From Home Furnishing Business
Furniture Retailers Should Get Ready to Come out Swinging This Year.
Home furnishings retailers are getting back into fighting trim versus survival mode as the economy returns to some sense of normalcy.
Wretched headlines out of Washington and news media that seem more intent on generating heat than light in a 24-7 competition for attention sometimes overshadow the fact conditions favorable to our industry have improved. Could the furniture retail sector be in for a stronger competitive stance relative to other areas where consumers can spend their money, such as travel, electronics and automobiles?
While he predicts a “mild” recession next year, economist Alan Beaulieu, president of ITR Economics in Boscawen, N.H., thinks the answer is yes.
Beaulieu talked to attendees at last month’s Myriad Software Conference in San Antonio about moves retailers should make this year and the next.
“2013 is going to be a positive year, but 2014 will have a mild consumer recession,” he said. “The government has ensured that” with changes to FICA and concerns about the impact of health care legislation.
He added that 2015-2018 will be see very positive growth, with increased hiring and economic activity.
“How do I get ready for 2015?” he said. “Training, cross-training, improving efficiency. Start doing it now, because training takes time.”
He pointed out that a little more than 40 percent of American’s still think the country is in recession, largely due to negative headlines and continued high unemployment levels.
“Don’t let the media tell you the economy’s going to crater,” he said. “This (2014) recession—a mild one—has nothing to do with the last one. … The consumer has done a tremendous job of right-sizing and deleveraging. … Debt-to-equity ratios are at 20-year lows.
“If you can reach that consumer and line up with their expectations you’ll find they will spend.”
Home furnishings, he predicted, will outperform other retail sectors, what with steady improvement in the housing market: “While overall retail sales are okay, people want to buy what you’re selling.”
He added that now is the time to borrow money to invest in your business, since the Dodd-Frank (Financial Regulatory Reform Act) will have a negative effect on lending in 2014.
“You have this year to get your best deal,” he said. “You have to spend money to invest in a growing business.”
While furniture retail is off to a desultory start in 2013, retailers should expect and set themselves up for brighter times ahead, said Jerry Epperson, director, Mann Armistead & Epperson, Richmond, Va.
“Unfortunately, we were slammed pretty hard in February—retail was tough in general, and home furnishings was one of the worst categories,” Epperson said. “We think a lot of that has to do with severe weather tax returns running 10 days behind. A lot of retailers are telling us March is flat at best.
“If you want the reasons we’ll have bad business this year, there’s a long list, and Washington has been a very generous contributor.”
Now, for a very large “but” that gives retailers reasons for optimism.
“The housing numbers are blowing the doors off what anyone expected in their wildest dreams—we’re getting in range of it being a healthy market,” Epperson noted. “This year, new household formations will be double what they were in 2010, and Amex just said 50 percent more people will be changing homes than during last year.
“If you focus on what we rely on as an industry, you can have a good year—if you just watch 24-hour news you won’t,” he said. “The things that create demand for home furnishings are up. That’s what we’re trying to get people to focus on. If you want to be miserable, be miserable, but someone’s going to be out there meeting demand for all these people.”
Epperson believes exciting concepts are emerging for home furnishings retail, such as Ashley’s Sleep and Art Van’s Pure Sleep shops, and pointed out that more retailers are expanding, with more new stores opening in any year since 2002.
“The larger retailers are investing in growth,” he said. “Last year our total sales for all routes of distribution were up 5.9 percent. The real driver was the mattress sector, which I showed as 9.7 percent growth, the third straight strong year for mattresses.
“I think this will be a great year for outdoor furniture sales,” Epperson said. “We had this exceptionally cold, snowy winter, especially compared with last year, and people are excited about spring and summer.”
New stores in Epperson’s home town of Richmond, Va., include a Rooms to Go, and he said what happened there is an object lesson in opportunity.
“Their being here has made our Ashley stores, our Value City stores, Haynes Furniture, which is local, better,” he said. “Television, print ads are way up. It’s like Rooms to Go woke up the city.
“I don’t have the exact numbers, but with their coming to town, I’m willing to say furniture sales around Richmond are up 20 to 25 percent because of all the excitement created by this big guy and what everyone else did to respond.”
THE ENEMY AIN’T US
Retailers don’t need to wait for new furniture competition to start building consumer mind-share for furniture relative to the real competition—other categories of consumer goods.
