Distribution channels evaluation for church synagogues furniture market in the us by Sutherland Global Services

Case Study and Sample Slides Distribution Channels Evaluation for Church/Synagogues Furniture Market in the US

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As of 2008, 77.2% of the adult US population is composed of Christians or Jews US Adult Population by Religion (in %) 4% 2% 8%

86%

1990

Christian

8% 1% 14%

8% 1% 15%

87%

76%

2001

2008

No Religion

Jewish

• Due to the country’s multi-cultural demographic break-up, the US is one of the most diverse nations in terms of religion • Still, Christianity is the most widely followed religion in the US, with nearly 76% of the population Christian • Proportion of Christian population has declined from 1990 as the number of people following no religion has doubled since that time

Others

• Judaism is the next most prominent religion followed in the US

Diversity within Christianity - US Christians by Theology, 2008 (in %) • Nearly 50% of the US population are of Protestant denomination • Moreover, the Protestants are characterized by significant internal diversity and fragmentation • Evangelical Protestant churches, mainline Protestant churches and historically black Protestant churches are the three major categories within the Protestants

Protestant Churches and Traditions 65%

Catholic 33%

• Most of the Christians across the globe are Catholic, but in the US only 25% of the population describe themselves as Catholic

Mormon (LDS) and Other Christian Groups* 2%

Source: American Religion Identification Survey (ARIS) 2008; Sutherland Research Analysis

*Other Christian Groups include Jehovah’s Witnesses (0.8%) and other smaller congregations (0.1%) LDS – Latter Day Saints

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Nearly 84% of the US church membership is contributed by the top 25 US church congregations US Church Membership – Largest 25 Congregations (in Mn)

• Although the proportion of Christians in the US population is declining every year, the church membership has seen only a marginal decline

147.6

148.4

147.0

147.4

146.7

• There are over 270 church bodies in the US with nearly 175 Mn members • Interestingly, although this number represents only 57% of the total US population, more than 146 Mn members belong to one of the top 25 US church congregations

2005

2006

2007

2008

2009

Ten Largest Christian Bodies and Membership - 2009 Rank

Church Body

Membership (in Mn)

Rank

Church Body

Membership (in Mn)

Roman Catholic Church

National Baptist Convention

Southern Baptist Convention

16.3

Evangelical Lutheran Church in America

4.7

United Methodist Church

7.9

National Baptist Convention of America, Inc.

3.5

Church of Jesus Christ of Latter-day Saints

5.9

Presbyterian Church (USA)

2.9

Church of God in Christ

5.5

Assemblies of God

2.9

Source: Yearbook of American and Canadian Churches – National Council of Churches; American Religion Data Archives (ARDA); Sutherland Research Analysis

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With over 0.37Mn churches, the church product market represents an estimated USD47.6Bn opportunity Number of Churches by Theology

Protestant Churches and Traditions

Number of Churches*

Members (in Mn)*

320,590

88,798,713

85%

Catholic

20,081

67,782,072

Other Christian Groups

20,405

6,080,370

14,356

5,962,055

3,769

6,141,325

Mormon (LDS) 4%

Jewish 1% Churches/Synagogues

Total Number of Churches â&#x20AC;&#x201C; 3,79,201

*Note: Number of Churches and Church Membership data are as per the latest reporting year provided by ARDA

Source American Religion Data Archives (ARDA); Christianity Today International; Sutherland Research Analysis

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Church/synagogue furniture industry is a small yet vital component of the church market and… Overview of the Church Furnishing Industry

Church/Synagogue Furniture Industry • According to industry experts, the church/synagogue furniture market is estimated to be worth USD150Mn Church Seating

Other Church Furnishings

• Church/synagogue furniture industry can primarily be divided into two broad segments, namely, – Church seating market

Church Pews

Platform Furniture

– Other church furnishings • As per industry participants, church seating comprises an estimated 70% of the costs borne on church furnishing and other church furnishings consist of the remaining 30%

Church Chairs

Sanctuary Furniture

Theater and Auditorium Seating

Chancel Furniture

Bema and other Synagogue Furniture

• The choice of seating made could be either pews, chairs or theater and auditorium seating or a combination of any of the above options • Other church furnishings comprise platform or sanctuary furniture such as pulpits, altars, communion tables, kneelers, etc. or synagogue furnishings such as Aron Kodesh, Bimah, etc.

