From Home Furnishing Business
Cover Story: The Internet: Friend Or Foe
2017 by Jane Chero in Business Strategy, Industry
With all the noise about the coming retail apocalypse, retailers are searching for the enemy. The economy did expand last quarter (2.6 annualized) more than double the anemic rate of 1.2% for the first quarter. The furniture retail sector did grow as well with the 2nd Quarter producing a growth rate of 2.14% compared to the same quarter over last year.
According to a Credit Suisse report, ALL retailers are failing in record numbers. It is projected that 8,640 will close. This is up 40% from its peak in 2008. We will leave this discussion for the October issue on State of the Industry, but will say that ecommerce alone is not causing this Armageddon.
The internet can be the solution to survival for the independent furniture retailer. The major concern today is the absence of traffic that is coming through the door. Instead of defining this as a problem, the retailer needs to embrace the fact that the consumer coming through the door is more informed about what they want and have selected your store as one of the two they have chosen to provide a home furnishing solution. Without a doubt the traffic is down. Statistically, the close rate should be 50% if your performance is average. This is adjusted down for consumers that do not purchase anywhere. It should be in the high 30%. However, the traffic that arrives at your door is ready for you to provide that home furnishings solution.
For retailers their website is the first touch point for the consumer and their store. Even if your store is not first shopped (49%), ultimately it is an influencer on 72% of all consumers that buy. Your website cannot be one and done, but a continuous process of improvement.
As a retailer does with the brick and mortar store when walking the floor critically assessing how to make the merchandise more appealing, questioning retail sales associates’ product knowledge, and evaluating their readiness to assist the consumer, all of these must also be done on the retailer’s website.
Today, the retailer embraces digital. However, is it merely lip service and dollars spent for results? There are many digital vendors willing to provide the magic solution to drive traffic to your store and entice them while they are visiting. The retailer must take a critical look at what is being communicated to prospective consumers via email blasts and presentation on the site. What happens in the digital world should match what happens in the store. Let’s go forward and understand the buying process as it relates to the internet and how to measure digital success.
From a consumer’s perspective, computers and their hand maiden, the internet, have moved beyond business applications and become essential to daily existence. With the coming of voice commands integrated with artificial intelligence (AI), the prospect of “pepper,” the human-shaped robot designed to be the humanoid companion is not beyond belief.
We are still years away from the time when all of our needs will be dutifully performed by a machine that understands our every taste level. For now let’s understand the consumer’s perception of shopping for furniture on the internet.
In terms of marketing, the first promise of the digital evolution was that the consumer could pursue product information on his or her schedule and not be the target of mass marketing’s continuous bombardment with enticements to purchase. While there is now an abundance of information on the internet for any product, the consumer is still targeted constantly with an estimated 360 impressions daily. With all of this noise it is understandable how one could conclude that the demise of brick-and-mortar retail is inevitable.
While it is painfully obvious that retail stores ARE closing (think HH Gregg and Sports Authority, for example), only a portion of that lost volume can be attributed to the explosion of e-commerce. The truth is that the overzealous opening of new stores was beyond the justifiable increase in demand. Fortunately, furniture retailers, either because of prudence or the lack of capital, did not enter this frenzy of store count expansion. Just as the dotcom bubble tried to translate “eyeballs” to revenue, the concept of more locations in a single market did not directly translate to increased revenue. Now the piper must be paid.
What about the impact of the internet on the furniture consumer? Let’s follow this step by step through the buying process. For a brick-and-mortar store the fear is that the consumer will go on the internet to research furniture and will purchase from someone else. The internet is a given for the consumer to accomplish the research, and consumers simply do not have the time to visit the five to six stores that they did a decade ago.
No matter where the consumer ultimately purchases, the first step (54%) for the majority is to visit the internet before visiting the stores. Graphic A illustrates the sequence steps for the consumer in his or her buying process.
Steps In Buying Process – A
It should be noted that for a significant percentage of consumers (40%) the initial step is still to visit a store before going to the internet for research.
Let’s put a perspective on the fear of e-commerce for the brick-and-mortar retailer. Currently only 11.65% of purchases (not dollars) is made on the internet. Table B breaks down purchases by retail channel.
Type of Retailer Purchased From – B
Let’s understand the buying process beginning with the impact that internet advertising has on the furniture consumer. The internet and, specifically the web presence and e-mail, are indicated by 37.5% of the consumers as the most influential advertising media on the intention to purchase furniture. This percentage is more than double that of other advertising media as seen in Graphic C.
