Lately I’ve received many calls from panicked customers along the lines of what should I do with my business, I don’t think I can make it? This prompted me to reach back into my 30 year-old Rolodex to make some phone calls.
Thirty years ago I knew who to call. Yesterday I wasn’t so sure. Much to my surprise, the contacts hadn’t changed. Planned Furniture Promotions, an affiliate of Gene Rosenberg Associates, is very much in business. Since 1962 Gene Rosenberg Associates has been considered to be one of most professional and best known promotional specialists in the country. My contact this time was Burt Homonoff, Partner and Vice President of Operations. With so many furniture companies going out of business, the last ones that came to mind for me were Levitz and Wickes Furniture. From what I’ve read, Levitz, at the time of their closing, had 80 stores and had been in business for 100 years.
I asked Burt if we might talk about the furniture industry; it seems like they’re in trouble. Here's my paraphrasing and additional thoughts based on what Burt shared with me.
The consumer has been changing over the past twenty years. Most furniture retailers just missed it. It’s been a gradual change, taking a little chunk out of business yearly. Consumers are using their homes differently. The American dream, a Cadillac in the garage (now it’s a Lexus) and a new living room and bed room set. First it was a media room, a work out room or spa, a game room and of course the in home office for their computers. Consumers are playing Guitar Hero or Wie and not sitting on their sofas.
And the competition has intensified.
According to Furniture Today, furniture in the United States used to be a producer-driven industry. Now, it’s turned into a quasi-buyer-driven industry. Driven by a rise in innovative branding, retailing and marketing, new trends like "life-style branding” are creating whole new niches at the retail end. With innovations in retail, low shipping and import costs, even small retailers are entering the furniture business with new designs and variety.
"It’s all about change," says Burt, "and many furniture retailers missed it."
Many furniture stores still look like the furniture stores of yesterday. They display the same furniture that was in style 10 years ago with the same accessories. They just don’t seem to see the trends or they are "mature" retailers who still think the customer is their age.
Younger customers, different priorities.
Furniture has taken a low priority on the customers' "have to have" list. Remember when furniture used to be sold only in furniture stores? Now everyone has some type of furniture — from Walmart to Target. In the summer, the grocery stores carry outdoor furniture.
I’ve noticed that brides used to register for furnIture and the other day I saw a story about a couple (in the New York Times) who wanted money for a start up business and were giving “the investors” shares in their new venture! What happened to the brides?
Couples used to ask for bedroom sets, something substantial so they could hand it down to their kids. Then couples started moving around for better jobs and different types of lifestyles; nobody wanted to lug a bedroom set across the country. The same applies to the big dining room sets, very few people entertain on that scale these days. People are looking for furniture that is more inexpensive and disposable.
I see many more “rent to own” furniture stores; I thought they were just for people who couldn’t afford to buy and then I found some of my friends renting furniture. Are they taking market share?
Since this isn’t Burt’s niche I went to check it out. The rent-to-own is a $6.3-billion dollar business. The RTO continues to improve its business, customer service and pricing becoming a viable consumer option in the American economy. The unique rent-to-own transaction sprang up in the 1960s in response to a growing consumer need for acquiring the use of household products without incurring debt or jeopardizing the family’s credit. Rent-to-own customers come from all walks of life, desiring consumer durable goods in their homes without the long-term financial obligations associated with credit sales.
How does IKEA figure in the mix? Consumers rave about the Swedish meatballs and I see that they were serving free breakfast on January 9th. I was in one of the Chicago stores — it was quite impressive.
IKEA is noted for their trendy styles and their great price points. They cater to the new lifestyle, KD (knocked down) furniture, easy styles and definitely disposable. In addition they offer everything including the dishes. A one stop shop. IKEA’S interior design teams create functional and trendy room settings which make the products easier to buy.
Customers want the looks but don’t want to pay the price. They also know if they look long enough they won’t have to pay the price. The average sale has gone from $1500.00 10 years ago to $800.00.
What happened to “Made in the USA?”
As furniture factories have moved to China, their suppliers and related businesses have followed, making the country an exceptionally efficient place to operate. It’s said that labor represents 30% of the cost of production in the United Sates and in China it’s less than 7%. Because product is so cheap, they can easily follow worldwide trends.
Consumers want Toyotas and Lexus's these days, not Chevys.
What should a furniture store do if they’re having trouble and seeing their market share slip away?
- If they’re going to survive and thrive they will have to change, and change quickly.
- Think of the new consumer trends, it’s doubtful that the trends will go backwards. Consumers don’t want to spend money and want disposable furniture. You can’t change the trends and live in "the old days."
- Move into other areas of home furnishings. Carry furniture that fits into consumer’s lifestyles, casual, trendier pieces.
- Consumers don’t want to wait, so quick delivery is even more important. Don’t overstock but have access to a local distributor who can deliver quickly.
Sounds like another industry needing an overhaul.
Remember, keep on top of trends. Style is constantly changing — sometimes even changing back to what it used to be.