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.
I remember when ecommerce first began. There were concerns on privacy and security- after all who would really submit their credit card information online!
We all know how it’s worked out for ecommerce.
Brian Cornell, CEO of Target did not downplay the shift in the Target customer base. In the most recent Mass Market Retail magazine he indicated that their “industry is in the midst of a seismic change.”
The real change, as Cornell identified, is the shift in the customer’s mindset. There is still value in going to a store. to be able to work with a competent sales person, or designer, that understands the style preferences and design a room with the customer.
For customers that have done the research on their own and they know exactly what they want, ecommerce is the preferred channel. The value proposition (overall selection and convenience- able to find exactly what they want, review the products from other customers, and it’s very easy to purchase) outweigh the burden of going to a store (or stores), fight the crowds just to get what they already know they want.
With that customer mindset shift in mind, the Wall Street Journal reported on May 28th that WeChat (a Chinese social media, messaging and payment processing mobile application) is now adding luxury brand name vendors in fashion, handbags and spirits to their platform.
There are two things that stand out with this news-
- These Luxury good that were once exclusive to a few stores in a few cities, are now selling on a mobile platform. Available to anyone with WeChat. Selection and convenience again out-weigh price.
- Another new media for customers to purchase- through mobile messaging and social networks.
I would expect that WeChat will be successful (especially in China); and someone will develop a similar application in the US and be successful.
Going back to the customer’s mindset- a significant amount of customers my age and a majority of Generation Z customers are glued to their smartphones. That is the media they are most familiar and comfortable with. The more products, services, etc. are in front of them (literally in front of their eyes) the more likely they will buy on that platform.
It is a new world. Technology is changing how people buy goods, consume entertainment and generally interact with other people. Understanding the new mind shift earlier will help you adapt your business to be able to attract and service the younger customers that are quickly growing up and earning money.
Never a day goes by that a new development appears in the e-commerce field. It is fascinating how the landscape changes daily with competitors trying to counter whatever is Amazon’s latest foray in the battle of giants on the web. With Jay and his staff deeply embedded in the channel, Furniture Sales keeps abreast of the fast moving competition. Both Walmart and Target are investing substantial money and re-sources to keep from getting overrun by Amazon’s aggressive approach. Meantime, except for a few progressive chains, traditional retailers are taking a wait and see approach to web sales. Most have given short-shift to anything but selling to their customers in their present delivery perimeter. Whatever the means the internet will be a major channel for sales as each year goes by, which is why Jay devotes so much time to working with the best e-tailers.
Just studied a document that a major furniture source provided that outlines 10 home furnishing trends. Many of the items mentioned have been gleaned from their web business. I’ll highlight the 10.
#1 No one will be interested in designing an entire space, let alone a whole house, with a strict period in mind. Pressure is off to pairing antiques with other historical periods. You will see more of a mix of multiple historical periods.
#2 With space at a premium, oversized furniture overwhelms and is an inefficient use of space. Furniture will become ideally spaced for smaller spaces.
#3 Industrial looks have had their day. Shiny, worn metals like bronze and gold are resurging as important ways to lend elegance to any space.
#4 Matte finish is a multi-use finish for object whether traditionally lustrous or glossy. Matte adds depth and definition.
#5 Marble is becoming a huge trend as it shows up in every home environment.
#6 Cerused wood (a finish or technique that brings out the unique grains of the wood) has trickled down from the high end. This technique seems to be universally accepted on cabinets in addition to tables, chairs, and storage pieces.
#7 Say “goodbye” to beige. The new look for walls and accents will be deep jewel tones.
#8 Nailheads – “a classic for upholstered but is being used in whole new ways: storage chests, credenzas, and on bases or trim on dining tables and lighting fixtures.
#9 Subway tiles seem to work as a universal choice with all kinds of styles at an affordable price. No graffiti that usually is seen on them!
#10 Smart Home Features to make the home revolve around our DEVICES. We will be seeing more and more creative ways of incorporating charging docks and areas specifically dedicated to these devices into the design of a space in the home. There you have it! Food for thought as you plan your new looks.