Media - Pie Chart – C
This influence is not to be confused with social networks such as Facebook, Pinterest, etc., which have a number one position for only 8.5% of consumers who purchased furniture. The challenge for retailers is to translate that consumer traffic to the website into traffic into the store.
Furniture is not a commodity product, at least not yet. Less than 30% of consumers consider their furniture purchase as “a practical purchase that meets my basic needs.” The majority of consumers believe their home furnishings must communicate “who I am” and reflect a sense of current style.
Table D illustrates the consumer’s attitude toward decorating and home furnishings.
Significantly, the number of consumers who ultimately purchased on the internet exceeds the number who purchased in other distribution channels in both the “practical” and “style” attitudes, and only scored less with the consumer who was interested in projecting the image of success.
Today’s consumer is very interested in buying furniture, with over 68% either thinking about a purchase or has already begun the shopping process. The remaining consumers are actively shopping or have purchased. As can be seen in Table E, those who are actively shopping are predominately online purchasers or those who have purchased from brick-and-mortar retailers.
Stage of Shopping – Table E
As would be expected, the female most frequently initiates the first mention of the need or desire for new furniture. No matter if it is an individual or a partnership, with 49% being female or 21% with spousal partners, the ratio is 3 to 1 female. However, when compared to historical research, it represents a significant change from the 8 to 1 female-to-male radio in the 80’s. The information is presented in Graphic F.
However, as seen in Graphic F, the ratio for the internet purchaser increases to 3 to 1 for the female furniture consumers. Unlike other consumer online purchasers, the female has embraced the e-commerce distribution channel.
It is interesting to note that, on average, the internet purchasers shopped more retailers than the brick-and-mortar purchasers. Additional research will be required to understand better the reason for this. Was it to confirm both price and quality before making the leap to purchase online?
A common belief is that the internet purchaser does so because he or she doesn’t want to drive to a distant store. However, the research shows that the consumer who purchases on the internet is as willing to drive to shop for furniture.
Graphic I How Long Did You Shop Before Making a Purchase?
The major perception is that the internet purchaser comes to a decision faster than the brick and mortar consumer. The fact is that 29% of internet purchasers shop longer than one month as compared to 21% for the brick-and-mortar customers. We believe this is connected to the internet purchaser that is driven by selection.
Graphic J How Was Your Last Furniture Buying Experience?
Fortunately for brick-and-mortar retailers, the internet purchase rated their experience 6 or 7, with 7 being rated excellent only 53% of the time as compared to 58% of the time for the brick-and-mortar retailer. As can be seen from the graphic, the internet tended to be more exuberant with 40% being excellent. Are they trying to convince themselves of their decision?
Graphic K Specifically, Experience by Area
As seen from the graphic, brick-and-mortar consumers give the highest ranking (7) for courtesy of store personnel (41.6 %), product knowledge, (33.8 %) and product display (33.9%), but rank almost evenly with ease of shopping and product selection. There is still an advantage to being able to talk with knowledgeable sales associates and to experience a great visual display.
In summary, the Internet purchaser is a fact of life. The challenge for brick-and-mortar retailers is to make their advantages known to the consumer. Today’s drive in ecommerce is virtual reality to assist the consumer in making product decisions. Will it ever replace a competent retail sales associate?
Without a doubt, the internet has brought about a change much like that of the Industrial Revolution, which moved our society from agrarian to urban in the span of two generations. But what has the internet done to our focus – furniture retailing?
During the past decade, furniture retailers have developed an Alternative Universe. Do not panic! We are not spinning off into science fiction and losing our touch on reality. The advent of the internet forced the furniture retailer to create a virtual store where 72% of all furniture purchasers visit before making a purchase. The furniture retailer had little choice but to establish a web presence. In the early days, some were no more than an expanded “yellow pages,” which were produced by the retailer’s high school-age nephew.
Now, retail sites have expanded from placeholders with the address, brands carried, and store hours to expansive catalogs of every product made by every supplier carried in the retailer’s store. The concept of “the endless aisle,” while important in other industries, lacks importance in the furniture industry. For the furniture retailer, the average time on a site is less than five minutes (for non-ecommerce sites).
The website was envisioned by the early adopters as a way to reduce the cost of advertising. The idea of having consumers visit a website to preview the merchandise when they are ready to purchase furniture, which cost the retailer a fraction of what newsprint and television cost was exciting.
What has transpired is internet research has reduced the number of stores shopped, which has resulted in the industry standard of measure cost per up to increase. Currently, the cost per up average for all retailers is about $14, but can range from $12 to $40 depending upon the size of the retailer. The accompanying graphic illustrates.
