This case study helps a real-world furniture retailer get out of a sales slump with practical strategies to get more foot in the door and more sales in the register.
Transcript:
Raj: Hi there and welcome to another case study. I’m RajJha, I’m here with Hannah Mears and we are doing case studies about demand generation, about brand. How you can make the most of all of those in your companies and hearing these stories about real companies with real issues. And how we’re going to recommend that they address them can be a great learning experience for you and your company. So, Hannah, what do we have with us today?
Hannah: Okay. “I’m a girl. I love to shop. I’ve been looking for new houses and apartments lately. So maybe I’ll be visiting this store in the future. We have a retail furniture store in a mid-sized college town, and here’s the issue.” The store was founded 20 years ago and they have a reputation in the community as a budget-friendly retailer. Many locals and businesses are repeat customers. 10% of their sales are direct to consumers online currently, up from just 2% last year. Those sales were from websites with people calling in orders. They’ve had luck with parents shopping for their college kids moving into off-campus housing and their advertising has been billboards, newspapers, and some Google ads. Their sales are primarily by floor walk-ons talking to the sales staff and occasional phone-based orders. They offer free delivery also within 30 miles, which I think is the rate for someone in a college town. But the issue is a lot of branding, I would say. The first thing Raj that comes to your mind from a branding perspective with this company is what?
Raj: Well, based on the summary of that, the first thing about branding is that they do have a name in the community and they’ve been around for 20 years. So like it or not, they have a brand. So what is a brand, it is the impression in the specific minds of your audience. And so they do have a brand, but the thing they don’t have is control of their brand. There are a few things in there. And we’ll get to it about what their pricing is going to college town then known for various things. Folks are, they do have repeat buyers. They have people coming to the website. There are some phone owners, so there are all different kinds of things going on. So it sounds like they do have a brand, but it’s really not sharp. It’s not precise. And they aren’t using that brand to generate demand for themselves. That’s the first thing that comes to mind.
Hannah: Okay. That’s a great insight. There are some things this company’s doing to say, “Hey, this is who we are. We’ve sort of figured out who we’re looking for.” But the question that they’re really facing, Raj comes down to price and how competitive that can be. Their question to you was furniture. Sales are becoming a race to the bottom on price. Our competition is always discounting and offering sales and we’ve had to compete so our margins are low. Pretty much everyone is matching on price. At this point, margins are so low. It barely breaks even when using paid advertising. Before I get to the next part, why do you think that is? Why do you think that they’re barely breaking even?
Raj: Well, probably because of the price comparison and price shopping. You’ll see this activity in lots of kinds of retail. Some will come in and they’ve got their phone open and they’re looking and it’s like, “Okay, a Sealy Posturepedic.” And they’re going to look that up online and look for some mattress discounter. I’m not an expert on all the brands of furniture, obviously, but really between that and having a sale-based culture and a lot of retail, especially older, more traditional retail has gone towards this if there’s always a closing sale. They’ve educated the shopper to look for the sale so it’s almost like they can’t sell anything without a sale. What’s going to happen then is their margins are gonna get crushed. Prices are going down and down. They’ve got a fixed overhead of needing to give over, to the showroom in a warehouse and the delivery staff and sales staff. That’s just going to keep on going down unless they do something good.
Hannah: It’s so easy nowadays to take your phone and find a QR code and compare prices. I know that people in my life use coupon apps as well and find different things to physically draw someone in your store and say, “We know we have the best prices. You don’t even have to look it up.” That can definitely be a challenge. Hopefully, as we move further into this case study, we answer some of those questions as to how you can get your company to stand out without having the click of a button to price compare. The last part of what they told you was in the long term. We want to open stores regionally, but margins are really thin in the current location. Some months were barely breaking even. We knew that was their biggest problem. Now that you’ve discussed a lot of their branding issues and some of the problems they’ve been having with pricing, how do you evaluate the customer issue that they’re having? We know that they’re price-based shoppers. We know people are coming in and clicking. But how are we starting to fix that issue?
