From Home Furnishing Business
As a marketing executive, it is time to focus on the next opportunity — those consumers that are “thinking about buying furniture.” Currently, that equals 30%+ of the population that you can infl uence. The decision on how to proceed with engaging these consumers is the question. The media mix varies signifi cantly by the demographics. The message is totally infl uenced by the lifestyle (psychographics). No matt er the strategy, a feedback loop to measure the results is essential.
Most retailers cannot aff ord an advertising expense as a percentage of revenue at 33% as reported by Casper. Financially, 6% is the target. In other words, every message must count. The details around this discussion are contained in the feature. Call to discuss your experience.
And fi nally, to you, the owner or representatives of the owner — the chief executive offi cer: your challenge is more long term, especially in that your company is competing for the consumer’s discretionary spending. Today there are many competing ways for the consumer to spend money. For some discretionary spending is perceived as a necessity. The following recent research presents your challenge.
You can find hope in the emerging generation of furniture purchasers – now make it happen.
Furniture retailers responded creating a web presence. Initially, many were placeholders as there was a “land stampede” for domain names. Now, those placeholders have transformed into signifi cant presentations of not only product, but also the variance in the retailer’s services that make them uniquely diff erent from their competitors. Today, depending upon the merchandise price point, 72% of consumers visit the Internet during the buying process for research.
This presents the obvious question, “of the consumers actively considering or shopping for furniture within my market footprint, how many are visiting my website and how many are visiting my store?” Current research updated quarterly via FurnitureCore, the research arm of Home Furnishings Business, measures the stage of shopping for consumers as shown in Graphic A. Obviously these percentages vary by age group with 39% of the 35-54 age group having begun the buying process compared to the other age groups at 30%.
Understanding how many unique visitors come to your website is provided by Google analytics and is well accepted as the most accurate source of this data. Combining this with your store traffi c counts will provide a good perspective of how your advertising is impacting your performance. Graphic B combines all of these statistics into one graphic.
For many retailers, this visual is often a shock when they see the diff erence between those visiting their site and those visiting their stores. However, considering that consumers may visit more than seven websites on average, but only shop 2-3 stores indicates the challenge of bringing customers into the physical store (Graphic C).
Obviously, this statistic varied by age / income reflecting the demographics and depending upon the advertising media used to convey product differences.
Comparing the unique visitors to the retailer’s website to the number of consumers actively engaged in shopping for furniture is just as important. A large defi cit indicates that consumers are not considering the retailer. This factor measures the brand awareness of the retailer. Considering recent fi nancial fi lings by Casper that indicated expenditures of $400M in advertising to achieve 31% added brand awareness emphasizes the challenge. Consumer research that asks which retailers were considered, shopped, and purchased from measures the retailer’s market position. Graphic D presents the findings in a typical market.
Advertising is the process of changing these statistics. Having more consumers considering your store and having more consumers visiting your store after viewing your website is the objective. The advertising strategy of the retailer should be influenced by the media that most influences the consumer target. The leading influencer, according to recent research, is the Internet, followed almost equally by television and magazines combined.
Graphic E presents the findings. Obviously these statistics would vary by age with the younger consumer < 45 years of age, indicating television as 13.25% compared to older consumers 45+ at 17.90%. Again, the retailer must select the advertising media for the consumer they are targeting. For that reason, lifestyle retailers, such as Pottery Barn and RH (Restoration Hardware), use direct mail and social media as these mediums are the preference of the 45 age segment.
Interestingly, from a financial perspective, traditional retailers (independents / regional chains) expend significantly more on television (broadcast). The breakdown as a percentage of sales is shown in graphic F. Beyond the how of advertising is the what? What is the specific message that will most motivate the consumer to select you as the retailer of choice? The messages must start with the why. Graphic G shows the consumer is purchasing replacement furniture (43.95%), and is based upon recent research that explores the most relevant reason for the consumer to make a purchase.
For industry veterans, this is an astonishing statistic as it has more than doubled in the past 20 years. In fact, there was a feeling then that we “built our furniture too well,” and, “should we consider an obsolescence factor?” Unfortunately, a frayed sofa doesn’t create the same sense of urgency as a broken refrigerator. It is, therefore, a postponed purchase.
