Retail Observer: Loading... 2020

“The Times They Are A-Changin’.” If you remember this Bob Dylan song (also referenced by Ed Tashjian in the Point/Counterpoint feature in the March/April 2018 edition of Furniture World) when it was new and popular, you may very well be a great grandparent by now. This song, which Wikipedia describes as Dylan’s “deliberate attempt to create an anthem of change for the time,” is now 55 years old and counting. And, not surprisingly, a half century later, the times are still changing, probably faster than ever.

So, what does this have to do with selling furniture at retail? To quote another earlier poet, “Let me count the ways.”

How it Used to Be

Let’s spend a couple of lines on this subject, if only because it can give us perspective on just how far we’ve come in the last 28 years (the era of my experience in furniture retail). In 1991, almost all retail furniture sales were done in brick and mortar type establishments. Why? The reason was this: at that time it was about the only way to sell major home furnishings and appliances. You advertised in the newspaper, on the radio and TV. It was to be hoped, people would come into your store and buy your merchandise.

How it is Now

Almost everything you read in the above paragraph is still true today except that on the eve of the year 2020, brick and mortar establishments are clawing, tooth and toenail, for a declining slice of the traditional “store” retail pie. This is not to say that all stores are suffering. Some are flourishing, but in today’s market, they look more like the exception than the rule.

So, where has the missing (or declining) slice of the pie gone? We are not breaking any blockbuster news here. Ironically, it has sort of gone back to the future, to the way Sears and Roebuck USED to operate. The customer picked up the catalog, thumbed through until she found what she wanted, and placed an order. After a time, the item was delivered to the happy and expectant purchaser. The difference is now, of course, a galactic online catalog, has largely replaced the old catalog. It is interesting to note that Sears, with the increasing urbanization of America, decades ago de-emphasized catalog sales, and opened thousands of retail stores, mostly in suburban malls. Sears was an early adapter of e-commerce, but failed to execute properly. The rest is, as they say, history.

Why Has This Happened?

Over the past decade, some really smart MBAs, retailers and manufacturers have wrung their hands over why this sea change in retail sales has taken place. Is it the seventy million strong millennial generation with their post-modern culture? Is it the rapid onset and omnipresence of social media? Is it something else, entirely? Or, is it a combination of all of these? And, most important of all, what can be done about it?

Social Media

Twenty odd years ago, there was a brief, tepid debate over whether the “internet” was a temporary flash in the pan or a permanent fixture in our culture. We now know the answer to that question.

The next question concerns the so-called millennials. There seems to be prevailing wonderment as to why this generation, defined by “experts” as anyone born between 1981 and 1998, has turned out to be so different from their parents and especially their grandparents.

To me, the answer is pretty clear. Let me start out by saying that I think the arbitrary date range of 1981 to 1998 is flawed since there are pretty big cultural differences between virtually all older and younger millennials. What the members of this generation have in common is that most, if not all, of their entire lives have been molded by their total immersion in the social media phenomenon. This is especially true of those born after 1990.

Of course, social media is now “everything, all the time!” for a lot of people. How often have you been out in public and noticed a group of what appear to be friends or at least acquaintances sitting together, and everybody is glued to their smart phone; with not a word spoken by anyone?

Now, the funny thing to me is that this group of friends may not be a millennial crowd. They might even be people in their 40s or 50s or older.

Social media has not only shaped and sculpted the millennial generation, it has also strongly influenced the culture of older generational groups, for better or worse. And, it’s probably not going to change, at least until the next culture-shifting technology is unleashed upon an unsuspecting world.

The Result?

Before we go any further, let’s spend a few words on the evolution of sourcing home furnishing products and the effects of those changes. Over the last twenty-five years, much of the furniture manufacturing industry has been shipped off-shore. This sourcing change didn’t necessarily have a destructive effect on retail stores. Products were just “jobbed out” by existing brands, supposedly to lower costs. Retail stores were largely unaffected by these sourcing changes, except for some product quality issues and the reality of plant closings and loss of domestic manufacturing jobs.

The mattress industry, interestingly, avoided off-shoring until the “bed-in-a-box” phenomenon took off. Today, perhaps fifteen percent or more of the entire bedding market is now purchased directly online, and the products sold are manufactured primarily in Asian facilities. For many retailers, a fifteen percent decline in business can be the difference between profit and loss.

But, it’s not just the mattress business that is affected. More and more, especially by the millennial generation, furniture is purchased online and shipped directly to the customer.

Now, let’s return to the millennials.

How Different Are the Millennials?

There seems to be a widespread perception that the millennials are different, and it's been suggested that they are somehow deficient and inferior to previous generations. I'm not sure I agree with this assessment, and suspect that, like virtually every other generation since the dawn of time, there is the usual distribution of superior, average and sub-standard beings present in the population.

Let’s address briefly why the millennials seem so odd to more mature observers.

Without expressing partiality or social and political biases, it should be clear to any rational person that we have seen at least three important cultural shifts in the last fifty years. First, many parents are more indulgent to their children than parents used to be. Second, the educational establishment, both at the public school level and at the collegiate level have made significant philosophical changes in curriculum emphasis and expectations of achievement. Evidence hints that many standardized tests have been “dumbed down” to maintain a certain parity of test scores. And, third, the tidal wave of social media is in the process of drowning everything that it touches.