“The mom and pops need to not worry about the big boxes and the giants of our industry,” said Mary Frye, president of Home Furnishings Independents Association, which is merging along with the National Home Furnishings and Western Home Furnishings associations next month into the new North American Home Furnishings Alliance. “They need to tap into their knowledge of their customers and customize the experience for those customers.”
Frye always has believed furniture retailers’ true competition lies outside the industry, and that retailers should have some fun in taking on other sectors.
“Retailers can take a tongue-in-cheek approach regarding other categories in their communications,” she said.
Going on a cruise? You might come back with some pictures, and you might also end up on a broken ship. Did that hotel look as good in person as it did on the Internet?
“Spend your money on something you can’t keep, or you can turn your home into the place you want it to be,” Frye said.
PRIMING THE PUMP
Home Furnishings Business asked a number of retailers what they’re doing to get consumers thinking more about buying the products they offer.
With Internet shopping—and purchasing—gaining ever more traction across a range of consumer categories, e-commerce is getting plenty of attention.
Colfax Furniture & Mattress in Greensboro, N.C., for example, is getting set to open its online store within the next couple of months after it tested the waters with an e-mail program that generated a big response from consumers.
Starting at the beginning of February, the retailer began showing products on its Web site for which consumers could request a quote.
“We have a person who manages those e-mails and sends back a price to the customers,” said Jan Linder, finance operations manager for Colfax. “They can come to any of our locations with that e-mail with pricing, and we’ll process a special order for them.”
The move generated overwhelming response.
“We haven’t tracked how many of those converted to sales, and that’s the reason we want to get our shopping cart up and running,” Linder said. “The interest is out there—we’ve been very pleasantly surprised at the amount of interest.”
Colfax is working with Micro D on phase two of the project, setting up online product displays with pricing.
“The general market is going toward online shopping, and also the ability to see the product and the pricing is often enough to drive people into the (brick-and-mortar) store,” Linder said.
The online move is attractive from an overhead standpoint, she added, noting that it’s far less expensive than opening another brick-and-mortar store.
“Online shopping is a boat that has sailed, and the furniture industry needs to get on it,” Linder said. “If we limit our shopping cart to our delivery area, we can deliver absolutely anything we can sell in our store. We believe it can do just as well or even exceed our brick-and-mortar sales.”
In March, Furnitureland South in Jamestown, N.C., went live with its online store, targeting shoppers across the country and beyond.
That initiative also came in response to consumers’ tendency to hit the Internet first when shopping for just about any big purchase.
It also builds on Furnitureland South’s brick-and-mortar service roots. Customers are encouraged to contact a design consultant for full-service design expertise; from space planning to color coordination and fabric selection, expert consultants work to create a turnkey service free of charge. Purchases also are delivered by the retailer’s in-house, white glove delivery team.
Colfax expects its online store to pay dividends at its brick-and-mortar locations.
“Everyone starts on the Internet seeing what styles they want, whether it’s a store they want to go to,” Linder said. “That’s very important for us because of where we’re located—we’re a destination, we aren’t sitting on Wendover Avenue (a major Greensboro traffic artery), and you have to make a decision to come see us.
“It’s not just a matter of convenience for shopping, it entices customers to come to the store if they’re not an online shopper.”
Above all, Colfax wants a “seamless” relationship between its online presence and its stores.
“We’re trying to design our Web site and our Web store to match the message and the quality of our brick and mortar,” Linder noted. “We don’t want customers to go to the Web site, decide to come see us and have get a different impression of the our stores.”
Frye at HFIA noted that retailers can offer customers via their Web sites service that pure online retailers often don’t.
“Retailer’s can search out that source and make things happen that the customer doesn’t know how to do,” she said, noting that with an Internet-only retailer, customers can be on their own. “We sell a very subjective product. What’s beautiful to one is awful to someone else. Our reasons for buying are equally subjective. Emotion sells so much more than statistics do.”
The economist Beaulieu noted that e-commerce held up better during the recent recession, and retailers should explore that avenue before the next downturn.
“E-commerce can provide additional opportunity if you can optimize your presence on the Web,” he said.
PLAYING TO STRENGTH
Bassett Home Furnishings licensee Bassett San Diego’s San Marcos, Calif., store is the network’s No. 2 performer nationwide, and Bassett’s new HGTV Home collection should help maintain that high standard, said Matt Huffman, vice president.
