From Home Furnishing Business
Not a month goes by that another retail concept announces an assault on the traditional furniture supply model. The recent announcement is that Amazon is planning four major distribution centers to serve its anticipated expansion into furniture in order to increase its retail presence. This move on top of the major discount retailers of Target and Big Lots indicate their future stores will have a focus on home furnishings.
This constant evolution of the furniture supply model is not new. In 1886 the upstarts, Richard Sears and Alvah Roebuck, created a mail order company to compete with the general stores in the hinterlands whose model was limited selection and significantly higher prices. While less of a presence today, it has lasted for 131 years.
Innovative concepts have always been part of the landscape. For example in Lebanon, Pennsylvania Richard Levitz introduced a concept that evolved into a national chain that pioneered the “furniture warehouse” concept. This concept expanded for nearly 100 years before liquidation because the consumers wanted to see furniture displayed in “vignettes” in order for them to envision how the furniture would look in their homes.
While there are tantalizing announcements, such as furniture on demand produced from 3-D printers, there are two considerations required when exploring changes to the furniture distribution model. The first is the cost to conceive and deliver to the consumer a product that meets their demands. The second is the ever-changing demands of the consumer – and this is the most important. The fickle consumers are fast to embrace a new concept that they believe will address their perceived shortfall in the current model, only to abandon when the new model doesn’t address another need.
Top quartile retailers are continuously analyzing their financial performance in order to discover ways to increase the bottom line. However, as can be seen from the following article, these improvements are incremental. Major profit improvement can only occur with changes in the total business model. The accompanying table presents the major cost components comparing the traditional model to those that are currently challenges to the status quo.
Furniture Brands International, using the manufacturing vertical concept, was poised to capitalize on its consumer brands by opening, with retail partners, focused stores under distribution agreements. Financial difficulties halted that strategy. However, Ashley Home Store, founded in 1997, had prospered with this concept. It now has over 450 locations in North America with over $3 billion in sales.
This model has the potential for changing the traditional industry model. Financially, it reduces the expense of selling/marketing to retailers since the dealers are captive to the manufacturers. Interestingly, the manufacturing direct concept challenges the perception that the consumer will not wait for delivery. The dealer maintains little inventory at its warehouse. It is only a cross dock transferring to delivery trucks for the consumer. The major challenge is the percentage of consumers who will wait the 20-30 days for delivery when competition is offering same-day delivery.
The manufacturing vertical model relies on the local dealer to execute a local advertising plan supported by a national advertising campaign. This approach, in total, is a more efficient expenditure executed at a higher level of professionalism.
The store footprint of around 30,000 square feet reduces the occupancy cost of display. At this point the lack of selection is not a negative to the younger consumer who prefers a more curated presentation that supports their busy lifestyle.
The challenge is that this model must conform to the perceived retail experience of the consumer, an experience that is constantly changing based upon research from Impact Consulting Services, parent company of Home Furnishings Business. These are the major factors.
While the potential exists to reduce costs which can translate into higher profits or lower prices, the increased risk of relying on a single manufacturer to consistently satisfy the consumer’s perceived needs.
The emerging etailers, using ecommerce as the way to distribute furniture, are challenging the retail sector of the traditional furniture model. Eliminating the brick and mortar of the traditional furniture retailers and utilizing their web presence to entice the consumer to purchase is still a challenge. The need for the consumer to experience the product before making a major purchase is important to most consumers. However, they have still captured 15-17% of total furniture sold.
The need to provide white glove delivery has been a significant expenditure when compared to local delivery by the brick and mortar retailer. To overcome this factor etailers, such as Wayfair, are establishing their own warehousing/delivery infrastructure. While more cost competitive, can it provide the service levels expected by the consumer?
The discount chains are just developing their furniture strategy. Their major opportunity for cost reduction is in the sales process. Relying on consumer-to-self sell will be an interesting experience. While acceptable for bar stools and less expensive product categories, will it translate to more expensive products? It has worked in apparel for all except the premium price points. The integration of the furniture product category into the already-established warehousing/distribution system is the next opportunity for cost reduction.
