Memo to Upper-End Retailers
These are a few indisputable facts and two conclusions. One conclusion is fairly obvious. The second, while unconventional just might ring cash registers through the use of a highly effective strategy borrowed from another industry.Fact: The furniture industry is in a deep recession (not exactly breaking news).
Fact: Many consumers, particularly at the better end of the spectrum are buying merchandise that is “Good Enough”. Instead of buying the $4,000 sofa they might have purchased just 3 years ago, today many are buying the $1,600 sofa that is “good enough”. It is important to point out that this is not necessarily trading down. In many cases this is the same customer…their outlook, needs, or circumstances just may be different.
Fact: By most accounts, better end consumers are looking for deals more than ever. In today’s economic environment, very few customers walk through the door with a ‘price is no object’ viewpoint.
Fact: For the first time in recent memory (mine), upper-end retailers are struggling as greatly as promotional retailers.
Fact: While many furniture retailers are struggling, business at furniture consignment stores is absolutely booming. Why? Because there is a large segment of consumers out there, that would like to save 50 or 60% by buying ‘gently used’ furniture. These buyers still want the more expensive furniture…but are unwilling to pay the retail price. So, many are buying pre-owned at half or less than half the price.
CONCLUSION 1: Upper end retailers should make doubly sure that they are offering an outstanding selection of ‘Good Enough’ merchandise.
CONCLUSION 2: Upper End Retailers should consider accepting traded-in merchandise from their customers and selling this gently used merchandise in their clearance operations as trade-ins because:
1. Customers understand the concept of purchasing trade-ins.
2. Often furniture being traded in at upper end retailers will be in near perfect condition (or do not accept it).
3. The retailer will be selling merchandise with little out of pocket expense in cost of goods.
4. Often, these consumers simply want their old furniture out of the house and will accept just about any trade-in value to that end.
5. Margins will be for greater than new furniture Think in terms of allowing $200 trade in for a sofa and selling it for $899, still priced well below new. Plus…trade-ins enter the inventory as a result of a new merchandise sale.
6. This strategy would have excellent marketing value and might breathe new life into a retailer’s clearance operation.
Fact: Mercedes, Lexus, Jaguar, Mazerati and Rolls Royce all accept traded in automobiles as a means to new car sales.
Fact: During recessionary periods, used automobiles tend to sell better than new automobiles.
Fact: In the automobile industry as a generality, direct sales of used automobiles tends to be more profitable than sales of new automobiles. Margins are greater.
Fact: There are many upper-end customers that 1) want some way to dispose of their furniture when the new purchase arrives, 2) may feel the furniture is too good to just give away and 3) will feel as though they have received some small benefit from their old furniture by trading it in.
Fact: Manufacturers reading this will likely say, “What…are you nuts? How does this help us?” Answer: It helps, because trade-ins will only occur when new merchandise has been purchased by a consumer. It may be the incentive needed that will turn the tide of decision making by a buyer to make that purchase.
Retailers interested in a telephone consultation regarding this strategy can contact me at jim@furnitureindustry101.com to set up a phone meeting.
I would be interested in your views regarding this post.
Jim Green commented:
Thanks for writing, Katherine. I believe that the surviving retailers in our industry will be led by managers and executives unafraid to shed strategies that are no longer working in favor of new ideas that position the ultimate consumer at the center of their efforts.
Jim Green commented:
Thanks for writing, Katherine. I believe that the surviving retailers in our industry will be led by managers and executives unafraid to shed strategies that are no longer working in favor of new ideas that position the ultimate consumer at the center of their efforts.
KatherineC commented:
I think this is a fantastic idea!...only gently used would or should be accepted.I believe it shows the retailers interest in doing something different.The customer benefits and so does the retailer...of course this is a completely different animal...we are in completely different times...There is still plenty of money out there(not excess printed)to spend.When others with a conscience see their fave store DOING something different,it will move many.I totally get the indignation the earlier gentleman showed,quality is #1.Many cold fish swim the retail waters but even theyare opportunists!We see new psychology in the works...and it isn't going anywhere but forward....in my never to be humble opinion.Seems a good opportunity to make a great impression on THE CUSTOMER.Great stuff,thanks for the chance to volley!
Jim Green commented:
Dear Steve:
Thanks for your view, Matt. The genesis of this idea for me was a social visit with a close friend. I went to their home for dinner and saw two sofas the individual bought from a high end consignment store and made by a high-end manufacturer. The sofas had no more wear than would be found as a floor sample on any high end furniture store in the country. I know the original retail price (because I was very familiar with the line and their pricing)was about $3000. The cost at the consignment store was $550 (and the consignment store made a profit). My point is that there are businesses that sell this merchandise...why shouldn't it be the retailer trying to survive. Secondly, I agree that this merchandise should never be sold on the main selling floor and not be confused with the normal line-up. The merchandise should only be sold in a clearance operation. Thirdly, as I wrote, the fact that the store accepts traded in merchandise (if and only if the merchandise is in excellent condition) might be the clencher to the sale. Finally, in my view the idea should only be attempted at the upper-end, NOT at more promotional levels partly because the traded in merchandise will logically be of greater quality and have seen less use.
As I see it, keeping this product separate does not send an ambiguous message to the consumer. In fact, I think it sends the message that the store wishes to do what is necessary to earn the customer's business.
Lastly, my 'Lexus' analogy was only meant to point out that this is the same customer that shops with the upper end furniture retailers and they certainly understand the concept. In fact, I would guess that there are an awful lot of pre-owned Lexuses and Mercedes automobiles sold.
Thanks again for your point of view.
Jim
matt commented:
I am sorry but Comparing a used sofa to a used Lexus is ridiculous.
Our upper end and very focused dealers are the ones who are actually the ones weathering the storm-why because they are focused and present a stable and consistent message to the consumer.
Expecting the retailer to give up floor space to sell used furniture makes no sense for both the retailer and us the manufacturer( who cannot afford to lose those spots to consignment furniture)
Let the consumer sell there stuff on craiglist and ebay-
Jim Green commented:
I had not thought of this aspect of the idea and I thank you for pointing it out. Jim
Steve Walker commented:
While your emphasis is on the business side, rightly so, there is also a "green" benefit to this concept. We at N.C. State in the Furniture Manufacturing and Management Center are working on a project to show cost benefits to the economy, and the environment, on establishing viable trade in markets for furniture. This should be interesting.
