.
We believe an ongoing focus on a company’s statistics is the path to high performance companies. It is not achieved in a month, but is part of a continuing process. Such a process is greatly enhanced with membership in a retail performance group that allows for open and frank discussion with peers of the barriers to achieve certain objectives.
While the overall industry statistics are discouraging, there are individual retailers who achieve 10 to 20 times this performance level. We challenge you to be one of those. Home Furnishings Business is committed to providing input to your process.
June 8,
2015 by in Industry
By Tom Zollar
Research shows that as consumers have evolved over the past two decades, they have become more confident in their ability to make decisions for their home. In addition, consumers have become more driven by the desire for style in her life.
The enhanced importance for the concept of lifestyle in how she dresses, eats, looks and furnishes her living spaces has also grown. The growth home-focused entertainment has created an increase in consumers’ exposure to home furnishings. Add to that the impact of the Internet and consumers arrive in stores in a much different state previous generations.
Even though they are more confident, many remain overwhelmed by the process of decorating their dream room. They may have a vision, but they can’t always put it together.
While the dynamic increases the value of the salesperson in the process, the consumer’s distrust and sense of “I know what I want, all I have to do is see it” drives them to answer brush off in-store assistance.
My informal research with hundreds of sales associates indicates that as many as 75 percent of first time customers are now likely to say push aside a salesperson’s greeting. That is about three times the total it was before the Internet and HGTV.
Overcoming the rejection is the primary cause of lower closing totals. If you can’t connect with a customer, they can’t be sold. More importantly, we consistently see failure in a key part of the process that reduces the ability to satisfy the ones with whom we connect.
Think about it: When you get to a place with a customer where they will tell you why they came in your chances of selling them should be pretty high. Unless they came in looking for something you don’t carry, which due to their prior research on the Internet does not happen very often anymore, this should be a slam dunk.
Many stores are closing less than half of the customers they get that far in the process with and very often are selling them less than they really need to fulfill their dream. Are the questions asked wrong? The process? The information gathered? Our response?
The answer is yes to all the above
The industry has the answer to the problem and has for some time. It is the focus of every major furniture sales training course I have ever seen in the last 40 years. Even though it’s proven to increase sales and customer satisfaction, many retail sales associates refuse to use it or give it a chance to work.
Room sketching with the customer in the store can make all the difference in the world.
I can hear the groans and yawns, just like I have heard from many sales associates over the years.
It has become more import to the retail selling effort now than it ever was before.
How do you compete with and beat the new retail home furnishings distribution channels like the Internet, big boxes and specialty stores? By providing services they don’t. By developing trusted relationships with customers. Creating loyal clients that don’t want to go elsewhere.
Those are a few of the reasons why you need to do it, but there are others, too. Here are some things to consider before rejecting the sketch as a way to better connect with your customers.
• Consumers want you to sketch their room when they visit your store, but they don’t expect you to because no one does that in a traditional furniture store. Consumers expect it from interior designers, but not furniture stores. Surprise them. A few years ago we did several surveys and focus groups asking furniture consumers a series of questions. About 90 percent of them said they wanted their sales associate to sketch the room for which they were shopping. On the flip side, only 5 percent said their associated did it.
• When a customer enters a store they have a problem they want solved, but unfortunately the problem is in their house. Typically, we act as if we can solve it for them by looking at products in the store. The best sale you can make results from a house call, but only a small percentage of customers will do that. Create a virtual house call by sitting down with them to develop a picture of the room on which they are working. By doing so, you take the consumer’s mind out of the store into their home and you go with them.
• At least 85 percent of consumers who enter a store have been pre-shopping on the Internet and have an idea of what they want. Consumers have been trained by Walmart, Target and grocery stores that “what you see is what you can get.” They believe they can walk through the store and see what it can do for them. The truth is that most stores only show a small percentage of what is available to consumers, and people really only take in about 15 percent of what they see walking through a store. If consumers don’t work with a sales associate, they have no idea what your store can do for them. If that associate does not slow them down and engage them in conversation about the room they are working on, they may believe your store cannot fill their need. What better way to get the customer to slow down and talk with you than to start a rough drawing. Draw two lines, ask where the recliner is going and customers will stop scanning the floor and look at the sketch and begin describing the room. You now have their complete attention. If you done correctly—asking the right questions, building knowledge and understanding about what they need—you will solve their problem; and sell them all they need and create a client for life.
• When you go to any professional consultations to solve a problem they will ask you a lot of questions, right? You would run away if you went to a doctor, a lawyer, a real estate or insurance agent and they didn’t take notes about your situation. Room sketching while doing a consumer needs analysis is how home furnishings retail associates should take notes. We deal with a lot of visual, logistical, size, usage and emotional issues in furniture, so having even a rough picture of the space you are working with is a huge advantage in your efforts to solve the problem. Customers realize you care and view you as professional when you sketch.
Do it.
Despite the excellent reasons to sketch, many sales associates will say they can’t or don’t need to do it. Here are the excuses they will have.
• I can’t sketch, I’m not a designer. We are not talking about a full room layout here, just a very rough drawing of the room, the major pieces in it and the products that the customer is looking for. No design skills needed.
• I can’t draw. This is mostly an excuse, because everyone can do stick figures and draw lines on a piece of paper. We are not looking for perfection; just something that resembles the room. Trust me, I can’t draw a straight line, and it worked for me.
