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Casual Retailers Face More Competitors

Competition inside the industry is anything but casual. Specialty retailers face growing competition from different directions.

Company stores and licensed ones have changed retail boundaries and added another level of competition for independent retailers. Earlier this year, Brown Jordan International opened two Elegant Outdoors model stores and an outlet in Houston. Laneventure partnered with retailers in Florida and California while Summer Classics added licensed stores in Nashville and St. Louis. A few other outdoor furniture manufacturers have stores in or near their headquarters, such as Ebel in Jacksonville, Fla., and Kettler in Virginia Beach, Va.

Some full-line furniture stores had stopped carrying patio furniture but now are returning outdoor products to their floors. A few furniture stores have freestanding patio furniture stores, which are expanding and creating casual superstores. Consider the recent East Coast to West Coast expansion of Carls Patio.

Catalogs, QVC, Internet sales and other direct sales also result in increased competition for independent retailers.

The question of why specialty stores are facing higher levels of competition from more directions than ever has a number of complex answers. Quality is up at lower price points. Economic challenges continue at the high end. Also, consumers are becoming more aware of the category through more attention from consumer magazines, home makeover television shows and national accounts' advertising blitzes. Homeowners are investing in outdoor living spaces with hopes of adding to resale value. It's not only for the wealthy in weather-perfect areas, but has trickled down to include average households.

The low end of the outdoor living market is rarely found now in specialty retail shops, but moves through mass merchants and warehouse clubs. But it's not just at the low end anymore. Merchandising and products at the big box stores are getting better.

"I think it just makes it tougher; it raises the bar for specialists to move fashion even faster," said Annette McEvoy, an independent retail expert. "You have to unearth and find the special supplier-vendor relationships, who exist and can't service a Wal-Mart." McEvoy's senior management experience includes retail, wholesale consumer products and advertising. She was most recently executive vice president with Limited Brands, where she led Bath & Body Work's strategic brand and category planning.

Independent retailers who try to compete on price will lose on price, Dudley Flanders of Lloyd/Flanders said. While Wal-Mart may be happy to operate on a 25% margin, he knows of no specialty retail store that can survive on it. Shoppers at specialty stores are lured by marketing and better customer service as much as perceived product differences.

"We're selling the experience," Flanders said. "It's the ambience, the look, the accessories — we're not just selling furniture."

Outdoor living finally has become a focus of the home that people are spending money on, Flanders said. "We like to use the analogy that in an upscale furniture store people will spend $20,000–$25,000 on a dining room set that they use Thanksgiving and Christmas, so why wouldn't they spend $5,000 on a patio set they'll use every evening?"

Outdoor Lifestyle President Fred Ilse said retailers, and ultimately consumers, lose when they settle for inferior materials. "The moment the price goes down, the quality goes down," he said. "It's like any quality thing, you get what you pay for."

Agio's Bob Gaylord agreed with that thinking. "You do get what you pay for — material is material," he said. "Mass merchandisers still do a lousy job with display. There's a tremendous opportunity out there at retail for specialty dealers, but they have got to invest in their stores and they had better make them a destination location or someday there's going to be a PetsMart of outdoor furniture."

Helping independents survive

If the casual industry were more aggressive, it would be healthier, said Sal Carrara, owner of Anacara Company. "This is not the outdoor furniture industry; this is lifestyle," he said. Besides eclectic designs, such as Anacara's Infinity sectional and tumbled marble tabletops, manufacturers have developed various strategies to help their specialty retail customers succeed. While a few manufacturers do not offer special orders, others say it's vital for specialty retailers' survival.

"Telescope has added in-season shipping within three weeks and we redesigned our whole plant concept for special orders," Jim Urch said. "We have to offer variety because that's where our value is — to give the dealers what they want, especially in season."

Laneventure gives retailers ideas to improve the display and theater of their stores, Gary McCray said. "Everything's so transparent these days," he said. "Consumers have a sense of pricing and an ability to compare. Retailers can't just put a price on a product and mark it up 40% with no explanation. Our challenge is to continue to differentiate ourselves, and specialty orders is how we do that."

"One thing I've tried to do here is show our range of product that's not like the mass," said Lou Rosebrock said of Whitecraft. "When we create better products for better prices, it makes us stronger competitors in the long run. We can't compete with mass on their level, but we can use the traffic they can help draw."

O.W. Lee's strategy involves keeping its lines unique, Terry Rogers Lee said. "We know who our customer base is," she said. "O.W. Lee appeals to a core group who are interested in the quality and design. We have to look at our manufacturing process to keep it competitive, too. We try real hard to maintain ourselves as an American manufacturer by sourcing only components, not finished products."

By staying clear of direct product imports, Homecrest makes its products available in all frame finishes and fabrics. Homecrest also listened to dealers as it recently redesigned its HI box, an index box system introduced earlier to help educate consumers. "We're rethinking our business along the lines of the consumer," President John Sundet said. "We've gotten an unbelievable amount of feedback from retailers. We're going to continue with our marketing programs and our focus on the consumer."

Merv Conn said Mallin avoids confusion by keeping its lines exclusive to specialty retailers. "We don't sell to the mass market," he said. "When I took over 30 years ago, we got out of that."

Many other vendors sell their brands through national accounts as well as specialty stores and catalogs.

"We have a totally separate division of premium product, exclusive to specialty retailers," said Jerry Glaser of Grosfillex.

"We have to have a clear separation between the specialty and mass products to effectively show the consumers why they're justified in spending more," Bill Brown said. "At Pride, we're giving them product that's very unique and of quality and style for properly furnishing an estate-size home."

Flanders considers increased catalog competition healthy because it validates the casual furniture category in consumers' minds. More attention from interior designers, consumer magazines, newspaper and cable television also adds to consumer interest, he said. "It challenges the specialty retailer to match that look in their store," he said. "A lot of what we do is supporting the reps and they go out and spread the gospel. It's trickle-down education. We don't like to admit how dependent we are on the weather, but we're even more dependent on that floor salesman. If they miscommunicate to the consumer, we've all lost the sale."

Most specialty retailers who have invested in their stores to demonstrate desired outdoor lifestyles have been successful. "The retailer has to maintain an identity, just like we do," said Dale Campbell of Lloyd/Flanders. "It's expensive to display well, but it seems to be money well spent." His philosophy as he puts together showroom displays is to do the expected but in an unexpected manner, he said.

"Obviously, the imports have made a big difference as far as the value and the price points," said Sandra Marion of Cast Craft. "Sophistication and designs have come up in all categories. We're getting closer to the indoor looks and comfort, and it's showing."

While many things about the casual industry are changing, some things never change. As in any fashion-forward industry, new products and designs remain the driving force whether in a store or at a trade show.

"What's new" are still the magic words.

Bentonville, Ark.-based Wal-Mart ranks as the biggest of the bog box chains.

Lowe's and The Home Depot vie for the No. 2 and No. 3 positions in selling outdoor furniture.

Increased exposure in catalogs and on TV draws more consumer interest.

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