Industry adapts to changing conditions
September 1, 2009,
With unprecedented economic changes since last September's Casual Market, the industry has adapted and changed as surely as the weather.
Weak consumer confidence, tightened credit and perceived value were also on the minds of manufacturers as they made changes this year, set strategies and looked ahead.
Agio President Bob Gaylord:
The greatest change is dealers' ability to get financing, resulting in tighter credit controls on our dealers. We emphasized value price points at the premarket, at the request of dealers on a nationwide basis, and we will offer even more value price points at the Casual Market. Simply put, we want to offer to our dealers price points that touch every homeowner's pocketbook.
We are already looking at a $40+ million increase in sales for the 2010 season. We have accomplished this through value pricing and innovative products including small space concepts, continued emphasis on core collections and an additional Disney Resorts collection.
We believe indoor furniture retailers hold a huge key for high-profile success in the casual furniture arena. We have indoor retailers whose business with Agio is up 40% over 2008. That says a lot about their ability to draw consumers into their store, offer selection, informed sales help and home delivery. They should be an important part of our industry's future.
Inventories at the masses are at an all-time low. Specialty retailers have a real opportunity to take advantage of the situation, and we expect the same will be true in 2010.
Laneventure President Gary McCray:
The biggest change is our narrowed focus to outdoor furniture and indoor wicker & rattan, along with making value creation for our customers our priority. We started this effort with our introductions in 2009 and accelerated it in 2010 by remerchandising price points.
By narrowing our line and getting out to retail with new product previews in the spring, we're able to maintain solid inventories of our best-sellers. Combined, this gives us a strong package for fall sales and placements ready for the spring.
We're also strengthening our supply chain including the development of FBN Asia as our sourcing organization and streamlining our manufacturing facility in Conover, N.C. With the changes we've made, we're strong and have the resources to expand quickly when a recovery occurs.
I expect the remainder of this year and next year to continue to be a challenge. Cash and credit are still short while buyers for consumer durables are staying away. I think the biggest opportunity is for specialty retailers to offer carefully selected new product to freshen their floor for the customers they do get in during this period.
Gloster President Eric Parsons:
At Gloster we are running more lean, but smarter. We are cutting costs in many areas while at the same time evaluating process/procedures to ensure we are meeting the needs of our customers across all channels. We continue to invest in the company but only in the areas where we can recognize a return on the investment.
Our operational supply model is unchanged even during these challenging economic times as we have become the standard for high quality, quick turn-around, custom-order delivery. While many manufacturers are quickly changing their supply models, Gloster has long maintained a quick-response inventory (now integrated with a first-class, in-house upholstery department) that provides for the needs of a more competitive marketplace and is supported by a comprehensive stock cushion program, weekly distribution of a stock availability bulletin and for 2010 access to a real-time, online inventory count.
Pricing will be adjusted for 2010 through significant reductions on key items. Additionally, we have modified our discounting strategy to enable retailers the ability to offer additional discounts to consumers.
Our growth will come by earning larger pieces of existing pies. Showroom/trade is a high-growth category for us and our efforts are focused on differentiating our product offering to the consumer. Contract continues to be a sizable and significant growth area for Gloster. Our ability to draw from our worldwide resources in a timely, efficient and cost-effective manner provides us with a marketplace advantage. Growth in contract offers the brand greater visibility with high-end consumers, thus creating advantage to our retail partners. Retail is a fashion industry, and our relentless and continued focus on developing new product, value, design, function, quality, new mediums/categories and branding is essential to our growth as a company and as an industry.
The key to Gloster's success will be our ability to focus on selling. It is of utmost importance that we approach any potential customer or order with an entrepreneurial spirit and the will to win. We must have a renewed focus on the core function of selling and ensure that no stone is left unturned in the effort to secure every possible profitable sales order.
We are not developing a strategy for "when things recover," instead we are accepting of the current market conditions, anticipating they will be with us for the foreseeable future and looking for/creating opportunity.
Gensun Vice President Jan Trinkley:
Gensun decided last year to concentrate our efforts on two main areas of the business. First, the early buy where the dealer takes the majority of the risk. With the Gensun Advantage Program, the dealer gets the same discount opportunity as an early buy by ordering and placing floor slots thus eliminating the inventory risk.
Second, Gensun will continue on its current course with beautiful designs, unparalleled quality and attractive pricing for the best value in the industry with cast aluminum furniture. The consumer is shopping and comparing. When they look at our product they get a design that normally runs 20% less than other comparable cast aluminum products.
Growth will come from those specialty retailers who offer choice and value to their customers thus differentiating themselves from other retailers and the mass merchant.
We are almost finished with a new state-of-the-art manufacturing facility encompassing more than 500,000 square feet. Gensun's growth over the past eight years has shown that our philosophy is right, and we will now be ready for the next eight years and more.
Gensun sees its greatest opportunities in working together with specialty retailers so inventory and inventory risk is greatly reduced, even eliminated, and profit dollars are enhanced and maximized.
Outdoor Lifestyle President Fred Ilse:
As a domestically based manufacturer, we have always had to have a strong focus on reducing our production costs to remain competitive, without compromising our product quality and customer service. We applied even greater emphasis on our cost management strategies during this recession. Pricing and terms have become even more important issues to dealers, as well as fresh new designs that set them apart from other dealers' offerings.
