Sales Strategies: Striking The Balance

February 28, 2007  by in UnCategorized   

By Home Furnishings Business in Advertising on March 2007 World Furniture Mall on the far outskirts of Chicago is always running a sale. At the start of the year, it was the “Delayed In Transit Sale ... Several containers of our finest merchandise didn’t arrive for the holidays ... Absolute Lowest Prices!”

It has also run the highly effective “Nickel Sale” (buy a bedroom, get a second one for a nickel), seasonal closeouts and, of course, the world-famous Bears-Packers Labor Day promotion. In that sale, shoppers were promised their purchases would be free if the Chicago Bears kept the arch-rival Green Bay Packers from scoring. The Bears did indeed post a shutout and World Furniture Mall Owner Randy Gonigam happily paid out more than $250,000 in refunds to happy shoppers.

The bulk of the refunds were covered by a “promotions insurance” firm. World Furniture Mall scored again in a similar New Year’s sale tied to the second meeting between the Bears and Packers: There was no shutout in that Dec. 31 game—the Packers actually won—but, even as a lifelong Bears fan, Gonigam was thrilled with the game’s impact on his store. “We got national and international publicity for the first one, and a ton of local publicity. We got lucky. If the Bears had not shut out the Packers (on Labor Day), nobody would have cared. When we did the second (game) promotion, we did 60 percent more business than on the first one. I wish they would play again. I think the one thing we lack in this industry as a whole is that sense of fun.”

Pulling The Plug On Discounts

As effective as a sales-oriented strategy can be, some national and regional retailers have pulled back from discount sales. Ethan Allen, for example, virtually eliminated long-running percentage-off sales two years ago. Chains like City Furniture in Tamarac, Fla., and Bob’s Discount Furniture of Southington, Conn., have stuck to an everyday-low-price strategy throughout their histories.

Other retailers have stepped away from sales promising “50 percent-off discounts” in favor of milder promotions they believe shoppers put more faith in. But there are plenty of furniture retailers who run new promotions virtually every weekend. “If you have a sale, consumers will beat a path to your door,” said Britt Beemer of America’s Research Group, a marketing and consulting firm that advises large furniture chains. “Just look at the millions of Americans who woke up at 3 a.m. on the Friday after Thanksgiving to stand in line for early bird specials” at retailers like Wal-Mart and Best Buy. “You can’t show me many successful furniture retailers who don’t have those kinds of offers.”

Beemer and other experts say there’s no one-size-fits-all formula when it comes to discount sales since so much depends on competitive factors in the market, the store’s location and how much a retailers is willing to devote to advertising and special deals.

Worth The Trip

Gonigam said World Furniture Mall has backed away from percentage-off discount sales. “That type of sale has run its course,” he said. “Consumers are not responding to the same kinds of triggers that used to work. There’s little predictability anymore about what it will take for consumers to respond, so we’re trying other types of promotions,” he said.

All of World Furniture Mall’s promotions are designed to prompt shoppers to drive to Lombard, Ill., from Chicago’s suburbs—a trip of 20 minutes or more. Another unique feature of World Furniture Mall is that its showroom is only open four days a week, Friday to Monday. “We think it creates more urgency. People like to buy from places that are busy, and we’re busy pretty much all of that time,” he said, adding that the four-day week eliminates the need to “hire salespeople I wouldn’t hire otherwise just to fill (added) hours.”

Among retailers that have adopted a less promotional approach is Bill Bacon, owner of Bacon’s Furniture of Port Charlotte, Fla. He’s constantly amazed by the aggressive tactics of nearby rivals. “There are (retailers) in this area who go to ridiculous extremes like advertising that they’re 60 percent off all the time. I don’t think the customer believes it. Those kinds of ads don’t have much credibility anymore.”

Instead, items at Bacon’s are marked with an everyday sale price that’s typically 35 percent to 40 percent off a manufacturer’s suggested price. The store periodically holds sales with additional discounts of perhaps 10 percent. More often, Bacon’s advertisements feature special buys—or what Bacon calls “extreme values”—such as a $399 leather recliner. “It doesn’t make any sense to say (in ads) that a $399 chair is regularly $999. The customer is going to recognize it’s a good value at that price, and they’ll buy it. I think our strategy gets us out of the used car salesman mentality where every day, they have a different price. I think customers appreciate that we’re not playing games. Our prices are real, and you’re not going to see huge fluctuations.”

Ads Wearing Thin?

While Bacon and some other retailers believe many furniture shoppers tune out furniture ads promising huge reductions, Beemer argues that most consumers never notice furniture store ads during times they’re not in the market for furniture. “I’ll bet you can’t recall what tire dealers ran ads last weekend,” he said, “but if you needed to buy tires, you’ll know exactly what tire stores ran the best ads. It’s exactly the same with furniture ads.”

Dave Harkness of Harkness Furniture in Tacoma, Wash., said his store runs sales promotions almost constantly. But the discounts at Harkness—typically 20 percent to 30 percent off the manfacturer’s suggested retail price—don’t keep pace with some of the offers at larger furniture stores that are growing more aggressive. “One of the big players in our area is offering no interest until 2011. It’s just unbelievable,” he said, adding that Harkness general limits financing deals to 12 months.

Rather than matching those costly offers, Harkness focuses on deals he believes are credible to shoppers who are familiar with his 86-year-old store. “I know (attention-grabbing deals) work, but I don’t want to create those kinds of expectations with the customer because when you come off of that type of sale, you can’t sell furniture” without the same kinds of costly incentives.

An Honest Discount

He said the store’s most effective promotion is a discount of less than 10 percent. “The ones that have the most appeal with us is a no-sales-tax promotion since, in Washington, that’s an honest 8.8 percent discount off of our regular pricing,” he said. “Customers seem to realize that’s a good deal for our store.”

Blackledge Furniture Owner Eric Blackledge said he sticks to a largely every-day-low-price strategy in the belief that consumers have become conditioned to be highly skeptical of claims of big discounts. “As a shopper, I don’t buy anything in a department store unless it’s at least 50 percent off. I just figure that the regular price in a department store is so overly inflated that I won’t buy anything at their regular price.”

Blackledge Furniture of Corvallis, Ore., is “essentially a one-price store” that typically prices goods below the manufacturer’s suggested retail price and marks down slow sellers when that’s warranted. “If we have a manufacturer (supported) sale where there is truly a reduction in our cost for a limited period, then we’ll feature that in a sale, but we don’t do up-and-down pricing,” he said. “I think furniture shoppers are less likely to go to a furniture store they feel is overpriced between sales.”

Among the strategies that are working at World Furniture Mall are volume discounts in which the store awards a percentage off on purchases that exceed the store’s average ticket of more than $1,500.

Like Harkness, Blackledge’s store also offers financing specials—and discounts for cash purchases—periodically.

He and other retailers say many furniture retailers have stepped away from claims that an item is selling at “50 percent off” because of stepped-up state laws that require dealers to prove that the same item has sold at the higher price and that those higher prices have been in place for 30 days or more.

Beemer said every furniture retailer is working to strike a balance that appeals to both discount seekers and shoppers who may be willing to pay full price for an item. “The lower price point customer definitely wants deals and offers, and the upper price point customer may also want deals, but if they find what they want, they’ll go ahead and buy it.”