Daily News Archive
Brought to you by Home Furnishings Business
November 30,
2008 by in UnCategorized 
By Home Furnishings Business in Furniture Retailing on December 2008
No doubt 2009 is shaping up much the same as 2008. Here, we’ve compiled forecasts and prognostications from many industry notables on what the new year holds for the furniture industry, and a bit on strategies they are looking to implement to keep business afloat. Here’s hoping the thought sharing helps in planning for what is sure to be another tumultuous year for furniture.
Bill Hartman, president
Furniture First buying group
Harrisburg, Pa.
“My feeling is 2009 will be predominantly like the first three quarters of 2008. ... One thing we’ve been working on is providing training to help our retailers increase closing ratios and improve average tickets. We’ve trained about 70 percent of the membership (of 160 companies with 328 stores) on mattresses. We’ve also had about eight more general sales training programs over the past two years to help sales managers and sales associates. We hold regional training meetings that are set up so everybody can get there with less than a three-hour drive. That has been part of our strategy for some time, because we just knew that the economy was going to get extremely tough, so in late 2006, we planned all this training out.
“It helps our salespeople, it helps our stores and it helps our suppliers. The more difficult strategy is getting people in the front doors, and that becomes a continual effort. Part of it relies on our network of members to share information and ideas when something has worked. We do it through advertising, sharing advertising ideas and using our Web site.
“It’s just incredibly difficult right now, but (Veteran’s Day Weekend) sales provided a little bit of a glimpse of hope. Hopefully, it will continue into the next weekend, too.”
Tom Olinde, president
Olinde’s Furniture
Baton Rouge, La.
Olinde, who is also 2008 president of Furniture Marketing Group, a buying group whose members operate more than 500 stores, said, “I really feel it’s going to be a difficult Christmas and a difficult 2009.
“The retailers who are going to fare better are the stores that don’t have too much debt or are too leveraged. Those stores can kind of dig in and try to improve their operations to operate more efficiently, lower their inventory levels and operate in a (very lean) way. That’s what we’re trying to do with our company (which includes four Olinde’s stores and four Ashley HomeStores).
“In terms of inventory stock levels, we’re trying not to buy as deep container-wise as we have in the past. If there are warehouse programs that make sense and that can be competitive, we look to those programs. ...
“Independent retailers are going to have to think hard that way. You’re still going to have to buy a significant number of containers to be competitive, but you can still look for vendors that offer good just-in-time-type delivery, as well. That way, if things get slow or you have a bad buy, you’re not stuck with a container and more coming in.”
Art DeFehr, president and CEO
Palliser Furniture
Winnipeg, Manitoba, Canada
“Over half our market is outside the United States, so while the American economy has a huge impact, we have other markets that are very important, too. If you follow the exchange rates, the Mexican and (Canadian) currencies both dropped 15 percent to 20 percent in (mid-October), so our areas of production have had a devaluation of currency. It does two things: It makes our products more competitive into all markets, and it also means that the markets that we serve like Canada and the U.S. have more trouble importing from other countries.
“So, the currency moves are hugely important to us, and where some retailers (in Canada) see them as negative, they’re actually significantly positive in our case, and they make us more viable, help us hold prices in the U.S., and make it easier to compete in our home markets. ...
“In the U.S., we shift to be relatively more competitive, because we produce in the currencies that are moving in the right direction compared to China, which tends to be (increasing). It used to be the Canadian dollar was on par with the U.S. dollar, and now it’s at 82 cents to 83 cents.”
Jeremy Sommer, president
Zocalo
San Francisco
“In Asia, factories are looking for customers. We have the ability to have really excellent factories make product for us that a couple of years ago would have been completely full with product. It’s true in Vietnam and throughout Asia. In addition to factories slowing down, freight rates are coming down and fuel surcharges are coming down.
“These are all positive things for the economy (in the U.S.). I think the biggest impact in 2009 will be an expected 12-percent increase in (existing home) sales. I think it’s going to be even higher because there are vacant houses all over America that the banks have to get people into. ... Many local governments are trying to get people in the empty houses because they realize what a problem it is.
“So, getting people into these houses is going to be a big priority in 2009, and all of those people are going to need furniture. During the last two years, you’ve had people leaving homes. Now, you’re going to have all these people entering homes again, and, in a lot of cases, they’re going to be bigger homes.
“Also, in slow times, it’s an opportunity for businesses to fine-tune what they’re doing. We’ve spent a lot of money on technology and improving different systems within our company that would be difficult to do in a boom period. ... No one looks at every aspect of their business during good times. They look at things during tough times, and when business is good again, it just means you’re going to be that much more profitable.”
Peter Bjerregaard, president
Ekornes USA
Somerset, N.J.
“There’s no doubt in my mind that 2009 is going to be one of the most difficult years we have seen in a long, long time. What we’re going to do is more of what we already do—we’re going to put more money into advertising and marketing our brand, and we’re putting more money into promoting our brands together with retailers.
“What we’re saying to our retailers is ‘Stick to the plan! Think about what brought you to this point, from having, maybe, one store to having three or four. Build on your strengths. Don’t go crazy putting everything on sale because it’s not going to make a difference.’
