Editor’s Note: Here's more from Furniture World's point/counterpoint duo, Bill Napier and Ed Tashjian. This is their third installment, having previously debated celebrity licensing and the millennial myth.
Point: Bill Napier
I don’t know what keeps you up at night, but my suspicion is that for many retailers it’s often the day-to-day operational and sales challenges that are common to the demanding retail lifestyle.
Retail Destruction
What keeps me up at night is the big issue of watching and witnessing retail destruction. The demise of brick and mortar retail scares me from a multitude of perspectives, primarily as it pertains to present and future employment at retail and manufacturing. It is predicted that 8,600 retail storefronts will close this year. This is probably no surprise to anyone who is paying attention. Consider the announcements of recent high profile closings of 68 Macy’s stores, 138 JC Penny stores, eight Sears stores, 35 Kmart stores, 220 h.h. Gregg stores, plus so many others in sectors from clothing to shoes to office supplies.
How many in the furniture store category? A bunch! Furniture store closings have been steady for a number of years and from my talks with the folks who specialize in store liquidations, there’s been an up-tick in their business this summer.
In my opinion, this is what should be keeping you up at night. All retailers MUST be aware of this trend and adapt their business models right now. If the Big Guys are feeling the heat, with all their money and access to technology, what's a smaller retailer to do? The fact remains, consumers want to shop/buy locally, but retailers seem to stay focused on "price" to drive sales, instead of technology to increase efficiency, create content, conversations and connections.
So who’s to blame? Store owners and the media tend to blame the internet for the retail debacle, or Asian manufacturing for the manufacturing debacle, but these are just effects of deeper problems here in the USA, an even bigger nightmare that keeps me up at night. It’s the dumbing down of the educational system in America.
Our Education System
We don’t make stuff anymore and that is because we don’t teach STEM – Science-Technology-Engineering-Math. I have a friend and mentor who frequently talks about Sputnik, the first artificial Earth satellite. The Soviet Union launched it into an elliptical low Earth orbit on 4 October 1957.
This shocked our nation into innovation and caused the space race. The launch ushered in a new political, military, technological, and scientific development surge – the second American industrial revolution.
Our education system is more focused on degrees in “nothingness”, with some institutions actually giving degrees in social justice which may be noble to some, but I’m confused how that degree helps us compete in STEM, which is the foundation for forward thinking, problem solving and innovation, ultimately with the goal of innovation and “making stuff”.
In a recent Wall Street Journal article, Douglas Belkin wrote, “Freshmen and seniors at about 200 colleges across the U.S. take a little-known test every year to measure how much better they get at learning to think. The results are discouraging.
"At more than half of schools, at least a third of seniors were unable to make a cohesive argument, assess the quality of evidence in a document or interpret data in a table." The article goes on to state; “At most schools in this country, students basically spend four years in college, and they don’t necessarily become better thinkers and problem solvers,” said Josipa Roksa, a University of Virginia sociology professor who co-wrote a book in 2011 about the CLA+ test. "Employers are going to hire the best they can get, and if we don’t have that, then what is at stake in the long run is our ability to compete.”
I have many more nightmares related to education, or the lack thereof. We need apprenticeships, we need to teach STEM, we need to just plain create and make stuff… AGAIN.
Whiners Keep Me Up
A third nightmare is caused by my conviction that many retailers have in many ways just given up. It’s summed up for me in this statement, “If you don’t want to try it – say it’s impossible!”
There are too many whiners who used to be winners in our industry saying, “It’s too hard – it’s too expensive – it’s whatever.” This is an excuse and easy way to quit.
I hear this so often and it takes many different forms. I remember when I had my marketing agency in the ‘90s I prohibited the use of the words “Can’t – Won’t – Don’t”. These words, to me, were and still are defeatist and these two words, “It’s Impossible,” seem to have redefined the words, Can’t, Won’t and Don’t.
Life is hard and the furniture business is even harder because you have other lives that are dependent on you whether they are customers or employees, or both. As Yoda in Star Wars said, “Do. Or do not. There is no try.”
In the home furnishings industry, we have lost over 450 manufacturing plants, over 230,000 jobs, many of these job losses are related to furniture factories and supporting businesses.
In the U.S. furniture retailing industry, pure-play furniture stores include about 24,000 establishments (single-location companies and units of multi-location companies) according to Dun and Bradstreet. My estimates are we’ve lost over 10,000 pure-play brick and mortar furniture storefronts over the past ten years.
Slow Technology Adapters
When I discuss technology with retailers and brands, I get “the deer in the headlights” look, usually for two reasons; they don’t understand it or they think they can’t afford it … or usually both. They say it’s impossible, too hard. But is it really?