As can be seen from Graphic G, “desire for new furniture” is just over 27% of purchase motivators. However, for our prime furniture buyer age 25-54, a recent move and remodeling are over 50% of the purchase motivators. The importance of direct mail to influence the new movers is well justified with over 25% of purchases from this demographic. As would be expected, when the consumer’s reason to purchase is driven by furniture replacement, quality (29%) would be the most important feature that attracted the consumer to the product they purchased (Graphic H).
While quality is consistent across all age groups as being of importance, warranty is much more important to the 35-54 age segment, being the segment that have experienced the decline in quality first hand. The opportunity to provide warranty is a significant opportunity to add profitability. A key profitability item in appliances and electronics has not been fully executed in furniture retailing.
While the purchase motivator for new furniture is style representing only 25%, it does present an opportunity for larger tickets and higher margin. Where does the consumer get their style inspiration? Again, the Internet (37.5%) is the primary response, but there are other important infl uences as shown in Graphic I.
As you would expect, for our emerging furniture purchasers (25-34) age group, the Internet is more important. However, retail stores represent less than half. Are we creating the visual experience in our stores?
What ultimately motivated the consumer to purchase? Unfortunately, the manufacturer and retailer reputation contributed less than a third of the motivation (Graphic J). Again, the repeat of quality as the prime motivation was the consensus. From an advertising perspective, the most diffi - cult element to communicate is quality. In advertising, the substitute for quality is brand.
Finally, we must consider the financial aspect of advertising. Unless you have fi nancial backers, such as Casper, you cannot aff ord to spend 33% of revenue on advertising. A percentage in the 5.5% to 6.0% range would be appropriate. The table below (Graphic K) presents the statistics by retailer’s revenue.
Beyond the advertising expense must be the eff ectiveness of advertising. In other words, does your advertising bring the consumer through the door? The most common measure is the cost per up. The industry average can be seen in Graphic L .
As can be seen, the smaller retailer < $5M is at a signifi cant disadvantage. Advertising in furniture retailing today has become more challenging. While the Internet can be a more eff ective medium to communicate considering our time-starved consumer, it is diffi cult to communicate the quality. What is emerging is the direct to consumer brands. These manufacturing direct brands are Omni-channels with unique brands with unique points of diff erences, begun on the Internet and moving to physical stores will be their strategy. The need to expand customer bases will drive the need for brick and mortar.
However, their stores will be customer experience focused. By that, they will be personalized, frictionless, and enjoyable, staff ed by passionate sales associates. The stores will be smaller, less high-price environments focused on brand building assets, such as digital screens. The new retail will be data driven, putt ing the consumer experience first. Maybe the retail experience will become the advertising. We are beginning to serve the experience generation.
Without question, social media has impacted how consumers are influenced by home trends from designers showcasing their most recent project to personal friends posting photos of their latest décor purchases perfectly positioned for their Instagram feed. A simple search of ‘rugs’ on Pinterest leads consumers not just to images suggesting the latest colorways and layering techniques, but where to purchase the product online. This vein of social media grew from simply influencing consumers to directing them to online retailers. The good news is that the exposure has driven sales in the category.
“The rug industry has grown and impacted the economy greatly thanks to the growing interest of consumers towards interior decoration and the rise in remodeling activities,” says Paola Bradfield, Tayse marketing supervisor. “There is no doubt the revolution of technology and easy access to information and products that are one click away from purchase has also significantly increased sales and influenced our industry by raising standards of quality and trend awareness.”
Based on consumer research conducted by FurnitureCore, Inc., the research arm of Home Furnishings Business, consumers were asked where they made their most recent rug purchase. The largest cluster reported purchasing their rug online at 30.77%. Luckily for the traditional retailer, the second largest cluster at 25% reported making their most recent rug purchase at a traditional furniture store. Mass merchants were next at 17.31%, followed by home improvement stores at 15.38%. The remaining 11.54% purchased from a floor covering store. With consumers who are armed with research and online influence, retailers need to have the necessary product knowledge on hand to convince customers to make in store purchases in order to maintain marketshare and negate online purchases.