While new concepts are always exciting, what about the existing traditional model? We have discussed several over the last decade, but have failed to execute. For example:
Suppliers’ prices include delivery, not just the containers, but also small lots.
Delivery directly to the consumer, competing with the etailers.
Suppliers assuming responsibility for communicating to the consumer the uniqueness of their products and relying on retailers to communicate price/value and service.
I could go on, but why don’t we “whiteboard it.” Let’s make existing models
Traditional furniture stores, feeling the relentless pressure from online retailers as well as local competition from vertical manufacturers, warehouse price clubs, and discount superstores, are scrambling to maintain market share. As the furniture industry in total experienced slow growth last year, traditional furniture stores subscribing to an online performance application developed by Impact Consulting Services, parent company of Home Furnishings Business, took baby steps to improve their profitability, eking out minor improvements wherever possible. These are retailers actively involved in managing their businesses. Net income for this group increased only slightly from 3.7 percent in 2015 to 4.0 percent in 2016. Meanwhile, the total furniture and bedding industry slowed growing 3.0 percent 2015 to 2016. (Figure A)
This is the fourth report on Performance Metrics for Furniture Retailing providing a comprehensive look at financial performance in the home furnishings industry via comprehensive data collected throughout the year by Impact Consulting Services, parent company of Home Furnishings Business. 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 retailer’s numbers are shared, only composite percentage results. (See methodology for additional criteria used in the retail metrics report.)
The focus of this article’s financial comparisons is two-fold. Results are provided for all participants and reflect the performance of the entire sample compared to last year. In addition, the top quartile results are presented in four retailer size segments for performance comparisons based on revenues – under $5 million, $5 million to $25 million, $25 million to $100 million, and $100 million and over. The top quartile includes the top 25 percent in performance. It should be noted that retailers participating in FurnitureCore’s Best Practices application are retailers focused on improving their company’s performance and does not reflect the industry in total.
The sales ranges not only reflect size of retailer, but in turn the differing operational characteristics the company size brings to profitability. The under $5 million retailers are the surviving Mom and Pops who have developed niches and strategies for staying in business. Retailers with sales $5 million to $25 million have often emerged from Mom and Pop stores and are usually very owner-focused in operations. The larger $25 to $100 million retailers may also reflect similar ownership, but have also developed more tiered management operations adding professional managers, for example in warehousing/delivery functions. The largest sales group, the over $100 million retailers have accounting practices that are often driven by tax strategies.
The overall financial performance of all participants is shown in Table 1. Each portion is further compared to the top quartile in each size segment with more in depth analysis.
Overview of Key Performance Indicators
After a hefty improvement in financial performance in 2015 among the traditional retailers that comprise the statistics in this report, retailers showed only a slight improvement in net income in 2016, up from 6.4 percent to 6.8 percent total. Lacking a clear strategy going forward to combat the pressures from the e-tailers and alternative distribution channels, all areas of the P&L held steady with the only slight improvement being a 0.4 percent improvement in cost of goods sold.
Table 2 gives an overview of key indicators – gross profit, sales expense, general & administrative expense, net operating Income, and credit expense. Last year produced very little improvement in any of these areas. However, the importance of controlling all facets of the business is reflected in the higher performance level of the top quartile retailers compared to all participants. And while these top retailers did slightly better at controlling cost of goods sold, significant to their success was their reduction in sales expense and general and administrative expense compared to the group. Sales expense is comprised mostly of sales force compensation, advertising, and warehouse/delivery expense. The biggest chunks of G&A are occupancy costs (rent/lease) 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 fabric/leather protection, and delivery income (Figure B). The needle moved very little last year compared to 2015 in all of these areas.
Returns: Merchandise returns (Figure B) represent about 1.3 percent of total revenue for the group, about the same as last year. (Note: Historical 2015 data has been revised from previous reports.) Smaller retailers tend to handle many of 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 often an important profitability component for traditional retailers, with the exception of upper to premium dealers, who often consider it a negative. This income usually represents around 3 percent of total revenue, regardless of retailer size, and was essentially flat in sales growth over last year.
