From the Editor: The Happiest of Quarters?

November 12, 2013   by in Business Strategy, Industry   

By Sheila Long O’Mara

We’ve stepped into fall. The season in which Mother Nature pulls out her best and brightest colors to show off her splendor. Halloween has passed, and we’re charging head first into the holiday season with Thanksgiving, Hanukkah and Christmas.

Pop Stars

October 10, 2013   by in Business Strategy, Industry   

Pop up locations show potential as a model for home furnishings.

By Powell Slaughter

So-called pop-up locations, temporary installations in high-traffic shopping areas such as malls, have proven highly effective in various consumer goods categories. Sometimes they work as actual retail shops, whether seasonal—think gifts during the holidays—or to build excitement and sales for athletic equipment or clothing lines. They also can serve as a lure to a permanent store with enticing displays or promotion of new merchandise. “It gets people to think about you,” said John Egger, CEO of furniture retail management consultancy Profitability Consulting Group.

“It’s a representation of your store in a high-traffic area—it’s like an interactive billboard.” The technique represents a huge opportunity that most of the furniture industry has yet to understand, said Connie Post, CEO of retail and trade showroom design specialist Affordable Design Solutions.

“Retailers could go into malls and drive holiday traffic to their stores,” she said. “People like Nike and other athletic equipment brands have put out shipping containers and turned them into a retail space. Other parts of retail worldwide are doing it. We in the furniture industry are very slow with new ideas.”

She pointed to West Virginia and Kentucky retailer Big Sandy as an example of a furniture retailer employing a pop-up.

“They had a kiosk for the holidays that did quite well,” Post said. “You can use those as a model to sell specific categories.”

Now you sell it

The pop-up model is central to promoting the HGTV Home Furniture Collection, produced by Bassett Furniture for the network’s consumer products segment. By the end of the year, six pop-up stores around the country will have promoted the HGTV Home Furniture brand to customer in locations outside traditional furniture store fronts. “It’s an HGTV initiative to create consumer awareness about the home line of products,” said Renee Loper, vice president of independent retail development and marketing for Bassett. “Because this is a new endeavor, consumers weren’t aware HGTV even has these products.”

The HGTV Home Pop-Up Shop was a way to increase consumer awareness about the home line of products. “The goals are engagement and consumer awareness,” she said. A pop-up location was in downtown Chicago through Sept. 22. This month, a location opened in Tyson’s Corner, Va ., on the seventh and will run through Nov. 10.Later that month, a pop-up is set to open in Santa Monica Place in Los Angeles on Nov. 25. Next year, HGTV Home Pop-Up Shop are scheduled for the King of Prussia Mall in the Philadelphia area; Atlanta; and the Mall of America in Bloomington, Minn.“Chicago is the first location where we’ve had a retailer carrying the line (Darvin’s Furniture) in very close proximity,” Loper said. “We are doing a coupon that’s handed out in the pop-up shop for the store. Anecdotally, I hear Darvin’s has seen some additional traffic. Traffic at the pop-ups has ranged from 5,000to 6,000 per location.”

Robin Ulrich, senior vice president of consumer products at HGTV, said the HGTV Pop Up Shops are designed to inspire ideas with categories to match the biggest projects. “By bringing all our partners together in one space, we can show how it all works together,” she said, adding that tying in with local stores carrying the goods is a priority—goods on display in the pop ups are not for sale, but for display and inspiration only. Belfort Furniture in Dulles, Va., for example, is counting on the HGTV pop-up location in Tyson’s Corner, a suburb of Washington, D.C., to build excitement for its launch of the HGTV Home Furniture Collection.

“They’re launching at the store, Nov. 9, and Genevieve Gorder will be there,” said Robin Ulrich, senior vice president of consumer products, HGTV. “We make sure when consumers come to the store we have a retailer in the area for all of our product categories listed on a take-away.” Those range from lighting to flooring to HGTV’s paint line with Sherwin-Williams in addition to furniture. “It’s important that if we’re in that market, we want to make sure visitors know they can buy the products they see (in the pop-up) locally,” Ulrich said. With the furniture line, “we’ll really push our local retailers, be it a local independent or a Bassett store.” HFB

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Inset Story

A Take on Other Models Furniture’s getting sold in all sorts of ways, and traditional furniture stores could learn from some of those models. Profitability Consulting Group CEO John Egger offered his take on several.