Raj: Realizing number one, that price-based shoppers are not loyal shoppers. There are different kinds of mentality to shoppers. Sometimes you’ve got luxury shoppers and what they want is they want to buy the most expensive thing. They really don’t care about anything else. They want to say, they bought the most expensive thing. Then all the way on the other end of the spectrum, you got, what they’re dealing with, which is price-based shoppers are coming in and looking at the price comparison app, or they’re looking at coming in looking for a deal. But there’s a whole big swath of folks in the middle. And those are the folks that they really should be focusing on more. The price is an issue, but it’s not maybe the primary issue. It could be a sense of belonging.
It could be a bunch of other things we’ll go into in a moment. But the first thing is to move away from price-based shoppers. You’re not going to win. Do you think you’re going to win against the internet? Where folks at a click of a button can get all of these things and get it delivered and never have to even walk into a showroom. They’re going to go into your showroom, see something they like, find it somewhere else. All you’ve done is pay for a showroom for an internet retailer. That’s definitely not the way that they should go. They really have to start thinking about some other strategies to switch from that to a loyal kind of customer. Does that make sense?
Hannah: Yes! Let’s start getting them thinking about it. I know a lot for someone to wrap their head around, they know what they have to do, but I think the hardest part for a lot of these businesses is knowing where to start. So what’s the most tactical thing to start with?
Raj: The most tactical thing is number one, a customer reactivation campaign. This is something that pretty much any business can do. And that is you have someone who has paid you in the past. They’ve done the hardest thing that could ever happen, which is converted from someone who didn’t know you into having a relationship with you. They’ve handed you money. So that is always the first place to go to see, well, “Can I get a repeat buyer?” Because that’s the beginning again of loyalty. They’ve taken a risk and a chance to buy with you. Hopefully, they’re happy if they’re not, you can address it. And if they are, they might buy again. So number one is customer reactivation. Hopefully, they’ve been gathering email addresses, phone numbers, contact information and then they can send out to folks and give them something special in order to do business again.
Hannah: Yeah, I agree. And something else I think is also interesting that they can do to keep generating people back to their business and separating themselves. You’re in a college town, offer some deals, offer some packages so that when parents are coming with their kids to find furniture for their new apartment, they’re hearing that from other people saying, “Hey, they offer this really cool package. You can do something, maybe resell it at the end of the year to them to get some money back, have some trade-in value.” So what are some situations where you’ve seen preset and pre-priced packages work for types of companies like this?
Raj: Having packages is a great idea because you’ve got these college students and they all have a similar need, but they’re coming in with different budgets. But they’re all gonna need the dining room table and the four chairs, and they’re gonna need a bedroom set and they’re gonna need a crappy futon, and they’re gonna need the TV stand. Whatever it is, they’re coming in with a budget and having the packages and that great idea that you had as well, Hannah, about being able to maybe return it at the end of the year. And this can be a rotating Huge bin of things. Both give them value and take away decisions in a good way because they don’t have to make the decision about, “Oh, well, can I afford this side table with this?” And they’re running around with a calculator and trying to figure that all out. So a package is a great shortcut and it’s another opportunity to differentiate because all the other stores are saying just sales, instead, No, it’s a package for a very specific person. and something that I think
Hannah: Here’s something that I think would be interesting. As a college student who was doing broadcast, as well as interviewing for different positions during a worldwide pandemic, nobody expected. Something I think these furniture and retail stores could start doing is implementing packages that are like an emergency zoom meeting package. Right? So offer somebody some sort of backdrop and maybe a little bit of an interior design with it, as well as maybe a stool and a chair table in front of it to set your laptop on. I think a lot of people should pre-plan for this type of stuff now, because I think also there’s a lot of companies who may just say, you know what, we can work from home now because we have the ability to do so, and we tested it and it works. If you’re a retail store out there, I know I could have benefited from you and the equipment that you have and the items available in your store. Show me something that could look great in my apartment, that if I’m a professional and I have to be on camera and doing an interview because I can’t travel somewhere to get there, I want to make it look like I don’t just have that funny $2 poster hanging on my wall behind me. That could be a package Raj that maybe no one’s thought of before all of it.