Delivery Income: Free delivery (Figure B) has become the expectation of consumers in all retail outlets, and this is especially true for smaller retailers. The best performing companies have still been able to offset this expense as delivery income as a percent of revenue continues to slowly decline. Larger retailers are able to offset this expense at nearly double the rate of smaller companies.
Cost of Goods Sold
An improvement in cost of goods sold for the retailer is accomplished by either “buying better” or simply not having to discount its merchandise so heavily. The total group did neither last year seeing less than 0.5 percent improvement – 51.5 percent COGS in 2016 compared to 51.9 percent the previous year. Larger companies over $100 million outperformed their smaller counterparts; however, no size segment saw much change from the previous year. (Figure C)
With little improvement in COGS, gross profit also saw only minor growth as well. For all participants, gross profit grew only slightly from 48.1 percent of revenue in 2015 to 48.5 percent in 2016. Top quartile performers among all sales ranges reached gross profits of 51 percent, except for the size range $25M to $100M who as a group struggled to keep up with the entire group at 48.2 percent GP. (Figure D)
The furniture industry’s gross margin is the envy of many retail sectors. Some vertical furniture retailers enjoy higher margins due to their direct sourcing models while electronics and appliance margins can run in the teens. With such healthy margins, why does the furniture industry make so little profit? Tracking how much of it the industry spends on selling the product and running the business brings these low profits into focus.
A significant 23 percent to 24 percent of revenue is spent on selling expenses (Figure E), and this figure has remained constant last year over the previous 2015. This is the cost of attracting the consumer to the store (advertising), converting that consumer to a purchaser by trained personnel (sales) and successfully delivering that product to the consumer’s home (warehouse/delivery).
Advertising Expense: The cost of promoting product has also remained constant at about 6 percent of revenue (Figure E). Except for very small firms under $5 million in sales, the top quartile companies in profitability held their advertising costs to about 4.3 to 4.5 percent. Advertising channels may differ by size of retailer where larger retailers will use more broadcast/air channels while smaller retailers rely heavily on print media, but the cost results are similar. Very small Mom and Pop retailers are increasingly required to spend more on advertising to attract customers with the top quartile of these small dealers spending around 7 percent of revenue. 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. (Figure E).
Sales Expense: The largest component of selling expenses is the cost of the sales associates, along with the cost of managing and motivating them. Included in sales expense (Figure E) is the sales associates’ commission, as well as sales management, bonuses/contests and similar activities. Overall, sales expense runs about 9.2 percent of revenue. Last year these costs were consistent across the sales ranges for the Top 25 percent of each group.
Warehouse/Delivery/Service: The “after the sale” cost of warehouse/delivery/service is also a significant cost to the retailer. Last year these expenses totaled 6.9 percent of revenue similar to the previous year (Figure E). Often a retailer’s upfront performance is negated by the backend if the retailer is unable to manage it correctly. Many midsize traditional retailers are now outsourcing this function in an effort to bring this cost down.
Store Sales Expense: A small but important selling cost, store sales expense, averages 1.8 percent of sales for the total group. For the most part, top quartile companies do a better job controlling these expenses. Larger companies over $25 million do the best job, spending under 1 percent of revenue on store sales expenses (Figure E). Retail technologies exist to eliminate the sales counter which can cost one percent or more, but can negatively impact the consumer’s excitement for the furniture purchase.
General and Administrative Expense
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 and generally vary significantly by the size of the retailer. (Figure F).
Information Systems: Technology costs are staying well under 1 percent for the total group as well as the best performing retailers (Figure F). Even smaller retailers are embracing the implementation and ongoing maintenance of systems necessary to run a business smoothly understanding these systems 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: Costs for keeping the doors open ran 7.7 percent of revenue for the total group last year, only slightly higher than last year. The best performing companies enjoy occupancy costs around 5 to 6 percent (Figure F). And while very large retailers over $100 million often have the upper hand with the ability to secure the best locations, real estate rents are escalating in prime areas with the top quartile of these high volume companies averaging 9.1 percent in occupancy. Consumers are increasingly 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 is management salaries along with bonuses, professional fees, and insurance. Overall administrative fees can total 8 percent to 10 percent of revenue on average for all retailers. Top quartile small Mom and Pop stores run higher at over 10 percent. Larger retailers over $25 are keeping their salaries down to 7 to 8 percent (Figure F). The high cost of hiring managerial positions is often a difficult decision but can often 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 2 percent to 4 percent of revenue for the top quartile regardless of size and 3 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. But in our experience, less than 30 percent of consumers opt for offered credit promotions.