“We know traffic is going to be down to the stores because of the economy and the fact that the consumer is researching a lot more on the Internet before they get to a store. Then, as a retailer, it’s the job of the retailer to have motivated people in the store who can close the people who come in. Customers are more informed because of the Internet, and they demand a salesperson who can add on to what they already know.
“They don’t need someone who can tell them basic stuff. That puts a lot of pressure on the sales associates in the store. It’s a challenge (where traffic is slower). When a customer comes in, the associate has to be ready. So, retailers have to make sure their sales associates are motivated and they need to keep the mood in the store as positive as they can.”
Kurt Darrow, president and CEO
La-Z-Boy
Monroe, Mich.
“If we’re going to have a difficult 2009, I think you have to be prudent about your expenses.
“There probably will be a lot less store openings. I don’t think you can cut your advertising to nothing. That would just give the consumer no reason whatsoever (to shop), but there certainly won’t be as much risk-taking, and retailers probably won’t carry as much inventory. There will probably be some contraction going for a a while until we see some (more positive) signs. It’s also important to remember that the level of business is certainly not consistent across North America. There’s the five or six really hard-hit states. There are some areas of the country that have been holding up okay. Most of the people I’ve talked to in Canada have been pretty good, but the recent rise of the dollar may change some of those dynamics. ... I think retailers have to try to get the most out of their salespeople in the stores. Our close rate as an industry is not that good relative to other industries. I realize people shop multiple stores before making a purchase, but how many of those names do we capture? What kind of follow-up can we be doing? That kind of marketing isn’t expensive. It takes our salespeople’s time when there are not customers in the store. As for reps, I think sales organizations need to be sure they’re not out in the field participating in doom and gloom, because that can become a self-fulfilling prophecy and it feeds on itself. We try to remind them of that, and we reinforce the old adage of going back to basics and making sure you’re training on features and benefits and uniqueness of product. ... Also, it’s a time when salespeople also have a more listening ear and can be more able to learn and develop skills. Sales associates can be more receptive when things are tougher and shoppers aren’t beating down the doors and the sales process isn’t as easy.”
Farooq Kathwari, chairman and CEO
Ethan Allen
Danbury, Conn.
“I think (the industry) is in a major crisis. It’s almost like a forest fire. It has to be put down. What’s happened, I think, is the downturn or recession has been expedited. In my view, we’re going to come out of it faster. My perspective is you’ll see a major change (soon). ... My philosophy has always been is you have to be ready for a recession before it comes. We have to be ready for the next (positive) cycle before it comes, too. At Ethan Allen, we had been ready for the recession, having made all the changes we’ve made in recent years. We’ve been able to maintain our policy of not having discount sales. We are holding up gross margin even when sales are, obviously, down, and we’re profitable with cash, and we don’t have any bank borrowings, so we don’t have that as a worry.”
Gary Fazio, CEO
The Mattress Firm
Houston
“We do a lot of contests in the stores on weekends to try to stimulate some activity and competition to get (our) people revved up. We’re looking to hold some (staff meetings) in December and January to talk through these things. For a lot of people, this might be their first or second recession, but it’s my fifth, and I think the best approach is to be as direct and open as possible. Also, with our experience, as management, we can provide perspective of having been through a recession and explain, ‘Here is how we adjust.’ I know (employees) appreciate an open and honest talk because it shows them we don’t have our head in the sand, so we discuss those things as much as we can when we have our calls with our managers on duty. The great thing about mattresses is that the consumer who is coming in the store is very serious. There’s not a lot of (casual) shopping in our category. So we focus on our conversion rates and ways to create values that get consumers to come in.”
Howard Haimsohn, president
Lawrance Contemporary
San Diego
“For our [Contemporary Design Group (CDG) buying organization] conference this year, one of the things that came up was keeping people motivated, finding things to do and how can you be more productive when things are slow and there’s downtime? ... Those are going to be key topics we’ll be dealing with (at the December event). The West Coast is supposed be the worst part of the country (for foreclosures). ... I’m hopeful that we may come out of this a little bit sooner than some other areas of the country just because we went into it sooner and were affected more. ... We rode (rising real estate values) up steeper than many other areas, so the ride down is steeper as well. It’s all a mindset with people with the whole housing thing. ... We have people who thought they were rich because of their home value and now they think that they’re poor. In Oklahoma, they never felt rich or poor due to their home values. At our (Dec. 5 CDG meeting), a lot of time will be spent on operational efficiency; how people are cutting overhead, how they’re reallocating their resources, how they’re making adjustments. We heard from members who wanted to talk about keeping staff members motivated and busy. We’ll be spending a lot of time on those kinds of issues. The (challenge) is they may not always have the energy and the motivation. On the flip side, they can be more motivated because every ‘Up’ counts more, but you can kind of have difficulty maintaining that enthusiasm, too. There are a couple of different sides to that.”
Woody Whichard
Midtown Furniture Superstore & Mattress Center
Madison, N.C.
“The economy is very uncertain, but if I want something to change, I believe it’s up to me to change it. ... Plus, our local economy has not been hit as hard as the nation as a whole.
