COVER STORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Joe Tatulli

The HOM Commitment - Taking a serious approach makes for retail success

Everyone loves a success story and we have devoted a considerable amount of time (in these pages) touting the success of many futon sofa sleeper retailers. Over the years we have focused on specialists and full line stores. Some have been large and some small but one thing seems to be a constant. That universal theme is commitment to the category. It’s that simple. Retailers who commit substantial floor space, sales training time, and top-level managerial oversight and review succeed, while those who ride the wave with little or no investment fail.
Of the many retailers who exist today with roots in the waterbed business only a handful can claim to equal the success of HOM when it comes to the futon sofa sleeper. Their story has both typical and unique aspects, but one thing is for sure they have found a way to dominate their market and they plan to keep it that way.

Tim Sommer has been with HOM from the beginning. I spent a day with him last summer and what follows is the content of what I learned that day. We drove around the Minneapolis-St. Paul area to four stores and the HOM distribution center. Tim was charged up and ready to go. So if you have a few minutes come along for the ride and find out how HOM sells futon furniture, and lots of it.

FL: Tim, give me a little history. How did HOM get started?

TS: Originally it all started with Waterbedroom and our Home Oak and Leather stores. At one point we had twenty plus locations all over the upper Midwest and we certainly had a dominant position in the Twin Cities market, probably a 50-60% market share. By the time I came on board in 1990-91 the handwriting was already on the wall for the waterbed business and futon furniture was already on the floor.

Some big changes were in the works though for the growing company.

TS: Throughout the early 90’s both operations were growing. We started to try to figure out how to combine the two staffs (Home Oak and Leather and Waterbedroom) together. The idea was to consolidate the two into one so that we could get the bedroom business. The plan right from the beginning in Wayne & Rod’s (the Johansen brothers own HOM) head was to have HOM Furniture (the new concept store) be a full line furniture store. By 1997 we were ready to do that, we opened our first HOM store in Coon Rapids in April of 1997.

Coon Rapids was the first big store we had ever run. All of our other stores had three sales people and a manager. Now we had a store that needed 30 sales people. It was 65,000 square feet, which was a whole new thing for us. That was the beginning of the transformation. We went about closing all of our smaller stores and went into the big store program. The Roseville store was the second of the big stores and it represents a second evolution of the design.

The HOM retail environment concept starts with a visually striking entrance that leads to several paths on the first floor and also to a centrally located and dramatic atrium style stairway to the second level. The stairway is designed with “landings” that feature living room and dining room furniture styled to the max with a full compliment of accessories. The look is grand without being pretentious.

Sommer told me several stories of how he, owners Wayne and Rod Johansen and other members of the management team traveled around the country visiting retail colleagues for brain storming and to bounce ideas around. They asked direct questions about running stores with 30 people, and also about hiring, training, and the like. I asked him if they actually sat down with the owners of these stores.

TS: Very often we did. It’s one of the wonderful things about the furniture business. It’s a big business but a pretty small community. We went to ElDorado Furniture and the Cappos gave us a whole day of their time, Pedro took us around and spent a great deal of time with us. We’ve gotten to know the guys at City Furniture real well over the years too, and we spent a whole day with them and they spent a day here with us. We went down to Star Furniture to spend time with Melvin and we got a chance to really try and understand their system, all with the purpose of trying many of these things back here at HOM.

When we got specific about futon furniture Sommer was quick with his analysis. HOM puts their futon furnishings department right alongside the mattress department.

TS: When I became the buyer in the mattress department the idea was to create a specialized department and really make it a focal point for business again. We had kind of lost the focus when we expanded. In late 1999 I started the “Mattress Specialist” program and we defined a mattress department, futon department, and metal beds all under one specialist group. At that time the rest of the store was a completely open floor.

In general, the HOM Furniture concept worked like this: a customer could be greeted at the door and then one salesperson could lead them through the store, except for the mattress department. That was a bit of a challenge. That’s why we designed the “Mattress Specialist” program. The idea was to get a special focus there, maximize the dollars you can get out of that department, increase the closing ratio and so on. We worked all ends of it, grew every angle you can imagine. We grew it, and the futon business along with it.

With 2000 and 2001 being flat for retailers Sommer experienced the challenge of a lifetime. But challenges are sometimes just the catalyst you need and that was the case for the HOM Furniture mattress and futon furniture program.

TS: We’ve turned that around now. In fact we’ve got it growing to the point it’s exceeding the rest of the companies’ growth.

Every story I write has a golden nugget or two. This is that part of the story. Sommer made several adjustments that proved to be critical to growing the department and futon furniture sales in particular. The first thing he did was show more in the allotted space.

TS: We made a couple of basic changes in philosophy along the way. In the past we had displayed each suite as a complete set so you could only put about seven groups on the floor. Because we put tables and chairs with every single group it would eat up a lot of the available space. Well, customers would come in and they would be interested but they would say, “You don’t have a big enough selection. All you have are these seven frames.” So we started reducing the number of complete sets we showed. If we’re carrying Big Tree, we would show one Big Tree (top) chair and just point out that they all sit the same and that it’s just a matter of the arm being different. Maximize your floor space. We did that, and we ended up showing as many as a dozen frames on the floor.