Bassett San Diego has been doing in-home sales for more than 10 years—the technique accounts for as much as 20 percent of business. HGTV is all about makeovers, and the Bassett/HGTV Home connection makes Bassett San Diego’s in-home efforts an easier sale.
“Our HGTV partnership helps tie up our in-home designer sales,” Huffman said. “And that’s really important since those are normally five times the average ticket of other sales.
“There’s a correlation between HGTV and what we’re trying to do. It makes what we’re doing so much easier—people just don’t invite you into their home very readily,” he said.
Larry Marquez is president of La-Z-Boy Furniture Galleries of New Orleans in Metarie, La., which has two stores in the New Orleans market. His plan is to continue what worked last year.
“In 2012 we were up 30, 31 percent,” he said. This year we want a minimum of 12 percent growth, hopefully closer to 18 percent. Since we’re a La-Z-Boy dealer, the brand’s not an issue.
“We sell our quality story and the La-Z-Boy brand,” Marquez said. “It appears people are looking for quality products and that they do have the financial means to buy that middle to upper-end product.”
Marquez’s advertising goal is to focus on direct mail and television, the two media getting people into the stores.
“We’re also offering some special financing on occasion—30 months, no interest,” he said. “When you can buy something of quality and can pay it off in three years with no interest, that’s a draw. We do that once a quarter.
“It’s a simple plan—it worked last year and we’re going to try to carry it on this year.”
TWEAKING THE APPROACH
Harkness Furniture in Tacoma, Wash., isn’t into full-blown e-commerce, but it’s tweaking its online approach to grab consumers’ attention and business.
“It’s a long road. One of our main competitors is the technology realm—televisions, electronics,” said Kellen Harkness, purchasing manager. “The hard thing for us to compare against is the ease of purchase. We’re trying to make furniture easier for consumers to buy.”
For that reason, Harkness Furniture has added pricing to its Web site like Best Buy would.
“We aren’t in full-on e-commerce yet but we want to head in that direction with a cart or taking credit card information,” Harkness said. “We recently updated our Web site—we priced our top best-sellers that we know we have in stock. When people see anything priced online they assume you have it.”
The store was on an older version of Ayr1, but upgraded three months ago.
“If we do go with e-commerce we’re set up for it now,” Harkness said. “We’re still determining what to price and what not to. … The big boxes do that well, but it’s a slower process for furniture.”
Around 150 people a day review the Harkness Web site, which the store views as a virtual showroom.
“We get buyer inquiries all the time from the Web site. They can build a shopping cart and send it to us,” Harkness said. “I took those inquiries over, and I try to answer every one the same day, and I attach a $25 gift certificate good on any purchase in the store over $99.
“We don’t have a set letter, and I try to personalize that e-mail. If they’re looking for something we don’t carry in stock, I might say, ‘I can definitely special order it in X-amount of time, but we also have these options you can purchase immediately.’ I also include pricing.”
Formerly, Harkness just sent pricing on customer inquiries, but Kellen revamped the process when he took over the e-mail responses about a year ago. Those inquiries get a lot more traction now.
“In the first week, we had five people come in the store with the $25 certificate—before, we had none,” he said.
He’s also transitioning into a new position where he’ll have more access and more time to work on the Web site.
“In the near future, we’re looking at pricing as much product as we can,” he said. “That means staying up-to-date with what our competitors are doing; examining our stock levels; and if special ordering, focusing on the amount of time it will take.”
Vermuellen Furniture in Jackson, Mich., is examining where to put marketing dollars in a time its traditional print advertising partners are cutting back. Part of that process involves better tracking of what brings customers to the Jackson, Mich., store, and that’s one of the reasons Vermuellen signed on with Myriad Software a few months ago.
“Our local newspaper is printed only two days a week now, and is just online the other days,” said Denise Fisher, CFO at Vermuellen. “A lot of the (surrounding) rural communities had their own newspapers, and a lot of those are going away.
“We used to do a lot of print broadsheets, but we can’t rely on that now. My boss isn’t real comfortable with digital, but we’re pushing him into it—life is pushing him into it.”
Vermuellen has begun e-mail marketing, which Fisher said is cost effective, and more television advertising and is using its new Myriad system to better track what brings customers to the store (Vermuellen also operates three La-Z-Boy locations, but uses La-Z-Boy’s own system at those). Fisher said the store’s local market demands care in how it approaches digital marketing.