Raj: That is a great idea, Hannah, because really what you’re doing is instead of just having this furniture store selling, “Hey, this is a stool, right? Or this is just a desk in making it through a solution.” The solution isn’t that someone wanted the stool or a desk, it’s going to get their attention much more because like, “Hey, do you have this need and filling that need?” So the packaging is a great way to differentiate your business.
Hannah: Right? And if you walk into a store and you’re someone who sees that you’re like, I need that for my apartment because I had this problem. And I was rearranging all this furniture all the time. Whereas I can take these types of things, put them in front of a blank wall. And all of a sudden they have a professional studio to do whatever it may be. Even if it’s online classes, job interviews, you look professional. Another idea that I had had is I was a college student, okay. I was looking for cheap prices as well, but college students are willing to do fun things. And they’ll remember you from something fun that you’ve given them or an opportunity that was fun. A local retail store around here, they’re from about a midsize college town as well. And they have this big warehouse blowout. I’m unsure exactly how they get all the furniture.
I don’t know if it’s from selling other products trading, but they have a warehouse of furniture like decor, rugs, anything that you may need to furnish a house, an apartment, an office, whatever it may be. They have this big blowout sale about twice a year. They have over 11,000 followers now on Facebook because of people going there and finding the great things that they need. And get these people to sit outside as early as maybe two in the morning. So doors open at about 7:00 AM so that they’re first in line. That’s how great the quality of materials are and the prices that they’ve gotten as well. Holding events like this, maybe once or twice a year, maybe moving in and moving out times is a great way for people to remember you. Then to make them not just a price shopper, but a loyal customer, get them to come to your store, buy something at full price and say, “If you buy our item at full price, but we have, here’s a ticket to skip the line that day, come on in and get a discount from us that day.”
I think hosting events like that would be super fun in college towns. And you’re going to have college kids come out at two 30 in the morning. I promise that’s not early for them at all. They will be there. I think thinking a little bit outside the box, knowing your audience around you, what times of day they’ll come, what they’ll come for could be a really cool way to build and make yourself unique as a retail store in a mid-sized college town.
Raj: Yeah. And think about what you just did there, which is really clever, which is you took the Apple store effect. Right? Well, people will line up around the block or down the street from the new iPhone, but this is being done in a furniture context. And how unsexy is that? But it doesn’t have to be sexy stuff. It just has to be, you’re creating demand. That’s building a specific image in the mind of your consumer in this case, that’s the college kids. But they also, and I’ll go back to the original description of the case study. They’re also selling to businesses. So you can do the same thing with business owners. Now they might not want to wait in a line at two in the morning, certainly. That’s not worth their time, but you can also have packages. The new employee desk package could be done as well. And building those relationships, getting those email addresses, and thinking about creative ways of solving problems for them. Being a solution provider that’s valuable, adding services around it can make a huge difference.
Hannah: I think all of this is great information and insight that they can take literally tomorrow and start creating things and make their business stand out. But I think one thing in this profile is really talking about price. Everyone in a college town, a lot of businesses serve a lot of the same purpose and so it becomes a price war. I know I try to use my student ID for anything I could for discounts. So maybe from my perspective, if you’re offering anything like that, I’d show up. But from the business side of things, Raj, how do they win this prize war?
Raj: Yeah. On the business side of things, it is about creating a brand that is not about price. So it’s opting out of the price war. Now that’s not necessarily something you can go and quit cold Turkey. But definitely, if you’re building up a relationship with your audience, then that’s something that you can do because their loyalty matters a huge amount. If you were really involved, especially if you’ve got business buyers and you’re involved in it. Okay, well, “Let’s talk about what your plans are for the next few years.” Maybe we can set you up with a loyalty program to make sure that we’re going to be able to furnish your new location, furnish, upgrade your furniture. We’ll come up with a long-term plan for you. Becoming part of their process is definitely worth doing because it’s also going to allow you to order correctly. Instead of holding a bunch of inventory and paying to hold that inventory, having a lot of cash locked up in inventory, and then hoping that someone buys that thing instead of you can proactively plan. And do that layer of value add, that’s going to add a huge amount of margin.
