How appliance, furniture sellers can weather inflation

As retail sales slow from pandemic highs amid rising inflation, fuel prices and continued supply chain congestion, Deliveright co-founder and CEO Doug Ladden still sees opportunity for sellers of heavy goods such as furniture and appliances.

“What we’ve been seeing is volume is lighter than it was six months ago. I don’t think that is surprising,” Ladden told Modern Shipper. “Within e-commerce we’ve seen some retailers go out of business, we’ve seen some retailers slow down and we’ve seen some retailers grow steadily and grow market share.”

Ladden said an analysis of Deliveright’s top 10 customers showed most are still growing.

“They are adapting to this market,” he said. “There are other companies where it just seems like they haven’t figured out the secret sauce.”

Deliveright provides last-mile logistics technology for heavy goods, with a primary focus at this point on furniture. Its Grasshopper technology integrates with both warehouse management systems and transportation management systems. The solution is cloud-based and focuses on capacity optimization, allowing brands and delivery partners to maximize space inside vehicles.

Warning signs

The Commerce Department said overall retail sales rose in June 1%, but that is not adjusted for inflation. The sales volumes likely declined in June. Furniture and home furnishing stores posted a 1.4% increase in June over May and were up 4.6% over June 2021. On a six-month basis, the category is up 2.9% over the first six months of 2021, the Commerce Department said in its latest report.

In Deliveright’s core demographic, though, the situation could get worse. In its May housing market report, the Commerce Department said new home sales rose 10.7 percentage points over April, which saw the market drop 16.6% on a month-over-month basis. It was the lowest sales level since April 2020. Mark Zandi, chief economist at Moody’s Analytics, told a housing panel summit last month that he expects a nationwide correction in the home market.

With median sales prices approaching $450,000 and rising interest rates, a cooldown in the housing market may be coming quickly.

For now, Ladden said Deliveright’s customers have been navigating the challenges, and even slowing home sales remain above pre-pandemic levels.

“Home sales don’t look like they are in a recession,” he said. “There is still a need for furniture and appliances to go into homes. I don’t know that inflation by itself is going to shut down products like this. What I do think is [people are buying lower-priced items].”

Consumers making different choices

Commerce Signals, which tracks credit and debit card transactions from more than 40 million consumers, is suggesting that is exactly what is happening. The firm provided Modern Shipper a look at some of its data, and it showed that while overall retail is up 8.4% in terms of purchase volume, the average transaction (called a “ticket” by Commerce Signals) was up only 1.2%, even though inflation is driving prices much higher. With that said, in the company’s data, only 17 states showed declines in average ticket prices, suggesting that people are still buying, they are just being choosy on the price points.

Ladden said the depth and breadth of product options is important, and the Deliveright customers having the most success right now are offering that.

“Those may be lower-margin dollar sales, but they are still getting sales,” he said. “Top accounts are continuing to grow. The accounts that were less successful in the past are still less successful.”

Lowering shipping costs

At the Gartner Supply Chain Symposium in June, Gartner VP Tom Enright said that 53% of shipping costs and 41% of total supply chain costs are tied to the last mile. Adding to the cost are the complexity delivering heavy items and problems due to damages, delays, and often, a subpar delivery experience. Consumer research shows that there is very little margin for error:

  • 93% want real-time information throughout the delivery process — from in-transit status to final arrival date.
  • 47% will drop a brand with poor delivery tracking.
  • 44% said brands are not creating positive delivery experiences, while 98% said delivery is a key part of their brand loyalty.  

Ladden said collaborating with final-mile partners has never been more important.

“The industry I believe is performing better than it used to, but there are gaps,” he said. “The industry as a whole is getting better, but everyone in the industry needs to [get better].”

Deliveright, he said, has unique insight into customer activity, and that can help companies with their overall supply chain analysis.

“We’re on the front lines of seeing what’s selling, which companies are selling, which websites are selling and how e-commerce is doing overall,” Ladden said. “In the current environment, if you have the message right … you are going to be very successful.”

Making the buying decision easier

Beyond partnering with the right last-mile technology and carrier firms, Ladden said there are a few other things retailers can do to improve the experience and drive sales. Not surprisingly, technology plays a key role here as well. In this case, it is augmented reality.

“[Intiaro and Cooham] are companies that help retailers position their products and catalogs in a way that a consumer can see how it looks in their room,” he said. “The surprise factor is reduced significantly. The likelihood of customer remorse is greatly reduced.”

Ladden said that early communication is key. The likelihood of a customer cancellation drops 70% once a delivery is scheduled, so anything that can get that delivery booked as early in the process as possible increases revenue. He added that inflation may be driving quicker purchase decisions.

“By definition, when inflation is high, it makes sense for people to buy as quickly as possible because their dollar is going to [be worth less],” he said. “It’s a call to action. In high-inflation times, it’s bad to hold onto cash. We’re not in hyperinflation … but I do think as a retailer there is a mindset that inflation is high so that may scare people away from high-priced merchandise.”

Deliveright’s best customers are offering more price points, which is helping them weather the inflation storm. They also feature websites that are easy to use and navigate and show availability of products.

“The more successful companies are getting consumers,” Ladden said.

Click for more articles by Brian Straight.

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