“Jackson is a very traditional town,” she said. “We can’t necessarily do what everyone else is doing. It has to be area specific. We’re getting more into television, but there you have to decide whether to go cable or broadcast.
“We do direct-mail pieces, but that’s pretty expensive. We’ve started doing billboards, but we haven’t determined their effectiveness … We need to collect more data on what brought people in, and Myriad has a program for that.”
Vermuellen’s advertising manager also is developing the retailer’s Facebook presence to appeal to newer customers.
“Expectations are very generational,” Fisher said. “Our older customers expect a lot of customer service—they’ll want to repair a 15-year-old recliner. The younger buyers don’t seem to want as much since they’re used to finding everything online.”
TAP INTO ASPIRATIONS
HFIA’s Frye said furniture retailers need to celebrate the fact that they do good things for people, and the smaller independents that make up so much of the association’s members can make that happen personally.
“I can’t imagine there are many retailers I deal with who can’t sit down and call all their customers and have a meaningful conversation in a reasonable amount of time,” she said. “Be the person who can make it happen, who’ll use all their contacts and all of their knowledge to get that customer something they might not even know they need.
“We need to give our customers permission to say, ‘I’ve changed, and this doesn’t fit me anymore,’” she said. “Furnishings can lift you up.” HFB
Checklist for 2013-2014
Alan Beaulieu, president of ITR Economics in Boscawen, N.H., offers this checklist for ways retailers can
prepare for business conditions in the next year and a half.
• Positive leadership modeling (culture creates behavior).
• Invest in customer market research (know what they value).
• Training programs (people, process, internal metrics).
• Review and uncover your competitive advantages.
• Spend money on new products, marketing, advertising.
• Improve efficiencies with investment in technology and software.
• Check systems for readiness to accommodate increased activity.
• Add sales staff and hire top people.
• Lock in costs.
• Judiciously examine credit.
• Work on “What’s Next” (What are you doing to get ready for improved conditions?).
California Is Set to Revise its Flammability Standard—the Rest of the Country Awaits.
Never underestimate the power of the media.
A Chicago Tribune investigative report last summer examining the eco-toxicity of flame retardant chemicals used to meet the State of California’s open flame test for furniture led Governor Jerry Brown to demand a revision to the law, Technical Bulletin 117.
California regulations governing substances such as formaldehyde in home furnishings products have led to national standards, so retailers need to keep track of developments in the state regarding the issue of flammability in the products they sell on their floors—and anything else that might land them in legal trouble in the future (see accompanying story, “Prop 65 Looms”).
When it comes to flammability, a lot is happening fast, and that’s one reason the American Home Furnishings Alliance made flammability a focal point of its annual Sustainability Summit last month in Charlotte, N.C.
“People doing the science aren’t talking to the people making the decisions,” said Arlene Blum, a biophysical chemist who’s executive director and founder of the Green Science Policy Institute, Berkeley, Calif., and a visiting scholar at the University of California’s Department of Chemistry, during her keynote address to the AHFA gathering.
CHEMICAL HARM VS. LIVES SAVED
Blum has examined the toxicity of flame retardant chemicals since the 1970s, when her research was instrumental in banning the use of brominated tris in children’s pajamas, and her studies played a big role in the Chicago Tribune’s report. She got more media attention again in November with the release of a study examining the flame retardant chemicals found in sofas purchased over the last two decades. The gist of her argument is that the long-term health effects of off-gassing from flame-retarding chemicals causes more harm than any lives purportedly saved through regulations such as TB 117.
The revised standard does not direct manufacturers to use particular flame retardants. It’s a flame test only. It also exempts items believed to be of little fire risk from labeling requirements. For residential upholstery, it calls for a smoldering test only standard; addresses the upholstery cover fabric; tests the interactions of components of upholstered furniture; and adheres to testing standards of the American Society for Testing and Materials International (ASTM).
Tonya Blood, chief of California’s Bureau of Electronic and Appliance Repair, Home Furnishings and Insulation, is responsible for overseeing revisions to TB 117. She presented the revised state rule at the AHFA gathering.
“Health and safety relates to the workers in your plants and factories as well,” Blood told the AHFA gathering. “I do not test for chemicals. That is not my or my bureau’s function. We test for flammability alone. … If you want to use other products or other technology, we want to make sure our standard is flexible enough for you to do that.”
