Bill says, "We’re not driving your father’s Oldsmobile, so stop looking for spare parts!"
Ed says, "Unless you are a discerning bull or a protective rancher, all cows tend to look alike!
Editor’s Note: Here's more from Furniture World's point/counterpoint duo, Bill Napier and Ed Tashjian. This is their fourth installment, having previously debated celebrity licensing, digital advertising overload, and the millennial myth.
Point: Bill Napier
It’s easy to understand why super-regionals like Bob’s and Art Van are investing so much to grow. They see a market void that can and needs to be filled. I blame a lot of that void on our manufacturers for not stepping up with excellent marketing to help their retail customers educate and engage consumers.
First, The Bad News: This is just the beginning. Armed with wallets burgeoning with cash from industry outsiders, these retailers will continue to grow their footprints. Along the way, they will look for ways to decrease product costs and raise margins, and they’ll do it by sourcing their own products! That cannot be good news for their present suppliers or for those retailers who compete with them.
Next, More Bad News: We are a $100BN+ category that is still somewhat trapped in a 70’s, 80’s and 90’s marketing paradigm when business always seemed to be good. There were a few very powerful brands back then, brands people recognized and sought out. Not so much anymore because today, brands have promoted themselves into anonymity, by doing nothing!
When I joined the industry, as an “outsider”, I was told that the function of an experienced marketing person like myself was to focus on furniture shows.
OK, I got that, but when I questioned what my role should be after each market, I didn’t get an answer. That was probably because no one ever really had put much thought into that. The goal of getting placements and market penetration at the furniture markets made total sense, but then what? What about helping those retailers who purchased products at market increase their own, as well as the manufacturer's sales velocity? Apparently our industry's business plan was based on hope! Now, after all these years, we still go to market, and spend a ton of money promoting our brands to get placements, a good and necessary process. Many brands do an incredible job toward that end. Then, after the markets we all go home and abandon all the marketing of those brands until the next furniture show.
I can’t understand why a manufacturing brand would not arm their retail customers with sales and marketing materials that define their mission, vision, product attributes and more, to position and differentiate their products from the commoditization of everything in this industry. By commoditization, I mean that the primary brand platform out there is SALE with some differentiation by using the words Anniversary, Warehouse, Liquidation, Labor Day, etc., before the word SALE. The result is that industry brands and their products have become largely undifferentiated in the minds of consumers. And, industry manufacturers have allowed this to happen by not promoting their brand equity.
Level The Playing Field
The only way brands and retailers can level the playing field is by using technology, but most ignore it. I’ve worked with many technology companies specializing in augmented reality, artificial Intelligence, visual search, live video chat, in-store analytics, in-store heat mapping and more. The common reaction our industry has to these technologies is to say there is no interest, it's too expensive, or respond with a “deer in the headlights” scenario. My response, "You're not driving your father’s Oldsmobile anymore, so stop looking for spare parts!"
There is a lack of brand presence on the Internet as well, with only a handful of great furniture manufacturer’s websites. Most of them are geared towards furniture wholesale buyers. They ignore the more than 60 percent of consumers that search for brand information online. Whenever I buy something new, I always check the manufacturer, customer reviews and more before I buy. I bet you do, too. Herein lies the manufacturer's chance to BE A BRAND. Instead of being basic, why not try inspiring? When they enter your website ask them:
- How can we inspire you today?
- What rooms do you want to decorate today?
- How can we help you to make your home beautiful?
And then take them on a journey with awesome engagement tools and the new technology that virtually every company outside our industry is adapting: AR, AI, visual search, videos, live chat/video chat and more! Then make it easy for them to buy locally, or even off your website. Blasphemy you say? More on this in a minute.
Furniture manufacturing brands missed the Internet revolution and are ignoring its impact even today. They sat back and said selling online would never work because people must see, touch, and experience their products in stores. Enter Amazon, Wayfair, Overstock, and others and for many years, they still turned a blind-eye, and many still do, even though online sales of furniture increase by double digits every year and many predict by 2020, it will account for just about all furniture sold.
According to Business Insider, “Overall, the furniture retail category, which includes home goods, is one of the fastest-growing segments in e-commerce at the moment. BI Intelligence estimates that Americans will spend $38 billion buying furniture online in 2016...”
Imagine what it will be in 2020? BI predicts 32 percent of all furniture sales will be done online, and other research shows that prediction is real, too. So much for the touchy feely excuse, huh?
Brands waste money on room scene product photography, producing catalogs and other antiquated marketing materials instead of standardizing their products so retailers can push out those products on their websites. They don’t invest in product content, in product videos, and I guarantee they won’t invest in augmented reality imagery either. Why do I say this? It's because I’ve lived it. For years I worked to get manufacturing brands to standardize their data. Most manufacturers didn’t have a clue why this was needed, and worse, where they could find the data to do this. One major brand told me they kept their product data in PowerPoint and updated it from there. OMG!