“I feel that things will start improving around June. Our challenges as a 60,000-square-foot store in a small town are that many customers drive 25 miles (from the Greensboro area) to get here and will pass other stores to get here. We have to set ourselves apart. We’re the world’s largest Lane Furniture Gallery, we offer the best selection at the price points we carry, we have a seven-day money-back guarantee and we continuously have a sale to promote our products.
“Our motto is, ‘Advertise, advertise, advertise.’ We give the customer reasons to shop with us and we (reinforce) what those reasons are. ... When it comes to credit, I’ve seen some tightening of consumer credit, and I feel that the credit problems consumers and retailers are experiencing were not caused by us. The government will not be helping my business if I get myself in the position some of these (banks) are in. I won’t be getting a reward from anyone if I run my business improperly.”
Ron Wanek, chairman
Ashley
Arcadia, Wis.
Ashley Chairman Ron Wanek believes the economy is going through a necessary adjustment.
“Housing prices, the stock market were both overvalued,” he said. “Capitalism, from time to time, goes through a cleansing, and right now that’s exactly what it’s doing. I live in Florida now, and from what I can see from shopping for houses and waiting for decent prices ... In late 2005 a $100,000 home went for $300,000. They’re coming back to reality.”
Wanek also predicts further consolidation among both vendors and retailers in the furniture industry.
“You’ll see more business percentage-wise at the low-medium to promotional price points, which means more retailers and manufacturers will have to work with lower margins,” he said. “They’re all going to have to ‘lean down’ their organizations.”
As housing comes back, he also predicted fewer “McMansions” being built.
“A lot of people have lost a big portion of their net worth,” he said. “I think you’ll see a downsizing in the new homes being built, including a lot of homes sold at the high end of the market.”
The government’s relief package for the housing collapse will kick in during the second half of next year, Wanek noted, which could help settle consumer nerves.
He also hopes the economic situation will put a damper on the rising cost of making furniture.
“We’ve had price increases for everything, and hopefully we’ll see a big correction in that regard,” Wanek said. “It’s already beginning to happen ... fuel, foam, transport, raw materials.”
Steve Stagner, president and COO
The Mattress Firm
Houston
“There’s is a lot of art and science in (generating store traffic) this year. One thing we’ve tried is using promotional items, such as giving away a body pillow for $1 that sells at Linens ‘N Things for $19.89. Obviously, we’re not making money on it. We’ve tried other things to generate enthusiasm to drive people to the store and get people talking. Obviously, 20 percent of consumers are postponing purchases (across the furniture industry). ... It’s the same business, but it’s just that the water level is lower. ... What we need, more than anything, is for consumer confidence to come back.”
Greg Follett, owner
Follett’s Furniture
Lewiston, Idaho
Greg Follett manages Follett’s Furniture, a single-store operation in Lewiston, Idaho. He believes smaller retailers need to beware “giving it away” in tough economic times, but still show some flexibility in how they do business, especially as consumers get tapped out on their credit cards.
“A lot of people have done things right in the first place ... and people are learning to be more responsible,” he said. “They’re buying things with the money they actually have.”
Follett, who’s former president of the Pacific Furniture Dealers buying group, did note that some of his PFD colleagues are losing much of their customer base that’s always relied on credit.
“I decided a couple of months ago to get away from financing,” he said. Follett’s hoping to institutionalize a pricing model the store developed as part of a “retirement sale.” (His father is selling his portion of the business, and Follett plans to completely re-merchandise the store after liquidating existing inventory in October and November.) Instead of prices always ending breathlessly in .95 or .99—“$199.95!” $299.99!”—he’s mixing up the pricing.
“Getting out of the traditional furniture store pricing model is really working out,” he said. “People are becoming more responsible with their money. Because of the pricing we’re doing—it might be a difference of eight bucks—they feel they’re getting a better deal.”
Follett also believes retailers need to have some faith in what’s going on in the country.
“When gas prices kicked up, you saw American ingenuity in the way people adjusted, and that’s why I want to promote ‘made in the U.S.A.’ when we re-merchandise,” he said. “We’re also going into the concept of American-made product for everything on one side of the store. We’re in a small-town, Middle America location, and that seems important here.”
Follett Furniture also is examining delivery fees.
“I’ve always been ‘free delivery,’ but for my father’s retirement sale we charged 15 bucks ... and out of town for $25,” he said. “But we’re flexible ... We’re trying to go a little farther to make the sale, so I don’t want to build it into the model.”
Flexibility also includes a no-commission sales structure.
“We have a spiff system, but customers can talk to anyone when they come back in,” he said. “The other salespeople don’t blow a customer off because they won’t make money on it, and there’s no infighting among staff.”
A good experience leads to good word-of-mouth, which is particularly beneficial in smaller markets such as Lewiston.
“If you can show some interest in your customer’s real life, it takes down some of those walls between you and the sale,” Follett said. “There is nobody out there right now who’s not hurting.”
Irv Blumkin, CEO
Nebraska Furniture Mart
Omaha, Neb.
The industry is obviously in for a challenging year, but opportunities do exist for furniture retailers. That’s the opinion of Irv Blumkin, CEO of Nebraska Furniture Mart in Omaha.