Net Income (Percent of Revenue)
After deducting an average of 0.3% of revenue resulting from other income and expenses, including insurance and taxes, net income crept up to 4.0 percent in 2016 for the total group, up from 3.7 percent in 2015. For the top quartile in each size range, small improvements in all areas of cost of goods sold, sales expense and general and administrative expense added up to much higher net income for these top performers. Depending on company size, net income reached 8 percent to 12.4 percent among the top 25 percent. (Figure H)
The slow growth in the furniture industry this year is reflected in the flat financial performance of traditional furniture retailers. And lacking any new strategic direction to combat the onslaught from online retailers and other local distribution channels, management in these active and performance-focused companies realize they have their work cut out for them. 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. 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 indicate slow but steady growth, many retailers are achieving exceptional results. We challenge you to be one of those. Home Furnishings Business is committed to providing input to your process.
By Larry Thomas
As wood furniture manufacturing began moving offshore in earnest in the early 2000s and the industry became more price-driven, producers of solid wood furniture probably felt like Clara Peller, the snarky senior citizen who starred in ads for Wendy’s in the early 1980s.
A frustrated Peller became famous for asking, “Where’s the beef” when she ordered a burger from Wendy’s competitors. And solid wood producers became frustrated as they lost market share to wood furniture companies using particle board, plywood, MDF and a variety of other engineered woods.
“The term ‘solid wood’ was stretched and pushed in so many directions that is simply meant that it wasn’t hollow,” said Gat Caperton, president of solid wood producer Gat Creek Furniture. “Almost anything qualified as solid wood. It lost its cachet with consumers because the term wasn’t a very believable term.”
But after a decade in the doldrums, Caperton and other players in the category say solid wood is regaining its mojo.
“Clearly, there’s a consumer out there who not only appreciates, but is seeking out solid wood furniture,” said Max Dyer, vice president of marketing for La-Z-Boy Casegoods, which includes the solid wood Kincaid line. “The consumer is gravitating toward all things authentic and genuine … more than I’ve ever seen before.”
And Dyer said that desire for authenticity gives brands such as Kincaid an opportunity to shine.
“There’s an upside for the industry by telling the story and explaining the construction,” he said. “That would benefit not only the consumer, but also the retailers and the manufacturers. It’s an opportunity for our industry to offer better products and educate the consumer.”
Caperton agreed with that sentiment, but said education also is necessary for retailers.
“Four or five years ago, if you told a retailer you were a solid wood manufacturer, they would say, ‘I don’t care. It’s wood.’ But we’ve come off that trend today,” Caperton said. “Solid wood is starting to be a nice point of differentiation to the consumer as a higher-quality product.”
So just how much room is there for solid wood furniture to grow? That’s hard to quantify because no one seems certain of the size of the category.
Dyer, for example, said retailers typically devoted about 30% of their case goods slots to solid wood when he worked in furniture retailing in the 1990s, but he thinks it has dropped to around 5% today. Tom Inman, president of the trade group Appalachian Hardwood Manufacturers Inc., thinks it’s closer to 10% to 12%, but admits that’s an educated guess.
“But I can tell you that it’s growing,” Inman said of the category. “At the last four High Point Markets, there has been more solid wood in showrooms than we’ve seen in a long time, especially at the middle and upper-middle price points.”
But regardless of the category’s current size, Inman agreed that there’s still plenty of room for growth, which is music to the ears of the members of his organization.
And the customers of his members – furniture manufacturers – seem to agree. Caperton, for example, said Gat Creek’s business has improved to the point where the company has been adding workers at its West Virginia factory recently, while Virginia-based producers Bassett Furniture and Vaughan-Bassett have successfully launched solid wood lines to their product mix in the past two years.
