The Company Store Changing retail boundaries
Cinde Ingram -- Casual Living, April 15, 2005
More casual furniture manufacturers are moving into retail roles. In addition to Brown Jordan International opening two Elegant Outdoors model stores in Houston, Laneventure is partnering with retailers in California and Florida while Summer Classics' licensed stores are opening this month in Nashville and St. Louis. A few outdoor furniture makers have stores in or near their headquarters, like Ebel in Jacksonville, Fla., and Kettler in Virginia Beach, Va. Other manufacturer/retail operations have shared owners for years.
Webb Carter, Carter Grandle chairman and CEO, is among the manufacturers who oppose the migration. "I think it's very greedy for a manufacturer to try to go sell his goods against the people who feed him," Carter said. "To me, it's a desperate situation if I'm going to cross the bridge and cut out the people who have made me what I am."
Ken Ehrlich, president of Harrow's, is among the retailers alarmed by outdoor furniture manufacturers moving along the company-owned store path blazed by residential furniture makers, such as La-Z-Boy. "The challenge is to try and find out where the mind is of the manufacturers that they're supporting and advertising with their retail dollars," Ehrlich said. "Are they looking to go forward? Are these the first steps in a very bad trend of manufacturers deciding to compete with retailers?"
Bill Echols, BJI president of retail and contract divisions, said the intent in opening Elegant Outdoors stores in the Houston market was to provide a model its dealers can visit, see how it operates and the potential profitability in following part or all of a turnkey plan. He said BJI does not plan to open stores outside of Houston.
"The purpose of these stores is to show at least one strategy to separate yourself from what the mass merchant's doing and to demonstrate the profitability of that strategy," Echols said. "So it's not a matter of Brown Jordan International wanting to go into the retail business as it is to create an environment to demonstrate the strategy we believe works for the retailer."
Too many casual specialty stores are filling their floors with a much higher percentage of import goods and offering fewer choices, he added. "We get very concerned when we see the number of products on a dealer's floor that a consumer cannot pick the fabric or the finish they want — that really is the main difference a specialty retailer has over a mass merchant," Echols said. "Every time they diminish the number of floor spots that enhance their difference, they're diminishing their ability to compete."
Summer Classics was among the first casual furniture manufacturers to test retail waters in the late 1980s in Birmingham, Ala. What started as quarterly sales of overstocks, returns and damaged goods at its factory showroom grew through consumer demand and lack of competition. Another company-owned store opened in April 2001 in a former nursery in Raleigh, N.C., followed by a store in Charlotte, N.C., and licensed stores last year in Mobile and Huntsville, Ala. Licensed stores are set to open this month in Nashville and St. Louis while four additional licensed Summer Classics locations will open over the next 18 months.
Summer Classics' No. 1 goal was to build its brand name and its secondary goal was to improve displays of its furniture on retail floors, President Bew White said.
"In our business, a lot of dealers do a great job with display, but generally display has been in the past not very good," White said. "It has to do with a lack of competition to some degree. As long as they're successful and can throw the stuff out there on the floor and sell some of it, they're going to be happy and do the same thing next year."
Smaller dealers didn't invest in their store to improve merchandising, even with as small a cost as painting the walls. "Now, I've seen the big dealers come in and open more stores, but those dealers are trying to build their own brand," White said. They buy less from manufacturers, remove labels or change them into their own logos and rely more on direct import programs.
On the other hand, nurseries that converted their stores to make room for casual furniture were amazed at the results. Summer Classics Vice President Harold Hudson recalled asking Dave Mansfield, owner of Mansfield Nursery in St. Louis, how many bedding plants he had to sell to equal his margins on his first sale of outdoor furniture. "From the first year, he doubled what he was buying from us," Hudson said. "He got in the Shops program four or five years ago and has been one of our top five Shops retailers. And here it is six years later, he's converting his store over to a Summer Classics store."
When manufacturers move into retail, other retailers often are angered. "Usually the ones who have had heated conversations with me have never bought from me so they don't understand what I'm trying to do," White said. "The fact is we all have a lot better chance of building a brand together than trying to build a brand by selling a lot of different products for a lot of different manufacturers. What I'm really doing is what has been done in a lot of other industries — apparel, furniture." He compares it to the Ralph Lauren business model.
Gary McCray, Laneventure vice president of marketing, has an inside view of dealer-owned stores in the residential furniture industry through parent company Lane. Ethan Allen and La-Z-Boy were among the first to try dedicated stores, but spawned vigorous movement from others including Ashley, Bassett, Broyhill, Drexel Heritage and Thomasville.
"The indoor furniture industry is being driven by what's happening with imports, and what's happening with companies trying to control and strengthen their brand," McCray said. "One way to do that is to have more of a retail presence."
Laneventure plans no company-owned stores, but will partner more with retailers in the same way as its first venture in 2002 with World of Outdoor Living in Dalton, Ga. Retail partnerships with Authenticity in Banner Elk, N.C., and Four Seasons in Memphis followed. Last month, Laneventure worked with a retailer to open a store in Irvine, Calif., adjacent to Lane, Henredon and Drexel Heritage stores. This month, Laneventure partnered with a long-time Port Charlotte, Fla., dealer who is opening a store adjacent to a Lane store.
"It's an opportunity for us to build our distribution or enhance and build a stronger display," McCray said. He predicts the industry impact will depend on how manufacturers go about moving into retail. "In our case, we're looking at it on a limited scale, where it makes sense to increase distribution and be able to do more business," McCray said. "There's a place for it in the industry. I think it will make the industry better and stronger. What we want to do is take the things we learn in these partnerships and be able to spread it to the independent stores that we work with as well. It's certainly not our position that we want to move into areas where we already have distribution, we just want to enhance our company in area we don't and enhance our business with independent retailers where we do."
Paul Varshney, president of Suncoast Furniture, sold its retail store in Fort Myers, Fla., about three years ago. "The reason we sold was it was taking some of our time away from manufacturing," Varshney said. "We thought it was better for us to stay in manufacturing, which we do best, instead of us doing retail. The other thing was retailers were not feeling good about us. They thought that if we were doing retail in Fort Myers, it can happen that after a few years down the road we would be doing retail in their territory. We thought it was better to just get out of retailing so that way the retailers would have more confidence."
White realizes retailers who have sold 20 lines for 20 years will find it more difficult to change their way of thinking about working with manufacturers. "If I were a smart retailer, I would go and look at them all and say: Do I need to do this? Or can I compete with this? If you're comfortable that you can compete with it, then don't worry about it. But it's available for you to do it. Still almost no retailers, other than the ones who buy in excess of $300,000 from me, are looking at it. Frankly, it doesn't work very well for people who are in the business and don't have an open mind."
Hudson said he was surprised recently during visits to retailers when they asked "Are you bringing a Summer Classics store to California?" rather than seeking information about the licensing program itself.
Echols said he doesn't see dealer-owned stores being the strategy or marketing push of casual furniture manufacturers. "What I hear from my fellow manufacturers is: How do we make our retailers better? I think that's the overall goal for all of us."