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From Home Furnishing Business

The Long Haul

Sourcing’s Logistics Remain a Challenge, But There Is Some Good News.

Whoever said “getting there is half the fun” sure didn’t have furniture in mind. Shifting source country dynamics, lead times and rising fuel costs make getting product to your store or warehouse among furniture’s—or any retailing’s—greatest challenges.

There’s some good news on that front. Ocean freight appears fairly stable this year, according to several observers of and participants in the logistics field.
“On the issue of freight increases, I haven’t heard from my members as far as ocean freight increases,” said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation. “I believe all of the companies completed their yearly rate negotiations a couple of months ago. We stay out of those conversations for obvious reasons. Any kind of increases such as the GRI (General Rate Increase) would have to be subject to what’s in their contract.”
Jack Hawn, president and CEO of Zenith Global Logistics, Conover, N.C., also believes retailers can anticipate no big pricing changes due to ocean freight costs.
“I don’t think we’re looking at any big rate increases,” he said. “Barring sea carriers getting together and doing something crazy, I don’t anticipate a big change in rates.
“The rates we’re getting are pretty much level. On the other hand, port charges seem to be creeping up, it seems they’re dinging you for every little thing; and while that’s outside of the rates, the customer still has to pay for it.”
While fuel surcharges can fluctuate, Ray Johnson, senior vice president, global supply chain for St. Louis-based Furniture Brands International, doesn’t see much cost impact this year for floating furniture across the Pacific. There might be some offsets in raw materials and other product costs, though.
“Labor, materials and overhead are the main costs, so people are still moving toward Vietnam and Indonesia because of these costs,” he said. “We have seen plywood up 25 percent-plus in price from last year, driven by new housing. Plywood costs are just now starting to come down. Leather is up due to excess demand, we see some slight pricing increases in fabric and some increases in packaging.”

Not so long ago, retailers could were sharing horror stories of losing slots on ships for their containers due to vessel capacity issues. Containers even were getting harder to come by.
Hawn noted that right now, there seems to be a fair amount of supply for both vessels and containers.
Gold at NRF agreed.
“I think the supply is adequate right now,” he said. “I don’t believe we’ll have the shortage issue that we had a couple of years ago where containers were rolled and bumped from sailings. Hopefully this is due in part to better communication between the carriers and their customers.”
Johnson at Furniture Brands said he sees retailers wanting to do more direct container shipping instead of warehousing product in the USA.
“When a retailer owns the shipping, it’s all their cost. But when retailers use mixed container shipping, maybe six to eight retailers might share a container and share the shipping costs,” he said. “It’s a great option for them and we have successfully executed this mixed container shipment for Broyhill for quite some time.”
Gold suggested that retailers should pay attention to regulatory and legislative efforts that could impact their supply chains.
“Retailers should always be aware of the potential issues impacting capacity and the movement of their merchandise,” he said. “Key to this is close relationships with their transportation providers in order to stay abreast of the latest issues.
“The continuing negotiation of the Transpacific Partnership Agreement is another issue retailers should continue to pay attention to as the negotiations near their conclusion before the end of the year,” Gold said.
The stated goal of that agreement is to enhance trade and investment among the partner countries, which include a burgeoning source for furniture, Vietnam, along with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and the United States.

