Price or Value?

Lots of time is now being spent in the industry evaluating and marketing the “perceived price” as a bench mark for pricing, thus making the whole conversation a little last year.

People buy from people it’s the sellers skill which is the key to the question!

Thanks for the great info dog I owe you bgiigty.

serfssdf

This is a great blog.

sdfsdf

sfsdf

dfgdfgdfg

sdfsdf

Dear Stephen mMidwest VP:
Agreed. Thanks for writing. I have absolutely no problem with folks disagreeing with me. In fact, I think that it is healthy and positive to create a 'back and forth' dialogue. I just don't get why it is necessary for some to get so personal and mean spirited.

Jim, thanks to you and the other bloggers here @ Furn Today. I also devote time blogging elsewhere on an industry related site and forums like these are a great way to get other insights on the dynamics of this competitive business. What I don't understand are readers who 'hate' these forums as mentioned above...but obviously are voyueristic and intent upon taking the time out to say so...if you find these columns are not a valuable source of information, by all means...find a site that suits your requirements...I believe Cracked magazine is still in print...waste their time...and yours. Not the readers/authors who do enjoy this venue...smile...

To Rainmaker: I am a loss as to your accusation that (by implication) I am a recycled insider trying to teach “the consumer what they should like.” I didn’t write anything of the kind. The point of the blog was simply that once you get past the lowest price, the tie breaker is the value provided for that dollar. As Warren Buffet says, “what you get for what you pay.” The gist of it was merely that the absolute rock bottom price is not always the only variable that matters. In this regard, I am not sure that there is any difference between consumers today and of those of fifty years ago.

To Anthony: From one hot air person to another, in speaking about Century and AICO I was simply pointing out that if the lowest price were the only thing that mattered to consumers these companies would probably not exist. Much to your obvious consternation they still do. While I do respect these companies I am certainly not in awe of them. I do like your ‘back panel’ reference though.

I THINK ITS FNNY WHEN AICO AND CENTURY
ARE SAID IN THE SAME SENTENCE. WHICH IS ANOTHER
REASON I CAN'T STAND THESE BLOGS BECAUSE THEY
ARE ALOT OF HOT AIR PEOPLE JUST BLOWING SMOKE
UP OUR BACK PANELS.

The commentary and responses on this blog is like asking a church full of Southern Baptists what they think about Islam...Get outside the furniture industry, and see what it looks like from that perspective. The consumer is changing. The traditional consumer is dying (literally). Too many recycled insiders "teaching" the consumer what they "should" like. No wonder retailers look more like museums than active stores right now.

Maybe we will finally start to see consumers that see the true value in making purchase(s) of furniture based on factors other than price... Seems like furniture gets the last of the remaining household $$ because many worry about keeping up with the Jones by purchasing the bigger house, fancier car(s), larger screen TV's and latest IPhone or Blackberry.. Many consumers priorties seem a bit out of whack..

I guess to them furniture purchases are just not has exciting...

I often encounter buyers/prospects who will look to another line to see if there is another similar item they are perusing at a better price point. I almost always have to point out that good quality, hardwood furniture that is built to last just does not come cheap. Its really that simple. If quality is part of the sellers mission...price becomes less formidable an issue. There will always be a place for low-end, medium and luxury priced furnishings, just as there will always be low-income, medium income, and high income consumers, Period. The retail landscape will conform. It always has.

Michael: Well said. I couldn't agree more.

Value, like beauty is in the eye of the beholder. As much as we try to rationalize it with equations, it depends entirely on how you segment the market and the real and psychological needs of the target. In any product category there is always room for the best and the cheapest.

In my experience, the retailer is more focused on offering what will sell than on educating the customer in refined taste. And, rightly so.

Still, I am always amazed at the process of design migrating from the true designers to the furniture that is sold within the Mass Market. From a technical standpoint, the furniture at the Mass-Market is an extraordinary value but I would never want it in my house.

The truth is there is value at every pricepoint. Many of us in this industry--and me especially--are furniture snobs. In my career we have worked with people who have great design talents. More than furniture, designs can become sculptural works of refined art that could sit as comfortably in a museum as a living room. Once you are exposed to the very best of anything, it is hard to go backwards.

Truly great design is timeless and the materials and craftsmanship will make these products endure. If you LOVE it and can afford it, and use it, it is true value at any price.