The new California standard also acknowledges the role that cover fabrics play relative to filler material such as foam in fire behavior with upholstered furniture. Why ASTM standards?
ASTM “has broad stakeholder participation … and it’s a consensus-based standard,” Blood said. “The test methods are reproducible, reliable and widely practiced.”
California work also found smoking is a huge problem in furniture-related fires. Blood cited Department of Homeland Security research showing that the fatality rate was more than seven times greater in smoking-related residential fires than non-smoking-related residential fire; and that the National Fire Protection Association found smoking materials remain the leading cause and the greatest risk factor of upholstered furniture fires and losses today.
In California, of 50 deaths related to upholstered furniture fires annually, 44 are smoking-related.
Other impetuses to the changes in TB-117:
• A Consumer Product Safety Commission study found that flame retardant treated foam actually increases the damage to cover fabrics from a smoldering cigarette relative to untreated foam.
• A CPSC study found there is no significant difference between the flame retardant foams formulated to pass TB 117 and untreated foams.
• Upholstery cover fabrics play a more important role in fire behavior performance than filling materials per a CPSC study.
• Research confirmed that when the cover fabrics were changed to less smolder-prone fabrics, smoldering resistance of the mock-up assembly significantly improved.
The new standard addresses testing materials used including standard polyurethane foam, where it narrowed the density range of the foam; specified more properties of the foam; and selected higher density foam for testing, which screens out the most smolder prone fabrics or weak barriers.
For cigarettes as an ignition source, the new standard specifies the properties and the ignition strength; reduces potential for variable performance; and allows manufacturers to procure material from various vendors.
Type II tests specify a more smolder prone fabric for a more rigorous test of the barrier material.
The proposed new standard was published Feb. 13, which opened the floor for written comments. (Written comments should go to TB117comments@dca.ca.gov by e-mail; or by mail to BEARHFTI, 4244 S. Market St., Sacramento, Calif. 95834). A public hearing is set for the changes on March 26, and adoption should take place this fall. By July 1 next year, all upholstery manufactured for sale in the state of California must be in compliance.
For inclusion in the public record and consideration in the revision of TB 117, comments must be received in writing.
“Get comments in in time for review so you can perhaps impact changes to the standard,” Blood told the AHFA gathering. “Once adopted, it’s too late to make a change.”
After the March public hearing, Blood’s bureau will spend April reviewing comments, after which it will open the revised standard to additional comment in May or June.
Blood said when it comes to enforcing TB 117, California takes about 50 sample products a month for testing—mostly from retail storefronts.
“If products are failing, we notify the manufacturer,” she said. “We’ll issue a citation, a fine, up top stopping sale of that product in California. We’ve found manufacturers are quick to want to come into compliance and address the issue.”
TALKING ABOUT THE ISSUE
AHFA assembled a stakeholder panel at its Sustainability Summit to bring further depth to the fire-retardant chemical conversation, moderated by Dr. Ana Mascarenas, policy and communications coordinator with Physicians for Social Responsibility in Los Angeles. In addition to Tonya Blood and Arlene Blum, the panel included Robert Luedeka, executive director of the Polyurethane Foam Association; Hardy Poole, vice president of regulatory and technical affairs for the National Textile Association; Don Coleman, president of the Upholstered Furniture Action Council; and Malin Nasman, product requirements and compliance specialist for Ikea North America.
How attentive are retailers in general to regulations governing the product on their floors?
“For Ikea, it’s in our DNA,” Nasman said. “I do think it’s very important for retailers to get educated because regulators go to retailers to get product for testing. Tonya (Blood), Arlene (Blum) and I are reaching out to many retailers for that reason.”
Ikea has trading offices worldwide working with around 1,000 suppliers to control product development from design to retail floor. The retailer’s product requirements and compliance group must comply with standards in the 41 countries where it does business. The group monitors laws and standards, safety and compliance and global testing requirements. Ikea owns testing labs in Sweden and Shanghai—the latter facility serves as a training center for store associates and suppliers in China.
“Our policy is to minimize or completely refrain from using harmful materials,” said Nasman, who noted that Ikea has much more control over its supply chain than most home furnishings retailers.” We’ve removed several questionable substances (from our products) before they were even regulated.
“In general, our policy is when there are regulations, we go with the strictest one.”
TB 117 already has affected Ikea, due to flame retardant chemicals required to meet the state’s flammability standard.