EYES ON THE ROAD
Ocean freight might be holding steadier, but retailers should expect higher truck freight costs this year than in the past three or four said Ray Kuntz, CEO of furniture shipper Watkins-Shepard.
“We’re in the process of analyzing cost factors. We take a price hike once a year before the fall High Point Market, so our customers can count on a rate for the purchasing year,” he said. Most of our customers make purchase decisions for the next 12 months at October Market” so it’s for a shipping versus calendar year.
A recovering economy is carrying along some increasing costs.
“One of the biggest issues we’re facing from the cost side is equipment,” Kuntz said. “Trucks that cost $90,000 (a few years ago) might be $130,000 now. Tires have gone up dramatically, well over 10 percent.”
Truck maintenance expenses are up as well, especially when breakdowns occur away from a hub—as well as other costs.
“Whenever you have to get any parts or maintenance on the road, that’s gone up dramatically since the recession,” Kuntz said. We work out agreements to service our equipment regularly, but sometimes things happen unexpectedly in the field.
“Also, a lot of states are upside-down on their transportation budgets, so we’re seeing states increase fuel taxes and tolls.”
The absolute biggest issue for truck transport, though, is the driver situation, according to Kuntz.
“There’s a real shortage of drivers,” he said. “There weren’t many trained during the recession, and we have a lot of drivers over 60 who are looking to retire. … Everyone’s trying to keep up with the driver shortage. I’d expect in the next year, depending on where you’re looking, driver pay is going to go up 5 to 10 percent.”
Another freight-related issue for retailers to consider is the impact of changes to the Federal Motor Carrier Safety Act’s Driver’s Hours of Service regulations, which just took effect.
“This will certainly impact not only the flow, but the cost of getting goods to marker,” said NRF’s Gold.  “There are new requirements for the driver restart, including two consecutive nights off, which could impact delivery deadlines, especially if the retailers rely on nighttime driving.”
THE BRIGHT SIDE
There are things a dealer can do to counter that increasing cost of truck freight.
“It boils down to one truck making 10 deliveries is cheaper than 10 trucks making 10 deliveries,” Kuntz said. “If five dealers fill a trailer versus 15, I can get it unloaded in a day and travel fewer miles.
“Dealers should make sure to negotiate their own freight … If you have more than a couple of carriers coming to your store that’s probably costing you. Decrease your amount of carriers, and become more important to each carrier you work with.”
He also suggested that retailers not blindly accept vendors’ shipping preferences.
“Some dealers tell vendors to ship it however they want, but manufacturers have their own considerations,” Kuntz said. “The dealers needs to make sure they’re negotiating their own situation.”
Watkins-Shepard is still working on what rates it will bring to October High Point Market.
“We’re open to working with dealers to shrink that increase, or maybe even reduce the cost,” Kuntz noted. “Freight’s all about increasing revenue per drop, and to do that I can raise my rates or have more merchandise to deliver” on a drop.
Hawn believes the recession and slow recovery have retailers in a good position to handle logistics challenges.
“The way I see it, everyone’s gone through the tough times—if you’re still here, you’ll probably still be around,” he said. “Everyone’s cleaned up their act, their inventories are in check, and they’re much more cautious in their ordering. When they introduce a collection, they’ve done their homework, and they’re more confident it will sell. “I talked with a retailer in Texas who told me, ‘I have a bounce in my step again.’” HFB

Counter-Punching

With 13 stores, Spiller Furniture has buying power for a big selection at competitive pricing.

While most furniture stores were recovering from a recession that left cyclone-like devastation in its wake, Tuscaloosa, Ala.-based Spiller Furniture had a real tornado to deal with.
The April 27, 2011, storm left 52 dead
in the area and destroyed 12 percent of the city. It also wrecked the 13-store promotional furniture, appliance and electronics retailer’s nearby Alberta City location.
The retailer decided not to reopen that store. The tough
economy of 2008 to 2010 had forced Spiller to analyze all expenses and operations, and it already had closed some under-performing locations, trimming employment from a high of 175 to the 115 it has today.
Business is pointing in the right direction now.
“The past two years have been a steady growth of 5 to 8 percent in sales,” said Shane Spiller, the company’s third-generation president. “We are a much leaner operation now that operates with a core group of hard working employees.”
With 13 stores, the company has good buying power, and the ability to deliver quickly across a market that includes east central Alabama and eastern Mississippi. That, plus its own in-house credit terms, allows Spiller to make popular-price furniture accessible to a lot of people.
It’s turned out to be a strong niche.
“The customer has the ability to purchase using our relaxed in-house credit terms,” Spiller said. “We report the customer payment history to the credit bureaus, and it allows the customer to build their credit.
“Renting or leasing furniture does not allow the customer the ability to establish a credit history, and therefore they have nothing to show others their ability to pay their debts.”
As a regional chain, he added, Spiller Furniture has the purchasing power to provide a larger selection of merchandise to those customers; and a 60,000-square-foot warehouse to back quick delivery from any of its locations.    
THREE GENERATIONS & COUNTING
Spiller Furniture was founded 1948 by Shane’s grandfather, James E. Spiller  Jr., when he took a local moving company and slowly transitioned into a retail furniture store.
Spiller’s in-house installment credit was a fixture from the start, with most customers buying their furniture on credit.
“That business began to grow with route salespeople that would travel to local towns selling furniture and collecting on their accounts,” Spiller said. “New Spiller Furniture stores would be opened in towns where customer accounts were established.”