Rachel Fasciani, vice president, licensing and marketing at Momeni, has noted this consumer awareness saying, “We’re seeing a resurgence of interest in better goods in our offerings. Consumers recognize the value of higher quality products while retailers appreciate the opportunity for higher returns.” The same FurnitureCore study backs this and found that consumers are willing to spend a significant amount in order to make a quality purchase that they expect to last for years to come.
When asked how much was spent on their most recent rug purchase, 19.23% of consumers reported a purchase of $800-$1,499. A surprising 7.7% of consumers reported spending $1,500+ on their purchase. The same survey polled consumers and the length of time they expected their rug to stay in their home. The results showed that 46.15% of consumers expect to keep their rug for 5 years or longer. With these statistics coupled together, you can bet that consumers are hyper aware of the quality and durability built into their purchases. Read on to find some of the best-selling and performing rugs in the industry. They’ll be sure to satisfy your customers.
This is the same whether it is a store where what you see is what you can get or one that features endless customization of the products it has available. Granted, the task is more involved in the latter situation, but the basic function is the same – determine the need and provide a solution for it that fits the customer’s look, feel and budgetary considerations.
In essence, we must be problem solvers first and then use our selling/design skills to put the package together. It just does not work to do it the other way around, because if we start selling without first knowing what issues our customer is trying to solve, we will usually fail. Therefore, while most of us look at what we do as primarily a product sales function, in reality we are very much in the business of selling a much-needed service that uses our products to provide the final solutions to our customer’s needs and wants for their home. We need to understand that the act of problem solving is a service, not a product.
The reason this is important is that even though they are similar, product-based businesses are different from service-based businesses in some very important ways. Certainly, both involve customer interaction as part of a process that delivers a result the individual is looking for. However, a product business sells something that the customer can see, feel and touch. I am referring to tangible, physical items that when encountered by the customer can greatly influence the buying decision. We make a great effort in our stores and online to present our products in a way that enables the consumer to visualize them in their own house, which encourages our visitors to want to own them.
We also present features and benefits to answer questions the customer may have to help them better understand the product and assist them in their buying decision. In a service business, the “product” is the value provided by the intangible skills, expertise and time the provider spends delivering the results a buyer wants. In order to sell a service, it is critical that the target audience understands what makes that service valuable to them and why your staff is able to consistently provide it. In many cases, selling a service also requires a somewhat more trusting relationship with prospective clients than selling products does. Being able to get the point across clearly that one size does not fit all, and that each person gets individual, customized solutions adds a great deal of value.
Another difference is that products are mostly viewed as returnable if they don’t satisfy, while services are seen as “non-returnable”. You may get a refund, but the time and effort spent has basically been wasted. Therefore, when someone buys a service, it is the expectation of getting the results they want that really closes the deal. Since a person buying a service is paying for a desired outcome, it is critical to focus on the result of the effort in our selling process!
Both of these businesses actually have the same goal of customer gratification they just use different vehicles to get there. In a furniture store it is absolutely critical that they work hand-in-hand on the sales floor. The issue I see is that we often focus heavily on the product selling side of what we do in many important areas of our daily activities and business planning processes. Certainly, any selling system we use in our stores should be aimed at ultimately providing the problem-solving service addressed above, since that is the desired result we need to have for that critical aspect of our business.
In addition, most stores work hard to maintain delivery and customer care departments that solve problems every day for their customers. However, I believe that many furniture stores could do a better job understanding the value of the problem-solving service they provide to customers and find ways to improve how they sell and market it to their target audience.
Here are a few ideas that may help get you started thinking about better ways to sell and market the valuable problem-solving service you provide in your store:
- In a service-based business, your people and what they do are the product. So, it makes sense to sell them and the importance of their contribution, as much as you sell the value of your actual merchandise. You should develop a features and benefits story to tell about your staff, from your salespeople through the delivery staff. Potential customers need to view them as reliable and trustworthy in order to want to do business with your store.
- As stated earlier, service businesses are very relationship based. Therefore, it is important to let people get to know your staff and build some initial rapport with them. It is really common sense, but whatever you can do to connect your target audience to your staff such as online biographies and picture boards at the entrance will enhance your ability to make them want to work with you.