“Our business was positive up until October, and when the government was going through the bailout and the stock market went through turmoil, things just stopped,” Blumkin said.
Consumers’ psychology has changed, he said, noting that the onslaught of dire headlines made people more skittish than ever. Hopefully the just-completed presidential election will help settle things down.
“They need confidence in what’s going to happen. ... It’s going to stay tough before it gets better,” Blumkin said.
The good news is that slow times give retailers a chance to evaluate everything they do in their business.
“There’s also the opportunity to gain share” as other retailers pull back on their marketing, he said. “We want to remain aggressive relative to other retailers and other industries” that want a share of consumer dollars. HFB
‘Made in America’ Sees Brighter Future
By Jo Fleischer
Furniture makers with factories here in America say prices from Asia are still cheaper, but the gap is narrowing, and retailers are seeing more benefits in ordering from a warehouse that’s not half a world away.
Some of the few remaining American furniture manufacturers see positives in the fact that producers in Asia have been hiking prices in recent months, but say the real advantages of making furniture in the United States still involve being able to deliver rapidly, respond quickly, and offer furniture stores ways to cut costly inventory.
Vaughan-Bassett Chairman John Bassett III said price hikes in Asia come as a relief, because of what they reveal about overseas producers. “For eight or 10 years, there never were any price increases out of China and Asia,” he said during a forum presented by the American Home Furnishings Alliance during the High Point Market. “When they raised prices, it meant (factories in Asia) had come to the end of what their profits margins are. ... That tells me where I am in relation to them (for the first time). I know what my competition is.”
Bassett said “global competition has made us a better company,” adding that Vaughan-Bassett will continue to emphasize a deep selection of products, any of which can be delivered to a retailer in seven days or less.
Henry Vanderminden IV, president of Granville, N.Y.-based Telescope Furniture, said the company has a similar approach and its domestic factory also offers customized products, which is something overseas producer can’t provide. He said the prices of overseas furniture producers continue to be “a little less than we can do domestically,” but said that price gap is closing. “We’ve had to raise our prices more on (items) we’re importing than on domestic product” this year, he added.
Carol Gregg, the founder of Red Egg, a manufacturer of Asian-themed furniture, initially used factories in China, but shifted production of most wood pieces to the High Point area three years ago. As a smaller producer, Gregg said the three factories she works with in North Carolina can build to order, which eliminates the complexities of ordering products from factories thousands of miles away. “A couple of the reasons I did it was for the finish and quality and (eliminating) the delays of waiting for a container to come,” she said. “Also my conscience didn’t like the idea of shipping wood from North Carolina to China to manufacture my furniture and then have those products shipped back.”
Gregg said over half of her company’s production is now made in the High Point area, and one of the factories she works with hired 12 additional employees earlier this year.
Asked if rising prices in China could restart more factories in the United States, Bassett said it’s almost impossible due to an environmental permit process that can take 18 months or more. “I can see more shifts coming back to (an existing) factory, but when we shut down these factories, we gave up all the permits we had and they will never come back again,” Bassett said.
November 30,
2008 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on December 2008
The second edition of
Home Furnishings Business’s annual economic survey can be summed up easily: If you think things were tough last year, it was nothing compared to this year.
HFB surveyed more than 200 members of the home furnishings industry, asking a variety of questions about how the economy affected business and what, if anything, could be done about it.
Compared with last year, respondents were decidedly more pessimistic about current conditions and when they would improve, but most also cited plans already in place to bring in business. Last year, when questioned about the economy, survey respondents said, on a scale of 1 to 5 (5 is a lot, 1 not very much), the economy rated an overall median “4.” This year, respondents bumped that up to a “5,” indicating that the overall economy had a major impact on their business.
Just 1 percent of survey respondents said the overall economy had little or no effect on their business, with 58 percent, up from 28 percent last year, saying the economy had a major effect on their business.
For the second time, participants ranked consumer confidence as the most important economic factor, with home sales and housing starts not far behind. When asked to name the single most important economic factor, survey participants overwhelmingly chose consumer confidence, with many adding comments about how dominant this factor is.
Third-place honors this year went to gasoline prices, compared with last year’s No. 3, interest rates. This year, interest rates fell to ninth place in respondents’ ranking of the most important economic factors.
Mortgage rates shared ninth place this year with interest rates, quite a drop-off from last year’s fourth place.
For the first time,
HFB questioned survey participants about the role of the stock market in the economic climate and they gave the market indices fourth place in importance, possibly due to the timing of this year’s survey, which hit just as the markets took a huge tumble.
Looking Ahead When it came to figuring out what was going to happen next, survey participants sent mixed messages. Looking at the number of bankruptcies, about one-third thought that number would stay stable, with more than half believing bankruptcy rates would increase in coming months. The balance opted for a decrease in bankruptcies.
Last year’s survey showed more than half of respondents thought bankruptcies would stabilize, with 3 percent believing the number would decrease.
The most important factor affecting businesses, according to the survey, is consumer confidence. Looking forward, 37 percent of participants said confidence would stay the same, with 27 percent saying it would worsen and 36 percent seeing an improvement. Last year, more than half thought confidence would stay the same, something not borne out this year.
More than 80 percent of survey participants predicted gasoline prices would either improve or stay the same, compared with 93 percent last year.