Source: Sutherland Research Analysis based on secondary and primary research

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…church pews are the most dominant segment of the church furnishing industry, as per industry experts US Church Pew Market Size* (USD Mn)

65-75**

1997

2002

• According to industry experts, the church pew industry comprises almost half of the church furnishings market • Although the industry recorded a 4.3% CAGR between 1997 and 2002, it has witnessed stagnant growth following that period • Industry experts also felt that there has been a decline in the growth rate of churches coming up each year in the US and these have further dampened the prospects of the pew market

2008

US Church Pew Product Segments • Church pew industry, estimated to be worth USD65Mn to USD75Mn, offers churches with various types of products • Church pews are made using different types of construction materials, namely: – Solid oak wood – High Quality – Particle board and medium density fiberboard – Medium Quality – Veneer or Plywood – Medium to Low Quality • Although most companies offer standard pews, few have begun to offer radius or curved pews as well

Source: US Census Bureau; Sutherland Research Analysis

US Church Pew Industry Growth

US Church Pew Industry Trends • Pew industry has been impacted by an increasing preference towards chairs and theater seating • Although pews last for a longer duration, churches are adopting other seating options as they offer more flexibility to churches • New churches are coming up in multi-purpose buildings, which also act as gymnasiums or auditoriums and hence, flexible seating is preferred in such buildings • Increasing level of competition in the stagnant market has led to the downfall of many pew companies in the recent years

*Note: Based on Product Shipments Value as per US Census Bureau

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Pew industry is exemplified by existence of various parties leading to end-users in the Value Chain

Pew Companies

Distribution Channel

Buying Decision Influencers

After-Sales Services

End-Users

Pews Installation*

ChurchSynagogue Committees / Pastors

Pew Manufacturers*

Exclusive Distributors *

Architects / Interior Designing Firms

Independent Distributors *

General Contractors / Construction Firms

Churches

Pews Refinishing / Reupholstery *

Synagogues

- Major Elements of the Pews Value Chain

- Support Services of the Pews Value Chain, either provided by specialized firms or by pew manufacturers themselves. At times, sub-contracted to the distributors

Source: Sutherland Research Analysis based on secondary and primary research

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We interviewed 10 pew manufacturers to understand their views on the industry Manufacturer Interviews Conducted

Key Questions Market Overview • How has the pew industry been doing in the past few years and what are the main challenges? What does future hold for the pew industry? Competitive Landscape • How competitive is the church pews industry? Is regional competition more intense than the national competition? • Which are the large national pew manufacturers and what are their distribution and marketing models? • What are the factors that determine the price level for pew manufacturers? Value Chain Analysis • Other than the church furniture manufacturer, which are the other parties involved in the value chain leading up to the end consumer and what are their roles? • What are the general distribution models adopted in the pew industry? Do the models change depending on the size and region? • What kind of marketing strategies are adopted by church furniture manufacturers to differentiate themselves from other players? End-user Perception • Who are the major influencers and decision makers for purchasing of pews? • What are their most important buying criteria?

Source: Sutherland Research Analysis based on secondary and primary research

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We interviewed 10 pew manufacturers to understand their views on the industry Pew industry witnessing slow / declining growth over the past year •

According to pew manufacturers, the total church furniture industry is worth about USD150Mn, with the size of pews segment in the pie being anywhere between USD65Mn to USD75Mn

•

Pew industry is facing stagnant growth, with most manufacturers either maintaining status quo or facing declining sales over the past one year

•

Major reason for listless performance has been the general economic crisis leading to fall in church construction growth

•

Construction of traditional churches like Catholic churches have taken a dip, while Lutheran churches have seen marginal growth. Construction growth has been relatively good in contemporary denominations like Evangelical and Baptist churches

•

Also, many churches opting for alternate seating like chairs and auditorium seating has been one of the reasons for the sluggishness

Shifting of Preferences

Many churches opting for alternate seating over pews •

Top-end Market

Manufacturers were of the view that pews are facing stiff competition from alternate seating, especially chairs

•

Small and contemporary churches are finding it increasingly difficult to generate additional funds and hence, are choosing chairs over pews as they help to save costs by nearly 30%