Bassett’s solid wood success has come with its BenchMade line of custom dining tables, while Vaughan-Bassett has had noteworthy success with its Artisan & Post line of solid wood bedroom furniture. And Vaughan-Bassett is hoping to build on that success with a solid wood dining line that was rolled out at the April High Point Market.
The April market also saw a major solid wood rollout from Tennessee-based Cresent Fine Furniture, whose solid wood line currently is made at two factories in Vietnam. But the latest addition, a custom dining program, will feature products assembled and finished in Tennessee using “whitewood” components made in Vietnam.
“We believe that our years of expertise in solid wood manufacturing, sourcing and environmentally-friendly finishing will show in the excellent quality and value of the BenchMark dining selections,” said Taylor Condra, Cresent’s president and chief operating officer, noting that the company produced its entire line in Tennessee until 2006. “We still have the spray booths in place, and many of our employees have been with us ten to 20 years or more.”
Although the exact size of the solid wood market remains unclear, research by Impact Consulting Services, parent company of Home Furnishings Business, bolsters the assertion that consumers are beginning to appreciate solid wood and are willing to pay for it.
In a recent survey, 62% of consumers said solid wood was either “important” or “very important” in the purchase decision, and fully one-third of them (33%) said they are willing to pay up to 10% more for their purchase if they know it’s solid wood.
Another 21% said they would be willing to pay 10% to 20% more, while 17% said they would be willing to pay 20% to 30% more for solid wood.
That didn’t surprise Greg Harden, president of upstate New York-based Harden Furniture. He said his company’s market research “shows that the percentage of consumers who prefer solid wood is significantly higher than the amount of solid wood sold in the industry. That suggests we should be realizing some opportunities.”
Harden, whose company targets the upper-end of the market, said a demographic group that should be targeted by solid wood producers is called Henrys – High Earners Not Rich Yet.
“They want products made in America, and they want products that have been touched by the hands of craftsmen,” Harden said. “They can really relate to that.”
Caperton agreed, but added that marketing a solid wood collection as “heirloom” probably won’t be effective with Millennials, despite their appreciation of quality and authenticity.
“Heirloom is a tough story today with Millennials,” he said. “We just have to communicate that solid wood is more durable and more resilient. It feels like it has a little more quality when it’s a solid wood piece versus something that’s made from MDF.”
And MDF is something that won’t be found anywhere near Gat Creek’s factory.
“We only know MDF by its initials,” Caperton quipped. “We wouldn’t know what it looks like.”
Borkholder Furniture’s Madera
Introduced less than a year ago, this poster bed quickly became a best seller. Shown here in an almond finish, the bed initially is sandblasted to open the grain pattern, and then taken through a 12-step finish process by Amish artisans. This complicated process captures the beauty of the grain and all the nuances of solid wood.
Conrad Grebel’s New Haven
This contemporary solid ash bedroom group features a premium catalyzed varnish finish for ultimate wood protection. Dresser and nightstand drawers have full-extension drawer glides, fully-dovetailed drawers and drawer bottoms that are 3/8-inch thick. Made by hand by Amish and Mennonite craftsmen, it has an approximate retail price of $3,336 in queen.
Cresent Fine Furniture’s Gunnison
Featuring casual transitional styling, this solid poplar best-seller is highlighted by soft rounded corners on the clean-lined case pieces, and functional touches such as a drop-front media drawer in the dresser and a power strip with two USB connections in the nightstand. It is shown here with the optional cedar-lined storage drawers on the sleigh bed.
Durham Furniture’s Cascata
With a nod to mid-century modern design, this solid cherry bedroom collection draws on a design balance between classic Italian elegance and modern creativity. The symmetrical curves of concave drawer fronts and sides are defining design elements. Accented by minimalist nickel hardware, the flowing curves showcase the cherry wood grains.
Gat Creek Furniture’s Alison
This top-selling bed, which is available in twin, full, queen, king, and California king sizes, coordinates with the 13-piece Sabin bedroom collection. The bed and the case pieces are made-to-order and are available in 66 finishes in solid cherry or maple.