Currently, 75 percent of Spiller’s customers still rely on the retailer’s in-house installment credit.
The founder’s son, Mike Spiller, and his sisters, Jimmie, Nedra, and Joan all played a part in growing the business during the ‘60s and ‘70s. 
Mike Spiller, Shane’s father, became president in 1982 shortly before James Spiller passed.  He continued to lead the company until Shane was named president in 2004. 
Like many younger-generation retailers, Shane Spiller got an early start in the business.
“I started pushing a broom when I was 12, and worked summers and any time I was on break from school,” he said.
During those years, Spiller worked in a variety of areas in the business, in the warehouse, stocking, and then the sales floor. After graduating from the University of Alabama in 1995, he moved into inventory control, where he worked until succeeding his father as president in 2004.

FAMILY FRIENDLY TOUCH
Spiller Furniture strives for a consistent atmosphere at all stores, one that focuses on value-priced home furnishings and that’s welcoming to families shopping together.
Advertising promotes a friendly, family atmosphere for customers and employees, and the retailer makes that part of the store experience.
“When someone comes in the door, the person who greets them is representing the Spiller name, so I want a relationship with employees that will roll over to the customer,” Spiller said. “We have a children’s section in the stores where they can play while their parents shop, and where the parents can be comfortable leaving their kids.”
Television advertising and social media reinforce that family friendly message.
“We personally promote the business with me and my three sons (10-year-old twins Mike and Mac, and 5-year-old Major) telling about the current sales event,” Spiller said. “Our tag line is ‘Big Selection, Friendly Service, and Credit, Credit, Credit!’”
Television is one important vehicle. Another is the circular program, which Spiller Furniture does through “married mailings,” that is, combined with other pieces to get the cost down.

FOCUS ON VALUES
The recession forced Spiller Furniture to take a hard look at its business. Part of that process included hiring an interim CFO who introduced the retailer to the Entrepreneurial Operating System, a concept based on the book “Traction” by Gino Wickman.
EOS led to the establishment of Spiller’s Core Values, which provide a basic road map for everyone in the company.
Spiller’s six Core Values are: Dedicated and Committed; Is Accountable; Takes initiative; Does the Right Thing; Open and Honest; and Good Attitude.
“All organizations have their core values,” Spiller said. “These core values just need to be uncovered and communicated to all.”
The company started EOS at the beginning of 2012, so it’s been in place for 18 months.
“We have quarterly meetings where we set our 90-day goals—we call them ‘rocks,’ you know, ‘move the big rocks first’—and we have weekly management meetings,” Spiller said. “Right now we’re instituting weekly meetings at the store level, so the stores will all be on the same agenda. It makes sure we have the issues on the table.”
The values also have given the retailer consistent guidelines for hiring, firing and evaluating employees; and a framework for keeping everyone moving in the right direction. That’s especially important moving forward since Spiller Furniture runs a lot leaner than before, and if someone’s not pulling their weight, problems come up in a hurry.
The values are an all-or-nothing proposition for everyone at Spiller Furniture.
“If a particular employee doesn’t have one of the core values, we can do something,” Spiller said. “You get judged on those values three ways—you have it, you’re on the fence, or you don’t have it.
“If you don’t have it, we’ll counsel—there might be something going on at home and we’ll work with you—but you have to understand this is a business, and we need you to get on the bus.” HFB

From the Editor : A Changing Tide

No one ever said change was easy. In fact, for most, it’s human nature to resist change. We tend to get comfy and cozy with the status quo. At least until the status quo becomes so static and uncomfortable that we’re eager for a few changes. Then, look out because we’ll go searching for a better way.

Surely by now you’ve heard our news about Home Furnishings Business being acquired by Impact Consulting Services of Atlanta. If not, I’ll write it off as it being summer and vacations and the ever-revolving market cycle our industry has us plowing through. That’s a wee bit of change for the team here at the magazine; a change of which we’re all very welcoming.

Personally, I’ve known Bob George, the owner of Impact Consulting, for close to 20 years, which is when I first joined this crazy industry as a reporter. He and I have been sparring through interviews for years. He has great stories to share of our many conversations and the information gleaned; just ask him!

