Family Furniture

COMPETITOR ANALYSIS

A. Competitors’ Strategy

A look at Family Furniture’s competition requires us to take a look at some primary and secondary threats. Primary threats to Family Furniture include Crate & Barrel, Pottery Barn and IKEA. Secondary threats include independent furniture stores, big box stores, Costco and Sam’s, and the Internet websites.

Crate & Barrel and Pottery Barn are similar in their market strategy and target audience and both have locations in the area Family furniture compete in. Both sell higher end contemporary furniture and have great name recognition as a national chain and portray an image of providing good service, high quality products, and sell a lifestyle. They are extremely successful in portraying their product in a lifestyle of casual sophistication that their target audience aspires for and is drawn to. Their weakness tends to be in the form of price, especially with college students, recent grads and first-time homeowners. I have heard of a number of people who visit these stores to get ideas and go elsewhere to purchase something similar for a substantial savings.

IKEA is also viewed as a primary threat by Family furniture, despite being 125 miles away. IKEA’s are so large, catering to families with children’s play areas and food courts that it is an “event” to go there. People are willing to travel great distances to purchase furniture and Cheryl, the owner of Family Furniture, has learned that some of her customers have been driving to shop there. IKEA caters to a large group of people and their vision, per the IKEA website, “is to create a better everyday life for many people…by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” Their biggest weakness reside in their distance from where Family Furniture competes and because they target the masses with low prices they may be viewed as having lower end and lower quality merchandise.

Pottery Barn, Crate and Barrel and IKEA are all primary threats to Family Furniture because they all successfully target customers that are important to Family Furniture. There are also some secondary competitors of Family Furniture that need to be discussed. These secondary threats include independent furniture stores, big box stress like Wal-Mart and Target, Sam’s and Costco, and the Internet websites.

Independent furniture stores, although none are as large as Family Furniture and or have the customer loyalty that Family Furniture possesses. Many of these smaller competitors have closed or merged together over the last several years. Their lack of name recognition combined with the other factors render then a low-end threat.

Big box stores such as Wal-Mart and Target do sell furniture, but they sell lower priced and quality product that do not appeal to the more affluent consumers that we are targeting. Costco and Sam’s sell high-end leather furniture, but lack overall selection of a full service furniture store. If a customer sees a piece of leather furniture in a store like Sam’s that may even spur that customer on to go to Family Furniture to look at a larger selection of leather furniture.

The final competitor that needs to be discussed is websites on the internet selling furniture. The main advantage these sites enjoy is the consumer being able to look at their entire inventory from home without having to go to a store. Also the consumer’s have the overall perception that buying items off of the internet is less expensive than buying the same item in a store. However, in the case of many of this websites this perception can be untrue. Many sites do not have local warehouses, which means they have to ship furniture via freight, which is very expensive. For example, on www.furniturefind.com a $869 leather sofa cost $465 to ship and has a $85 fuel surcharge. All of the sudden a great leather sofa that a consumer thought they were getting for less than $900 is now $1400! While some sites have more regional centers they ship from, this is the exception not the rule. Due to the shipping expense, many consumers may shop on the internet, but not actually make a purchase. Finally, many consumers’ want to sit on furniture they are going to purchase and see how it feels. These two factors help reduce the threat offered by internet stores.

The two methods of credit that Family Furniture’s competitors offer are a store credit card and the “No, No, No” style of credit. That is to say no down payment, no interest and no payments until next year.

B. Value of Substitutions

There are an abundance of substitutes including retail stores to purchase from, styles of furniture, and type of furniture. Additionally, typically the furniture sold by one store can be found in another store or at least a similar product can be easily found. Finding what you want and locating it at the best price has become much easier with the advent of the Internet. What may become more difficult to substitute would be the feeling or image one buys into from purchasing something from a particular store.

C. Entry Barriers

The furniture retail industry is fairly competitive with many players ranging from large retail chains, independent furniture stores, big box stores like Costco and Sam’s, and Internet websites and even electronic stores like Best Buy sell furniture. Sometimes even driving down a country road you will see a truck on the side of the road selling chairs, bookcases, and some other locally handmade furniture. Barriers to entry are fairly weak and to compete successfully in the furniture retail business one needs to differentiate it effectively. One such way is to have exclusive products and designs. Other methods of differentiation include customer service, price, promotion, and place.

SWOT ANALYSIS

Strengths

Family Furniture has been in business since 1953 so the company possesses great reputation for providing good customer service, an inviting store appearance, extensive selection and great prices. Since the company is located in a small town, it has built over the years a large long time customer base which can transcend through generations (family of procreation concept). The store occupies 80,000 sft with a large warehouse and shipping facility. It also owns an extensive