“TB 117 requires a special range of upholstered furniture,” Nasman said. “We could never sell that sofa in Europe” because of the chemicals.
In general, she said Ikea’s avoidance of flame retardant chemicals leads to three benefits: positive effect on environment and human health; cost savings; and increased product lifetime.
UFAC’s Coleman said TB 117 isn’t the only potential regulatory issue of which retailers should be aware.
“It’s not just the flammability issue, but also what’s inside the product,” he said. “The UFAC tag can help with that. It gives consumers information on what they’re buying.”
Luedeka of the Polyurethane Foam Association warned retailers to make sure they don’t get too comfortable after any regulatory change.
“Any time there’s a change in a safety requirement, there’s a false sense of security,” he said. When it comes to furniture flammability he stressed the “importance of separating the ignition source from the fuel source” by way of example.
TB 117 Check List
Following is a check list for your vendor
partners under revised TB 117 guidelines.
n Do I have to test or re-test any
components or materials?
No, provided the material will not cause the upholstered furniture to fail.
n How will I know if a product will pass?
Manufacturers may demonstrate this by using the results from historical data OR Use a
barrier material between the cover fabric and the foam.
n When can I manufacture furniture under the new standard?
Once the regulation is adopted (Fall 2013).
n When must I manufacture furniture under the new standard?
July 1, 2014, is the mandatory compliance date.
n How will this impact me selling my
product to retailers?
There is no sell-through provision for retailers. Retailers must purchase furniture under the new standard on or after July 1, 2014.
Prop 65 Is an Issue
Don’t Look Now, But Plaintiffs Might Be Shopping
Your California Store
In October 2011, the California Office of Environmental Health Hazard Assessment added tris (1,3-dichloro-2-propyl) phosphate (TDCPP) to its Proposition 65 list of 800-plus chemicals “known to the State to cause cancer.”
Once a chemical is listed, businesses have 12 months to comply with the Prop 65 warning requirements, and some in the furniture business are getting into trouble. Since December, nearly around 20 furnishings manufacturers selling products in California have been listed in prospective lawsuits related to Proposition 65 labeling of upholstered furniture allegedly containing the TDCPP. AHFA offered guidance (http://bit.ly/XQKCkW) on Prop 65 labeling last October, and Bill Perdue, vice president of regulatory affairs for the association, gave an update at the Charlotte event.
The California law requires any product for sale, or that might be handled in the course of manufacture and delivery, containing a product on the list to be labeled with the statement: “WARNING: This product contains a chemical known to the State of California to cause cancer, birth defects or other reproductive harm.”
“This is a notification and warning to consumers that these chemicals are in a product or workplace,” said Bill Perdue, vice president of regulatory affairs for the American Home Furnishings Alliance, at last month’s AHFA Sustainability Summit in Charlotte, N.C. “All consumer products for sale in the state of California are subject to Prop 65,” he said.
Forget CARB, forget TB 117—this is a separate issue.
“Our suggestion is that on the label, include the language that takes care of ‘cancer, birth defects or other reproductive harm,’” Perdue said. “The business must provide a clear and reasonable warning of exposure—throughout the entire supply chain.”
He advised attendees at the Charlotte meeting to make a formal communique to any of its retail customers in California and come up with a label that notifies customers prior to purchase that a product contains a chemical on the Prop 65 list; and to even label their products’ boxes so they’re protected while goods are in transit.
Stores should place appropriate signage at the entrance, and Perdue said it’s a good idea to have a “billboard” in the store along with labeling on the product itself, since a sign on the door or a poster on a wall does not suffice as a point-of-purchase warning.
“The regulation doesn’t specify where to put the label, only that the consumer can see it prior to purchase,” he added.
A big problem for retailers is that ordinary customers aren’t necessarily the ones bringing attention to the labeling requirements. “Professional” plaintiffs are hiring people to purchase products, say an inexpensive ottoman, and testing it for TDCPP. Fighting such cases can be expensive.
The choice to fighting is to settle, either alone or with a group of businesses facing the same complaint.
“We’re told this is now a cost of doing business in the state of California,” Perdue said.
He added that Prop 65 applies to retailers selling goods over the Internet to customers in California: “Put the label on the Web site’s home page, or have it pop up when they type in a California ZIP code.”
