Retailers eager for '03 uptick
Stores working harder than ever to boost sales
By Clint Engel -- Furniture Today, December 29, 2002
After two consecutive years of tough going, will retailers see the turn in 2003 that some anticipated happening this past year?
The answer is a resounding "maybe."
The threat of war, a less-than-steady economy, low consumer confidence — these are the counters to the strong home sales and low interest rates that some thought by now would have released huge pent-up demand and sent business back on its merry way.
Now, there is no unfettered optimism, even among those who have bucked the soft sales trends and managed to overcome consumers' belt-tightening. Furniture dealers say they have to do everything right, watch every penny, promote like crazy and push the envelope with new ideas to be successful in today's uncertain retail world.
'Tumultuous' environment
"As far as I see it, it's pretty tumultuous, and it's going to remain that way," said Fred Berk, president of Fort Myers, Fla.-based Robb & Stucky. Consumer confidence hasn't been at a lower level in nearly 10 years, he said, and it's going to have to rise before the industry sees any sustained changes in buying patterns.
"You need to really pay attention to all aspects of your business," Berk said. "Every nickel counts."
Robb & Stucky, which has seen some of the margin erosion that comes with flooring imports in place of higher-priced domestic furniture, is experimenting with ways to make up the difference and become even more important to the consumer. In March, the company will open its first Southeast Florida store in Boca Raton, offering its first non-furniture line extensions, such as high-end linens, tabletop items and bath fixtures.
If the new lines boost revenue and margins as hoped, the company could end up rolling them out to its other stores in Florida, Texas and Arizona.
Intense competition and soft business conditions are driving much of this out-of-the-box kind of thinking. But one of Robb & Stucky's South Florida neighbors, City Furniture, has been trying new ideas, too, even though its sales have held up nicely.
Last year, City entered the home office and outdoor furniture categories in a big way with the opening of its 660,000-square-foot warehouse, showroom and headquarters complex in the Fort Lauderdale suburb of Tamarac. City President Keith Koenig said the new categories have been good moves strategically, though he needs to tweak the offering.
And in January, City's new Kevin Charles upholstery factory in New Albany, Miss., will begin shipping a line of midpriced upholstery to his 13 stores that Koenig believes will give consumers great quality and value.
The basic idea is to offer "really good quality frames, cushions and construction features" that typically can't be found on sofas starting at $499. "As always, we try to be a little creative," Koenig said.
Competition heating up
Efforts like this become even more important in a market like Southeast Florida, which is seeing new competition from players such as Robb & Stucky, Thomasville Home Furnishings and Value City's upcoming American Signature Home, as well as with expansion from regulars such as Carls, El Dorado Furniture, City and Rooms To Go.
"The marketplace is going to get more and more competitive in every way, and it's going to force all of us to execute better," Koenig said. "For us, that means serving our customers as well as we possibly can, focusing on values, being sharp in our buying, delivering on the customer's schedule, and of course offering attractive financing options.
"If we execute as well as we plan to, we expect to grow our business aggressively."
Creative promotions
At the high-end Louis Shanks of Texas, President Amor Forwood believes his stores need to continue pulling out all the stops on promotions to draw traffic and generate sales.
The Austin-based retailer recently held a tent sale that was such a successful draw that Forwood went to the front of the store to help direct traffic.
"We got them in with the tent sales," he said. But as it turned out, 70% of the business that weekend was done inside the store on regular merchandise.
Shanks had similar success earlier this year with a "dollar sale," in which consumers buy one item at regular retail and get a second item of equal or lesser value for a dollar.
"Those events are what's keeping us alive in these bad times," Forwood said, adding that the company had its biggest sales month in history in September. "We're going to have to run a lot of promotional events to stimulate business, because I think it's going to stay tough."
Training provides an edge
Bellwood, Pa.-based Wolf Furniture has a full-time employee trainer on board now and will continue to put an emphasis on training as a way to stand out from the competition, said Doug Wolf, President.
In addition, layered promotions are key these days. It's not unusual for Wolf to offer a financing offer along with special pricing on certain categories. Wolf also has had success running holiday events and Broyhill, La-Z-Boy, Pennsylvania House or other brand-name promotions — all at the same time.
The customer is not going to buy just because of credit now," Wolf said. "They want to see terrific product and value at the same time."
The nine-store Wolf is one of a small group of midpriced retailers that have managed strong sales increases without delving deeply into the import values that have blossomed in recent years. Wolf said he's been cautious about imports, concerned with the same profit-erosion issues that Robb & Stucky's Berk and others are raising these days.
"I don't believe that if that (imported) dining room set is $1,000 less, that it's going to drive more people into the market today," Wolf said.
At the same time, Wolf is doing "incredible business" with domestically produced, solid-wood furniture from Pennsylvania House, Crawford and Durham, he said. They may use imported components, but for the most part, "we're aligning with companies that still have the bulk of their product domestically manufactured," he said.
And don't tell Wolf that consumers don't care where product is coming from. In his neck of the woods, if consumers go looking under the chair and discover that it's made in China, "they're not pleased," he said.
Crunch time for retailers
Indeed, this coming year is shaping up to be a big decision time for many retailers, said Jerry Epperson, industry analyst and managing director of Mann, Armistead & Epperson in Richmond, Va.
Epperson estimates that with all the vertical moves that have taken place recently — retailers aligning with manufacturers' dedicated-store programs, or manufacturers acquiring their own retail distribution — 40% to 50% of the selling space once up for grabs for any independent manufacturer has disappeared.
That spells opportunity for the remaining independent retailers being wooed by factories that are not aligned in any big way, but their choices could be critical.
Retailers need to weigh everything from whether they have the capital structure to buy imports effectively to compete with bigger players to whether "they would rather be important to a small manufacturer or just a number to a big one," Epperson said.
"I'd look at who my consumer is and see if what I'm offering really matches up with who I'm (trying to reach)," he added.
Epperson said that's the toughest thing any retailer has to do "because furniture doesn't come with identifying demographics," and "there's a tendency to buy things that have worked in the past as opposed to what would attract the demographics we're going after."
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