DEDICATED STORES

“The advantage is that your design, floor display, marketing and merchandising are pretty much taken care of,” Egger said. “And you have name recognition. Some have leeway, some don’t.”

A disadvantage is that retailers are locked in since they don’t carry other brands. “Some of these brands don’t have bedding, and that’s something retailers need to carry,” he said. “Plus, some of the manufacturers aren’t great retailers. …You’re relying on one company.”

WEEKEND ONLY STORES

“I’ve worked with some of those,” Egger said. “Friday, Saturday and Sunday, that’s the core of our business, 80 to 90 percent of furniture retail takes place then.” There are some lower overhead and labor costs, especially if the operation takes a warehouse approach where the employees are more order takers than full-service sales associates. “There’s a perceived advantage among the public that they’ll have lower prices,” Egger said. “But even if you’re open three days a week, you still have to pay your rent and taxes; most and salespeople are on straight commission, so I’m not sure how much money you save. “It’s gimmicky, I think, but it’s a good advertising approach.”

RETAIL VERTICALS

The West Elms, the Crate & Barrels are where furniture stores can learn some lessons, according to Egger. “They’re in high-traffic areas, and they get great visibility,” he said.

“They’re always cutting edge, and they’ve got that young, upwardly mobile customer’s attention—It’s perceived as cool to be at West Elm.” In addition to great locations, appealing design and strong floor presentation, they offer lots of product that moves quickly. “They’re wide when it comes to product—towels, bath, candles,” Egger noted. “They are every appealing to shoppers in malls.

“We can learn from things they’re doing—some of their displays onto-go items are fabulous. That sort of thing can help build cash flow. I’d recommend that all furniture retailers spend time in those stores and look at what they’re doing with gift and other smaller items.”

ONLINE RETAILERS

Egger noted that the online model is making inroads even in what one might think are very “high touch” categories. “The thing that surprises me is bedding sales” online, he said. “How do you try out a QVC mattress unless it’s something you can find in a store?

Bedrooms See a Lot of Action

October 10, 2013   by in Business Strategy, Industry   

The online sales potential is too big for furniture suppliers to ignore.

BY SHEILA LONG O’MARA

In case you were wondering, American bedrooms are used for much more than sleeping and, ahem, a welcoming space to “reconnect” with partners. Bedrooms are no longer just a safe haven for a peaceful night’s sleep. In fact, a Home Furnishings Business survey conducted last month of consumers who had bought bedroom furniture in the last 18 months reveals the bedroom as a mini-hub of the home. According to the 250 survey participants, reading, watching television and working on computers are the ranked as the top three activities consumers do in their bedrooms. It’s a busy room the households, and activities—other than the obvious—include paying bills, completing work from the office and doing school work. Knowing that all of those activities are taking place in bedrooms provides suppliers and home furnishings retailers insight into designing and flooring bedroom products that resonate with consumers and their needs. Nightstands with easy-to-reach power stations, for example, make sense for those plugged-in night owls. The category, which harnessed $8.8 billion in sales last year, has posted a cumulative growth of 12.7 percent since 2009. What may surprise some is that the category’s growth rate is the slowest among all categories, including dining room, which boasts a three-year growth rate of 13.06 percent. Bedroom represents 18.2 percent of furniture retailers’ sales, and it reigns supreme as retailers’ highest margin category at 49.1 percent.

Why Buy?

More than 50 percent of the consumers in the survey report that their primary motivation for buying their bedroom was to replace their old furniture. Buying a new home came in at a distant second as motivation for buying with not quite 20 percent of the consumers citing their real estate purchase as the reason for a new bedroom collection. As one might expect, the showstopper is the bed. That’s the piece that a whopping 67 percent of our consumers were attracted to most from the collection of furniture they bought. The collection’s dresser was a distant second with a mere 14.7 percent.

It’s NOT the Price

While we as an industry tend to get bogged down on price and promotions that revolve around lowest, best pricing, consumers in our survey don’t appear to be driven by price. When asked about price expectations for a full bedroom suite with queen bed, dresser and mirror, chest, complete bed, nightstand nearly 84 percent fell in the price range of $1,000 to $7,999.