- Since you are providing solutions for your customer’s needs, it is important to show that you understand what their needs are and that you can offer solutions to solve their problems. Prospects should see you as a resource they can rely on to deliver the total results they seek. Testimonials from clients, design articles/essays from staff members and picture boards of successful projects are a great way to get this point across on your sales floor and website.
- Keep in mind it is not the actual service that the customer really cares about, it is the result it delivers when completed that truly matters. What is going to happen is more important than how it will happen and the way the effort will help them is really the critical issue. So, emphasize the results you can deliver more than the process to get them. Showing them how much their life can be improved as a result of being happier with their home is a great way to do this.
- Remember that the service you are providing a client is intangible. It can’t be returned and their investment in time cannot be reimbursed. Emphasizing that your design assistance is complementary and part of the total package you provide with the products they purchase can eliminate these issues by reducing any perceived risk involved.
- Your advertising, marketing and online efforts should strive to create an experience that reflects what your service will provide to the client. You need to identify the issues they expect to run into while creating their dream room and show that your service will solve their problems.
- Many of your competitors do not offer the services you provide, so use this as an advantage in your market. Online venders, membership warehouses, many discount stores and major chains like Target or Ikea for the most part do not have staff to deliver the total experience you can. Take advantage of this in all of your marketing efforts to separate yourself from the pack and add value to the relationship you offer prospective customers!
- Make sure all of your efforts answer the important questions your target audience will have, like: What services do you offer? Why are they important to me? What potential problems will they solve? What other benefits will they provide? What does it cost and what should I expect?
- Be sure to emphasize that you provide one-stop shopping for your products. Using the services you offer, customers will save time and money by not having to get outside help to complete their projects. Your staff members are experts on the merchandise you carry, and they will provide all the assistance needed to create solutions to any problems.
- Most service companies have found that email, website and social media marketing efforts work best to generate interest from their targeted consumer segments. Having your design staff post pictures of completed projects and testimonials from highly satisfied clients, creates a very powerful message about your ability to solve problems and deliver results. It is also extremely important to gather and post positive Facebook, Google and Yelp reviews both online and in your ads, since this provides support for your “we can do it” message!
Don’t take what your staff does and the valuable services they provide to your customers for granted. Make them a focal point for some of your marketing efforts and get credit for the difference they can make in your customers total experience with your company. I hope this helps you get started.
In 2019, natural increase (births minus deaths) fell to 957,000, marking the first time in decades that it declined below one million, forecasting a trend toward fewer births and more deaths. While birth rates are at historical lows, death rates are rising as Baby Boomers are retiring and aging.
Paired with dropping natural increase rates, international migration to the U.S. (immigration) has decreased to 595,000 people from 2018 to 2019, almost half the amount in 2016 of 1.05 million. Using data from the U.S. Census Bureau, this month’s Statistically Speaking details the factors in the country’s declining population growth by region alongside the impact on the future of the economy and furniture industry.
The annual net increase in the U.S. population peaked in 1992 when the U.S. added 3.53 million people to the population either through natural increase (births minus deaths) or net international migration (immigration) (Table A). Since 2015, when the U.S. added 2.3 million people, the growth rate has fallen to its lowest level in 80 years – reaching less than 1.6 million net change in 2019.
While total population increased only 2.4% in the last four years, births decreased 5% alongside a 5% increase in deaths. Once an offset in the rising low birth rates, immigration dropped 42.8% during the same fouryear period. Figure 1 breaks down the components of population from 2015 to 2019.
Many analysts believe the immigration restrictions started in 2016 combined with a perception that the U.S. has fewer economic opportunities than it did before the Great Recession has caused the decline. These components combined added 1.55 million to the population in 2019 compared to 2.33 million in 2015 – a decline of 6.6%. Economists worry because the growth rate of the economy is traditionally determined by the income growth per capita and population growth. While the impact of slowing population growth can hurt the entire U.S., some regions are already experiencing a decrease in population. As shown in Table B, the Northeast has decreased in population size over the past 2 years – dropping by 0.11% from 2018 to 2019. Overall 10 states decreased in population with West Virginia, Alaska, Illinois and New York topping the list in percent of population lost. Eleven states increased in population over 1%. Idaho, Nevada, Arizona, Utah and Texas were in the top five – with four of those in the West region. Idaho was the only state to reach a growth above 2%. Of the top five states gaining the most people, three of the states are in the South – Texas, Florida, and North Carolina.