• Not enough time to do it. Perhaps this is an indication they aren’t and don’t want to spend the proper amount of time with each customer. Sketching tends to slow down the process so you can maximize the results. Sales people that sketch consistently see their close rates double when they sketch and their average sale is tripled. It is also the best way to determine if a house call is needed. It is truly a case of slow down and sell more.
• Not everyone wants or needs it. This is true to some extent. A mattress customer probably does not need a drawing of the room unless they are getting a new bed, too. Some customers may be in too much of a hurry or actually only need one product and have their mind pretty much made up. If you don’t attempt to sketch with all of your ups, how will you know? In many stores completing a sketch with 50 percent of your opportunities is a good target, but in most middle to upper stores that goal should be closer to 75 percent.
The first step to developing a staff that sketches consistently is to bring in a quality trainer and teach them how to do it right. Once they’re trained, retailers must track the sketching, coach them and hold associates responsible for doing it.
Holding associates accountable is the hardest part. Many staff members know if they stonewall a new policy or process, it will go away eventually. Sketching is too important, don’t let that happen.
Do’s and Don’ts of Sketching
• Carry your sketchbook at all times. Never have to leave a customer to find it.
• Don’t remove sketches from the sketchbook. Make copies if needed.
• Sit down with the customer.
• Put the customer’s name, address and phone number on top of the sketch. Date every sketch.
• Draw the outline of the room yourself. Customers may wish to help with the sketch and should be encouraged. You should outline the room to have the largest possible sketching area while leaving room for margin notes.
• Make margin notes on the sketch regarding lifestyle issues like number of children, ages, names, other residents, etc.
• Make margin notes regarding additional products the customer needs, always concentrating on the product requested.
• Don’t attempt to place or sell additional products at this time.
• Talk about the importance of having a plan for the room.
• Discuss fabric treatment, wood furniture protection plans and extended warranties.
• Draw a second sketch to help the customer understand how the room may look in the future if changes in layout are being considered.
May 19,
2015 by in Business Strategy, Industry
By Sheila Long O'Mara
Father’s Day is just around the corner and the television airwaves and newspaper circulars are already touting the big day and Dad’s Chair as the perfect gift.
A fitting crown for the king of the household, recliners make for a great promotion during this time of the year. In fact, the kickoff to football season, Thanksgiving and the holidays seem to put the recliner front and center in promotions.
It’s an easy category for retailers to promote and a relatively easy category for consumers to understand and gravitate toward.
Recliner sales for 2014 increased slightly—2.87 percent—over recliner sales in 2013. Category sales last year were $4.51 billion; in 2013, recliner sales were $4.39 billion. Recliners remained steady accounting for slightly more than 5 percent of sales for total industry sales of $87.53 billion last year.
Today’s top-selling recliners seem to be generating a higher price point than those of year’s past when $299 and $399 were the sweet spot. No fear, those marks are still pulling in some volume—and they make for great promotions—but there is a slight trend in a higher price point.
Much of that swing can be attributed to consumers’ penchant toward the abundance of creature comforts and features available, including heat and massage, charging ports for electronics, better leathers and plusher fabrics.
In Home Furnishings Business’ most recent consumer survey, consumers ranked their top-wanted features they’d like to have in their reclining chairs. We asked them to pick their top four features they were most interested in for their recliner. An adjustable headrest and lumbar support landed at the top of the list of wanted features. Those support features were followed by heat and massage, hidden tables, storage drawer and a docking station for a smartphone.
While the majority of the consumers were pleased with their recliner shopping experience, they did face a few challenges. At the top of the list, they were somewhat disappointed by the selection of recliners from which to choose.
As is typical, the consumers also had a bit of sticker shock with pricing, and they had a hard time in distinguishing the differences between recliners. Those few stumbling blocks leave the door open for retail sales associates to explain the different features available in the different styles, and possibly the opportunity to upsell consumers into a higher ticket.
When it comes to shelling out dollars for recliners, the largest segment—41.2 percent—said they’d expect to pay between $300 and $599 for a recliner dressed in fabric. Another 35.3 percent said they’d pay between $600 and $999 for a fabric recliner. On the low end of the pricing scale, 17.7 percent said they’d expect to pay less than $300 for a fabric recliner.
Stepping up to leather posed a bit of a challenge in pricing for the surveyed consumers. More than 36 percent said they would be willing to pay only $50 more for a leather recliner, and 27.3 percent said they’d be willing to pay $100 more for a leather recliner.
When it comes to recliners, more than half of our consumers—53.6 percent—were most interested in traditionally styled chairs. Just over a quarter (28.6 percent) gravitated toward a more contemporary styled recliner.
Despite all the fancy bells and whistles consumers are demanding, they still like to go old school with the recliner mechanism. Nearly 68 percent chose lever-operated mechanisms as their preferred method for reclining their easy chair. Push-back mechanisms garnered 17.9 percent and power mechanisms took 14.3 percent as the preferred method to recline.
When asked about pricing and how much more they would be willing to pay for a power recline mechanism, 85.8 percent said they would only pay $100 more, and most of those—67.9 percent—said they would only pay $50 more.
When it comes to product warranties, most recliner consumers agree they matter. When asked whether or not they had a warranty on their chair, 64.3 percent said yes.
Overall, the consumers were satisfied with their recliner purchase. On a scale of one to seven with seven being “very satisfied” and one being “not at all satisfied”, more than 67 percent selected five or above.
Want More?
A more in-depth report on recliners is available for purchase by calling Natalia Hurd at (404) 390-1535 or via e-mail at NataliaHurd@ImpactConsultingServices.com