Appliance Giants Not Freezing Out Furniture Stores

January 31, 2007  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on February 2007 For furniture stores, selling appliances means battling head-to-head with The Home Depot and Lowe’s. In recent years, the twin Goliaths of the $23 billion appliance category have used aggressive price cutting to gain a collective 25 percent share of the appliance market.

Furniture retailers that sell appliances say staying in the game has required them to adopt new tactics and focus on niches the nation’s largest appliance sellers overlook.

“I’d be the first to tell you, it’s getting more difficult to be successful at selling appliances, but we’ve been at it for a long time,” said Slug Hefner, owner of Hefner Furniture & Appliance in Poplar Bluff, Mo. “We may be a dying breed.”

At Badcock Furniture &more, President and Chief Executive Officer Don Marks said it has become difficult, if not impossible, for the chain’s 300 stores to match the prices of The Home Depot, Lowe’s or Best Buy. “It’s gotten to be a commodity business, and the big-box guys are trying to outgun each other with monthly specials. The small retailer caught in the middle of all that is going to get hurt,” said Marks, whose company is based in Mulberry, Fla.

With the buying power that comes with 300 stores, Badcock is less vulnerable to pricing pressures than a single mom-and-pop store, but still its appliance strategy is based on elements other than price. Under Badcock’s unique structure, dealers earn a 25 percent commission on everything they sell. Given that a chain like Best Buy sells appliances at a far lesser profit margin—of perhaps 15 percent—Badcock’s appliance prices are typically higher than big box competitors, Marks said.

Convenience and Credit

Yet, appliance and electronics still account for about one-third of Badcock’s sales in many of its stores because of the preferences of its rural and credit customers. “In rural towns, the customer may have to drive 50 to 100 miles to get that (big box) price, and they may not be able to get delivery,” he said. “We also carry our own credit, and customers who may have difficulty obtaining credit elsewhere come to us,” he said. “It’s a tremendous service for the customer who may want it from a credit standpoint and a tremendous convenience for customers in smaller towns.”

In-house credit is also a powerful diffrentiator for Tepperman’s Furniture near Windsor, Ontario. Credit is one of the tools it has been using to counter competitors like The Home Depot, which has been active in the Canadian market for some time. Before the big-box retailer arrived, Tepperman’s completed a shift away from lower-end appliances to state-of-the art units that are carefully merchandised to “showcase a lifestyle look rather than lines of white fridges,” said Andrew Tepperman, president of the family-owned retailer.

He said Tepperman’s stands out from the big box crowd with next-day delivery on in-stock items and concientious delivery drivers. Whether it’s an appliance or a furniture purchase, Tepperman’s delivery crews protect the purchaser’s floors by laying down runners, and wear boot covers to avoid tracking dirt.

At AVB Brand Source in Anaheim, Calif., a buying group with $10 billion in purchasing power, Chief Executive Officer Bob Lawrence said that while the number of retailers selling both furniture and appliances has declined over the past decade, their numbers have stabilized in recent years. He said appliances still represent a solid opportunity for some furniture retailers, and cites large furniture retailers chains like R.C. Willey and Nebraska Furniture Mart as the most successful examples. “The beauty of it is those stores are a one-stop shop .... It’s much easier for established outlets than somebody who is going to jump into the business today.”

Perception of Value

Hefner said his sales staff was worried when a Lowe’s store opened near one of his two locations in 2005. While Hefner’s sales associates urged him to lower prices, he instead changed the delivery policies of his two stores. “We now have a take-with price and a stepped-up price that includes (appliance) delivery and installation. Lowe’s doesn’t have free delivery and they don’t have a service department like we do,” he said, adding that Hefner’s appliance sales remain strong. “I think furniture stores that sell appliances can compete, but the perception of value is what the challenge is because Lowe’s is constantly on TV.”

Hefner said his stores also have a dedicated appliance service department that helps set Hefner stores apart from larger competitors, which typically outsource repairs.

At Badcock, Marks said the company has to be careful in its advertising to avoid featuring appliances that may cost more than featured products at big-box stores. “The consumer may believe that what you’re selling appliances for is higher than at The Home Depot or Lowe’s down the street, even if they’re not. Consequently, they may think your furniture prices are high, too, even if they’re not.”

Appliance-Furniture Synergy

Marks said appliances can lead to furniture sales among credit customers who make a fixed payment every month, including many customers who bring their checks to a Badcock store each month. “When they’ve paid down their balance a little bit, they can buy furniture and it won’t even raise their monthly payment,” he said. “The credit business is a large driver for us.”

Hefner says people are often purchasing appliances for new homes, so many have a need for furniture, too. “You can use it as an enticement,” he said. “If their main purchase is furniture, a salesman who is really on his A game can tell them that they can save a (future) delivery charge by purchasing an appliance at the same time.”

Still, it can be challenging to have sales associates who are skilled at selling both furniture and appliances, Lawrence said. “With furniture, you’re selling fashion, but with appliances, it’s technology you’re selling. It’s an inside story versus selling a fashion item.”

The salespeople at Tepperman’s are dedicated to either furniture or appliances, and the retailer sees advantages in offering furniture, appliances and electronics under one roof. “Very few of our customers buy only one category from us,” said Noah Tepperman, treasurer and director of customer care. “Many have either opened a Tepperman’s credit account or are receiving one of our preferred customer (mailings). We’re continually working to create new compelling reasons why Tepperman’s can help you, whether you need furniture, appliances or electronics.”