I am sure I have opened myself up to criticism with these observations, but I will gladly listen to counter arguments.

Before we pass judgment, however, let’s look at a few millennial statistics. According to the Brookings Institute, Pew Research, Business Insider and others:

• The millennial generation is the most “diverse” in American history.

• More are college graduates, but the cost of this achievement is carrying a heavy college cost debt load.

• Millennials are the most populous generation in history, at 70 million plus.

• They are marrying less and having fewer children.

• They have fewer close friends and personal acquaintances.

• They entertain at home less than their parents or grandparents.

• They are much more likely to live in apartments.

• Some estimates suggest that as many as thirty percent of all millennials still live at home with their parents.

• They have lower credit scores than previous generations. Due to high unemployment, they have less disposable income.

Not many of these attributes are positive for our industry.

They don’t seem to have much money or credit. Where do they spend their limited money?

On average, the largest single expense outlay for millennials is a smart phone. Other big expenditures are for coffee, tattoos, computer games, drugs and alcohol. They don’t buy much furniture and what they do buy is temporary and easily disposable. This stuff can be purchased online and assembled on the living room floor, so they never have to go into a furniture store. We need to remember, however, that this much-maligned generation has also produced doctors, scientists, engineers, teachers, and other productive members of society.

So, what do we make of this? As I recall, if you take away the social media elephant in the room, my (baby boomer) generation wasn’t much different, making bookshelves out of cinder blocks and pallet wood. My first mattress set was a mismatched set that cost $99 each piece. The Millennials may eventually resemble their parents or, the parents will start resembling their offspring. But, what do retailers do in the meantime?

For an excellent survey of millennial culture and retail potential, I highly recommend the “Evolution of Millennial Shopping Behavior” by Bill Napier and Ed Tashjian in the September/October 2019 issue of Furniture World.

The Future

I can predict the future just as well or as poorly as the next person. The furniture retail business is not a get-rich-quick investment. Many stores are multi-generational and I suspect that they will continue to remain that way.

Let’s look at some realities that exist in today’s turbulent world. Our country sadly seems to be divided along political fault lines. It has been at least eleven years since our last so-called recession. The stock market has gone for years without a major correction. Some surveys suggest that nearly half of millennials do not have a favorable opinion of our free enterprise economic system. This is a worrisome fact for business owners who are invested for the long haul. If even some of these concerns became reality, what would happen to business, life and the economy? It’s hard to say.

And, let’s not forget there is another oncoming generation, curiously named Generation Z. These people are starting to enter adulthood as we speak. How will they change the culture? I wonder what dystopia comes after Gen Z, since we will be out of letters to assign to them.

Is There an Answer?

Let’s pretend that worst case scenarios will not happen. How do store owners cope with reality as it exists today? Some experts think that if you own a brick and mortar store, you will not survive unless you focus on ecommerce. Let me say this. Not every retail operation is ready to sell online. And, if you are not ready, don’t even try it.

To sell online successfully, the retailer must consider at least a few of the following points:

1. You must have a website that SELLS.

2. Developing a website that sells may be even more complicated than opening a store.

3. You must have a practical, timely way to collect payment and fill orders.

4. You must keep more inventory on hand than you normally do.

5. Here are a few realities to consider, in addition, that have been substantiated by industry statistics and surveys.

   • Up to thirty percent of all online orders are returned.

   • Forty nine percent of online retailers offer free shipping.

   • Seventy nine percent of consumers want free RETURN shipping.

   • Ninety two percent of consumers will buy if returning is EASY.

   • Sixty seven percent of consumers check the returns page before buying.

   • Forty seven percent of consumers expect an “easy to print” return label.

   • Sixty two percent will buy online if they can return it in-store.

   • Eighty four percent consult social media before buying.

The above statistics were derived from US Department of Commerce figures.

Amazon has changed the retail world. If you aren’t enthusiastic about executing the points described above, online retailing might not be for your store.

Easy Alternative

An easier alternative that you can work on today is to spruce up your store and your website to pull in more customers. As we said earlier, a lot of brick and mortar stores are prospering. How about a little analogy? Even with all the games and entertainment on TV and the internet these days, Disney’s throngs get larger every year, even as the cost of admission spirals into outer space. Does this teach us a lesson about making our stores more attractive destination locations?

Co-Operating

We used to hear about cross-advertising, meaning different non-competing businesses using each other’s message to advertise their own products and complement the other store’s message. Stores are installing coffee shops, restaurants, and other entertainment as part of their overall store package. Short of installing a tattoo parlor in the recliner department, I’m sure there are many other ideas that can enliven your store’s image and pull in more customers.

Consider one more point. Even if you don’t engage in ecommerce right now, the format and content of your website is critical, and growing more important with each passing day. Your website must SELL, even if you don’t sell merchandise online.

Final Thoughts

Has retail changed? Somewhat. Has marketing changed? To a certain extent, yes. Have the basic principles of sales and salesmanship changed? The basic principles of sales and salesmanship have NOT changed. The sales principles outlined in my book, "How to Win the Battle for Mattress Sales, the Bed Seller’s Manual" are still the same now as they were in 2013, and for that matter, the same as they were in 1983. Fundamental sales ideas and principles will never go out of style. Anyone who seriously studies, learns and applies them will never fail at retail, no matter how the times change.