Bob’s Discount Furniture invests in premium products and new pricing strategies to drive growth

At Bob’s Discount Furniture, a combination of premium products and new pricing strategies are driving sales. In Q3, the furniture outlet posted a 10.3% jump in net sales and a 3.8% increase in comparable sales. Behind the increase in comp sales was higher average order values stemming from investments in higher-priced items, CFO Carl Lukach told Retail Brew.

The furniture outlet, which went public earlier this year, divides its assortment into three value categories: good, better, and best. The latter two make up the premium tier, which constitutes about 60% of the business. As more customers traded into these categories, Lukach explained, average order values increased.

But bringing in new premium goods required Bob’s to carefully adjust its entire pricing “architecture,” which Lukach describes as the combination of prices across all value categories. If a customer comes in and sees an opening price point of $399 for a piece of furniture, for example, the next tier of $799 has to feel like an appropriate trade up. And if the higher price increases, widening the gap between the tiers, the customer needs to understand what they are getting for that additional value.

“If our peers are saying we’re raising that $799, but we’re holding the $399, we need to make sure that we add enough value in the product to give a compelling reason for the customer to say yes,” Lukach said.

One way Bob’s is getting its pricing architecture right is through a series of relatively new pricing strategies. “Every year, we’re investing more in our sophisticated pricing abilities,” Lukach said. These include web-scraping prices at competitors’ sites, expanding “zone pricing capabilities,” and looking at analytics to understand how customers are responding to different price points, he added.

The web-scraping capabilities allow the company to look at what a shopper is paying at a competitor, even accounting for promotions and delivery fees.

With zone pricing, Bob’s has started breaking up its footprint into geographic areas with their own pricing—mostly informed by competitive pricing in those regions.

“Several years ago, we had one zone,” Lukach said. “The price was the same nationally, even as we went into the West Coast. Only in the past several years have we introduced zone pricing, where we look at specific zones as a pricing band, and we’ve continually invested in [making] those zones even narrower.”

At the beginning of the quarter, Bob’s had 10 zones. Now it has 13 zones, as the company continues its expansion into the southeast United States.