Home Trends & Design’s Casablanca
Bringing a sense of timeless sophistication and old world charm to the dining area, this best-seller is made entirely from reclaimed Neem wood. Each exquisite piece features a durable frame-and-panel design with handcrafted details such as hand-turned pedestals and a hand-hewn inlay. This X-pattern inlay, combined with the solid wood construction and antique-rubbed lacquer finish, represents the master craftsmanship of this collection. Approximate retail price is $2,290.
Harden Furniture’s Live Edge
A sweeping V-shaped table leg highlights this best-seller from the Live Edge collection. Shown here in solid curly maple, it also is available in solid cherry, walnut or wormy maple. The starting retail price is about $8,599, but can vary depending on the customization options.
MacKenzie-Dow Fine Furniture’s Cascadia
Inspired by the Pacific Northwest, this end table, part of a three-table collection, is made of solid Appalachian black cherry and solid American steamed black walnut. Besides the organic look and feel, the design focus is the grain of the lumber "flowing over" the sides of the table, which is a tribute to the many waterways found in this area of the country. Approximate retail is $2,397.
Minnick Wood Products’ Luberon
Named after a French province, this dining set is made of solid oak harvested in France and featuring classic Italian craftsmanship. Highlights include dove-tailed drawer construction, spring-loaded stoppers, and hinges made of iron in a vintage look. The table top is 3.75 inches thick, and the serving cart comes with an Italian marble top as a cutting board.
New Ridge Home Goods’ Beaumont
Combining the quality of solid wood with the price points of RTA furniture, this solid birch shelf features modern cottage styling. Designed to fit into space-challenged spaces, it is available in six water-resistant color finishes. Approximate retail price is $100.
Simply Amish’s Wildwood
From the Modern Farmhouse collection, this canopy bed and nightstand highlights meticulously crafted mitered edges, refined scale, and a balance between modern and masculine design. Made of solid cherry, the bed retails for about $4,400 in queen, and the matching nightstand retails for about $1,410.
Vaughan Bassett’s American Maple
Part of the Appalachian Hardwood line, this hot-selling solid maple collection features French dovetail drawers and a smooth acrylic finish on the interior drawer sides and bottom. The collection includes two beds in natural maple, cherry, rustic white and grey finishes. The bed, dresser, mirror and nightstand retail for $2,199.
BY Trisha McBride Ferguson
While cocktail ottomans are gaining popularity as the place of choice for consumers to prop their feet or lay the remote, there’s no shortage of growth in the occasional table marketplace. From traditional to modern to farmhouse, today’s table styles help tie a room together while offering both fashion and function. No longer limited to identically matched sets of cocktail, end and sofa tables—consumers and designers are creating curated looks using carefully chosen tables to set a unique design aesthetic.
In 2015, occasional tables accounted for $3.3 billion in sales, a 5 percent increase when compared to sales of $3.17 billion in 2014. Sales growth in the category from 2013 to 2014 was notably lower at just 2.8 percent. In the overall home furnishings market, the occasional category accounted for 18.1% of total industry sales last year.
Greenington’s Rosemary Coffee Table
Edgy and eco-friendly, this coffee table is crafted of 100-percent solid bamboo. Its sophisticated lines reflect Mid-Century Modern influences. Suggested retail is $672.50.
Ferris Coffee Table NBWY-007 from Four Hands
The clever interplay of thick peroba wood slabs creates a modern take on the modular cocktail table. Its thoughtful design allows expansion from 48” to 76” wide. Suggested retail is $1,930.
Vanguard Furniture’s G231C Norma Cocktail Table
Part of its Barry Goralnick Collection, the Norma Cocktail Table features a metal base crafted in a French Brass finish. Its inlaid Agaria Marble Top adds both luxury and organic appeal. Suggested retail is $2,997.