But if you can't understand or appreciate the difference, it is no value at all. It is like owning a valuable piece of art that has no meaning or value to you. Or, like buying a mediocre suit on sale. It is a good value from the mathematical equation, but you don't love it well enough to wear it because it feels cheap and unauthentic to you. It is a poor value at any price.

My prediction is that economic crisis will force the market to become further segmented. As the rich get richer and the poor get poorer, the middle market will evaporate.

Value for the rich will focus on great artistry, true craftsmanship and extraordinary materials. The other side of the spectrum, Value will focus on low prices, immediacy and functional utility.

Finally in every value analysis you must remember that these are "irrational humans" making choices, not a computer using a decision matrix of weighted enumerated values. Each of us has his own value pyramid where some things are more important than others.

For both the retailer and manufacturer, finding the balance to offer the right product, at the price point, i.e. VALUE is the key and to show product differentiation, and other defining differences within a specialty store environment is also what leaves a lasting impression.

I believe it is very important that the partnership between the dealer and manufacturer fine tunes their product assortment and knows their target customer to take advantage of the greatest number of selling opportunities - based on the aforementioned value.

For the dealer and manufacturer, it also has to do with contribution to the bottom line - as at one time in my career, I was heavily involved in the mass retail market, top line sales (lower margin products and removing some cost basis to arrive at the acceptable price point - higher velocity products) vs bottom line profit (this is selling higher quality products at higher margins - but usually lower volume).

It is the old saying that price is what you consider when making a purchase but value is what you expect after the purchase, long after price is forgotten. In my mind, this is where the risk is! If there are more consumers who seek a low price, wouldn't the need for stores who sell better goods become minimized? As the better stores sell more on price, what differentiates specialty from the mass retailers and how will they compete, if it is solely based on price. Surely a store with 1000's of stores will be able to buy at a better price.

As Warren Buffett is credited by saying, "Price is what you pay. Value is what you get." And as you pointed out, depending on the demographic and the psychographic, that value is a different proposition.

Lastly, if the economic crisis will force the market to become further segmented and as I eluded that the rich get richer and the poor get poorer, the middle market will evaporate - that baits the question - what will that do for the specialty retailers and those manufacturers who only cater to that market?

I feel it is the consumer's purchasing habits that have shifted. Shifted away from buying "stuff" from retailers to creating environments via decorators and designers. These educated consumers want more than what a Retail Salesperson can offer - they want a complete concept. A concept that takes into account more than just the "stuff" approach most retailers offer. Those complaining should know that price is only the key factor when no other benefit is viewed as a greater value. So, when all you offer is basic stuff and no other tangible or intangible benefits you leave the customer with one option - price. As designers and decorators we have felt the pinch of the economy however, our clients are driven to achieve home environments that they love more than ever before.

If one considers that "Value" is the equation between price vs. benefit, what should be the direction for a manufacturer and its partner - the retailer? What about service, selection, comfort, style and delighting the customer at the sale and even after the sale?

From my recent store visits, meeting with buyers and extensive travels during the past 14 weeks, I have a brief question and also in a way, a caution, "Do you think manufacturers and retailers in our industry are beginning to cater too much to the price-conscious shopper?"

While this type of shopper is certainly more prevalent than 2 years ago, and while many may have taken the path of least resistance -- offering products with lower prices. Is this really the correct strategy for a better-goods industry and for its long-term success? Don't get me wrong - I understand survivability, short term sales and feeding our families - we are all in that plight together! Most dealers sell what the customer wants to buy and that includes what they are willing or can afford to pay!

But a quote from the 18th century says it quite well. “It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you lose a little money… that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the job for which it was bought."

Question: If a collection was purchased and it breaks in 1 1/2 years, is it VALUE even though it costs less and it has to be replaced?

The common law of business balance prohibits paying a little and getting a lot. It cannot be done. If you deal with the lowest bidder it is well to add something for the risk you run.

And if you doubt that, you will have enough to pay for something better. There is hardly anything in the world that some man cannot make a little worse and sell it a little cheaper and the people who consider price only, are this man’s prey”

What is the long term strategy and isn't the risk greater than the reward. Won't the customer remember both the store and the manufacturer who initially sold the product, if it does not work out?

