Preparing for recovery
Marc Barnes -- Casual Living, September 1, 2009
There's no place like home — and many observers within the casual furniture segment say that's where the growth will be when the recovery comes.
A spot check of manufacturers, retailers and other industry experts boils down to two words of advice: Be prepared.
Needed are innovative new products, better sales training, efficient operations, more effective marketing and promotions. And now is the time to put those plans in place.
Economies recover from recessions, in order, by improvements in the stock market, consumer spending, manufacturing and jobs, according to Dr. Gerald Fox, an economics professor at High Point University with expertise in the furniture industry.
The best news? Some positive signs are already being seen.
"Consumer spending has turned around a little bit at the national level," Fox said. "How much consumer spending continues to rise month by month and into the fall, to the extent that happens, it will benefit the furniture industry."
Veteran furniture analyst Jerry Epperson said timing will be crucial. "Part of it depends on when (the turnaround) occurs and part of it depends on the vigor with which it occurs," Epperson said. "We will know pretty soon how people feel about early buys. Given the current environment and the current banking environment, we are not going to see the kind that we had in the past."
If good news does come, it might be soon enough for retailers to make some late buys, Epperson said. If there is no good news, then it will be a matter of who has the goods.
Dudley Flanders, president of Lloyd/Flanders and chairman of the International Casual Furnishings Association, agreed. The recession has prompted many retailers to keep inventories small and sell what they had on hand, he said.
"People are going to want it right now, so I think the retailers who have the stock and the ability to special order from suppliers who can supply them quickly will win," Flanders said. Describing consumers' attitude, he added, "When they come back they are going to be pretty picky ... and (retailers) will have to overwhelm them with style and service to earn their dollars."
Joe Logan, executive director of the International Casual Furnishings Association, said he recognizes early indications of a recovery. "Based on the results of our recent premarket, the indications are very positive that our industry will emerge fairly quickly and well from the challenging months of the recent past," Logan said. "We are expecting a very strong market in September and we are seeing lots of strong indicators. People have money and they're starting to spend it."
James Hedgecock, director of business development for Dimension One Spas, said those who market higher-end goods will have to work harder.
"Product innovation will be the path to that success and not just quality, as big box (stores) will sell commodity products with good quality at ever lower prices," Hedgecock said.
The key to future success will be consumer confidence coupled with product availability, said David Swers, vice president, Glen Raven Custom Fabrics. When there is a rebound in demand, retailers who didn't order enough inventory will be scrambling to keep up.
"What happens in the next six months will have a lot to do with what kind of season we will have," Swers said. "Anybody who does direct importing and depends on overseas products where the lead times are substantial will have more of a challenge."
Bruce Aronson, president of the Pool & Patio Center in Metairie, La., agreed the near-term will be important — and predicted that goods with mid-range price points will fare best.
"I don't think we will come out of it in our industry that quickly," Aronson said. "I think some people have learned buying patterns over the past nine months that are not beneficial to the specialty industry."
Tom Steinbock, owner of The Patio Collection in Santa Monica, Calif., said he believes near-term growth will be in the lower end of the spectrum.
"If you take only the specialty store, where the average ticket was $4,000 now it would be $2,500," said Steinbock. "There are still a lot more looking for much better stuff than the big box store."
Rory Rehmert, vice president of sales and marketing at Pride Family Brands, said when the market does rebound growth will come in two ways, both from stylish, high-quality products and the effect of the refilling of the inventory pipeline.
"Inventory levels in our industry are at an unprecedented low and there will be a greater level of buy-in due to this," Rehmert said.
That re-stocking will both freshen inventory and create enthusiasm for sales personnel, Rehmert said.
Another way to create that level of enthusiasm is organic, according to Sparky Taft, author of the book, "Dynamic Sales Results: Creating Super Sales Success in a Competitive DOWN Market."
Taft, a nationally recognized advertising veteran who often works with casual furniture retailers in the Northwest, said an aggressive program of promotions with meaningful incentives works well, but isn't the whole picture.
"The advertising has to arouse a curiosity to the viewer or the listener to get people to come in and check out (the merchandise), but the retailer has to have compelling reasons in-house to get them to buy — good signage, good sales treatment, good training," Taft said. "You have to greet the customer properly and tell them they came at the right time, that right now you have some incredible opportunities and deals on patio furniture."
Customers are no longer on autopilot, agreed Karen Galindo, general manager of the Greenhouse Mall with locations in San Antonio and Austin, Texas. To counter that mindset, she has increased training to encourage her salespeople to assess what the customers' needs are — and then sell them the features and benefits of the item that will meet those needs.
"The consumers that come out are serious, and the fear of the unknown is the fact that they have to pick and choose, rather than to have it all," Galindo said. "That's making them deliberate shoppers — buying things that seem more like a sure thing, something that's less trendy, something they know will hold up."
Gary McCray, president of Laneventure, agreed with Galindo's assessment about shoppers becoming more intentional.
"I don't think they are going to rush back to exorbitant spending," McCray said. "I do think that customers will respect a good value. They will be looking for things that last and it may be different than what they are looking for right now."
Donna Dentner of Bucks Country Gardens in Doylestown, Pa., said she is seeing consumers who've grown cautious with the economy. For the future, Dentner predicted that people may well grow weary of bad news and invest in their homes.
"They are doing what they can afford to do and hopefully, they will come back and get stuff they really want," Dentner said. "And hopefully, it will be our lower price points and not that $50 Walmart price."
Carl Vice, general manager of Casual Living and Patio Center in Louisville, Ky., said the recession has meant a loss of customer base, which has headed out to big box stores searching for bargains.
"It is yet to be determined as to whether those who are buying those sets today will buy again in the next two or three years," Vice said. "There is only so much junk that people will want to buy. They're going to want to upgrade their quality and presentation and get away from the cookie cutter chair and table."
Cap Hendrix, chief executive officer of Tropitone Furniture Company, expects future growth to depend in part on how much the government takes out of the economy. Once the recession ends, he can see a growth rate of one to two percent a year for the next five to seven years.
"I would say that we are a cyclical business and as a cyclical business on top of secular growth, we should enjoy some rebound," Hendrix said.
At Fruehauf's Patio & Garden Center in Boulder, Colo., owner Mary Fruehauf said her state hasn't been hit nearly as hard as other areas.
"Even though it is not drastically down, there is pent-up demand from customers waiting for the go-ahead sign that it is OK to start spending again," Fruehauf said. "And when they do, I think they are going to be ready to spend more."
Tiny Girl, Big Dream