A prime example of what I’m ranting about is that Manufacturers don’t help their retailers with standardized product data. Why is that?
Everything today is digital and everyone knows that 85 percent of all home furnishing searches start “On the Web”, and more than 85 percent of furniture consumers would prefer to shop locally.
To find what consumers want, the product, its information, warranties, dimensions, availability and more MUST be available. For that to happen, all this information must be in one location and available to stream, via API or other means to a retailer’s website with the data being updated at least once weekly, preferably daily. I tried to make this happen three years ago, offering to standardize furniture company data for FREE and was astounded that 90 percent of all the manufacturers I approached had no clue how to get the data, much less standardize it.
NO data equates to NO presence, which equates to less than expected sales in the short or long term. I wonder why this is, because it’s not impossible, it is required in today’s digital shopping environment.
Here’s another example. Many retailers refuse to try to understand and engage the new consumer on the web.
Many retailers believe it’s too expensive to have a great website and it’s too hard to maintain it properly. What’s necessary can’t be impossible. Eighty-five percent of people that shop the home furnishings category probably won’t find what they are looking for on any given brick and mortar website and divert their attention and dollars to websites that do. You know, Wayfair, Amazon, etc. Simply because they don’t want to “invest” $699 to show everything they have open to buy.
Among all the main things that keep me up at night is that so many retailers don't embrace technological solutions to help them show more, tell more and sell more. Of all the industries out there, the home furnishings industry is made up of Neanderthals when it comes to embracing technological and other solutions, preferring to suffer with:
1. Very Poor Search Features: When consumers click on an item on a home furnishings website they want to see the items with that same "LOOK"; the same colors, same frame options, etc. Instead, retailers in our industry embrace "Shop by Style". Today the definitions of style; contemporary, modern, traditional, classic are ambiguous at best and outdated.
2. Non-Existent Business Analytics: Visual recognition that shows accurate store counts, by hour/day/week for staffing/marketing analytics and HEAT MAPS showing where people congregate so you can see your merchandising successes and/or failures.
3. No Live Chat/Video Chat: Just about every other industry uses video chat because it's proven to increase sales dramatically. Think texting - FaceTime, Google Chat, and so on for your store.
4. Fear of E-Commerce: Look at all the highly successful furniture e-tailers that only do special orders. It’s a proven way to sell more.
5. No Pricing On Websites: If a consumer doesn’t see a price along with an item on a furniture website, they will likely shop elsewhere. Hardly anyone calls a company today to get a price. It’s all done by texting and live chat.
Creative Destruction
In the book “The Good Profit”, Charles Koch writes, “If it’s not broke, break it, because if you don’t do it, someone, or something else sure will.” The term “Creative Destruction” was coined by Robert Schumpeter, who taught at Harvard during the ‘30s and ''40s.
Creative destruction is all about creating the “new commodity, the new technology, the new source of supply and most importantly, the new type of organization.
Our industry doesn’t embrace this theory as it should. Is this happening to your business now because you have resisted change? The new commodity is the internet, the new technologies are everywhere that can help you sell more, by changing how you show, tell and sell.
Creative destruction & disruption is happening to retail brick and mortar retailers every day, and I bet it scares the heck out of you and your operations. If this isn’t keeping you up at night, it should be.
Counterpoint: Ed Tashjian
As usual, my friend Bill makes some excellent points. But like all things that keep us up at night, I suspect that his fears stem from frustration, and frustration often leads us to overstate, overreact and ignore commonsense. In general, I'm sleeping pretty well.
Not Worried About Education
Bill highlights lack of education of furniture impresario’s as a key frustration. In the words of Will Rogers, “We are all ignorant, just about different things.” Furniture manufacturers and retailers are smarter than we give them credit for. The acquisition graveyard is littered with corporate corpses who thought they could apply the rules of packaged goods marketing to make a small fortune in the furniture business. In nearly every case they succeeded, but only by turning a large fortune into a small fortune. MASCO is an illustrative example, but there are many more. Read Mike Dugan’s book furniture wars https://www.amazon.com/Furniture-Wars-America-Billion-Industry/dp/1439225109 where he provides many examples.
I have had the fortune of working in manufacturing, retail, and logistics in my furniture career. Until you walk a mile in someone else’s moccasins, you can’t appreciate the nuances. It’s sort of like Mr. Trump’s assertion, “Who knew that healthcare could be so complicated?” What appears to be a lack of education from the outside, is often a practical response to a real-world problem. That said, the world is always evolving and we always need to be learning, but consider this: what other industry still sells stuff that was designed in the 18th-Century? We have plenty of STEM in this country, and I predict that manufacturing is coming back to America. But it won’t create jobs. It will be robots and computers. It will always be cheaper to manufacture where the raw materials and customers are. Just look at the BMW plant in South Carolina.