We’re still working to tie all of the loose ends together of, but once those are knotted, our readers can look forward to a more powerful, more informative read from Home Furnishings Business both in print and online. Due to our quick publishing schedule in July, we weren’t able to implement some of the enhancements we’ve got tucked up our sleeves. Here’s promising some beefed-up reporting and storytelling coming your way in September.
One noticeable change we were able to turn around for this issue was a beefed up version of “What Sells” on page 37. We’ve taken industry statistics and data that Impact’s FurnitureCore has gathered on the youth furniture market and combined the data with what retailers tell us are they’re top-selling items. The figures and data—information we didn’t have access to prior to our June buyout—make for a more powerful feature packed with useful information for our readers.
Look for more meatier “What Sells” features in future issues. This will become our footprint for the department.
The breadth of information available through FurnitureCore is mind-boggling. While the HFB team doesn’t have complete, unfettered access to the data available on FurnitureCore, we’re excited about the industry information we will be able to use to inform you. Our mantra has long been to provide useful insight into the industry to help our readers improve their businesses. That will not change.

You should know that I am still trying to convince Bob that more sharing of data is the better way to go. So far though, he’s not buying it!
The other aspect of information sharing that has me giddy is the ability FurnitureCore has to tap into the consumer and what she wants and needs from her home furnishings and the shopping experience. How darn cool is that?!? We’ll be able to field questions to your end consumer.
Home Furnishings Business has a fun, bright future ahead, and as always, I look forward to your input and your part of the industry’s conversation.
Enjoy!

 

Publisher's Letter : Why a Magazine?

Let’s get that question behind us. Simply put, the mission of the Impact Consulting group of companies is to integrate information into the management process of furniture retailers and manufacturers in order to create high performance companies.

We have accomplished our mission through management consulting (Impact Consulting), market research (FurnitureCore.com), performance groups (Impact Performance Groups), industry reports (Impact Reports), and now publishing (Home Furnishings Business). The acquisition of Home Furnishings Business will complete the spectrum of information delivery. The following graphic illustrates:

What is the Objective?
First, Home Furnishings Business will continue its commitment to journalistic integrity by publishing an unbiased perspective of what is happening in the industry.
What will change is the depth of our discussion. Our masthead has been changed slightly from “Strategy for the Furniture Retailer” to include all industry participants.

The fine line between manufacturer and retailer has increasingly blurred.
Next, using our proprietary industry databases and models, we will address the strategic issues facing the total industry. In order to frame the issues, we ask for participation from the industry—retailers, manufacturers, and suppliers. We will supply the research. Our mission is to initiate a true dialogue within the industry, and we invite you to be a part of this dialogue.

What is the Publisher’s Role?
A publisher’s role is not unlike that of a president of a company or a managing partner of a consulting firm.

In the case of a magazine, it encompasses the responsibility for all aspects of the periodical from creating content to transmitting the product via print or the Internet all within the parameters of generating a return on investment. Overlaying all of this is a commitment to pursuing a mission within the parameters of a code of ethics.

This is our pledge to our readers. We are confident that this commitment long term will be the foundation of our success.

As always, we ask for your input. Teaming our readers’ input with our industry knowledge and analysis will allow us to continue building a strong industry publication.

Do not hesitate to contact me with your comments. My e-mail address is bobgeorge@homefurnishingsbusiness.com.

Counter-Punching

With 13 stores, Spiller Furniture has buying power for a big selection at competitive pricing.

While most furniture stores were recovering from a recession that left cyclone-like devastation in its wake, Tuscaloosa, Ala.-based Spiller Furniture had a real tornado to deal with.
The April 27, 2011, storm left 52 dead
in the area and destroyed 12 percent of the city. It also wrecked the 13-store promotional furniture, appliance and electronics retailer’s nearby Alberta City location.
The retailer decided not to reopen that store. The tough
economy of 2008 to 2010 had forced Spiller to analyze all expenses and operations, and it already had closed some under-performing locations, trimming employment from a high of 175 to the 115 it has today.
Business is pointing in the right direction now.
“The past two years have been a steady growth of 5 to 8 percent in sales,” said Shane Spiller, the company’s third-generation president. “We are a much leaner operation now that operates with a core group of hard working employees.”
With 13 stores, the company has good buying power, and the ability to deliver quickly across a market that includes east central Alabama and eastern Mississippi. That, plus its own in-house credit terms, allows Spiller to make popular-price furniture accessible to a lot of people.
It’s turned out to be a strong niche.
“The customer has the ability to purchase using our relaxed in-house credit terms,” Spiller said. “We report the customer payment history to the credit bureaus, and it allows the customer to build their credit.
“Renting or leasing furniture does not allow the customer the ability to establish a credit history, and therefore they have nothing to show others their ability to pay their debts.”
As a regional chain, he added, Spiller Furniture has the purchasing power to provide a larger selection of merchandise to those customers; and a 60,000-square-foot warehouse to back quick delivery from any of its locations.    
THREE GENERATIONS & COUNTING
Spiller Furniture was founded 1948 by Shane’s grandfather, James E. Spiller  Jr., when he took a local moving company and slowly transitioned into a retail furniture store.
Spiller’s in-house installment credit was a fixture from the start, with most customers buying their furniture on credit.
“That business began to grow with route salespeople that would travel to local towns selling furniture and collecting on their accounts,” Spiller said. “New Spiller Furniture stores would be opened in towns where customer accounts were established.”

