At times, it seems that there is a genetic difference between manufacturers and retailers. You can be one or the other, not both. The retail cauldron continues to bubble, causing much toil and trouble for the retailer and supplier. Consumers keeps sending distress signals saying their needs are not being met, but the retail responses are inadequate.
By its nature, furniture is a space-eater requiring large retail footprints and warehouses. This means high fixed costs. It is also hard to handle as it goes from the factory packing room to a container, to a truck or rail car, to a port, to a ship, to another port, to another truck, to a warehouse, to a delivery truck, to a consumer’s home. This means high variable costs. Together, it means the consumer pays at least twice as much as the material, labor, and overhead cost of the product when it was packed.
A lot of this waste could be eliminated with the advent of a new retail format that requires less space. The technology to do this exists, but no one seems to be taking the lead in applying it.
Product Is Still King, but Its Crown Is Slipping
Furniture insiders have long claimed that the product itself is the key determinant of sales. During the shopping process, consumers, largely female, quickly dismiss the items they do not want and respond favorably to those that reflect their self image. No amount of marketing or selling can change this. Others, largely male, have insisted that most of the product looks the same anyway (“It’s just a sea of brown.”), so more attention should be paid to non-product variables.
Without question, the product is still king. The ‘over the top’ styling of the pre-meltdown period has been toned down somewhat, partially as a way to reduce cost, but the inevitable return to flashier styles could boost sales in a recovery. However, dependence on product while neglecting other variables can no longer be tolerated. Logistical expertise and the use of information technology are becoming the new keys to differentiation. No one ever raves about the product styling at Ethan Allen or Ashley, yet both of these brands have outperformed the field. Their customer service and use of computers make the difference, not their products.
Traditionally, the industry has been known for sub-standard customer service. Upholstery ‘broken promises’ were usually a result of unreliable fabric suppliers, and missed casegoods ship dates were caused by erratic factory schedules. The consumer has been greatly inconvenienced by this woeful practice, and the advent of off-shore production has exacerbated the situation. Those companies that manage their supply chain, no matter how lengthy, will gain competitive advantage by virtue of service reliability and inventory management.
In the meantime, the new product development process is badly in need of streamlining. Fraught with waste, the old process is costly and slow. Worse still, the results are only occasionally successful. It has been estimated that less than one third of new wood product introductions actually make it into production and only half of those retail well. Predicting winners may always remain an
FURNITURE INDUSTRY WATCH REPORT SEPTEMBER 2009