Next, Sommer radically changed his cover program.

TS: And then we got out of the special order cover business. Our cover sales grew immediately.

I asked him why.

TS: I really believe what was happening was, you’d have your ten or twelve or fifteen or twenty selections of inline covers and you would put those on the floor. With some of them, (most retailers didn’t put their stock covers on the floor), they put specific covers for a specific frame and they had their bread and butter covers (all their vanilla covers) in stock while the customers were forced to special order what they wanted. A certain amount of those customers would just walk because they were “just waiting.” The whole process was problematic.

The second thing was that the mortality rate on a special order sale is much higher than a “take with” sale. Customers would just cancel and come back, or they came late. Sometimes the cover would never show, or it would show up wrong…there are all different kinds of issues that would end up in a lost sale. So what we did was pick out a total of 25 covers. Every one of them was shown on the floor. Everything on the floor was “absolutely” in stock, and we required the showrooms to keep them in stock, including always having sets of pillows and a chair cover for every set. If the customer wanted a complete set it was there. We even started hanging the pillows from chains. Just load up a chain from the ceiling and fill it up, like a bouquet of flowers (bottom). It’s been much easier to manage and we got an instant 20% increase in cover sales.

Tim told me about a Night & Day frame (The Rosebud-right) that is flying off the floor in suites due to the selection of a specific cover from SIS.

TS: We are selling a lot of that. We are selling about 80% of that in suites. So you get the nice suite sale. You get a full set of covers and pillows. It all adds up. Shari (Hammer) and John (Christiansen) from SIS come over and work with us to get the look just right.

FL: So what would that sale be if somebody sold that whole suite with the tables and covers, etc.?

TS: Tables, covers, the whole thing works out to about $1,700.00. I think it’s $1,299.00 for the flat suite and then the covers and pillows. We sell four pillows per futon sofa sleeper, two bolsters and two squares. When we say a full set that’s what we mean.

The third aspect of the transition Sommer undertook in HOM’s futon sofa sleeper department was the futon mattress itself.

TS: I want to do 80% of my sales in my top two or three numbers.

Sommer then relayed how about eighteen months ago he switched vendors.

Tim Sommer and Wayne Johansen of HOM Furniture.

TS: This was one of those painful, difficult decisions. You know I had been doing business with a great vendor for 10 years, and frankly they were a near perfect supplier in terms of never missing a shipment, no back orders; all of those kinds of things were internally great. The line was high quality, didn’t have problems with it, but it wasn’t merchandising the way that I believed it could. The time was right for us so I made the change, and it has turned out to be a huge win.

Like I said, I wanted the high end (my top two or three numbers) to dominate and I asked them (Gold Bond) to show me how that could happen. They showed me a line that quality wise I don’t believe was any better than what I was carrying. But the steps were clear and your average consumer, on their own, could tell. And to me, that’s one of the benchmarks that I believe in. The consumer has to be able to determine on their own that there’s a difference, or you’re never going to sell it to them.

I made the jump, and it has turned out to be a huge win. Gold Bond has not missed a beat regarding their internal issues. Bob (Naboicheck) does a very good job.

And that’s not the end of the story. Sommer also added the Visco Opulence to the line and has seen an appreciable uptick in sales of both his innerspring (Cotton Coil) and SoftTouch models.

TS: The SoftTouch represents a $150.00 upgrade over my base price, and we just added the Visco Opulence.

FL: How’s that going?

TS: That’s already turning. We probably average about 30 to 40 turns a month in the Visco, but what’s happening is the SoftTouch is getting a ride up as well. Margins have climbed because we are moving the pricing up on the line, so it’s been very, very good… it’s been pretty solid.

Tim Sommer and I spent the rest of the day traveling from store to store talking futon furniture. His top selling futon sofa bed fully decked out with a basic mattress, cover and pillows retails at around $549.00. He is looking at a higher point frame ensemble that will retail at about $699.00.

TS: Big Tree’s got a very nice frame that I worked with them on and I got them to give it to me in a dark black, blackish blue color with a red rub through. It’s gorgeous. And I think that will be a $699 frame all day long. I like it because it feels like furniture.

We could go on and on but I think we would run out of ink. In closing then, it might be appropriate to end with this. I asked Tim what he thought would be a way to raise the bar for
the category.

FL: What do you think the futon industry could do to raise the level? I mean how do you change the perception of this category if there’s a way to do it?

TS: It all starts with the connection you make with the customer. I think that you start by talking about the mattress as your driving force. Offering a selection of styles. (At HOM) we’re talking about how this will be the most comfortable place in your home and really making a case that if you really want comfortable furniture that’s casual and relaxing, this is it. We have found that this approach will get them to come and look at it. They have to buy the better mattress to get that comfort, and if you can do that you’re automatically adding volume to your business, volume that you’re not getting now. That’s number one. The other key thing you need is to really go out of your way to accessorize and make a statement. Pick a couple of frames that are unique in style or trendy and decorate the heck out of them. Really put some thought into it. When you do it like this, and take the time to really dress it up, customers come in and want the whole set.

People want to be comfortable in their home and at HOM, futon furniture delivers.

FL

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