In truth, more retailers have not totally embraced the digital advertising strategy and still spend less than one-half percent of sales on internet advertising. The subsequent table presents the expenditure by type of advertising currently.
The question is why continue the older medium and not entirely embrace digital? The fact is, with the current furniture buying consumer, digital has not been as effective as the more established television/print.
For sure, the future, with the approaching millennials, digital will be more effective. Television viewing and newspaper readership are declining. Direct mail, especially targeted demographically/psychographically, with content tailored to the recipient, holds great promise.
A great question for furniture retailers is what is the purpose of their site? If not for e-commerce, what is its objective? For this discussion, let’s put e-commerce to the side.
Most sites today have emerged as super catalogs, which present all products merchandised by the retailer, along with all products sold by their vendors. While this addresses the much touted “endless aisle” that many experts believe the consumer wants, it also challenges the fact that consumers spend less than three minutes on a non-e-commerce site. The graphic illustrates.
It is frustrating for a retailer to create a virtual store in which 72% of his customers may visit, but leave for the most part anonymous. Is this different from most advertising, either by direct mail or television? We should take as a positive the consumer spent more than three minutes previewing your store, the merchandise you carry, and the services you provide.
When designing your website, it is helpful to conceptualize it as a store. Your store design has been perfected over many years and has been effective in guiding your customer through the process of creating a beautiful room. The table presents areas of comparison.
There is nothing like the first impression, whether it be in your store or on your website. The first twenty feet of the store, often referred to as the Landing Zone, sets the expectation for the consumer as to what awaits them. Outstanding visual display of new products, service commitments, and special sales usually greet the consumer at the door. The Home Page of the website is the comparable element. The typical furniture retailer’s website has incorporated slides to present new product – a good solution to establish the style/quality of the merchandise you carry.
Unfortunately, this first impression can deteriorate over time into a haphazard collection of messages and promotions all screaming for attention. Would you let your vendors plaster signs over the windows of your store? Who is the editor of first impressions?
In your store, the important first step is to engage. Tailored to the vision of the store, whether a receptionist or the next salesperson in a rotation, it should be welcoming. The measure of your success on your website is the bounce rate at the home page. Best practices in the industry is an 18%-20% bounce rate for the home page and 20%-40% for the overall website.
There are many variables that impact these statistics, such as the percentage of mobile traffic, Facebook traffic, etc. The key is to measure your site continuously and understand the reason for any changes. The graphic illustrates the weekly monitoring.
Recently, the industry has seen heavy use of a “Pristil,” which is a fancy word for the intrusion of the consumers visit, enticing them to enter a drawing or to provide an email address for future mailings. While this service results in 3% to 5% of consumers doing so, the impact on bounce rate and the quality of the lead has not been accessed.
The next element in the store is for the retail sales associate to establish rapport with the consumer and to better understand what they are looking to purchase – needs assessment. This is a major challenge for the virtual store. While the search engine has been perfected over the past decade, the consumer has a difficult time in communicating what they have in mind. In fact, in our on-going research, when we ask a consumer why they did not purchase from a retailer, a typical response is “could not find what they were looking for” (30%-40%). This is for well-managed retailers. How would internet consumers respond?
The next step is the product presentation. The typical interaction with the retail sales associate and the consumer on the floor is 35-45 minutes. Of that time, about half is involved with the product presentation. A seasoned salesperson would have narrowed the choices for the consumer to 3 or 4 of the most probable selections, along with a step up and step down in price. With each of these choices, there’s a features and benefits story, as well. While a product spec sheet has the same information, it can’t be presented in such a way as to narrow down to a decision.
The final steps of handling objections and closing the sale are best done in person. While “chat” provides an alternative, with over 50% of all e-commerce involved in “chats,” it is difficult to engage the non-ecommerce consumer on-line. The application is inexpensive, but requires a dedicated person to handle all chats.
Obviously, all sites have an “inquiry” function that generates about 1% of unique traffic. The inquiries must be handled within an hour to produce results.
The key to success is to monitor your site and to investigate any changes. While Google Analytics provides a mountain of statistics, focusing on the important ones and relating them to your operation is essential.
We believe the following are important.
Tracking your unique visitors against the purchasers in your price point will provided a perspective of the effectiveness of your advertising, both print and digital. Comparing your visitors to the “ups” in your store is critical. The difference between the traffic to your site compared to your store is the most revealing. While the consumer only “shops” two stores, they visit five to six on average on the internet. If a retailer can achieve a 1:3 ratio, it is outstanding.