I know what many were thinking. They didn't, and still don’t want to show all their great products because the competition might see it and knock it off. Get over it! They acted like they had never heard of Google search or Google images. Just enter an SKU number in search and/or upload an image to Google images and find, “The emperor has no clothes”. Everything and everybody is transparent on the Internet, take advantage of it, don’t hide from it.
Bad News Again!: So, what is the state of marketing in this industry?
- Many manufacturers don’t have a formal marketing department, and if they do, the people are generally not consumer marketers. They usually came up through the ranks and are focused on furniture shows, not marketing.
- Most manufacturers don't invest in selling tools, both for their website and their salespeople. Few have available POS that shows different fabric and wood colors available. Where are the product videos that romance and show all the attributes, product functions and more?
•Many manufacturers don’t train their sales reps to understand consumer demographics or how they can and should help retailers understand trends, so they can sell more. Stop with showing the pictures and order taking already! That can all be automated online
OK, enough lecturing, let’s discuss the main subject, Your Brand.
Connecting Consumers With Your Brand
1. Whether you are a retail brand or a manufacturing brand this is the first and most important idea for you to consider. Instead of making your brand about YOU, make it about THEM, your consumer. Inspire, educate and motivate them.
2. Research and embrace how consumers interact with search, with social platforms, and the in-store experience. You’ll quickly realize they are very visual first, content/conversation inspired second, idea focused third, and concerned with functionality fourth. All these four elements are wrapped up into the complete value equation. Help them! Did you know that HOME is the #1 searched term on Pinterest?
3. Inspire people on your website. Take a lesson from Duncan Hines' corporate website www.duncanhines.com. They don’t talk much about the company. Instead they ask, “What would you like to bake today?” The website inspires visitors to think differently about baking with THEIR products. Imagine if your website invited potential customers to experience what you have to offer by asking, "What room would you like to create/design/accessorize today?"
4. If it’s a budget issue, consider reading the article at www.napiermkt.com titled, "Don't Be Fooled - The Real Cost of Hiring An Employee Vs. A Consultant/Agency. You will be shocked when you see this in-depth comparison.
E-Commerce & Brands: Notes eMarketer (https://www.emarketer.com), "Retail ecommerce sales of furniture and home furnishings will grow 16.4 percent in 2017 to reach $35.95 billion, and will total $62.36 billion by 2021."
Yep, many manufacturing brands will need to sell direct to consumers at MSRP or at a reasonable retail gross margin. If they don’t, they will lose big because, those big super-regionals will source direct, effectively cutting out manufacturing brands. And if you’re selling on Amazon, you’re paying 15+ percent anyway!
So, not to offend their good retail customers, manufacturing brands will also need to offer consumers in-store pickup/delivery based on their retailer customers' zip-codes. This way retailers stay involved and profit from the sale, plus have the opportunity to develop consumer relationships and up-sell. Think the way Amazon does with their 15 percent transaction fee. To the retailer that’s found money.
If the consumer chooses to have products shipped direct, without a retailer’s involvement, the retailer should get a percentage of the sale anyway. Again, think Amazon’s fee.
With all that has been said, do manufacturing brands even matter in the furniture category?
My guess is probably not, and with what I witness daily, it may never matter unless they decide to change from being irrelevant to relevant. They are commoditized for now, but will possibly be extinct tomorrow, joining with all the other manufacturers, retailers, and jobs we’ve lost, which I personally do NOT want to happen.
So, if you are reading this and represent a manufacturing brand, ask yourself this question: Why have you given up on the consumer after the investments you've made bringing products to market and getting that retail placement?
Like my Grandfather always said, “You’ll never learn younger”, and we're a very old industry!
CounterPoint: Ed Tashjian
For many of the reasons that Bill discusses in his rant, branding in the home furnishings industry is not only critical; it is essential if manufacturers have any hope of competing in the next decade. We have many of the same observations, but draw different conclusions.
A Herd of Cows: Let’s stop for a minute and think about what branding is, and its origins. Branding was developed for livestock to be able to tell them apart. It showed ownership of an undifferentiated commodity. I share Bill's conclusion that most furniture manufacturers' products are mostly undifferentiated, with websites and advertising that also tend to look nearly identical. Put your hand over the logo from any furniture advertising or website, and try to tell them apart. Couple that with the fact that all beds and dining tables conform to specific standards, the designs are often copied from one another, and that the average size of an image on most furniture websites are about two inches wide. What you will realize is that they look no different than a herd of cows! Those of us who visit dozens of showrooms each market lament that by the end of the week, it all tends to look the same. Furniture is fungible. Unless you are a discerning bull or a protective rancher, all cows tend to look-alike. Branding was intended to claim property, to show ownership and keep less reputable ranchers from rustling heifers.