At first glance, it may seem like Colorado-based bedding chain Urban Mattress is doing everything … well, wrong. The stores give a percentage of all sales to charity. They don’t do big promotions. They’re very selective in what they carry, avoiding most of the big mattress brands. They encourage employees to own their own franchises.
Thing is, these unconventional principles are working. The eight-store chain (with more locations in the works) is thriving, experiencing growth in a still-hurting economy, with no end in sight. How did they do it, and why is it working so well?
“The driving force behind what we do … our value system … it’s really about justice, fairness and humility,” said Steve Von Diest , a co-founder and franchise owner in Urban Mattress who also coaches new franchisees.
“How justice plays out in the mattress industry is fairly deceiving,” Von Diest continued. “The bait-and-switching, even the labeling of mattresses from the same vendor between two different stores is very different … so we said, ‘What products can we choose that are going to eliminate the three-to-six-year turnaround (between beds)?’ We focused on products that we believe (are) right for the customer. We may not see the customers back for 10 to 20 years. That may not necessarily be right for our bottom line, but it’s right for them.
“We’re very upfront. We don’t do sales (promotions) because we’ve noticed a pattern in the industry—sales are typically a markup with a dropdown … we’ve lowered our margins to as low as possible because we’re owner-operated and we can do that.”
As for the second part of the equation, mercy, Von Diest defined that as “the driving force for what we believe a for-profit business can do in the community. … We care about our customers—not just what their mattress feels like, but also what’s going on in their marriage, their lives, because it all fits into taking care of people.
“We also tweak their mentality on how they too can give back to the community. So our giving program is not just me and (co-founder) Ethan Rietma giving in the background. We’ve actually put it very upfront in our stores, so our customers know that 1 to 2 percent (of sales) is going to go to a local non-profit (charity), and our customer gets to choose the emphasis. … In each of our stores, there are four to five local charities that the owner or their staff is passionate about.”
Addressing humility, Von Diest said “I wouldn’t necessarily call the mattress industry a humble industry. There’s not a lot of admitting of fault and errors. Ethan and I know that many of our customers may know more than us. They’ve done research, so we’ll humbly say we’re sorry, we’re ignorant. We’ll also own our mistakes, and we’re going to make it right with the customer. If we’re replacing something, we want to be very upfront.”
A Chat Between Neighbors
Urban Mattress started out in 2008 as nothing more than a friendly exchange between neighbors. “Billy Williams, who owns the franchise, was my neighbor and a good friend, as was Ethan,” Von Diest recalls. “We all lived on the same street, and Ethan and I had done non-profit work, community development, we were former pastors. … Billy said ‘Hey, I’m going to start a mattress store and I’d love to have you and Ethan join me to infuse the non-profit values—caring for people, caring for the community—into Urban Mattress.” Williams launched the store in Boulder, Colo., with Von Diest and Rietma, who eventually started three more franchises.
To Von Diest, it was crucial that they bring in like-minded people to open new stores. He recalled, “What Ethan and I said was ‘We’re going to take on young guys—upper 20s to mid 30s—and we’re going to teach them how to do this non-profit value set/for-profit mattress business. … We’ll help them launch new stores of their own because I really believe that the owner-operated model allows for care and an opportunity to sell that’s really different than your big box stores.”
The leaders of Urban Mattress bring their carefully thought-out mindset to their selection of products as well. “We’re an elite retailer of Tempur-Pedic, and we love them,” Von Diest said. “Most of our staff sleep on them. Also, we are an exclusive retailer for Vi-Spring out of England. … We carry Sherwood Bedding out of Phoenix. Those are our main manufacturers. We do carry Sweet Sleep out of Boulder, Colo.—she is the provider of most of our organic pillows and accessories in the natural world.
“We’re not in bed with Serta, Sealy and Simmons and some of the big brands, so it allows us to differentiate product in our stores. It’s very difficult oftentimes to find our product style and quality in the big box stores … we’ve chosen our product to give (customers) a wide variety.”
No Push, Push, Push
Von Diest and his fellow franchisees pride themselves on Urban Mattress’ no-pressure sales approach.
“Our new staff, we script them that ‘You have to talk very upfront,’” he said. “Let’s just use the idea that there’s going to be no additional add-on prices of delivery, set-up, removal. All of that is very clear: It’s free. … We talk about why we price things the way we do. … The product we carry is good enough to sell itself. I just want (customers) to discover the best thing for them according to their pocketbook, as well as what’s good for their body.”
