Never a day goes by that we are not bombarded by the talk of the web, internet sales, or Amazon! From WalMart telling their vendors not to buy web services from Amazon to Nike now changing a long standing refusal to sell its products to Amazon, there has been a railing of all ecommerce based on what the giants are doing. But of more interest to me is the success of the bottom layer of the retail “food chain”: T.J. Maxx, dollar Stores, and Big Lots, Menards and other perceived value merchants in their categories. A front page article in W.S.J. on 6/21/17 on T.J. Maxx’s phenomenal success by adhering to a simple philosophy that under the right circumstances, people still like to shop in stores! Home Goods has had 33 straight quarters on increased sales on stores open a year. Their annual sales exceed the combined total of Nordstroms and JC Penny. With a market value of seven times Macy’s Inc. this is a big deal. Their growth plan envisions 5600 stores worldwide! What fuels this is their reliance on old fashioned merchandising instincts by buyers who have been with the company for decades. Their ability to bring recognizable value, to items at low prices the consumer recognizes, is the secret to their success. TJX is known as an off price retailer because it offers brand name goods at 20% to 60% off regular retail. The company takes an average of 25 days to sell its merchandise which is a quarter of the time a Kohls or Macys do with theirs. It is somewhat of the “treasure hunting” philosophy that aids the success of Costco. People are driven to buy now as it will be gone tomorrow. We do not have to chronical the struggles of regular retailers and particularly chain and department outlets. TJX is a beneficiary of the troubles of these giants. Suppliers have to eat large quantities of unsold goods by department stores which leads to bargains for TJ Maxx and Marshalls.
The company employs more than 1000 buyers who buy from more than 18,000 apparel and other goods from around the world. Each buyer controls millions of dollars and has the authority to make deals on the spot as opposed to department stores which can take weeks or months to review and approve orders. Once purchases are made the merchandise is rushed to stores where a “Door to Floor in 24” mantra exists. This stream of new goods arriving almost daily is a lure to keep shopper’s interest piqued. Obviously, their success has caused Macy’s, Backstage, Saks off 5th and Nordstrom to be expanded. The sales at T.J. Maxx and Marshalls is almost double per square foot as traditional department and chain stores. Because large chains are hidebound to traditional name brands, their merchandise policy requires months and years to develop. A similar story in USA Today about Dollar Store segment reinforces the thought that customers just like to save money and get wide choices of merchandise.
The startling facet of their growth is its almost total absence from internet sales. Retail Consultants feel that it is difficult to sell inexpensive apparel online with 40% return rates. That same conundrum strikes me when I hear that most online mattress sellers and Wayfair just tell their customer to donate a product that they don’t like rather than pay return shipping. To build in that margin seems to be a loser as a long term strategy both to the merchant and his suppliers. The reason this whole subject tweaks my interest is who is getting the promotional furniture buyer in today’s market? I’ve seen a metamorphosis from the hundreds of small credit houses to the present where Menards, Big Lots, and Rent to Own chains, and inner city ethnic furniture stores are doing a larger and larger share of low to low middle home furnishing business. Some salient exceptions to the traditional retailers vacating promotional good are: AFW in Denver, F.F.O throughout mid-south, NFM and to some extent the promotional areas of Ashley Home stores.
Is the young consumer and the vast working class buyer having trouble finding merchandise they can afford after rising rents, car leases, more bills for devices and phone bills etc, eat up a family income that is rising very slowly. Is there a place for outlet or clearance department stores in your present operation. With competition from the off price furniture outlets, can you count of the “Holiday Pro-motion sales” to keep market share? There is much worry about losing business to internet competition, but the TJX success in soft good retailing make me want to make sure we are not missing that in lower priced home furnishings
Right before the 4th of July I attended the inaugural Shift Conference. This conference was an incredible experience! It was a technology based conference with speakers directing their message to furniture industry professionals. In attendance were representatives from top 20 furniture retailers, manufacturers, independent retailers and they even let a sales rep in!
While the message was strongly technology based, the premise of the conference was to take a step away from the day-to-day operations, take your blinders off, and see what you can apply from other industries that are successful. The keynotes were from vendors that operate in multiple industries, and I came back with several application for our business as well as our retail and manufacturing partner’s business.
After listening to all the keynotes, talking with the attendees and reviewing all my notes the real takeaway that I discovered from this conference was….
In looking at this from a furniture perspective there is plenty that we are battling every day. Competition from retailers in the same market; competition from vendors; the challenge of ecommerce and all other digital trends.
Some retailers will look at those issues as challenges that will greatly change the out-look of the industry. How-ever whenever there is a challenge there is also opportunity. The greatest opportunity in this time – regardless of industry—is the customer experience.
That part of business has not changed. Give your customer a great experience – online and offline; through great products and unforgettable service – and you will thrive. Those challenges that most perceive as negative obstacles are tremendous opportunities for you.
Our industry is facing significant new entrants that are interrupting the way things always were done. We must adapt or continually see our market share decrease to new ways of commerce. As always if we can help you by sharing what we see across many platforms, give us a call
How Tough is business this summer? It’s so tough that even Jerry Epperson, the consummate furniture cheerleader, is having trouble finding anything good to say about retail sales. In his June newsletter he reminds us the first half of the year is generally less than the second half due to the fact that people have become accustomed to buying furniture on holidays and there are several coming up including Labor Day, Thanksgiving and Christmas. He gives a number of demographic concerns about the population base age and interest in furniture purchasing which we have covered before in this newsletter. But the hope is that as new home sales creep up, eventually the need for furniture will as well.
Our business tracks closely with our retailer customer base because if you don’t sell something then neither do we. Epperson suggests several items to help get through the tough times. Most surround looking at your operation, advertising, personnel, and merchandise mix with an idea towards cutting out the low performers. I think that is important , but more important may be to look at new avenues for growth.
For example a strong performer for us has been Cozzia Mas-sage Chairs. Last market they introduced a new massage chair retailing for $5999. We are currently oversold on that chair. On many sales floors I traded a $3000 retail spot for a $6000 retail spot. The customer gets the best chair on the planet for the money and the retailer and the sales person has now doubled their average ticket. A win win for all.
So this market Cozzia has partnered with the Homedics brand and instead of going higher priced, they are now introducing some low end massage products starting as low as $699 retail. I expect this new product line will also be successful with an entirely different group of customers. I have seen a lot of stores grade up their merchandise mix when times were good. But when times become sluggish it’s good to have some fodder to draw people into the stores. Since everyone uses Ashley for advertising, consider looking at other vendors like Hughes (see Emmet back page) so you don’t end up offering the same look in your ads as every other retailer.
With Las Vegas market right around the corner, now is a great time to make changes when business is slow. You will find our market information in this newsletter. Be sure and stop by and let us show you things you won’t find elsewhere.