Magnussen Home’s Bellamy T2491
Modern meets traditional in this stylish cocktail table crafted of pine solids and featuring brass hardware with a pewter overlay. Its classic scroll design gives it a timeless quality. Suggested retail is $
Stein World’s Vincent Cocktail Table 331
A table with a point to make, Stein World’s Vincent occasional group features a solid, inverted triangle-shaped base. It’s crafted in a mahogany tone finish and has a wood-framed glass shelf.
Ashley Furniture’s Traxmore Table T766-1
Wood and metal combine to create this unique cocktail table. Casual, medium-brown pine table tops feature removable wood serving trays and are supported by a slanted black metal base crafted from tubular steel and finished in a dark, textured, powder-coated finish.
Circles Cocktail Table from Hickory Chair
Inspired by an artifact on display in the collections of the New Mexico History Museum, this Made to Measure cocktail table is rich with historic influences. Its straight lines and clean silhouette give a nod to Arts & Crafts styling. Suggested retail is $3,225.
Klaussner’s Shoal Creek Cocktail Table
This multifunctional cocktail table is all about keeping clutter contained. It features a lift-top storage feature on one side and drawer storage on the other. Antique pewter metal legs and an “X” metal stretcher complement a light gray, ash finish and U-shaped drop bail pull hardware. Suggested retail is $
Jofran’s Beacon Street Cocktail Table 1649-1
Offering a new twist on a classic shape, this slatted-shelf cocktail table boasts a warm, multi-toned finish over solid acacia. It’s complemented by coordinating end, sofa, and chairside tables. Suggested retail is $199.99
Stickley Furniture’s 2016 Collector Edition Console
Equally at home in the foyer, living room or dining room, this console boasts dark copper hardware and three inlays made with sycamore, maple, cherry, makore, magnolia, and bird’s eye maple. Also includes back panel wire access cutouts and a power strip.
A.R.T. Furniture’s Epicenters Williamsburg Single Dresser
Featuring unique artwork created by a local artist and inspired by Brooklyn street art, this distinctive chest delivers plenty of charisma. Suggested retail is $2,079.
Borkholder Furniture’s Sienna Bench
Scaled for today’s living, this multifunctional bench features distinctive architectural elements. American-made and solid-wood, it’s shown in a brown maple finish. Suggested retail is $1,499.
By Bob George
As a nation with our smartphones, we have become obsessed with our personal performance. We measure the number of steps we take each day, the calories we consume and the hours we sleep.
Moving to the next level, we measure how we compare to others (typically anonymous others) in terms of the best time on this defined jogging trail or the highest finish in a road race. We self monitor our health by checking our heart rate and, in the not too distant future, we will do this with all of our vital signs. In our financial lives on a daily basis we monitor the daily stock updates and note any changes in our bank balances.
From a business perspective we are just beginning to monitor our business activities such as daily traffic and daily sales.
As we move to the next level we will begin to compare our businesses to other similar retailers. In this issue of Home Furnishings Business we have addressed retail metrics and, specifically the financials. Overall, as an industry, the results are pretty poor. However, this is understandable with a high percentage of retailers having under $5 million in sales. A small retailer with sales of about $2 milion is primarily a family income with no reason to show a profit. Our focus is on the retailers with sales of $5 million or more. We are measuring against the top 25 percent of performers and then the top 10 percent to provide a perspective of what could be.
Creating a high performance company starts with a vision. However, the emphasis must quickly focus on the details. It begins with increasing margin by half a point and reducing warehousing costs by 5 percent.
Think of the way you would approach that anonymous jogger who bested you by 10 minutes on this new course. You would view this not as a discouragement, but as a challenge to do better. You would probably never meet that runner, but you know he or she is aware that someone else is in the game. That is what defines a high performance retailer.
Our total organization from the magazine to the research division to the consulting group celebrates high performers. If you are not currently in the race, get to the starting line. We are here to cheer you on.
By Sheila Long O'Mara
As furniture retailers continue to bounce back from the Great Recession, they’re paying close attention to a variety of metrics.
While the furniture industry as a whole would like to completely forget the dark years between 2007 and 2009, there are a slew of lessons to be learned.
Those dark and gloomy days of the recession had furniture retailers doing some real soul searching and number crunching to make it through to the other side. That struggling time taught many a lesson on where to look and how to come out stronger and better.