Not Technology Either
Bill opines that the lack of standardized data is hurting our industry. I contend that he is thinking like a grocery store marketer. The reason for a lack of standardized data is that the products themselves are not standardized. You can’t barcode a custom sofa, like you can a box of cereal or a tube of toothpaste. Each one is unique.
Share-data in our industry is practically worthless, because the base sizes are so small one can’t do the kinds of analyses available in other industries. Most manufacturers collect data which can be mined, parsed, interpreted, trended and projected. In fact, that is how I make my living by helping retailers and manufacturers to understand that knowledge is power, but only if it is applied. Here is an unabashed plug for anyone who needs help in understanding their data, please call me.
ERP systems were over promised and oversold. Skillful salespeople convinced retailers and manufacturers alike that they were stupid and that their technology would make them smart. I have seen these implementations cripple companies because furniture is a unique business. Even the retail point-of-sale systems offered to furniture retailers are problematic because they try to force someone else’s business model into furniture retailing which is a unique animal. I have known many retailers who are quite successful running their business out of a cigar box.
Another one of Bill’s frustrations is “Retailers' lack of understanding of web technology.” I think a better way of saying this is retailers' unwillingness to collaborate with people who understand how to make the most of the web. His assertion is a generalization and I would postulate that the knowledge of this is more related to age and then industry. The future of furniture retail is not clicks—it is clicks and bricks. Retailers and manufacturers alike need web partners, but it is a fool’s errand to try to keep up with the latest technology. The web should be viewed simply as an alternate channel of distribution and not as a strategy of itself. The overriding marketing question is always, how do we create and deliver value for our customer? Even Amazon is buying retailers and opening stores. Retailers should partner with web firms and specialists, not attempt to do this themselves.
Bill references that not enough retailers do special order business or show pricing on their websites. This does not keep me up at night, but I wholeheartedly agree with him. The fastest way to get a customer to leave your website is to frustrate her by not showing pricing. That said, I understand that pricing furniture is complicated. We start with a ridiculous suggested retail price, which no customer has ever purchased at in the history of furniture retailing. But it is a necessary evil because we use it as a benchmark from which to discount. Regrettably, it is so unrealistically high that retailers fear it will scare customers away.
This is what I recommend: for every item of furniture three prices should be shown, suggested retail, our price as shown, and a starting-at price. It should include a sentence like, ”this item can be customized in a myriad of ways which affects its price. Please visit our store to get a custom quote.” Many manufacturers are experimenting with configurators that calculate pricing on-the-fly as the consumer creates a one-of-a-kind piece. I think this also holds promise, but custom furniture can be complicated to the inexperienced. Some manufacturers are creating kiosks in the store which makes this easier, where consumers can actually see and touch the finishes, materials and hardware.
Creative Destruction?
Bill is frustrated by his belief that Retailers don't embrace the theory of "Creative Destruction.” I think that they do much more than we believe. But the difference between being a consultant and a manufacturer versus being a retailer, is that retailers are forced to play in the present and make decisions in real-time. The question I ask my clients is, if we were going to create our business from scratch, how would we do it, and how can we work towards it? Disruption creates opportunities for everyone. True, there are many stores that have gone out of business, and this trend will continue. I have studied this, and in many cases it was because the real estate was more valuable than the business.
My Own Frustrations
I have my own frustrations, although they don’t keep me awake at night. This is what bothers me.
1. Why do furniture manufacturers try to reinvent themselves every six months and lose interest in new introductions just as they’re hitting retail? Why is the stuff on the drawing board always more interesting than what is already selling at retail? Why do manufacturers' efforts stop after placement on retail floors? Why don’t they spend more time developing programs that help retailers sell through the product to consumers?
2. Why are gross margins so darn low in this industry? Why do retailers cut each other’s throats? Why can’t furniture be as profitable as bedding? When manufacturers and retailers conspire to give away the product to the consumer at slightly above cost, it creates no margin for marketing, differentiation and creativity.
3. Why don’t retailers and manufacturers collaborate more? In the '90s, manufacturers held the power because there was more demand than supply. The proliferation of Asian production changed all that, and now retailers have the upper hand. There should be no upper hand. There should be synergy, and it should be more than just lip service.
4. Why aren’t we counting the blessings? Twenty years from now people will still be sleeping in beds, eating at dining tables, and parking their derrières in front of a screen to watch sports. In what other business will so little change? Thank goodness, we don’t make computer chips or film.
About Ed Tashjian: Ed Tashjian is Principal of Tashjian Marketing, a strategic marketing and business development consulting firm based in Hickory, NC specializing in the home furnishings industry. Get more information at www.Tashjianmarketing.com or call (828) 855-0100.