The Recession’s Lessons

June 30, 2010  by in UnCategorized   

By Home Furnishings Business in on July 1, 2010 Even as we start to emerge from the recent recession€”which caused thousands of furniture stores to close €”there are hard-won lessons to reflect on. Simply surviving in a difficult environment is a victory, and the good news is that the stores that remain (along with their battle-tested owners) are poised to gain market share as customers finally begin to replace some of their aging, outdated furniture.

So, as we wish for the most vigorous recovery possible, it€™s a good time to take a look in the rearview mirror to consider some of the painful learning opportunities of the recession. Among history€™s lessons it would be unwise to repeat:

COSTLY REAL ESTATE€”It€™s become clear many furniture stores were paying far too much rent on top-tier locations. In the early part of the decade, robust furniture sales in many fast-growing housing markets prompted furniture retailers to expand in the very best locations (adjoining malls or at the highest-traffic intersections). When home values dropped and consumers€™ purses snapped shut, it became clear that it€™s difficult for furniture stores to sustain the kind of sales levels that go hand-in-hand with the very best Class A sites.

Historically, many furniture retailers have thrived in less visible, secondary locations€”just as many interstate motels operate in slightly out-of-the-way areas, tucked behind a popular restaurant or on a service road that parallels a high-traffic shopping strip. Since furniture stores are usually large, there€™s a multitude of ways to use the building€™s façade and signage to draw in shoppers. Of course, secondary locations also demand your advertising is highly effective and your Web site engages the shopper before she makes a trip to the store itself.

INFLATED FIXED COSTS€”Like entrepreneurs everywhere, it€™s easy for furniture store owners to focus so intently on day-to-day challenges that longer-term considerations become an afterthought. As a result, an insurance policy (or the advertising account) is often entrusted to a neighbor, a golfing partner, or the firm the store owner€™s father used. The extreme financial pressures of the past couple of years prompted many store owners to more closely assess fixed costs, including the question of whether your local providers are charging nationally competitive rates. In many cases, those store owners called in larger service providers that specialize in home furnishings for a comprehensive audit. Often, store owners reduced fixed costs and improved cash flow.

XXL STORES€”Even Walmart seems to be coming to the conclusion that 120,000-square-foot stores are too vast for a quick bread-and-milk shopping trip, and they€™re experimenting with small formats. In the same way, Ashley is finding success with 5,000-square-foot stores in some markets. In recent years, I€™ve worked with a number of independents that are using technology to boost sales in small formats. With video catalogs displayed on high-definition flat-screen televisions, shoppers can see expanded offerings of collections they like and sit on a few examples of the collection in the store. Unlike in the past, the customer€™s orders often arrive in days€”not weeks.

We€™re also seeing large furniture stores create separate entrances for a distinct mattress area or a bedroom gallery to appeal to shoppers who simply don€™t want to navigate through an enormous space to find a single item. Furniture Row has used the same strategy for years to position itself as a community€™s mattress specialist with Denver Mattress, as well as that same city€™s leading seating store through Sofa Mart.

SUB-PAR STAFFING€”High turnover has always been a huge management challenge, but one outgrowth of the current economy is that sales associates are likely to have a longer tenure with your store. With this in mind, it€™s wise to invest in sales training (and eliminate sub-par sellers) because it€™s more important than ever to turn every browser into a buyer. Your store probably does enough product knowledge training, but most stores need to create opportunities to boost selling skills. The reality is that every customer who comes in has already shopped your store via the Internet, and it€™s the initial interaction with one of your store associates that will determine whether she buys in your store today.

MIS-MERCHANDISING€”It€™s unfortunate that the recession caused so many furniture chains to cut visual merchandising jobs in recent years. The result has been dull, drab and uninspiring showrooms, and I think those boring beige displays are hurting sales. Some stores are responding by arranging for skilled merchandisers to come in on an occasional basis, and I€™m visiting several stores at the start of each season to plan upcoming displays with an eye toward freshening the showroom and adding some of the color and style that shoppers complain has been lacking of late. HFB