What your biggest challenge in this tough credit climate?
By Marc Barnes -- Furniture Today, April 27, 2008
High Point — The biggest challenge for furniture retailers in today's tight credit market has less to do with credit within the industry and more to do with financial pressures throughout the American economy, according to a spot- check of furniture retailers across the United States.
From Alaska to Florida, many different kinds of retailers in different market areas said there is a general and consistent fear among many would-be furniture buyers.
In terms of credit, some retailers have seen some tightening, reflected in a slight increase in turndowns for their customers trying to finance a furniture purchase. But other factors — the slowdown in the housing market, rising home mortgage interest rates, increasing costs of gasoline and food prices and a contracting economy — have led to an overall drop in consumer confidence, which has resulted in less foot traffic and sales in furniture stores.
To counter the slowdown, retailers are using a number of different tactics, including contacting past customers to encourage repeat purchases, increasing sales training, running more specials and reworking marketing programs.
"(Some retailers are) trying to get their old customers back and we are doing the same by contacting existing customers. Of course, we have had to discount a lot in order to keep the customer coming into the store.
"This is a business cycle like all others but a bit deeper. The market will rebound and we must be sure that we are ready with healthy dealers and adequate supply (improved supply chain.) To that end, we are taking a very promotional stance (discounts) in order to keep our dealers healthy and we are doing all we can to minimize out-of-stocks even if it causes increased inventory. We want to be prepared for the turnaround which we know will come, and possibly without enough warning, to dial up our overseas supply chain."
Henry C. Badcock, Executive Vice President/Strategic Planning, Badcock Home Furniture & more, Mulberry, Fla.
"The consumer confidence numbers are down. If you are in a contracting economic cycle, people are going to pull back. You can't pull back on groceries or other necessities. You are going to pull back on cars, homes, home improvements and furniture. We are doing the basics as well as we possibly can. We are servicing every customer as well as we possibly can and we always try to continue to improve."
Keith Koenig, President, City Furniture, Fort Lauderdale, Fla.
"The customer as a whole is more guarded — that's a side effect of tight credit. It is affecting our customer's posture more than our posture. What we are doing to offset that is asking more of the salespeople and more of the managers. We are shoring up our procedures and making sure everyone is aware of our selling techniques. (We are also) expecting more of the manufacturers...Manufacturers' reps who do not return phone calls, we are coming back on them pretty hard. We are expecting more of everybody.
"I am keeping my finger on the pulse of the business day in and day out."
Joseph "Slug" Hefner, President, Hefner Furniture, Poplar Bluff, Mo.
"Our new customer base —(those) are the ones who are not coming in. Our traffic is down between 30% and 40%. What we are doing is actually trying to call those customers in our database who have credit limits and open-to-buy and try to get them in to buy more furniture. It is better to call the existing customer base than it is to try to get the new ones in the door at this time. There is a panic more so than a reality — 95% of our customers have a mortgage with a low interest rate (and) bought their home five or 10 years ago. Five percent of the market is in foreclosure. Everybody talks about the 5% and nobody talks about the 95%. And the 95% is unfortunately holding on to their money."
Pedro Capo, Chief Operating Officer, El Dorado Furniture, Miami Gardens, Fla.
"Our challenge? We are hoping all these other furniture retailers (who operate) on zero interest for five years and jack up the price will stop. It's not a good deal for consumers, who get into trouble with subprime mortages. All of them come due sooner rather than later. Hopefully, it will start to stop and we can go back to selling furniture and services and not selling financing terms."
Jim McIngvale, CEO, Gallery Furniture, Houston
"We have seen a higher percentage of turndowns, but we're not under the impression that that's what's happening ... We were joking about it — business is so bad that people who have bad credit aren't even shopping. The fact is that tight credit comes from budgets being tighter — gas is up, interest on their houses is going up, electrical costs are going up. People we are doing business with are looking for more opportunities for secondary financing for those who are turned down, where interest rates are higher. They are helping retailers turn those over to someone who will take those accounts."
Giff Gates, President, Gates Home Furnishings, Grants Pass, Ore.
"We have in-house credit — we tote the note. We have plenty of available credit, but we are trying to get customers. To meet that challenge, we are doing a lot of advertising — direct mail, newspaper inserts, television and limited radio. We are not worried about credit card companies turning them down, because we are in a position to finance them. If we can get them to come, we can get our share. We have room for a few more."
Stuart Shevin, President, Standard Furniture, Birmingham, Ala.
"My cost of business has actually gone down. I have a couple of real estate loans that are tied to the federal discount rates and that (cost) has dropped on us. In Alaska, we have not had anywhere near the number of home foreclosures or home credit issues. But people's minds are that there has got to be an issue out there because they hear about it so much from the candidates and on the national news.
"People who are coming into the store right now are going to buy. They are not just kicking the tires. We have been training and training our sales staff on all the proper steps of the sales — increasing product knowledge and rearranging store managers' time so (they can) observe salespeople's behavior to the consumer and coach them on ways for improvement."
Dave Cavitt, President, Furniture Enterprises of Alaska, Anchorage
"There are just not as many people coming in. This always happens as well during tax time and during election years. We have been here 70 years — we've been through tax times and election years and recessions. It normally bounces back at the end of April. We've learned to weather it...we keep churning away, we advertise weekly and we are trying to run more specific specials. We do have a couple of special events. Obviously, we are going to have to think a little harder for the rest of the year. Even people with money get down in the mouth. People don't like their stock reports and it is enough to cause old money just to sit on it frankly and hunker down for awhile."
Don Fedde, President, Fedde Furniture, Pasadena, Calif.
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