Retail Observer

August 2017

The Retail Observer is an industry leading magazine for INDEPENDENT RETAILERS in Major Appliances, Consumer Electronics and Home Furnishings

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RETAILOBSERVER.COM AUGUST 2017 32 T imes are certainly changing for the furniture and bedding industry. Traditional brick and mortar stores are closing their doors at a record pace due to the rise in online retailers 1 conveniently shipping consumers a wide variety of products from fresh produce and pet food to electronics. And now, online retailers are setting their sights on furniture. According to Barclays U.S., online furniture sales grew by 18% in 2015 2 and Amazon's general manager for furniture confirmed the online retailer is planning to offer online shoppers more furniture options, including customizable items such as sofas. As consumer purchasing preferences continue to evolve, how should traditional furniture dealers react? THE 'GRANDMA TEST' Wells Fargo Commercial Distribution Finance (CDF) views the changing landscape as an opportunity for dealers to tackle these new sets of challenges. Selling furniture isn't the same as selling other smaller, more portable items like clothing, books, or toys. Consumers want to see, sit on, or lie down on a mattress or look at large piece of furniture before purchasing. Seeing the product online and reading its description just won't satisfy some customers – failing the 'grandma test.' This testing demographic describes consumers who are reluctant to purchase a product because they don't recognize the brand and/or haven't had a chance to experience it in person. While the online trends continue to evolve and adjust to meet the needs of consumers, Wells Fargo CDF sees an opportunity to really help dealers impress this skeptical demographic. Dealers should focus on providing customers with the right product, offer a competitive price, and more importantly, pass the grandma test by delivering an outstanding in-person buying experience. To begin, take stock of your business' operations by answering the following questions: 1. Are you losing customers because you don't have the right items in stock? 2. Are you paying for products before they are sold? 3. Is your cashflow inconsistent and unpredictable due to seasonal sales? 4. Are inventory payment terms not matching inventory turns? If you answered "yes" to any of the above questions, you may have some work to do. RIGHT PRODUCT IN STOCK Today's retail landscape has created a culture of instant gratification. Over the years, the balance of power has shifted in favor of the consumer as a result of market globalization, comparison shopping, and price wars. To address this, dealers need to meet customer expectations on price, quality, availability, and selection. Stocking the wrong products or not having the right ones available can result in fewer sales, diminished loyalty, tarnished brand perception, and customer attrition. This commonly occurs when a business does not have access to cash in order to replenish inventory. In this instance, inventory financing can be a great option to help improve cashflow and restock shelves. COMPETITIVE PRICING Cashflow is a key factor in determining a company's long-term future. For example, Wells Fargo CDF's activity ratio calculator allows you to track and optimize cashflow trends by simply entering a few of your businesses' annual data points. Ideally, a business should aim to reduce inventory levels and payment terms, and accelerate collection times. You can further strengthen your operational performance by reducing your business' reliance on debt or other external forms of financing. To start that process, analyze your business' ability to convert inventory and account receivables into cash. CDF has developed a GMROII calculator to help determine the success of each product line. CUSTOMER EXPERIENCE While online retailers are promoting a convenient shopping experience, brick and mortar stores offer something that websites just can't compete with – an in-store experience. By providing a great in-store experience, dealers can combat this growing online purchasing trend and impress those scrupulous shoppers looking to test out a product before buying. Focus on a quality in-store customer service. Embrace it because it's something online retailers can't replicate on a web page. When a customer interacts with knowledgeable, informed, and seemingly trustworthy team members in store, the price often becomes significantly less relevant. Customers who have a positive in-store experience are also more likely to return. While the furniture and bedding industry is facing challenges working with industry experts, like Wells Fargo CDF, can help furniture retailers stay ahead of the competition and industry trends. In addition to inventory financing options for furniture dealers, CDFconnect™ is a program for CDF customers that delivers learning opportunities and best practices sharing to help businesses grow and pass the "grandma test." 1 Bloomberg 2 Fortune F I N A N C E [ N O T E S ] HOW BRICK AND MORTAR DEALERS CAN PASS THE 'GRANDMA TEST' RO

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