Currently, 75 percent of Spiller’s customers still rely on the retailer’s in-house installment credit.
The founder’s son, Mike Spiller, and his sisters, Jimmie, Nedra, and Joan all played a part in growing the business during the ‘60s and ‘70s. 
Mike Spiller, Shane’s father, became president in 1982 shortly before James Spiller passed.  He continued to lead the company until Shane was named president in 2004. 
Like many younger-generation retailers, Shane Spiller got an early start in the business.
“I started pushing a broom when I was 12, and worked summers and any time I was on break from school,” he said.
During those years, Spiller worked in a variety of areas in the business, in the warehouse, stocking, and then the sales floor. After graduating from the University of Alabama in 1995, he moved into inventory control, where he worked until succeeding his father as president in 2004.

FAMILY FRIENDLY TOUCH
Spiller Furniture strives for a consistent atmosphere at all stores, one that focuses on value-priced home furnishings and that’s welcoming to families shopping together.
Advertising promotes a friendly, family atmosphere for customers and employees, and the retailer makes that part of the store experience.
“When someone comes in the door, the person who greets them is representing the Spiller name, so I want a relationship with employees that will roll over to the customer,” Spiller said. “We have a children’s section in the stores where they can play while their parents shop, and where the parents can be comfortable leaving their kids.”
Television advertising and social media reinforce that family friendly message.
“We personally promote the business with me and my three sons (10-year-old twins Mike and Mac, and 5-year-old Major) telling about the current sales event,” Spiller said. “Our tag line is ‘Big Selection, Friendly Service, and Credit, Credit, Credit!’”
Television is one important vehicle. Another is the circular program, which Spiller Furniture does through “married mailings,” that is, combined with other pieces to get the cost down.

FOCUS ON VALUES
The recession forced Spiller Furniture to take a hard look at its business. Part of that process included hiring an interim CFO who introduced the retailer to the Entrepreneurial Operating System, a concept based on the book “Traction” by Gino Wickman.
EOS led to the establishment of Spiller’s Core Values, which provide a basic road map for everyone in the company.
Spiller’s six Core Values are: Dedicated and Committed; Is Accountable; Takes initiative; Does the Right Thing; Open and Honest; and Good Attitude.
“All organizations have their core values,” Spiller said. “These core values just need to be uncovered and communicated to all.”
The company started EOS at the beginning of 2012, so it’s been in place for 18 months.
“We have quarterly meetings where we set our 90-day goals—we call them ‘rocks,’ you know, ‘move the big rocks first’—and we have weekly management meetings,” Spiller said. “Right now we’re instituting weekly meetings at the store level, so the stores will all be on the same agenda. It makes sure we have the issues on the table.”
The values also have given the retailer consistent guidelines for hiring, firing and evaluating employees; and a framework for keeping everyone moving in the right direction. That’s especially important moving forward since Spiller Furniture runs a lot leaner than before, and if someone’s not pulling their weight, problems come up in a hurry.
The values are an all-or-nothing proposition for everyone at Spiller Furniture.
“If a particular employee doesn’t have one of the core values, we can do something,” Spiller said. “You get judged on those values three ways—you have it, you’re on the fence, or you don’t have it.
“If you don’t have it, we’ll counsel—there might be something going on at home and we’ll work with you—but you have to understand this is a business, and we need you to get on the bus.” HFB