Stores look for ways to supplement credit hook
By Marc Barnes -- Furniture Today, February 23, 2009
High Point — High Point— For many retailers, marketing furniture used to mean making two main points in an advertisement: The benefit of buying new furniture now and the ease of paying for it through credit.
But industry observers are now saying that half that marketing message isn't getting through the way it did in the past. With the credit meltdown late last year, it became more difficult to get credit, which prompted many would-be customers to not even try.
The challenge for many retailers, then, is to find other ways to draw traffic into their stores without credit, or to advertise that credit may still be available, to overcome buyer resistance. Many retailers have either made adjustments to fit their messaging into the new credit environment, or made changes to meet customer demand.
Cathy DiSante, director of advertising and marketing for Art Van Furniture in Warren, Mich., said that credit is not the driving force it once was, especially given the hit that the local economy in Michigan has taken with the downturn in the auto industry. She said that the old practice of lay-a-way, which works well with Kmart, also works well with some Art Van stores.
Mostly, DiSante said, Art Van has looked more closely at its merchandise mix, offering additional discounts, highlighting individual prices, and using time-sensitive special purchases. Examples include giving away a Best Buy gift card with the purchase of a TV console or entertainment wall, and holding a casting call for the television show, "Survivor."
"Customers walking through the door are more valuable than they used to be," said DiSante. "If they were golden before, they are platinum now. We now take some time, to see what their needs are and try to put them together with the best product and the best offer."
Mike Albert, owner of Pilgrim Furniture in Southington, Conn., said that his store is still advertising financing in almost all of its television ads. But he added that today's customers have become more interested in saving money on their purchases rather than finding a way to pay for them over time.
"I think there were a lot of questionable people who were buying on credit and now those people don't have the credit scores to get financing," said Albert. "The stronger customers who have the money feel that they want to get a good buy and get the most value that they possibly can.
"If you are a strong consumer and you want to buy a house, it is a great time to go to Florida and buy a house. If you are questionable, you are not going to Florida."
Todd Lehman, owner of Interiors in Lancaster, Pa., said that the trend he has seen is that consumers have actually begun backing off financing on purpose — and instead begun trying to bargain for deals made in cash.
"We are still advertising free financing, primarily one-year free financing, but interestingly, we are finding that consumers are actually more interested in finding out the lowest price for cash," said Lehman. "We are finding that to be the case particularly for larger jobs of $10,000, $15,000 and $20,000. Those consumers are buying but they're wanting to leverage their cash to get the best price."
Sherry Sheely of Sheely's in North Lima, Ohio, said that she agrees that more customers are looking at price and value, but she says that her store's brand centers on an everyday low-price model, which means that they do not bargain down from the posted price.
In terms of financing, Sheely's offers six-month financing all the time and 12-month financing once each month. Keeping offers to a minimum works.
"What has increased for us are e-mails on the Internet," said Sheely. "I am getting 1,200 to 1,600 hits on my site on the weekend and between 25 and 40 e-mails a day which we need to answer, which is good for one store here. I am looking at pulling ad dollars from radio and putting all that in the Internet over the next couple of months."
Sheely also decided on getting out there in front of the public by making monthly appearances on a locally produced morning talk show.
"It's not about 'I want to sell you something. It's about fashion and your home and about entertaining and being comfortable in your own space," said Sheely. "You've got to find a way to make your company the brand that they will trust...too many got into 'no, no, no' and they cannot find their way out of it."
For Bill Twelves, director of merchandising at Olum's in Vestal, N.Y., the use of credit depends on the customer and the store. Olum's has its own stores and it also runs an Ashley HomeStore. For Olum's, he is seeing customer demand increase for higher-end furniture; at Ashley, he is driving as much financing as he can get his hands on.
For its part, Olum's does carry its own paper, offering three months interest-free for appliances and six months interest free on furniture. Twelves said the revolving credit program, called "Magic Circle," was begun years ago in response to a flood, in which large numbers of people had to refurnish their homes quickly.
The difference between the two stores boils down to straight economics, said Twelves.
"That (higher-end) customer is not affected, whereas the typical Ashley customer was struggling to put gas in his car and is now struggling to keep their job," said Twelves. "Ashley does quite a bit of financing offers and we participate in all of those in-between events or promotions. I make up more of a reason to advertise for New Year's Day and Black Friday."
Jim Kittle, president of Kittle's in Indianapolis, Ind., said that his company offers financing with every sale and he doesn't see that changing anytime soon. Ordinarily, the Top 100 retailer's financing offers run between six months and two years.
"GE Money is our credit card at Kittle's and they did tighten at the end of the year but they are now about to normal,"said Kittle. "I don't see people around us changing — people have always had financing in their offers and they still do — I don't see them doing more or less."
Giff Gates, owner of Gates Furniture in Grants Pass, Ore., acknowledged that while credit is indeed tighter, he continues to use no-interest offers. Still, roughly 80% of his customers are paying with credit card, cash or check.
Gates said that his latest round of marketing will center on a new TV campaign that stresses free delivery, a low-price guarantee and no-hassle return policy. He's keeping his emphasis on his Web site, monthly e-mail newsletter and monthly e-mail promotions.
His other marketing efforts include getting his sales staff to send gifts to one selected customer each week, teaching classes on accessorizing your room and decorating for the holidays; and paying nonprofit organizations $500 each quarter to hold signs at nine separate locations for a five-hour stretch.
"We hope the new institutional campaign will convince shoppers to put us in their No. 1 or No. 2 shopping destinations when they are ready," said Gates.
Henry Badcock, executive vice president of strategic planning for Badcock Home Furniture & more in Florida, said that his company has provided its own credit for years — and it remains an important part of the mix.
"We feel like that has always been a strong point for a very long time," said Badcock. "In the last eight or 10 years, anybody has been able to get credit, but now with the credit industry being so tight, they cannot. Our stores can make the decision right there in the store."
Badcock said that offering credit in-house has enabled the Top 100 chain to build strong relationships over the years, especially in small towns where the furniture store manager knows his customers.
"Until probably the early part of the 1990s, the cash credit-constrained consumer could not get credit, couldn't get a bank card or a MasterCard and they would come to us," said Badcock.
"In the latter part of the 90s, everybody started offering credit to anybody who could fog up a mirror. That's what's caused the problem today with the housing industry and the credit industry — they have given credit to people who shouldn't have credit. Now that that has evaporated, we are still standing."
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