This past year has been an interesting one for observers of the furniture industry. I dare say that 2017 could be one of the most trans-formative years for retail based on the immense pace that technology has thrust on the industry. 2008 was for some cataclysmic as retail-ers struggled to survive while others gobbled up market share. But today is different . Here are five of my takeaways from this past year. These are not meant to be critical of any operating model, just observations to consider as you plot out your plans for 2018.
1. 2017 threw many in our industry to a soul searching meaning for their companies future identity. The Omni Channel concept of having your online doorstep be the face of the business equal to the brick &mortar store is shaking things up. As I have written before, the Wayfairs and Amazons view themselves as tech companies and play by different bottom line rules than traditional retailers. But what they are doing is taking business out of the market like IKEA does when it sells a $49 entertainment stand. We can say that’s not our customer but at the end of the day the customer has met a need they had and they are out of the market until they have another need. They buy a few times from a vendor and a pattern emerges. Furniture retailers are scrambling to figure out their online presence to compete.
2. Door swings are down across most furniture retail storefronts. There is not as much need for the consumer to come into the store for pre-shopping because they now can go to the Internet from the comfort of their own living room. A friend who is successful as a mortgage broker for big projects has indicated that retail store financing is one of the toughest categories to get approved because most bankers want to steer clear of the death of retail. But people still need to buy stuff and that will be done thru retail in part in stores and in part online. The store of the future needs to give consumers a reason to show up physically. Christ Walton, an independent consultant and former vice president of Target Store of the Future brilliantly describes retail stores of the future like this “They will be one-part Amazon, one-part Starbucks, one-part Bonobos and one-part Ikea, shrouded in the customer-focused ethos of a casino.”
3. Ashley is to furniture what Amazon is to retail. Much like Amazon has deep pockets, huge customer bases, and great logistics for an online player, Ashley through its retailers & retail stores is equally dominant to the furniture industry. Personally Amazon makes it very easy for me as a consumer to buy. The more they are in the space, the more likely traditional brick & mortar stores will lose incremental sales needed to stay afloat. On the other hand, Ashley makes it extremely easy for retailers to do business with them. But Ashley is every retailers greatest competitor either by selling the same thing in your market through another brick and mortar vendor or by selling online and delivering through an Ashley Home store. The greatest threat to the furniture channel is every store looks the same with Ashley products. That sameness drives consumers online to find something different than what they see in every store in America. Be careful with the vendors you support. Just like Amazon is working diligently to capture customer data so they can sell more of your customers, there will come a time when Ashley realizes they do not need you and will be able to go directly to your customers through their website and store network.
4. In my dad’s era, Louie Blumkin was a master of working with vendors. He had his favorites but he would always be respectful of the vendors because he never knew when one might get hot. Retailers today should be mindful of nurturing vendor relation-ships rather than short term demands that put retailers at odds with manufacturers. At some point the pendulum will swing the other way with technology allowing manufacturers if they choose to sell direct to the consumer. If there is friction in the relation-ships, vendors may very well decide that is a better path. We are in a unique position to observe best practices on this because we work closely with quality vendors. For more details give me a call.
5. The competition is no longer selling furniture. Apple has sold more than one billion iPhones worldwide from 2007 to 2016. In the first quarter of 2017, iPhone sales accounted for more than $54 billion. On Nov. 3 Apple started shipping IPhone X, a $1000 cell phone. I could trade them a Hughes sofa, loveseat, recliner, a set of Progressive tables, media console, and dining set before I reach $1000. As goofy as this sounds, todays customer is a lot more excited about $50 a month for a phone than furniture. Furniture is just not as sexy or compelling as other options.
So that’s my list. As I wrote the column I realized there are several ideas to look forward into 2018 that I’ll report on in January. Hope you have a joyous and healthy holiday season. We look at all of our customers and factories as partners. We truly appreciate your business and look forward to building a prosperous 2018 together.