The essence of marketing is differentiation. Your brand stands for how you are different and better. If you are not demonstrably different and better to a specific target, and you cannot explain your superiority, you are not a marketer, but rather a commodities trader. It can be done. What is more fungible than coffee or sneakers? And yet somehow Starbucks and Nike have developed great brands. You can too.
Let’s look at a few of the reasons why furniture companies have not effectively branded, and discuss the implications in the future.
Disintermediation: There is a long chain between manufacturer and the end consumer. This chain has been lengthened through sourcing. At each stage of production through delivery, there are a variety of middlemen that each try to capture value. Because of the competitive nature of furniture, low barriers to entry and oversupply, many intermediaries are sharing a slim margin. It's a problem. Successful brands cannot be built without gross margins.
Slim Margins: Slim margins mean small or non-existent funds for consumer brand building. It is no secret that it is difficult to make money in the furniture industry. Whenever supply outweighs demand, competitive pressure forces pricing down. The next time you read a magazine or watch television and view a commercial that you have seen many times, ask yourself what the gross margins are on the product. In every case, they will be very generous. (This is one of the rare times I can use the word "every" and still be right.) Furniture is a durable and not a consumable. Consumer advertising is worth the investment for brands that can generate profits from consumers who purchase frequently over their lifetimes. That's why it pays for toothpaste, deodorant and laundry detergent to advertise. Unfortunately, the time between furniture purchases is far longer, and less predictable.
Retailer As The Brand: When a consumer buys a tube of Crest toothpaste, they consider Crest to be brand, and not the store where they purchased it. The same is true of durables like refrigerators and appliances. In our industry, retailers have become the primary brand, with some exceptions. Verticals like Ethan Allen, Restoration Hardware, Ashley, La-Z-Boy, Bassett and Sleep Number have significant brand identification. There are also a few furniture manufacturers that have some brand equity left over from previous advertising, but that is fading with time.
Marketing Talent: The furniture industry attracts and keeps weak marketing talent. Frankly, most marketing jobs in the furniture industry are small “m” marketing services jobs. The primary responsibilities are photography, cataloging and maintaining a website. There is little strategy, branding or innovation, the kinds of things that excite true marketers. Typically, there is a vice president of sales and marketing in most manufacturing companies, suggesting that furniture manufacturers can't tell the difference! And, there is little upward mobility. When is the last time you heard of the marketing guy being elevated to become the president of a furniture company?
Relevance & Resonance: First and foremost, what brands represent must be unique. Manufacturing brands must stand for something more meaningful than the platitudes and pieties of quality construction. Marketing isn’t complicated. It's about segmentation, targeting and positioning. In other words, brands can’t be everything to everyone. Good marketers must pick a segment and create a product and an experience strategy to meet their customers' needs better than anyone else. Then, they must demonstrate how they are different and better at every touch point by comparing their products to something consumers already know. The goal of branding is not increasing brand awareness, but rather relevance and resonance to a specific segment with specific needs and wants that is sizable, reachable and accessible. Brand awareness does not matter if you have a flawed business model. You must be able to communicate how you are different and better.
Ironically, furniture may be the cheapest category in which to brand. People who are interested in the home are already segmented by the magazines to which they choose to subscribe. Furniture manufacturers pay about half the going rate in these publications because the magazines are so hungry for indigenous advertising. With an advertising budget of $5 million, a manufacturing brand could own a category. I can't think of any industry as large as ours where this is true.
Ed 's Solution
In the coming decades, manufacturers have two choices, both of which require branding. They can either choose to sell directly and manage delivery logistics, or they can work together with retailers to sell through their brands in the marketplace. The first option is somewhat risky. Currently, about 11 percent of furniture is sold through e-commerce, and it tends to be lower priced items. To compete requires a dedicated differentiation strategy, innovation, a different kind of packaging and an acceptable return policy for both parties. This channel will continue to grow and peak at 25-30 percent when hybrids make e-commerce irrelevant. And, selling the same branded product through e-commerce alienates retailers.
The more obvious choice is to work with retailers rather than to compete against them. Rather than dumping furniture on their doorstep and leaving the selling up to them, manufacturers need a thoughtful strategy for selling the product through to the consumer. Today, most manufacturing marketing efforts focus on the High Point and Las Vegas Markets. These are important, but it shouldn't end there. A true marketing-focused company would start with the end consumer and work backward. They would collaborate with retailers to make the whole furniture buying experience more emotionally satisfying because branding transcends a product-only relationship.
About Ed Tashjian: Tashjian Marketing provides senior marketing leadership to the Home Furnishings Industry. It specializes in business analytics and in helping its clients to segment the market, define and communicate a sustainable differentiated value proposition. Get more information at www.Tashjianmarketing.com or call (828) 855-0100.