Birth rates continue to decrease every year – down to a rate of 11.6 births per 1,000 population in 2019 from 12.8 in 2011 (Table C). According to the Centers for Disease Control, this is the lowest level since the 1980s, despite an improving economy. Many people are finding it increasingly difficult to afford children. Rising maternity fees, childcare costs, and increasing debt mixed with a static wage growth are causing many people to delay having children and/or having fewer children. Many Millennials claim they have delayed child birth, not by choice, but by economic necessity.
With birth rates at historical lows, only eight states had more births in 2019 than 2018. The top four states with the highest numerical increases were in the Northwest – Utah, North Dakota, Alaska and South Dakota. The lowest birth rates in 2019 occurred in New Hampshire, Vermont, Maine, Connecticut, and Rhode Island – all in the Northeast. But only one state in the nation, Vermont, a low birth rate state, increased its birth rate from 2018 to 2019, but only by 0.8%.
While the birth rate is decreasing in the U.S., the death rate is ramping up – increasing from 8.1 deaths per 1,000 population in 2011 to 8.7 in 2019 (Table D). This rate will increase as more Baby Boomers enter old age. They are projected to make up 20% of the population by 2029, less than 10 years away. As more Baby Boomers head to retirement, the impact on the labor force and consumer spending will increase as employed Boomers have traditionally been high consumers of furniture products. However, retirees produce and contribute less to the economy, and also spend less than younger working consumers.
West Virginia, Alabama, Maine, Mississippi and Pennsylvania had the highest rates of deaths in 2019 – all above 10.4 per 1,000 population. The states with the lowest death rates were Utah, Alaska, Colorado, Texas and California. Utah has half the number of deaths per 1,000 population as West Virginia and Alabama, reflecting the much younger demographic.
In 2019, natural increase (births minus deaths) fell below 1 million for the first time in decades, due to the aging population of the Baby Boomers. As shown in Table E, the natural increase rate has declined an average of 6% per year since 2011. The majority of states decreased their natural increase rate with only 10 states showing a slight natural increase in population per 1,000 persons from 2018 to 2019. Not surprisingly, younger populated states - Utah, Alaska, Texas – had the highest rates of natural increase.
U.S. net immigration levels peaked in 2016 at 1.05 million just as tougher immigration laws were being enacted and have fallen consistently to just over 595,000 in 2019. Over 40 percent of all immigrants in 2019 settled in Southern states, consistent with historical trends (Figure 2).
The total international migration rate dropped 15.2% to 1.8 immigrants per 1,000 population 2018 to 2019 – the lowest level in more than a decade (Table F). With the decline in natural increase, population growth has become more dependent on immigration and the dependency is expected to increase over the next decade. Low immigration paired with falling natural population increase rates point to growing labor shortages and a weakening economy.
Of the 17 states with international migration over 10,000 persons in 2019, only two states received more immigrants than the previous year – California (increasing 3.8%) and Washington state (up 2.1%).
The final missing piece to understanding the shifting population demographics is “domestic migration,” the net number of current U.S. residents moving into a state versus the number moving out of state.
Data shows that the percentage of Americans changing residence is at a post-World War II low of 10.1% — less than half the rate the U.S. had in the 1950s and lower than in 1990s. The domestic migration rate continues its negative trends in the Northeast and Midwest, while the South and West attract the highest mobility rates (Table G). For example, in Idaho, for every 1,000 residents, 15.3 moved into Idaho in 2019 – the highest domestic migration rate within the U.S. Nevada, Arizona, South Carolina and Delaware completed the list of the top five states with highest domestic migration rates. Conversely, in the Northeast, in 2019 for every 1,000 population, a net of 5.3 people left the region. In the Midwest, the net domestic migration was -2.4 persons per 1,000. The impact of negative domestic migration on some states discussed here may seem insignificant, but compounded over time and coupled with low birth rates, high death rates, and low immigration can have large economic consequences in the future. Note that city migration rates will not be available from the Census Bureau for a few months.