Our strategy going forward is to provide even greater value to the consumer, and at the same time help the dealers move stock by making it more affordable, both in terms of price and offering generous dealer programs. Our new designs offer great value.
One of the reasons we can do this is that the company has no debt on the books, limited fixed overheads and is well-financed.
Before any real growth can happen, we have to go through a recovery phase and get many dealers back to the pre-recession levels of business, where they will be profitable again and able to put money into the bank. Since consumers have held back on spending for more than a year now: many will have not replaced furniture that they had planned to replace before the recession hit. This applies both to the retail and contract markets.
Dealers will continue to be extremely wary of holding big inventories going into 2010. As manufacturers, we have a responsibility to all our dealers to make sure they get through this recession by taking on more of the inventory-holding risk. Many dealers have seen negative cash flows in the past 18 months, and many just don't have the cash or bank facilities to tie their money up in too much inventory. We are nimble enough to ramp up production and to supply them quickly when business picks up again, be it one set or a truckload of furniture.
Our goal is to get the dealers back into a positive cash-flow position as quickly as possible. We have the people, the production facilities and flexible dealer programs to do that. We are well-positioned financially and have the production capacity to ramp up our business very quickly.
Those dealers and manufacturers who have actively applied strategic cost management strategies in this recession will benefit from them in the long run, especially when we have an upturn in the economy and they maintain these strategies.
O.W. Lee Co-President Terri Lee Rogers:
The shareholders of O.W. Lee are very close to the day-to-day operations, and recognized early on the need to analyze ways to reduce costs and budget 2009 on reduced volume. This is been a great exercise and the results have been remarkable.
Going forward, we are planning for a successful 2010. While we were more conservative in our product development and the production of sales and marketing materials, we are very pleased with the reaction and support we have received from our dealers on our new product and strategies for 2010.
We are staying true to our core principles and products, paying attention to expenses, and reinvesting back into the business. We are positioning ourselves to have enough capital to take advantage of opportunities as they present themselves.
As an industry, we have many opportunities to market our outdoor lifestyle as a pleasant diversion away from the day-to-day drudgery. Although outdoor furniture is considered discretionary, it also represents tangible value and a secure investment to the homeowner vs. the luxury vacation that has an element of risk to personal safety, and also is fleeting. I believe today's consumers are looking for lasting value.
Pride Family Brands VP of Sales and Marketing Rory Rehmert:
The current economic situation has affected our business in that it forced several of our larger accounts out of business thereby reducing our overall volume. The accounts that went out of business were businesses that depended on other product categories that were hard hit by the economy. Our remaining accounts illustrated that the upper-end consumer continued to spend, and we concluded the season with a slight increase within these accounts.
Our strategy remains consistent: Manufacture the very best casual furniture available, with unique designs, finishes and great values. The upper end of the market demands these attributes and we have been very successful in fulfilling their needs.
We are focusing on our manufacturing operations to ensure that we are positioned for the increase in demand that will come with the spring of 2010. Additionally, we are working with our accounts so that they can better understand and appreciate the successes that can be realized through the sales of superior products.
We are fully tooled and ready with our 2010 offering. Lead times are fairly short now and it is a good time for retailers to reset the floor and encourage consumers to get the latest and greatest products now.
Growth for the future can come from increased penetration into markets that have limited distribution. Secondly, furniture store retailers are beginning to show renewed interest in our category. We see this as very positive in that it is a natural fit. Lastly, the design community is, and has been, a very good area for growth for our company.
Our largest opportunity is to not determine that the season is over before it truly is. We continue to see products sell well into the fall. The season does not end with Labor Day. We see a significant number of large custom orders being generated well after Labor Day. Consumers are becoming more aware that the fall is an awesome time to enjoy their outdoor environment.
CEO Oliver Ma and COO Margaret Chang:Treasure Garden has always tried to operate in a profitable and efficient manner, and our continued success (even in times like this) is largely due to these
efficiencies. What has changed is that our focus has shifted to becoming more flexible to meet the changing needs of our valuable business partner dealers.
Our strategy for 2010 (and beyond) is to remain aggressive. Although this is not limited to innovative new product and category introductions, we do feel these are vital parts of any company's success — especially ours. The introduction of our new Treasure Chest, and our entry into the Garden Pavilion category are just two examples we are confident will contribute to our long-term health and stability.
The economy will recover, and those who are ready to react quickly will be in the best position for success and continued growth. The key to surviving a tough economy is to be proactive in everything you do — and get ready before it gets tough. The recent relocation of our Ningbo facilities, and our expansion into Qingdao are two ways in which we have positioned ourselves for this.
The biggest opportunity that this industry has right now is for companies to fine-tune the ways in which they operate. The old saying "work smarter, not harder" has never been more true than it is right now — even if it means dramatic changes to business philosophies and strategies. The world is different now, and so are its consumers. The successful ones will be those who embrace the change — changes in cost controls and efficiencies, purchasing, advertising, merchandising and delivery — just to name a few. Even during an economic downturn such as this, one thing in this industry has not changed: The need for unique, innovative and stylish products that offer value to our dealers and their customers. As an industry, we must not lose sight of this. If the industry is to survive into the coming years, then it must expand its reach into other related product categories.
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In this issue:
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- Focus On: Patterns punch up the style quotient of outdoor accessories.