Respondents stayed pessimistic about healthcare/insurance costs, with 58 percent expecting costs to rise, measured against 55 percent last year. For the most part, participants were more optimistic about home foreclosures, with 20 percent expecting the foreclosure rate to improve, versus 3 percent last year. Last year, 62 percent said foreclosures would worsen, compared with 48 percent this year.
Housing activity is expected to pick up by 28 percent of respondents, double that of last year. One-third said housing activity would decline, compared with 45 percent last year, leaving about the same number in both years predicting home sales and starts would remain the same.
Inflation is a predicted problem this year, with 49 percent of those surveyed indicating it would get worse, compared with 34 percent last year. Half of last year’s participants thought inflation would remain the same versus 39 percent this year.
Interest rates were judged to likely remain the same by respondents of both surveys.
This year, participants were slightly more optimistic about mortgage rates staying the same, 53 percent this year compared with 42 percent last year. Respondents expected home prices to continue to improve, by 28 percent this year versus 17 percent last year, with 36 percent saying prices would worsen this year compared with 45 percent last year.
About half expected taxes to stay the same this year, compared with 69 percent last year. This year, 10 percent expected taxes would improve, with 38 percent anticipating higher taxes. Last year, 31 percent said taxes would increase, with no one expecting a bettered tax rate.
Perhaps the biggest change, year over year, is the expected unemployment rate. This year, 50 percent of survey participants expected unemployment to worsen, compared with 24 percent last year. A year ago, 62 percent of respondents anticipated unemployment to remain the same, far more than this year’s 39 percent. The balance in both years opted for an improved unemployment situation.
Sales Outlook Things are not looking nearly as rosy this year as last. In last year’s survey, 53 percent said sales were up compared with the prior year. That number slipped to 11 percent this year. Sixty-two percent of the participants in this year’s survey said sales were down, compared with 21 percent a year ago. Surprisingly, about the same number—27 percent this year versus 26 percent last year—said sales had remained the same.
For those experiencing a downturn in sales, 13 percent this year thought sales would improve in three months, compared with 34 percent last year. It would take six months, said 19 percent this year and 28 percent last year.
A year ago, 7 percent thought sales would turn around in nine months, versus 27 percent in this year’s survey. It would take a year or longer, according to 31 percent last year and 41 percent this year.
ACTION PLANS Despite a troubled economy, industry insiders are not lying down and taking it on the chin. A change in advertising was planned by nearly six out of 10 survey participants, with 62 percent planning on “implementing a more effective marketing plan.” Last year, 43 percent expected to change their advertising and 57 percent were going to work on their marketing plans.
Additionally, survey participants are looking at changing the price points they sell at (38 percent this year, 25 percent last year), either adding or laying off employees (34 percent this year, 32 percent last year) and changing employee hours or benefits (36 percent this year, 25 percent last year).
On respondent, remarking on the dominance of the consumer in determining the health of the economy, said, “Consumers’ perception and experience of these factors is critical. Most consumers are too busy to understand the specific condition of our economy but, whether their information comes from the evening news or other sources, they tend to ‘feel good’ or ‘feel bad—nervous, uncertain’ about the information as they see it ... and react accordingly. They base their desire to buy on these feelings. If they or their friends are in trouble, they stop buying.”
Others also keyed in on the importance of the news media in driving consumer behavior. One respondent said a major factor in consumer behavior was the “... overall state of the economy as reported in the news media. The over hyping of all economic and political info instead of fair and accurate reporting without sensationalism is the single factor that keeps people weary of spending.”
Despite concern about the economy, most industry people are not planning GOB sales. Many offered specific plans to improve their business, including:
• Becoming more customer focused and less product -focused
• Tightening inventory and cost controls
• Finding ways to trim costs even more
• Sharpening skills and doing more “fun” marketing
• Seeking product with higher perceived value
• Monitoring income and expenses opportunities
• Expanding services and being creative
• Buying very carefully and advertising
• Training to retain every customer
Others offered very realistic assessments but are determined to stay strong:
• Cut costs and hang on!
• Hold on tight! We’ve done everything else.
The bottom line is that you make your own opportunities in this kind of economy. Watch costs, actively seek out opportunities and listen to your co-workers and customers.
November 30,
2008 by in UnCategorized
By Home Furnishings Business in Bedding on December 2008
Once again, it’s time for
Home Furnishings Business to celebrate its Newsmaker of the Year (NOTY) issue, an annual feature that recognizes executives who have had the most impact on the industry over the previous 12 months.
This year’s Newsmakers—Mattress Firm CEO Gary Fazio and President and COO Steve Stagner—have changed the bedding landscape by adding nearly 200 stores across the country to become a nationally known bedding retailer with 530 stores. As it has expanded into new markets, Mattress Firm has gained a reputation for continually striving to upgrade the “sleep shop” experience.
In a field where under-financed operators can open a store for a few thousand dollars, the Mattress Firm invests nearly 50 percent more than most sleep chains to build impressive stores on heavily traveled corners, and it invests even more in training employees, to help take the confusion out of a mattress-buying process that has become even more complicated with the rise of specialty bedding and other alternatives to traditional mattresses.
