5 Ways to Prepare Your Home Furnishings Business for What Comes Next
By: Tara Kelly, Founder, President and CEO, SPLICE Software
If your business sells furniture and home décor, congratulations — you’ve been enjoying the pandemic-related home goods boom where people were trapped at home and obsessed with upgrading their living space. U.S. Commerce Department data showed monthly sales spikes of over 180% last year, even as supply chain breakdowns and port bottlenecks delayed shipments.
This has been a challenging time due to delays and delivery hassles. But hopefully you built up cash reserves during the boom, stores of good will by taking great care of your customers, and collected lots of customer data plus permission to communicate across channels like email, text, social media, etc. Now it’s time to gear up for the next shift in consumer demand and market conditions, which is already underway.
Spending on goods (furniture, TVs, home improvement materials, etc.) is still above pre-pandemic levels but has fallen from earlier peaks as consumers direct more discretionary income toward services like travel and entertainment. Analysts suggest this is easing supply chain woes and may bring inflation down, but many also fear a recession in the months ahead. So, now is the time to create your plan and put it into action.
Here are five steps you can take to get ready for what comes next.
1. Conduct a brand audit:
As the marketplace shifts, it’s incredibly important to set a baseline and understand if the end-to-end customer experience is where you want it to be. Net Promoter Score (NPS) data can tell you whether shoppers had a positive experience or if the experience left something to be desired. This is especially valuable to know when order volume is up and shipping is delayed, which can make it difficult to deliver on the brand promise. So this is the perfect time to find out if customers will recommend your brand.
Keep in mind that it’s absolutely critical to make sure you deploy your NPS survey across all channels (calls, text, email, etc.) to make sure you’re capturing sentiment across your entire customer base instead of a subset. NPS can give you an opportunity to find out what’s working and what’s not so you can adjust accordingly and provide a closed-loop experience.
2. Do a customer data audit:
The next step is to audit your business data since you’ve probably had an influx of customers from the recent boom. You’ll need to know how many are new customers who are just getting familiar with your brand vs. loyal customers you’ve been serving for years. For home furniture retailers who’ve experienced a double- or even triple-digit growth in sales over the past couple of years, the customer base has changed, perhaps drastically.
A data audit can help you identify important trends in understanding how your customer base has evolved when you were busy trying to meet demand, address supply chain issues, and coordinate shipping. So, review, then integrate the right information and analyze it carefully for insights. Now more than ever is the time.
3. Calculate customer lifetime value:
Bearing in mind the principle that it’s easier to keep existing customers than to find new ones, furniture retailers need to analyze customer data to determine the potential lifetime value you can expect. This will help you understand where to focus so you minimize customer churn. A common formula for calculating customer lifetime value is to determine the average purchase value and multiply that figure by the average number of purchases.
Of course, all customers are valuable, but let’s face it: some are “cherry-pickers” who were attracted by a bargain or special promotion and unlikely to be repeat buyers. There are cherry-pickers in every retail operation, but once you know which customers have the most potential for generating lifetime value for your business, you can focus on them.
4. Get creative about adding value:
Next, it’s time to sharpen your pencils and come up with some creative ideas to deliver value to customers. The boom times have been great, and we all hope they continue. However, many analysts believe the home furniture sector will continue to cool, either due to consumers redirecting dollars to travel and entertainment, the possibility of a recession, or a slow-down in the housing market.
If that happens, you’ll be competing for a dwindling share of consumer dollars. But if you get creative about adding value, you can compete and win by attracting more customers. Think about starting a loyalty program or offering customers exclusive access to new collections. In-store events can also draw customers, as can online promotions.
5. Follow fashion:
This may sound like an unusual approach, but one way to key in on consumer zeitgeist is to watch what’s happening in the world of fashion. Retailers are hyping dressier outfits as consumers are spending more on fashion for post-pandemic life. After being cooped up at home and wearing yoga pants and tee shirts for months on end, people are ready to dress up and have fun again.
But that doesn’t mean they won’t need home furnishings — your customers may also be ready to jump back into entertaining friends and family, so maybe they’re ready to add a little bling and upgrade their dining room set with dinner parties in mind. That’s just one example, but the point is, fashion trends can help you understand what consumers want and reboot your collection accordingly.
The past few years have been busy and productive for retailers who sell home furnishings, despite the many frustrations associated with supply chain issues, shipping container shortages and backed up port operations. It’s been quite a ride for retailers, and the ride isn’t necessarily over yet, but market conditions are changing fast.
The years ahead can be just as exciting if you stay ahead of the curve. You can do that by thoroughly understanding where you stand with customers, how your customer base has evolved, and what your most valuable customers want and need from your business. If you do that, you’ll be prepared for whatever comes next.