Retailers vary on the metrics they turn to for keeping tabs on their operations. In addition to the basics, many use new measurements or are re-evaluating the way they look at some of the old standbys.
Metrics like gross margin return on investment—the old GMROI—inventory turns, inventory to sales, traffic counts, sales close rations and average ticket remain at the top of the heap.
Managers at some stores track total inventory, GMROI, inventory on hand awaiting delivery, gross margin on written and delivered goods by category and vendor, sales by salesperson and by square foot, advertising spend and return on that spend.
The figures can be mind-swelling, but those bread-and-butter stats are key to keeping a retail operation going.
Woody Whichard at Midtown Furniture Superstore & Mattress in Madison, N.C., likes to keep up with his store’s close ratio.
“We don’t have a door counter nor a sales manager on staff keeping count,” he said. “This is the responsibility of the entire sales team and is tracked through their contact cards.”
Individual and store gross margin sales are reviewed every Saturday morning during a sales meeting. The results are shared with the entire staff. Whichard is a stickler for following closely to the budget.
“The budget is very important for us to create and stick to as a course of action throughout the year,” he said. “The budget is watched daily.”
For Acton, Mass.-based Circle Furniture, it’s all about merchandise turns.
Peggy Burns said she things too many furniture people get stuck on tracking gross margin return on investment when at the end of the day it’s all about selling furniture.
“If something is a dog, it doesn’t matter,” she said. “If I put something on the floor, I want to see that it’s turning and earning its keep.”
As for just how much a product has to sell? It’s all relative, Burns said, but at the minimum it has to turn several times a month to remain in Circle’s merchandising lineup. If not, it’s gone and another product takes its place.
Like other retailers, Travis Garrish of Forma Furniture in Fort Collins, Colo., there’s not just one magic, go-to number that is the Holy Grail. He does, however, have a first stop, and it’s just as Burns said—gross margin return on investment.
“I always look at GMROI,” he said. “That’s been our focus this year. It does change with what needs the most attention at any given time.”
It’s the Quality
A key element to all retailers is how well their team is grooving. How’s the attitude quotient? Happy people tend to work harder and harder workers sell more.
“The main measure I look for is a good attitude every day from every team member companywide,” Whichard said, adding that good attitudes translate into a better customer experience for consumers shopping the store.
Several retailers mentioned positive attitude and high levels of customer service as important aspects of maintaining and building a loyal customer base. Retail is all about the detail and ensuring each minute one is managed.
Here are a few areas that retailers like to watch and ways to get the most out of every metric for successful retailing. Some are top-of-mind ideas, but always good to repeat.
1 Occupancy Costs
If you lease your building, consider renegotiating your lease rate. It never hurts to ask, and your landlord could be willing to cut a deal.
Lower costs by ensuring you get it right the first time. Prompt, clean and neat or words to live by and cuts down on return trips.
3 Cash Flow
Daily sales and deposit reports are must. How are receivables? Staying on top of cash flow is critical.
Set an annual budget and stick to it. Make a point to examine where you stand on a regular basis.
5 Merchandise Mix
Check the store and warehouse for product you’ve always had on hand but rarely sold. Get it rid of it.
Safety in Numbers
Furniture retailers are finding safety in numbers when it comes to idea and information sharing.
Through retail performance groups, independent retailers are pooling ideas, financials and support to stay on top of emerging business trends, merchandising trends and smart ways to run their businesses.
Are you having trouble finding good ideas for advertising? Do you know what marketing or categories are bringing positive results for other retailers? Are you tired of ordering goods at market that don't pan out sales-wise?
Performance groups give dealers the chance to gather with like-minded peers to exchange ideas, swap best practices and in some cases, conduct shared financial analysis. Such analysis allows retailers to rate their operation relative to others in the dealing with many of the same issues. (Full disclosure: Impact Consulting Services, parent company of Home Furnishings Business, helps run a number of retail performance groups within the industry.)
The concept of performance groups emerged from the automobile industry, where competing companies joined together to share information they used to develop performance standards each could use to measure themselves relative to the industry as a whole.