Style Slant

Traditional styling took a small lead ahead of contemporary designs with our consumers. Traditional designs eked past contemporary 38.2 percent to 33.8 percent. It is important to note that style preference is extremely subjective among consumer. Your declared contemporary could very well fall into some else’s traditional realm. While we in Furnitureland tend to seen a lot of upholstered headboards these days, it appears that consumers haven’t yet grasped hold of the trend. According to our survey, more than half—52.9 percent weren’t likely to buy a fully upholstered or partially upholstered headboard for their homes.

Sixty percent of the consumers surveyed said they prefer the look of wood over the upholstered headboards, and 23.3 percent said they didn’t even consider buying the upholstered version. Reasons varied from the concern of keeping the upholstery clean to fear of the style becoming dated too quickly to quality concerns.

What Suppliers Say

LEXINGTON HOME BRANDS

Tommy Bahama Home’s Ocean Club Paradise Point Bed from Lexington is a winner across all regions. With a suggested retail price of $2,529, the bed’s lasting success has a lot to do with its dramatic features—a woven rattan panel headboard framed by open fretwork design that continues down the side rails and footboard. The bed is a contemporary fusion of east and west with influence from islands of the Pacific Rim.

LEGACY CLASSIC FURNITURE

Evolution is Legacy Classic Furniture’s top-selling bedroom. Crafted in classic styling, the 9180 Evolution sleigh bed with dresser and mirror retails at $1,799. The bed alone is $799.

HGTV HOME AT BASSETT FURNITURE

European inspiration provides Caravan from HGTV Home at Bassett a casual, traditional feel. Available in a number finishes, like Midnight and Dusk. The collection features turned knobs with coin edging and oval ring pulls in an antique patina.

VAUGHAN-BASSETT FURNITURE

The Reflections bedroom is available from Vaughan-Bassett in six finish options, and the group is always in stock for quick delivery in any finish within six days. That flexibility offers retailers an entrée into the special order business without a lengthy consumer wait. Heavy moldings and bun feet convey a significant value to consumers. Retail on a queen storage bed is $799; $2499 for queen storage bed, dresser, mirror, and chest.

A.R.T. FURNITURE

Old World, retail $3999. Talk about the sliding top nightstand with the concealed storage, drawer cheer has hidden storage in the parting rail below the top drawer. Gentle men’s vest has a valet on the RSF end panel - storage sells!

KLAUSSNER HOME FURNISHINGS

Klaussner’s LaSalle bedroom includes this contemporary bed featuring footboard storage and a two-tone espresso finish. Striking wood grains framed in black offer a modern design statement, and the hardware takes a nod toward contemporary. The bed retails at $699.

VAUGHAN FURNITURE CO.

Form follows function in Vaughan’s Simply Shaker Too collection available in master and youth bedrooms. A warm cherry finish accents cherry veneers, and a decorative molding of vine graces some pieces with metal knobs. Designs feature a deep cut base rail. Drawer fronts and top moldings are softly rounded for a clean, yet weighty look. Also available finished in white or black.

What Retailers Say

Be sure to check out our online gallery to see the bedroom products that a sampling of retailer say are their top sellers. You can find it at HFbusiness.com

Where Strategies Come From

October 10, 2013   by in Business Strategy, Industry   

By Bob George

If you are the typical retailer, as you read the feature article, your thoughts will center on your own operation and whether or not you should pursue the strategies.

Be warned!

What works for one retailer in specific markets may not work for another one in another.

The landscape is littered with the remnants of the next great thing. Strategies are the result of a thoughtful process that considers your company against the competitive setting in which it exists.

Often overlooked is the foundation upon which the strategy is based—the assumptions. Assumptions are defined as “those statements about probable developments which cannot be predicted with accuracy, over which the business may have limited control, and which may have a major impact on the attainment of goals and objectives.” Unfortunately, our assumptions are often ingrained in our thought processes over years of talking to ourselves. Do any of the following statements ring true to you?

·         Consumers are price driven ignoring style and quality.

·         The features and benefits that define quality cannot be communicated to the typical consumer.

·         The only way to motivate the consumer to buy is a promotional message.

·         Consumers will not buy without seeing, feeling, or sitting on a product.

Because of these deep-seated beliefs, we often miss the real breakthrough strategies. What was the source of the visions for retailers such as I.O. Metro, Room & Board, and Frontgate (yes, an online retailer)? I assure you that it was not from the assumptions above. Go to their Web sites to understand their assumptions and then compare them to your own.