A new initiative, “Comfort by Color,” injects a dose of color to mattress stores that had been dominated by shades of white, while giving customers the power—and the knowledge—to guide themselves through the selection process, with help when it’s needed.
NOTY is a tradition that started six years ago with InFurniture Magazine, which HFB acquired in 2006. Fazio and Stagner join a short and exclusive list of NOTY recipients. Previous Newsmakers have included Neil, Michael and Steven Goldberg of Raymour & Flanigan (2007); Ron and Todd Wanek of Ashley Furniture (2006); Keith Koenig of City Furniture (2005); Vaughan Bassett CEO John Bassett III (2003); and the late Laurence “Larry” Moh of Fine Furniture (2002).
Positive Discontent
A sense of never being satisfied, even when things are going well, has been a force behind the strong growth of Mattress Firm. After opening more than 180 stores in two years, Mattress Firm has established itself as the only multi-brand mattress chain with a presence across all four time zones, and it is poised to become the first national retail brand in its category as it rapidly closes in on $1 billion in annual sales.
What sets Mattress Firm apart from its rivals is what CEO Gary Fazio calls “a positive sense of discontent.”
Even in a year in which the Houston-based chain reached 530 stores after opening 68 locations (on top of building and acquiring 115 in 2007), Fazio said neither he nor President Steve Stagner are entirely satisfied. “We always just want it to be a little bit better,” Fazio told Home Furnishings Business in an interview at the company’s headquarters. “It’s not unhappiness, but you also have to always be careful that you don’t pat yourself on the back too hard” over past accomplishments.
Fazio, 58, who jokes about positive discontent as an illness, said it led him to leave Sealy as general manager in 2001 to join Mattress Firm—which was then losing money—and quickly return the company to profitability and begin to set the foundation for rapid growth.
Stagner, 39, may have an even more advanced case of positive discontent. He left a sales position with a mattress manufacturer at age 26 to open a Mattress Firm franchise in Atlanta in 1996. That one store grew to a chain of 50 locations with sales of $63 million by 2005 when he merged his business with Mattress Firm.
LOFTY GOALS Since then, the management team that Fazio and Stagner lead has established Mattress Firm as the nation’s only retailer of both conventional and specialty mattresses with a presence in all four time zones. Top executives are now focused on goals that Fazio calls “audacious.” One is boosting sales past the $1 billion mark in 2011 (from about $525 million this year) and the second is establishing Mattress Firm as the first truly national multi-brand retailer in the mattress category, and those goals don’t seem out of reach when you consider the company’s recent track record.
Even though 2008 was one of the most difficult years in the history of mattresses—with an industry-wide sales decline of 10 percent or more on a unit basis—Mattress Firm’s revenues increased on the strength of its store growth and the company is profitable. Fazio declined to be specific about the sales increase, but said the company plans another 50 stores in 2009.
HIRE FOR FUTURE PLANS Since there has never been a national brand in the conventional mattress industry, Mattress Firm has modeled itself on highly successful (and profitable) specialty retailers in other segments. It has also filled its management team with executives with experience leading high-growth retailers like David’s Bridal and Chico’s. “We think of ourselves as a specialty retailer building a national brand, not just as a sleep shop,” Fazio said. “It’s a distinct retail model and our earnings are much more like the nation’s fastest-growing specialty chains than retailers in the mattress category.”
The company’s most recent growth spurt came after Fazio and Stagner spent a couple of years of focused effort on establishing a platform for adding stores at a rapid rate. The company made additions to its management team, upgraded technology and established a network of 24 distribution centers capable of delivering twice as many mattresses as the company handles today.
In January 2007, the growth-minded J.W. Childs Associates private equity firm (along with Fazio, Stagner and other top executives) purchased what was then a 305-store chain from Sun Capital Partners. Fazio said J.W. Childs put the company on a fast growth track, which has included a number of acquisitions.
RED CARPET TREATMENT Mattress Firm’s stores are appointed like boutiques in a luxury mall, with wood floors, large flat-panel television displays and, in a few new locations, a coffee bar with a distinctive high-end flair. If you buy a mattress, the crew that brings it to your home will unfurl a red carpet in your entryway and slip on booties to prevent dirt from being tracked in—no matter whether you bought a $399 store brand or a $3,999 luxury bed.
Stagner said “Red Carpet Delivery” and the company’s same-day service are just a couple of the ways Mattress Firm has sought to set itself apart from its many competitors, which include club stores, traditional furniture retailers, department stores and countless sleep shops.
Over the years, mattress advertisers have bombarded shoppers with confusing claims and counter-claims and bait-and-switch pricing strategies. In a typical mattress department or store, shoppers are almost completely reliant on a salesperson who has been trained to rattle off specifications about coil counts and foam density, which often leave shoppers even more confused. “It all has led to a lack of trust or, at least, a challenge when it comes to trust with consumers,” Stagner said. “It’s difficult for customers to compare similar products in stores that are often a sea of sameness with a bunch of white cloth rectangles on the floors,” he said. “For us, it’s all about ‘Sleep Made Easy.’ It influences everything we do, including our training, our marketing messages and the way we go to Market.”