All one has to do is look at the reality. Stores like Porter's of Racine closed. More than 150 years of selling high end furniture down the tubes. There is only 1 Thomasville store in all of New York state? Plunkett Furniture stores closed after 78 years. The list goes on and on. Yes, there are some who are not affected by the recession. Very few. The rest are trying to hang on to what they have and are getting very frugal with their purchases. The credit crunch doesn't help either. 70 to 80% of our customers who apply are being turned down. Those who would have been approved for $5k+ are lucky to get $1500. Too bad the owner is busy raising our profit requirements to exceed non-existent shoppers. No wonder over 50% of our sales people are actively seeking other employment.....good luck with that.

I find it unfortunate that FT now only allows comments on blogs and not articles. That has been taken away and with it a service to the industry, whether it was good or bad. Jim knew you when I was with R&S and your son, who I believe is no longer in the industry much like myself. After 25 years and trying to find a position. What can one say when a person 1/2 my age doesn't hire me and has no idea of the past. Welcome to the new retail, now run bye colege grads at the store level that no nothing about classic styles history or the industry but are all fed the corporate mantra of ups, conversions, and price points and have no idea of value.

I find it unfortunate that FT now only allows comments on blogs and not articles. That has been taken away and with it a service to the industry, whether it was good or bad. Jim knew you when I was with R&S and your son, who I believe is no longer in the industry much like myself. After 25 years and trying to find a position. What can one say when a person 1/2 my age doesn't hire me and has no idea of the past. Welcome to the new retail, now run bye colege grads at the store level that no nothing about classic styles history or the industry but are all fed the corporate mantra of ups, conversions, and price points and have no idea of value.

Its a good thought, Henry. I'll pass it along.

Would be interesting to see Furniture Today to do a focus group study on the purchasing drivers which consumers use to visit store....Just a thought

If, indeed, price is the only critical point regarding the ability to sell merchandise, I would ask: How can it be that in SW Florida for example Ashely Furniture, Rooms To Go, City Furniture, El Dorado Furniture and American Signature Furniture all compete against one another at the same relative price points, in the same market and survive? Furthermore, if price is all that matters how can Robb and Stucky, Baers,and Carls possibly compete in that market at their higher price points? I am not saying that price doesn't matter, especially at the lower price levels. I said in this blog that "many (I'll even ammend that to 'most')retailers at the promotional end of the spectrum are indeed price driven". However, there are two points to be made. 1. All potential furniture buyers do not wish to spend the lowest price they can for an item. There are those that want to spend more, even, much more to purchase the 'better' or the 'best'. After that they want to spend the least amount they can to obtain the most perceived worth as a result of the sale. This is pretty much the definition of 'value'. I think that it is pretty clear that the Ashley customer is probably not the Robb and Stucky customer and vise versa. 2) After the customer has some idea of what he or she is willing to spend, that pretty much determines where he or she is going to shop. Once that is done, all the other things that define value come into play and the customer (Theoretically , at least) buys. I believe price determines where customers are going to shop; value determines where they are going to buy.

If the market is not driven by price then why is Ashley #1 and Wal Mart #2 in the industry right now? There is no value with either of those two companies. It's all about price sir. Sad, but true.

If the market is not driven by price then why is Ashley #1 and Wal Mart #2 in the industry right now? There is no value with either of those two companies. It's all about price sir. Sad, but true.

That explains why Bob's Discount Furniture is doing high sales. In recession lower price always rules. In normal times the above article applies. Check out Haverty and the rest and see how much they are down for the year. Then look at Bobs and see how much they are up.

We all consider price at some point but you are correct, it is the value that is always more important. Quality, Service, Materials, etc are all very important aspects and should always be considered when we make our purchases. That is like telling Mercedes, Porche or Rolex to focus on price first... They focus on the value of their products... Our challenging economy should have taught us one thing when it comes to our purchases... VALUE is King and our $$ must work for us as long as possible..

Nice blog :)

We all consider price at some point but you are correct, it is the value that is always more important. Quality, Service, Materials, etc are all very important aspects and should always be considered when we make our purchases. That is like telling Mercedes, Porche or Rolex to focus on price first... They focus on the value of their products... Our challenging economy should have taught us one thing when it comes to our purchases... VALUE is King and our $$ must work for us as long as possible..

Nice blog :)