•

Other major reasons are flexibility and space utilization offered by chairs

•

New start-up churches are being built in multi-purpose buildings and consequently, they tend to go in for

Solid Oak Pews

Theatre / Auditorium Seating

chairs that can be moved in and out easily •

However, manufacturers are optimistic about the long-term prospects of pews due to some of the inherent

Bottom-end Market

constraints of chairs •

Not only do pews last much longer than chairs but chairs also have additional maintenance expenses

•

Large traditional churches like Catholic churches still prefer pews due to their conventional looks but many small and medium contemporary denominations are going for chairs and theatre seating

Veneer/ Particle Board Pews

Metal Stackable Chairs

Source: Sutherland Research Analysis based on secondary and primary research

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Pew industry is highly competitive, with most of the competition being regional in nature Pew industry is highly fragmented, competition being regional in nature •

According to industry experts, about a dozen companies command nearly 45 to 50% of the market share in the US

•

However, many small- and mid-size regional companies are vying to get a piece of the remaining market share

•

The industry is characterized by existence of high logistics costs and hence, majority of the manufacturers choose to compete within a certain region or territory

•

There are a very few players who have a capability of producing in one part of the country and delivering it right to the other end of the country

•

There are about three to four large national players and about 15 to 20 super regional players (Companies dominant in certain territories within the US)

•

Sauder Worship is the largest amongst the lot, alone commanding about 20% market share in the US

•

Other large national companies like New Holland Church furniture and Imperial Woodworks giving a tough competition to Sauder

•

Super regional companies like Kivett’s Church Furniture, Virginia Church Furniture, Covenant Church Furniture, Southeast Church Furniture, Rugel Church Furnishings, etc., which give very tough competition to national players in their regions or territories

•

According to many manufacturers, the industry is ageing with no new players entering the market due to inherent competitive nature

•

In fact, there have been many instances of many small and medium companies either closing down or being taken over in the last few years

•

Over 90% of the pew manufacturers had not heard about Lavi furniture or any of its brands

National Players

Super-Regional Players

Source :Sutherland Research Analysis based on secondary and primary research

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Pricing of pews is dependent on variety of factors, the most critical being the type of wood used Type of wood used for pew making is the most critical pricing variable •

Type of wood used for manufacturing a pew is the single most critical variable deciding the pricing

•

Primarily, there are two types of woods used for pew manufacturing: Solid Oak and Veneer / Light Particle Board

•

Sales of a majority of small manufacturers are driven by veneer pews due to lower pricing but the durability is on a lower side with an average age of 10-15 years

•

A good number of large regional and national manufacturers offer only solid oak pews that are about 2-3 times costlier than veneer pews but the average age ranging from 50 to even 100 years at times

Pew style options drive the overall pricing •

Another important variable deciding the pricing is the pew style, with the pew end, pew upholstering and pew curve driving the pricing of the pew

•

There are number of customized pew end options available with simpler the pew end, lesser the price and vice-versa; as for upholstering, the pricing depends on the fabric used

•

Majority of the companies offer standard pews but there are companies specializing in curved pews, which adds to the aesthetics of the church but are about 30% more expensive when compared to standard pews

Scale of job is another important pricing variable •

Scale of the job also shapes the total pricing. Generally, lower the total pew feet of job, the higher the pricing per foot and vice-versa

•

Apart from the quality and brand name, large manufacturers bag the medium and large projects (more than 600 feet), as the economies of scale allow them to quote lower price per foot and get the contract as against smaller manufacturers

•

Also bundling plays an important role in pricing. A manufacturer can reduce the margins on the total project if it includes other church furniture like pulpits, chancels, etc apart from the pews

Logistics and delivery also play vital role in pricing decision •

At times, pricing is also dependent on the cost of delivery. Large manufacturers having their own delivery infrastructure provide pricing including the delivery cost. For small and medium manufacturers, a large amount of projects are lost out due to the high delivery costs.