The retailers and manufacturers that will survive and prosper are those looking beyond their accepted assumptions and identify the emerging trends. For example;

·         Almost 58 percent of consumers are willing to pay more for ‘sustainable’ product.

·         The quality delivered by American-made “Amish built” is a value to a growing number of consumers.

·         The retail experience delivered by certain lifestyle retailers results in margins 1.5 times those of the traditional independent dealers.

With a set of assumptions in place, the next step requires an honest evaluation of a company’s strengths and weaknesses in combination with an identification of your threats and opportunities. What do I mean by that? The definitions are below.

Strengths — Significant positive factors or competitive advantages within an organization that may be capitalized upon in the future.

Weaknesses—Significant negative factors or competitive disadvantages within an organization that may prevent that organization from achieving its goals and objectives.

Opportunities—Major external situations or events that may exist now or will occur in the future that, if exploited, could improve organizational performance.

Threats—Major external obstructions or risks that may now or in the future which should be avoided, minimized, or managed.

After this careful thought process, you can then begin to define the Strategic Elements of a plan. If the following are a part of your plan, go back to the beginning and start over!

·         Lower prices for products that are designed to replicate similar higher priced products. Low average unit selling price on premium bedding, bonded leather, etc.

·         Sales promotion that begin with 50 percent off and continue down the slippery slope to 60 percent and more off.

·         New after-sale add-ons beyond delivery charges.

While this is frustrating to the consumer, it is not as bad as the airlines’ baggage fees … yet.

A Giant Retail Strategy

October 10, 2013   by in Business Strategy, Industry   

By Sheila Long O’Mara

Love ‘em or hate ‘em, mass discounter Walmart can sure turn some merchandise, and the retailer has figured out how to recreate itself every five years or so.

That’s part of massive Walmart’s overreaching strategy. Today’s Walmart is far different from where the chain was in 2008, and it’s quite likely the retail giant will be much different in five years from now.

In a presentation last month at a retail conference in New York, Bill Simon, Walmart’s CEO, said the retailer was constantly investing in all channels. Those channels—ship from store, ship to lockers, smartphone self-scanning, same-day delivery and store loyalty—are building on the company’s founding principles of everyday low prices and a lean supply chain.

The interesting thing to note of Walmart’s strategy is that all the layers on top of that foundation, are open for discussion. Nothing is set in stone and inflexible. Currently, the retailer is in the midst of a number of new initiatives revolving around “the convergence of the digital and physical retail worlds,” Simon said. Take a look at a few of the projects that have come online at the giant retailer in the last 12 months.

1. Ship from store. The volume of fast-moving items ordered from Walmart.com that are then shipped to customers from local stores is in the “double digits,” Simon said. Ship from store is out of the test phase and now a reality.

2. Pay with cash—ONLINE. That’s unique for thee-commerce world. Walmart has figured out how to accept cash via its Web site.

3. Lockers in stores. Walmart has established lockers in its stores so customers can order online, go to the locker at a convenient time and pick up their order. Convenience at its best.

4. Scan and go mobile payment. This option gives consumers an easy self-checkout using their smartphone.

5. Store-specific mobile app. The app informs shoppers of specials available in a specific store on a particular date.

6. Same-day delivery. The grocery option is up and running in San Francisco.

What the heck does all of that have to do with strategy for furniture retailers?

Well, first of all, Walmart is selling a pretty decent chunk of furniture; that elephant in the middle of your marketplace is one of your competitors. Like it or not, it is. Next, the retailer is thinking strategically about its future, and that forecasting has its executive team looking ahead five years. What will the future look like for retail? For furniture retail? While the above specifics may not be specific to furniture, Simon hinted at other promising initiatives the retailer has cooking on its back burner. Adult beverages, fresh produce, Walmart Express AND, wait for it … home furnishings.

Much of what the retailer touches seems to turn to silver, if not gold. Strategic thinking is in its DNA. A lesson all retailers, including furniture dealers, should take to heart. Planning and thinking about and for the future are building blocks for success and longevity. Let’s get started on those and make the next five years in furniture retailing a success while we set the gears in motion for five and 10 years beyond.  

Happy High Point Market! We’ll see you there.