by Furniture stores that want to stay in business need to create enticing environments
During last week’s market, I had the chance to chat with Todd Wanek, president and CEO of Ashley Furniture Industries. As usual, the chat was informational, educational and a bit controversial.
When the conversation focused on the state of furniture retail, Todd asked a million-dollar question that all came down to five bucks. He said that today, any furniture retailer hoping to be in the business for the long haul needs to ask the million-dollar question: “Would consumers pay five dollars to come into your store?”
If, as others have suggested, that retail is theater, clearly Wanek believes that furniture stores need to both visually and intrinsically tell a story so alluring that a customer would gladly pay five dollars just to enter the store to take in the experience.
Although this notion of retail theater is not brand-new and, in fact, was pioneered by upscale London department stores such as Selfridges, more and more retailers are realizing the need to visually up their games, especially in today’s less-than-robust market.
Whether it is called social shopping, shoppertainment or retail theater, the common denominator for retailers is to find ways to create more exciting and inviting in-store shopping experiences.
And for those who think retail theater is an open-and-shut case of frivolity, Wanek points to a recent report from UBS Research that predicts that the number of retail store closures will continue to climb, with as many as 80,000 retail outlets shuttering within the next five years.
According to the UBS report, “An enduring legacy of the pandemic is that online penetration rose sharply. We expect that it will continue to increase, which will drive further rationalization of retail stores, especially as some of the unique support measures from the government subside.
“Our deep-dive analysis lays out our base scenario where we expect ~80,000 stores to close over the next five years. This will bring the total number of retail stores to 797,000 from 878,000 in ’20. This assumes that online penetration grows to 27% in CY ’26, from 18% in 2020. Yet, our analysis also presumes that retailers evolve and adapt their store formats to be the centerpiece of interacting with consumers, including fulfilling online orders. In this case, we assume that e-commerce sales fulfilled by retail stores grows from 10% in CY’ 20 to 20% in CY ’26. Overall, under this framework, every 100 bp increase in online penetration results in the equivalent sales of 8,000 stores shifting to e-commerce. Going forward, we think retailers best positioned to adapt their store formats or levered to categories with less disruption from the shift online will be best positioned.”
The report also predicted that store closures will vary sharply by subsector. While the report believes that home improvement, grocery and auto parts stores will close the fewest number of stores, UBS thinks apparel and furniture stores will be most adversely impacted by store closures. “We believe that malls will likely continue to be a source of closures. If the number of malls per household regressed to 1980 levels, it would imply a 9%-10% decline in malls,” the report concluded.
Commenting on the report, Wanek said it underscores just one of the major shifts the home furnishings industry is facing. “Other major shifts include the growing importance of the millennial consumer and that consumer’s appetite for more contemporary looks,” he said.
“Retailers need to reinvest the money they made during the pandemic into every area of their stores, including merchandising, social media and product assortment,” Wanek advised, adding, “Massive shifts are underway, and retailers as well as suppliers need to understand them and proactively adapt.”