Source: Sutherland Research Analysis based on secondary and primary research

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Overall, manufacturers prefer the direct route but larger players also depend on distributors for reach Disclaimer Manufacturer is the most critical element in the pew industry value chain

Distribution Model* Overall Industry 70

Local and small regional Manufacturers 95

Large national and super-regional Manufacturers 40

Direct

45 Individual Distributor

15 Exclusive Distributor

•

Pew manufacturers are the most critical element in the value chain leading to end-users, largely due to the fact that they prefer to approach churches and synagogues directly

•

However, national players also have a distribution intermediary due to the national scale of their business, which forms another critical link in the value chain

•

Local and small regional manufacturers tend to sell pews directly to the churches or to other decision makers such as architects or general contractors & construction firms

•

Large national as well as super regional manufacturers tend to employ a mixture of direct selling and distributor-driven selling models with larger emphasis on the latter

•

Large manufacturers prefer company sales representatives in their regions of influence but contract with regional or territorial distributors for other regions of the country

•

Majority of the distributors are not exclusive and are free to sell pews of different manufacturers

•

Installation of pews is undertaken by the manufacturer themselves as there is a warranty on the pews, which is voidable if the installation is carried out by a third party

•

Large manufacturers also target interior designers who work for them, either on an individual or exclusive basis

•

These interior designers work in conjunction with architects and construction companies who have large influence over the church’s buying decision

•

However, at times the manufacturer might sub-contract it to installation specialists or the distributors on a project basis

•

Pew refinishing and reupholstering is a completely separate business with not many manufacturers providing these services

•

Unlike other church furniture, pews are not part of general church products & furniture stores and as they are customized products which demand product elucidation and presentation

Source :Sutherland Research Analysis based on secondary and primary research

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A number of marketing tactics are employed by pew manufacturers, most common being pew presentations Pew presentations and catalogs are the most important marketing tools; internet is fast emerging as a critical lead generator •

Pew presentations are the most common marketing tool employed by the manufacturer as it provides churches with a hands-on experience of the quality of the pews

•

Manufacturers, opting for the direct model, advertise and market themselves but if the manufacturer contracts with a distributor, majority of times the responsibility of lead generation and marketing is with the latter party

•

Manufacturers place a lot of emphasis on referential work and word of mouth endorsements from past projects done with churches, architects, interior designers and construction firms

•

Internet acts an important tool for lead generation in case of pews as churches and other decision-makers state their requirements on the websites of pew manufacturers

•

These requirements are passed on to the regions sales representative or distributor, who initiates further discussions with the churches

•

Advertising through product catalogs, church magazines and local yellow pages is also a preferred ploy adopted by many manufacturers

Marketing Routes

Large Manufacturers*

Small Manufacturers*

Pew Presentations

References / Word of Mouth

Catalogs / Brochures

Church Magazines / Internet Articles

Least frequently used marketing route Most frequently used marketing route

Internet

* Shades of the balls represent the frequency of usage of the particular marketing route and its relative importance

Source: Sutherland Research Analysis based on secondary and primary research

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Manufacturers target church committees, who are responsible for Disclaimer making the final purchase decision Church committees are the largest influencers and decision makers •

Church committees are the largest influencers for the pew buying decision of the church

•

Other parties like architects, interior designers and construction firms also play an important role in the buying decision

•

Small churches with low congregation size has the pastor making the decision, while for medium-sized churches it’s the church committees that make buying decisions

•

Most large churches have separate committees for furnishing who award contracts to several construction firms, interior designers and architects for design and furnishings of churches

Most important Buying Criteria*

Large Churches 20

Price

Quality

Church Committees

Construction Firms

Architects / Interior Designers

Quality and Price are the major buying criteria, but vary on church size

Small Churches 80

Influencers / Buying Decision Makers*

•

The market has moved from quality being the single most important criteria to price/quality combination

•

This change has come due to customer awareness of various options and general slowdown leading to price sensitivity

•

Small or independent churches having low committee funds go for price and look for cheaper products like veneer pews or metal chairs

•

Large Catholic or Methodist churches go for quality, looking for sturdiness and longevity of the pews (preferably solid oak)

•

Branding does not have a huge role in the church pew market. However, churches do require a list of references which contain the past projects executed by the pew manufacturer

Brand

There are no reservations about the manufacturer’s religion on buying decision •

All the manufacturers were unanimous in their opinion about reservations about manufacturer’s religion, with all of them negating any such reservations over a Jewish selling the pews to a church and vice versa

Source: Sutherland Research Analysis based on secondary and primary research

* Approximate figures, indicative from primary research

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