School Dazed and Confused

Why Home Retailers Should be Cracking the Books

By Warren Shoulberg

It’s time for many home furnishings retailers to go back-to-school – when it comes to back-to-school.

While the late summer/early fall back-to-school selling season is primarily focused on apparel, some stores in the home business have gotten a nice seasonal boost selling dorm items to college kids. It’s developed into a nice business for stores at a time of year when there aren’t any natural holiday-oriented events on their home promotional calendar.

The Robin ReportBut it’s not as easy as A-B-C. While stores like Bed Bath & Beyond (BBY) and Kohl’s (KSS) have seized the college back-to-school season and made it their own, a lot of retailers have simply been left behind.The home furnishings business, other than some obvious exceptions like beach towels and patio furniture, is largely a seasonless business. Stores are used to at most a twice-a-year merchandise reset, with the occasional drop-in program. It’s not like apparel where you wake up every other Tuesday needing to remerchandise half the department.So, this whole back-to-school seasonal thing doesn’t come naturally to most home buying and merchandising staffs. But maybe it’s about time they learned.

The late, largely unlamented Linens’n Things is generally credited with being one of the first retailers in the home space to discover the back-to-school business. But it didn’t take long for its archrival – and eventual destroyer – Bed Bath & Beyond to move in and, as usual, do it better.

At first these stores just identified off-the-shelf products and pitched them to the dorm-bound college student. Some of these were obvious. Twin extra-long sheets for the odd-shaped mattresses found in many dormitories became a core product. (Personally, I never understood this item as it made no sense that kids were any taller when they went to college than they were back home, but what do I know?) Home retailers then moved into items like desk lamps, toaster ovens, and pretty soon had a decent-sized business.

That’s when they began developing specific products and programs specifically for the dorm market. One of the more famous ones was the shower caddy, a plastic basket with assorted bathing accessories, all in easy-to-get-moldy and even-easier-to-dump-at-the-end-of-the-semester plastic. General merchandise stores like Kohl’s and Target (TGT) pretty quickly picked up on all of this and soon they too had a brand new business. And they had the extra-added advantage of having the back-to-school customer already in the store shopping for clothing.

The business grew even more. Annual sales of dorm furnishings have been over $6 billion for several years, according to the National Retail Federation. But as retailers are wont to do, they pushed success to excess. One of my favorite inside stories involves just such a case.

One retailer had great success with a certain back-to-school item from a certain supplier and when it came time to develop next year’s programs, they came up with the illogical holy grail of retailing: We will sell more if we cut the price.

They went back to the supplier and told him he needed to cut the price of this item 40 percent and if it did, they would order more. Of course, they wanted similar quality although they promised to look the other way if certain compromises had to be made.

This vendor did what any vendor does: It went back to its Chinese factory and said, “You need to use thinner plastics, slice a few inches off the size of this thing and oh, by the way, you have to cut your margins.”

Sure enough, it all happened according to plan…that is, until the goods hit the retail floor. (You could see this one coming from the other side of the mall, couldn’t you?) The price was 40 percent less but the store sold maybe 10 percent more units. The vendor got slammed with markdown chargebacks, the goods got closed-out or put in the backroom for the following year and the customer – remember her? – got a crummy product when she was perfectly willing to pay for a better one.

This tale of woe is certainly not unique to the home back-to-school market, but what is unexpected is that more stores have not jumped on the back-to-school bus.

I’ve mentioned the stores that are doing a good job with the business, so you can pretty much guess who isn’t. Some of these guys are trying but they are certainly not in the same class as the best students of the season.

All the more unexplainable is that most of the retailers know how to handle seasonal businesses.

Most stores have already locked in their back-to-school programs for 2011, so we’ll have to see who gets a passing grade this year…and who gets a Big F for…messing things up.

School’s out, but should be in, for home stores.

Warren Shoulberg is editorial director of several home furnishings magazines for Sandow Media and has been reporting on the home business for a long time.

Warren Shoulberg About Warren Shoulberg

Warren Shoulberg is editorial director of several home furnishings magazines for Sandow Media and has been reporting on the home business for a long time. He is currently working on his next book, Stupid Business.