The goal is to minimize the clicks for the consumer from the home page to the product in which he or she shows interest. The industry average is 4-5 pages. Understanding how your web design impacts your pages visited is critical.
The industry average of 3-4 minutes on the site confirms the consumer is just previewing your store and not seriously making a decision.
Understanding the different sources of traffic to your site will better allow the retailer to incorporate his website into his overall marketing plan.
Most sites today have been designed for mobile devices. Obviously, the percentage of mobile usage impacts other statistics.
While research shows social media is not very effective in influencing the consumer’s intent to purchase home furnishings, it is very effective in building brand.
The website is an important part of a furniture retailer’s marketing strategy. Creating a positive experience on the website will influence the percentage of time the consumer visits the store to consider a purchase.
For Wichita Furniture founder Jay Storey, the choice was clear. In fact, there really was no choice.
Traffic at his 59,000-square-foot store in Wichita, Kan., was falling fast with no bottom in sight. If he didn’t make a radical change soon, the business he started in 1989 with $5,000 in borrowed money wouldn’t be around much longer.
The only choice was to swallow hard and go digital. That meant replacing a website that contained barely more than the store hours and directions with a full-fledged transactional e-commerce website. And never looking back.
“The revolution is over and the customer has won,” he said, borrowing a quote from a retail pundit whose name has been forgotten. “They are going digital. It’s done. It’s over. We can either get on board with it or we’re done.”
And since he took that leap of faith a little more than two years ago – with a lot of encouragement from his Millennial son, Jordan, the company’s marketing and e-commerce director – the hyper-growth in sales generated by the website has more than offset the decline in store traffic.
Website traffic, in fact, increased more than 50% in 2016, and the company now routinely delivers more than 3,000 pieces of furniture a week.
“Our brick-and-mortar traffic has continued to decrease, but our web traffic has exponentially picked up where the brick-and-mortar traffic has left off,” said Jordan.
Jay Storey said driving that website traffic meant taking another leap of faith by moving a sizeable chunk of marketing and advertising dollars away from traditional broadcast and print ads and into digital marketing.
Today, about 30% of the marketing budget is set aside for digital, and he said the company has been especially successful using Google AdWords, which allows a company to “buy” specific search words. In turn, that gives the user the ability to know who is using Google to search for, say, a recliner, or is visiting websites that include information about recliners.
“One of the beauties of Google is that we’re now able to have that rifle approach where we can target our audience way more than we can from a traditional media standpoint,” said Jordan Storey. “With Google analytics, you can really go into one-on-one marketing.”
And that one-on-one marketing, for example, can result in a Wichita Furniture ad appearing on a non-furniture website when that consumer who was searching for information on recliners moves onto something else on the Web.
“It would probably scare you to know how far Google can take you into their audience,” quipped Jordan Storey. “The truth of the matter is we know who is looking at what, when they’re looking, and where they’re at. And therefore, you have the opportunity to reach them.”
Or as his father puts it, “With Google, you have the ability to find the person with a need, versus spraying (your advertising message) out there and praying that it works.”
Jordan said he especially likes the ability to target specific age groups or other demographic profiles. He said such targeting is typically not possible with traditional media because demographic data is often outdated.
“But digital data is real time. And you can change it immediately if you need to,” he said.
And while Wichita Furniture does ship furniture nationwide – usually smaller parcels that are sent via UPS or FedEx – the Storeys said the biggest benefit of the robust e-commerce platform is the product knowledge it provides consumers, noting the clear majority of them do extensive online research before deciding what store to visit.
“It’s the online education that gets them to transact in your store,” said Jay Storey. “They’re not going to transact as much online because they want to come in and touch it and feel it. But when they walk through the door, they will hold their phone up and say, ‘I want to see this item’.”
Although he wouldn’t disclose specific numbers, Jordan Storey said the improved website has significantly boosted close rates even as traffic has fallen. That has kept retail sales associates fully engaged, knowing that many customers walk through the door ready to buy – and they may walk in with as much product knowledge as the staff.
“It has helped our metrics across the board … close ratios, average tickets, sales per guest, and so on,” Jordan said of the website. “We clearly have a more educated consumer.”
And his once old-school, furniture industry-veteran father knows there is no turning back. He says there is no question that going digital is a huge leap of faith that requires a large investment of time and money, but it’s a necessity rather than a luxury.
“You never will fully grasp the digital world because it changes to fast,” Jay Storey said. “You have to pick and choose where you’re going to go and be the best and what you do. You cannot just be OK at everything.”