While he was explaining the features and benefits of the product, I casually mentioned a feature I saw on a similar product in another showroom. The feature I mentioned is a definite benefit and could easily be adapted to most any product you see at Market.
It addresses a problem most consumers have had an issue with at some point before. The fix was a very simple one, but one I had never seen. When I mentioned this, the manufacturer said in jest, “Thanks for the tip.” When I heard his response I just paused and thought, “oh damn, I just let the cat out of the bag.” After a couple of seconds, we both chuckled and our conversation began on how long it would take before others in the industry began knocking off this particular feature.
I’m guessing I’ll see it again in High Point at the April Market, but not from my manufacturing friend. He’s far too reputable and classy to blatantly “take” someone’s idea—but there are others, I’m sure, who are implementing this into the design right now.
I’ve heard it said, “Imitation is the highest form of flattery”, but maybe not in this case. Designers spend months working on a concept, picking the right materials and coming up with the perfect lines to create the perfect piece.
Once they are happy with the product, work begins with a manufacturer to produce it. The manufacturer builds and markets it, with hopes of getting it to retailers and in front of the consumer. A lot of time and effort go into this piece. It was an idea in someone’s head just a few months ago. Now the whole world can see it, draw inspiration from it and well, knock it off.
I’m really not sure how I feel about this. When does a person cross the line from drawing inspiration to outright knocking off an idea? You all have seen a number of bedroom suits with similar designs and features, someone was first up with the idea, so did all others knock it off? Do you or your customer really care?
I’m guessing the deciding factor is whether or not it moves off your showroom floor; and I’m OK with that. Maybe the original manufacturer that made this piece should have done a better job of marketing this item. They need to make the potential buyer aware of why the original design is hands down a better product.
They have to distinguish a value at that price point. Then, the consumer has a better understanding on why the price point is set as such. As they decide on which product to purchase, original or knock off, maybe that saying “you get what you pay for” will echo in their heads.
This issue of Home Furnishings Business magazine takes a look at intellectual properties and potential issues that could arise from buying and selling copyright infringed goods. Please take some time to read this issue and make sure you aren’t putting your business in a potential situation that you may regret later.
Think about it, after all; retail has amazingly long hours, little thanks, sometimes finicky consumers.
That’s a lot to take without a love for helping people create welcoming homes.
Several conversations with retail friends have all led back to the frustration that legal topics and issues bring into their businesses. Staying abreast of changes in regulations impacting business owners is more than a full-time affair—there are hour and wage regulations; safety regulations; truth in advertising regulations and the list goes on and on.
Hint at the possibilities of a lawsuit over copyright infringement from a competitor or supplier and some retailers may break out into a body-coating sweat. Heaven forbid a legal squabble with a consumer who happened to break her arm and injure her rotator cuff when she stumbled over a low-profile cocktail table while she was admiring great artwork on the wall. (True story, by the way, that cost a retailer a good chunk of change in lawyer and settlement fees.)
In today’s world of hurry-up electronics, smartphones, the Internet and social media, copyright regs get more and more murky and indepth. It’s hard to know what is a copyrighted content, images or designs when surfing through Pinterest, Facebook and Google+. When does someone cross the line from sharing and step into copying?
On another regulation front, the industry is having to reevaluate the use of flame-retardant chemicals in upholstery and bedding. I remember stepping into this industry nearly 20 years ago when the debate over flame retardants was raging as to should we or shouldn’t we use such chemicals in home furnishings to prevent fires.
Today’s research shows the chemicals could leach and result in ill effects to people. Back in 1994, there were folks in the industry who stood firmly against such treatments for the very reason of the unknown human impact of the chemicals. California—the state with some of the strictest regulations—is currently leaning toward changing its standards on chemical treatment for upholstery. Typically, as goes California, so does the rest of the Union.
It’s enough to make one’s head spin, and it’s not easy.
The legal aspects of running a retail business seem more complicated than our country’s tax code. Thankfully, there are lawyers in the world who understand the ins and outs of legal matters that mean the most to retailers.
Inside this month, we take a look at a few of the legal issues retailers face on a regular basis. By no means did we delve into every single law or nuance that you or your colleagues have to worry about. THAT would take some doing.
Read the issue, and take some notes. Voice your concerns with your legal counsel. Make him or her a true business partner that you consult on a regular basis instead of only in times of legal crisis. You’ll be glad you did.