State of the industry: Jim Schultz
Cinde Ingram -- Casual Living, September 13, 2011
Casual Living tapped the brains of the International Casual Furnishings Association's executive committee and director to find out their prognoses on the health of the industry. The three manufacturing veterans and two specialty retailers shared their perspectives on the current season as well as their outlooks for the 2012 season.
As sponsor of the International Casual Furniture & Accessories Market, the Design Excellence Awards and the Apollo Awards recognizing retail excellence, ICFA is recognized as the authoritative voice of the outdoor furnishings industry. Read on as each of these industry leaders share their views, reflecting on the changing economic landscape and looking toward the horizon for full recovery.
1. How would you describe the health of the casual industry?
I would think, as far as most of the industry in this economic situation, it's pretty healthy. I think the movement for some of the manufacturers to bring some of their production back to the United States from China is a good move. But the economy itself is affecting everybody.
I didn't go to the July premarket but my sister did - she's the buyer who owns the business with me. She said it really wasn't very well-attended so I think even the industry itself as far as the manufacturers are not as optimistic this year as they were last year. I think it's worse than what they thought it was going to be. I can't speak for anybody else in the industry except for myself. California was one of the earliest-hit and the state itself has got a problem. I don't see this year being an extremely good year after what has happened in Congress for the last few weeks.
2. What do you see as the biggest challenges facing the industry now?
It's to bring customers into the store. The retailers are the ones who are really suffering. They're not going to be extending their early buys as deep as the manufacturers would expect. It's a domino effect. If we don't get customers in that are willing to spend the money, it just affects everything. Especially for us here in the desert, we're so associated with the housing market and the building of homes, and that's been really nonexistent for the last four years. And I don't see it getting any better for the next two years.
3. Where do you see opportunity for future growth?
The election in 2012, but not going into it. I think people will want to wait and see what will happen as a result of the election. It's very much like it was two years ago before the election.
4. What strategies has your company used this year despite (or because of) the economy?
We've gone into a little more of the contract [category]. The margins are certainly not as good, but it did help our sales, going out and doing the boutique hotels and things like that. We can't do the big hotels like the Marriott or Hyatt, because they're pretty locked into the manufacturers and it's done at a corporate level, but we certainly can go out to the small hotels and country clubs and so forth here in the desert. That certainly has helped us a little.
We've been in a mode for the last four years of cutting our budget. We cut our budget more than 50% and reduced our rent for both stores.
Cushioned woven collections are the most popular choices at Patios Plus because of its Southern California desert location.
5. What have you learned that you wish you had known earlier?
It's been a constant battle for the last four years of just trying to survive. Now, that might be just indicative of California, but I understand through talking to sales reps that the whole state of California is not doing well and here we're in the midst of the summer. For us, it's our slow time. Our season in the desert is September through May. People spend the winters out here and that's basically our customer.
It's hard to compete when people come in and want quality furniture at Costco prices. We're not a Costco and most of your specialty retail stores are not Costco. You have a problem right there when people come in and think you're just going to give the product away.
Now we're faced this season where the manufacturers have kind of stayed steady with their prices, but their resources have gone up over the last couple of years. This year, we've been told pretty much by all the manufacturers that there are going to be substantial price increases. So that just adds to the dilemma for retailers. Everything is going up. The price of having goods made in China certainly has affected that, too. The cost of transportation of the containers, and China is trying to build a middle class so their people are getting higher pay for work so they can become customers of theirs.
We have several products that are totally Made in the USA. I don't know if customers ask about that as much as we tell them sometimes. It's just another item where we can enhance the value of what they are buying. That's the whole point of a specialty retailer: We're enhancing the value where they can custom design their furniture as far as fabrics and colors and finishes. You can't do that at Costco, they don't even know the manufacturers themselves in most cases.
We have to promote the value of the product we have on our floor - where it's made, the quality of it and how long it's going to last. We have severe summers out here where it's 115 degrees.
6. What product or category has been your bestseller?
Out here we sell a lot of cushioned pieces because people want comfort on their patios, and so we promote the comfort plus quality.
7. Why do you think it became a winner?
Other than I guess the rest of the country, which sells a lot of slings for their easy maintenance, we don't have any mildew problems here.
8. What new product or collection do you expect to become a bestseller?
My sister (Kristine Schultz Hutchinson) has her own interior-design business, and she also owns Patios Plus with me as well as doing all the buying. I think she was rather disappointed with not seeing a lot of new things. As a matter of fact, she might be coming back to Chicago with me in September just because she was hoping there will be more to see. But I think that is indicative of the economic climate we're in that a lot of companies aren't producing new things or a lot of new things. They might be coming out with one group or so forth.
The manufacturers are looking out for their costs as well. It costs a lot of money to produce new products. All that goes into the design of it and then building prototypes and testing how it sits - there's a lot of cost involved, especially if you bring out a whole new group in that category.
Patios Plus makes the most of an accessories wall, which adds cool color to its sales display.
9. If you could send a message to retailers to help them strengthen their business, what would it be?
The retailers for specialty stores have built the industry and they should remember that. A lot of them are going into large box stores and they're not supporting the small retailers and specialty stores that have built the industry.
We've got places out here in the desert that buy all their indoor furniture from China and their prices are low. And they buy as much low-end patio as they can. The Lowe's, Home Depot and all of those are not buying the quality this season that they did two years ago, I think just because of the money factor. This is a unique situation with the economy the way it is. Things are not normal and you can't expect them to be normal. We're in a very, very serious situation, and no one seems to have any answers. If you or I ran a business like the federal government, we would be out of business.