SLEEP MADE EASY Mattress Firm’s newest “Comfort by Color” merchandising initiative groups mattresses into categories, so a shopper can easily use store signs and color-coded displays to find what they’re looking for, whether it be firm, plush or pillow top. It’s much the same process an athletic shoe store uses to help a runner pinpoint the jogging shoe section and then be able to narrow his search to a preferred brand or price. “We’re enabling customers to be much more involved and engaged in the selection process, and that’s something that makes shoppers a lot more comfortable,” Stagner said.
Another innovation at Mattress Firm is its in-store television network (delivered live by satellite). With multiple screens throughout the store, a shopper can see various mattress categories defined in one area of the store or watch an educational video on tips for a better night’s sleep on another nearby screen. “It gives us an opportunity to sell benefits that are difficult to deliver in any other way,” Stagner said.
LONG-DISTANCE LEARNING The private television network is also used for employee training, enabling Fazio and the management team to broadcast messages to the chain’s stores. “We can provide first-generation information to all of our associates out there simultaneously, which is critical when you have stores across four time zones,” Fazio said.
Last year, the company teamed with sleep expert Dr. Michael Breus, a well-known psychologist who has appeared on television programs like the “Today” Show and “Oprah.” He develops and delivers training programs to deepen the knowledge of Mattress Firm associates about sleep disorders and solutions.
SEEKING OUT A SPECIALIST The company’s brand lineup has insulated it to some degree from the steep sales declines some mattress sellers have seen, especially during the second half of 2008. Fazio said the difficult environment “has not been fun.” He predicts a number of under-financed bedding retailers will go out of business, but adds that Mattress Firm will grow. “This is a good time to build stores, but that doesn’t mean (increasing) same-store sales are going to be easy to come by.”
With three decades of experience, Fazio also knows that every time the mattress industry has suffered a down year or two, it has seen a sharp boom period once the economy has turned in a positive direction.
Of course, Mattress Firm has benefited from a move by consumers away from super-sized stores toward specialty retailers, including sleep shops. That trend is especially pronounced in furniture, where sleep shops accounted for 19 percent of the market in 1990 and up to 45 percent this year, according to the company’s internal research. “Specialty stores are succeeding because consumers are time-constrained and selection-driven,” Stagner said. “We believe we have all the best brands, and that’s a real motivator for consumers who don’t typically visit several stores, but still want to compare. We’re the only chain in most of our markets that has Select Comfort and Tempur-Pedic in one place, which is powerful because those companies spend $200 million a year on advertising.”
Mattress Firm also carries brands like Sealy, Simmons and Stearns & Foster, as well as its own private-label brand.
DOMINATING MARKETS While the company has goals, including reaching $1 billion in as little as three years, Fazio said the company is even more focused on being dominant in the market where it operates. In most cases, that means working to maintain twice the market share as its closest rival in the sleep category.
He believes Mattress Firm will capture more sales than most because of the talents of the chain’s store-level associates. “A restaurant can have a great chef, but if the waiter is bad, you’re not going to go back, and that’s always in our mind as we think about the sales associates in our stores,” he said.
FOCUS ON STORES, NOT COIL COUNTS New hires, 60 percent of whom are college graduates, fly to Houston for a week of intensive training before ever selling their first mattress, and all Mattress Firm employees receive three full weeks of continuing education every year—and Stagner said very little of the training focuses on coil counts or other technical aspects of mattresses.
After having opened in five new markets in 2007, Mattress Firm’s goals include operating in as many as 100 markets nationwide in just a few years. As a result, it’s going to need hundreds of new associates and it needs many of its store managers to develop into divisional managers, regional managers and executives with even broader responsibilities. “What we’re teaching is, essentially, how to run a business and gain work and life competencies that will help you for the rest of your life,” Stagner said.
Fazio said the chains pays better than average, and it’s been reported that after their first year, Mattress Firm’s full-time, commissioned associates can earn well in excess of $50,000 a year. At Stephen F. Austin University in East Texas, where Mattress Firm’s success is well-known, scores of seniors in the business school line up each year to interview with the company. The same thing occurs at the University of South Dakota, which like the Houston school, often calls on Fazio, Stagner and other company executives to serve as guest lecturers.
One result of Mattress Firm’s strong sales crop is that its sales in the luxury category tops 50 percent, meaning that more than half of its sales involve a mattress priced at over $1,000—which is far above industry averages.
ORGANIC GROWTH & NEW HORIZONS Looking toward the future, Fazio said there’s plenty of room to grow in the 44 markets in 21 states where Mattress Firm currently has stores, but also adds that the company currently reaches only 24 percent of the population—which leaves open a lot of opportunities. “We’re going to grow it at the right speed,” Fazio said. “We have the purpose and the passion to become a national chain, but we can increase our store count by 60 percent in the markets we’re already in.”
At press time, Mattress Firm announced it had added five stores to its 530 corporate locations by acquiring five franchise locations in Birmingham, Ala., which had opened all five locations in that city over the previous 15 months.
Fazio said the company’s franchise program has not been very active in recent years, but the company has hired two executives to begin focusing on smaller markets. Corporate stores will continue to focus on cities with a population of 1 million or more.