Hannah: Yeah. And I think something, a lot of these businesses need to keep in mind, especially maybe in a unique market like that is to make your place and experience when they come. If you want to be opted out of the price war, be known as an experience, be known as somewhere where people are coming because they enjoy the atmosphere. They know exactly what they’re going to get. They know the benefits they can get from it. They have quality products, but overall being an experience for someone. And I know that can probably be a hard question to hone in on like what, what a good experience would be. But do you agree, Raj, being an experience that’s really attractive to society today?
Raj: Absolutely. Because we’re in it for the experience. Ultimately, and if they’re not in for the experience, they are in it for the price or what it gets them. It’s gotta be a solution, it’s got to be experienced, but not in the price as long as you do those things. And that’s what brand is all about. It’s the experience of the individual and it’s personal to the individual, but that only comes with that attention to detail instead of just being almost as if they’re selling something on Amazon. All you’re going to lose. Let’s look at the ratings, let’s look at the price, let’s pick. You have to get away from that. That’s why so many retailers hate Amazon and being on Amazon. They have a love, hate relationship. I can sell a lot at almost no money or, in the olden days being in Walmart, it’s the same kind of thing. But if you protect that customer experience, they will be willing to pay a premium.
Hannah: Okay. So to say all of that is really great. Someone eventually wants to be an experience for sure, but that’s a little bit more long-term. They’re still focused on generating cash. Do you have another solution as to how they can do this?
Raj: I think one of the things to think about is private labels because a lot of the comparison shopping is okay. “Oh, it’s a Sealy Posturepedic mattress and they can look that up online.” On the other hand, you can create your own private label, which is not as hard as it seems. You can call it the manufacturer and say, “Can you essentially put my tag on this thing?” And for a price, they can do that. All of a sudden you’ve got something that’s exclusive and can’t be priced compared because now it’s Bob’s luxury mattress but it is your house brand. And that is again, it’s consistent with your brand. If you’re thinking about how to up the perceived value, something that you can’t get anywhere else.
Hannah: And the last part of this problem that this company is facing is their retail furniture store, they want to be able to expand. Are there any other ways that they can get to that capital?
Raj: Yeah. Internally cash is obviously the way that most of these expand. You could go for investor capital, that’s one thing that you can do. I will say that without getting a lot of these issues under control, it’s not really going to be the best deal for you. I don’t think investor capital where you’ve got a lot of price compression going on, the margin compression going on, where you haven’t really figured out the marketing component is the best way. A second way to think about it is merging with another retailer. Perhaps there’s another location and they have another independent store, and then you can actually get some synergies there and potentially knock out one of the warehouses so that you don’t need to carry as much inventory.
You can harmonize the kinds of things you’re selling. And that’s another way to do it. But really ultimately I think in this particular case it’s, let’s really focus on solving the issue of customer loyalty and fixing the margin issues because getting the company to better financial shape, which doesn’t have to take a long time. I think within six months to a year, a lot of this can be alleviated. That’ll put them in a much better position to either take on investor capital or from internally generated capital, and be able to open a second location. But jumping the gun and trying to expand without having a good foundation, doesn’t seem like the best idea. There’s plenty of what we’ve talked about today, Hannah, that they can go and look at and, and make a big difference I think, and not a really long period of time.
Hannah: Absolutely. We’ve given them ways to help hone in on their brand, generate cash, have fun ideas for your college atmosphere while at the same time offering really great packages to the businesses. Also, don’t be afraid to use your influencers per se, in a college challenge. A lot of athletes, musicians, people are making a difference in the college world. A lot of followers on social media and odds are they post a picture that they’re buying something from your company; somebody going to see it. And a college student who also idolizes them or a company may come in and buy your stuff as well. Take advantage of every resource you can, that’s available to you from your target market. Overall, Raj, I think you’ve done a great job at explaining just how they can be successful and get where they want to be.
Raj: Excellent! Thank you, Hannah, for some great ideas today. Thanks, everyone for joining. And as my video goes out, that’s the sign that we’re ending the show. Isn’t it? Okay. Until next time then thanks for joining us. Bye-Bye.
