How Long Will the Furniture Boom Continue?
Customer service 101: When business isn’t going as planned, be honest about it.
Room & Board, like many retailers, is struggling to keep up with pandemic demand, which hasn’t subsided, despite 2020’s rush to redecorate during lockdown. Many popular items are out of stock. Furniture that typically ships within a week is currently taking as long as four months. Blame a confluence of factors: Sales are up 35 percent so far this year. Meanwhile, Room & Board relies on many small U.S. manufacturing partners that can’t quickly pick up the production pace. And while still playing catch up from last spring’s shutdown, when stores were closed and no deliveries could be made, new challenges keep arising—like the Texas ice storms, which caused pipes to freeze and burst at a foam factory that supplies material for Room & Board upholstered goods. This week, the Minneapolis-based retailer took to social media to explain.
“…Right now, the furniture industry supply chains are strained. Material availability, staffing shortages and unprecedented demand is impacting everyone’s ability to fulfill orders quickly, including ours…We’re investing in our capacity to serve you by bringing on new U.S. manufacturing partners, adding delivery staff members and increasing warehouse space…Many of our popular items are out of stock for an extended time. If you’ve already ordered and your items are delayed, we apologize for the wait. From all of us at Room & Board, we appreciate your understanding and patience.”
“My feeling is, let’s be open,” Room & Board president and CEO Bruce Champeau said. “We’ve got a 40-year track record and set a pretty high bar for ourselves. The customer is going to understand.”
Indeed, that candor seemed to resonate with Room & Board fans, who “liked” the retailer’s Instagram post more than 1,400 times with nary a negative comment and dozens of notes of encouragement like “I appreciate the communication” and “worth the wait.”
As one customer commented, “Everyone needs to take a breath…if late furniture is your biggest problem, you should count your blessings.”
Certainly no one needs to worry about Room & Board.
Despite closing stores nationwide from April to June 2020 and halting deliveries for more than a month at the start of the Covid-19 outbreak, Room & Board ended the year up 10 percent, Champeau said. And even after last year’s stock up on home office décor and patio furniture, demand continues to increase. Champeau said the private company is on pace to hit a record $675 million in sales this year. “Every time we find ourselves thinking it’s going to plateau, it’s a moving target.”
It’s the same story for Blu Dot, another Minneapolis-based furniture retailer with stores nationwide and a distribution center next door to Room & Board’s, in Otsego, Minn. Outdoor furniture orders jumped 100 percent last year; office increased by 90 percent, said Blu Dot co-founder and chief operating officer Maurice Blanks. “We keep asking ourselves how long it can continue,” Blanks said. “We just don’t know.”
Blu Dot is best known for its modern home furnishings, but contract sales for commercial spaces—office, hotel, restaurant—account for a significant portion of the company’s business. That side “hit the skids” last year, but Blanks said the increase in residential sales “more than made up for it.” Commercial orders are already picking up for 2021, with office projects leading the way.
“When we do come back to the office, we’re coming to collaborate—that’s what you can’t do on Zoom,” Blanks said. “And rather than being in a cubicle for eight hours, businesses are going to want areas that look a lot like a living room.”
A second wave of home furniture purchases is being triggered by more companies announcing plans to remain hybrid. The desk chair that might have been good enough this past year suddenly demands an upgrade at the thought of work from home as a permanent state. Some companies are offering home office allowances to help employees get properly set up to work from home for the long haul.
“I do think there’s been a sustained change in terms of how we work,” Champeau said. “People are looking for opportunities to still work from home, so they’re investing more. Home is a place of comfort, rejuvenation.”
The guesswork of retail planning
When it comes to “demand planning” for a furniture retailer, “The only thing you can be sure of is that you’ll always get it wrong,” Blu Dot’s Blanks said. “We try to be conservative, but we also don’t want to lose sales that might be out there.”
The sort of high variability in demand for certain products that became more desirable in a pandemic, like desks and patio tables; bicycles and trampolines, is especially tricky to plan for with items that typically require longer production time, said operations and supply chain expert Sanjeev Bordoloi, an associate professor at the University of St. Thomas Opus College of Business. If Blu Dot wanted to design a new desk today, Blanks said it might take 6 to 12 months until it’s ready to ship.
As a result, Blu Dot is making smaller adjustments to meet current demand: offering some of its most popular products in additional finishes and new dimensions. Room & Board’s most significant category expansion is bathroom vanities. “The remodel movement has been amazing,” Champeau said.
Most disrupted supply chain
But even if retailers correctly predict which products customers currently want, there’s the additional uncertainty of how long it will take to manufacture, ship, and deliver.
Ninety eight percent of retailers recently surveyed by the National Retail Federation said they had been impacted by port and shipping delays. Respondents cited container and labor shortages, the continued impact of Covid-19 outbreaks at ports and among staff, and delays throughout the supply chain process starting in supplier countries and continuing through to congestion at U.S. ports.
The most common challenges NRF survey respondents mentioned were lack of inventory or delays in receiving inventory and added costs incurring in their supply chain. Some mentioned concerns about receiving seasonal items in time.
“This is the most disrupted supply chain I’ve seen in 23 years of business,” Blanks said. “In a typical year, there might be trouble at a port, isolated to transportation. This year, it’s every single thing: raw materials, components, not enough trucks and drivers. You might have a great supplier around the corner, but they rely on fabric from China or wood from Europe. Every single step is disrupted.”
The challenge stems from last spring when manufacturers and retailers initially responded to Covid-19 by shutting down. Freight ships were pulled off the ocean; containers were taken out of circulation; delivery workers were laid off. “All the capacity was sucked right out and then we had increased demand,” Blanks explained. “You can’t rebuild quickly.”
Room & Board prides itself on contracting with U.S. manufacturers for 90 percent of its product assortment. But many of those partners are small companies that can’t easily increase production. “The reality is, for them to ramp up capacity is significant,” Champeau said. “And we don’t want to pressure them. We’re having conversations with many [manufacturers] now, asking, ‘how big do you want to get?’ ‘how much do you want to grow.’ We’re also trying to identify the gaps.”
Champeau expects Room & Board to add more product makers this year. The retailer plans to expand its key distribution centers in North Carolina and Otsego, Minn. Its warehouse just outside the Twin Cities is 485,000 square feet with an option to expand to 700,000 square feet. Champeau said Room & Board is weighing temporary space versus a permanent addition.
Of course, additional capacity is only useful when there are workers to staff it. Room & Board is looking to hire 200 new employees, mainly in distribution and delivery roles, Champeau said. Blu Dot needs to fill around 20 new positions in stores, warehouses, headquarters and distribution. The distribution side is proving especially challenging, Blanks said. “Industrial and warehouse is so busy right now, everyone is competing.”
Return to stores
One thing that does seem certain: the importance of brick and mortar stores, even as online sales surge. More than half of Room & Board purchases are made online, but many of those customers visit the store first to do their research, Champeau said. “They just want to sit on a chair to confirm that it’s right, then they go home to order.”
Traffic at Room & Board stores is back to pre-Covid levels, Champeau said. But sales associates spend more time with each customer. “More people are doing complete design projects. They want our free design services.”
Blu Dot currently has three stores under construction and one that opened during the pandemic in Washington D.C.’s Georgetown area. Blu Dot’s corporate team hired an architect, construction team, and staff remotely, and opened the store last fall without having set foot in it. Blanks finally visited just a few weeks ago. “It looks beautiful, the staff is great, and the store is doing really well,” he said. “Good things can happen in a pandemic.”
Listen to our conversation with Blu Dot founders Maurice Blanks and John Christakos on By All Means.