INTERNET STRATEGY Stagner also sees the Internet as an opportunity for customers in existing delivery areas to have an easy option for quickly replacing their bed. The company’s Mattressfirm.com site now offers a lot of sleep tips and a broad selection of mattresses and prices, but Stagner said the site will become transactional in the not-too-distant future.
Despite the current state of the economy, Fazio sees a bright future:
“This category has not serviced the customer very well, and we believe there’s a way to do it better. ... We have the talent we need here in the building to reach our goals. We think it’s all about serving the customer, being profitable, providing a solid return to the shareholders and being good to our employees. If we can do all those things and do them right, we’ll get to exactly where we want to be with control and strong results.”
November 30,
2008 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on December 2008
A couple of years ago my son went mountain biking on the Slickrock Trail in Moab, Utah, with his scout troop. He was so excited to return and tell us about his new favorite sport. Furthermore, he was adamant that I buy a mountain bike and take up the sport with him. Over the course of the next several weeks he told me about the technique he used to keep himself upright and in control while descending the treacherously steep hills of Slickrock. “You have to keep your behind way over the rear tire,” he told me. I tried riding down our front steps. It was harder than it sounded, and I crashed on several attempts. After I had received enough scrapes and bruises, I did something exceptionally smart. I asked my son to show me exactly how he did it. Hey, it worked! I was finally able to ride the bike down our hard steps and, eventually, the steep trails of Slickrock.
We all want to be shown how to do new things. Whether we want to learn to mountain bike, divide fractions or sell furniture, we need someone to demonstrate the new skill to us. Demonstration is an important part of successful teaching, and it is especially important when teaching a complex skill like selling. Lecturing alone is just not enough.
Here are four simple and effective ways you can use demonstration to make sure that your sales associates learn the important skills they need to sell more furniture.
1. Role play: When you incorporate role-playing activities in your training, be sure that as the resident sales expert, you are the first to do the demonstrating. Sometimes, in an effort to involve all their students, teachers only have the students participate in role playing. Be sure that you don’t fall into that trap. Your associates need the chance to watch the expert.
2. Give lots of examples: Make sue that you give lots of examples of the skills you are trying to teach. Enact the same scenario multiple times, and vary your responses. For example, if you were teaching effective greetings to your associates, in your first example you might say, “That is a beautiful sweater you’re wearing.” The next time you might say, “Hello, my name is Mike Petersen; I am a sales associate here at Petersen’s Furniture Store. And you are ...?” Your third and final example might be, “Hello, My name is Mike Petersen. I am a sales associate here at Petersen’s Furniture Store. What brings you in on such a beautiful day?”
3. Write it down: Sometimes you don’t have enough time to show all the examples you would like. Go ahead and write a few of your most successful approaches and pass them on to your associates. Ask them to keep the paper in their pocket to review the examples between ups.
4. Video the best: Once you are confident that you have some excellent skills that your associates should see, make a video recording for them to refer to. Encourage your associates to watch it whenever they need to review an expert in action.
Most of the skills we acquire come as we watch what successful people do. We need excellent examples from which we can pattern our own behaviors. Make sure your sales associates have the opportunity to see the behaviors that you expect of them multiple times. As they are shown appropriate examples, their own sales skills will improve, and they will increase their sales. HFB
Mike Petersen is vice president of The Furniture Training Co. He can be reached at mikep@furnituretrainingcompany.com
November 25,
2008 by in UnCategorized
By Home Furnishings Business in on November 2008
Some good news: The Conference Board’s Consumer Confidence Index improved slightly in November, up 6.1 points to 44.9. The flip side is that there was nowhere to go but up, since the index hit a record low of 38.8 in October (1985=100).
The Present Situation Index slipped to 42.2 from 43.5 last month, and the Expectations Index increased to 46.7 from 35.7 in October.
Consumer plans for buying big-ticket items in the next six months were down from October levels, with 1.9 percent planning on purchasing a home, off from 2.6 percent in October; 3.7 percent expecting to buy an automobile, down from 4.5 percent last month; and 23.8 percent anticipating a major appliance purchase, down from 26.5 percent in October.
Consumers’ appraisal of current conditions deteriorated further in November, with 40.3 percent saying business conditions were “bad,” up from 37.1 percent in October. Just under 10 percent said conditions were “good,” up from 9.4 percent last month, with the balance citing conditions as “normal.”
The employment situation also concerned more consumers, as 37.2 percent in November said jobs were “hard to get,” up from 36.6 percent last month. Only 8.8 percent said jobs were “plentiful,” down slightly from October’s 9 percent with the balance in both months saying jobs were “not so plentiful.”
In a near perfect reversal of last month, regional consumer confidence improved in all but one of the nine regions. Only the West South Central region reported a decrease in confidence, dropping to 63.2 in November from 77 in October.
“The persistent declines in the Present Situation Index suggest that the economy has weakened further in the final months of this year,” said Lynn Franco, director of the Conference Board Consumer Research Center. “Inflation expectations, which have been at historically high levels in recent months, subsided considerably as a result of fall gas prices. But, despite the improvement in the Expectations Index this month, consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely.”
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The cutoff date for November’s preliminary results was Nov. 18.