Direct imports can be high-end with better values
By Bob Gaylord, President, Agio International -- Casual Living, 10/1/2006 12:00:00 AM
When I left my hometown of Detroit in 1980, it was clear the fate of the former automobile capital of the world was in jeopardy. As late as the mid-1970s, Detroit manufacturers delivered 96% of the cars in the U.S. market. Today, the city barely holds its market share of 50%. That percentage continues to decline because domestic auto manufacturers dismissed the import car market as a threat and refused, over the past 30 years, to meet the American consumer's demand for a better value.
It is my belief we face a similar circumstance in the casual furniture industry today, especially within the specialty retailer segment. And if specialty retailers don't accept the changes in the industry and embrace the move toward direct imports from a global marketplace, they will find it even more difficult to compete in the market and draw consumers to their business.
The fact is imported automobiles were originally designed to be more cost- and energy-efficient. The value was attractive and Americans latched onto a product that evolved into the highest quality and a better value overall, whether it was a stripped-down or luxury model. The casual furniture retailer must understand the dynamics at work here. America is not a domestic-driven market anymore. To refuse the value and profit margins available through direct imports is to refuse the realities of the marketplace. No longer can you rely on the traditional "old boys" network to save one of retailing's best kept secrets. It is no secret anymore. Everyone wants a piece of the action. The competition is stiff, and given the magnitude of the mass retailer's presence in the market place, you, the casual furniture specialty retailer, must re-establish yourself as a player, and take advantage of buying product from the most cost-efficient manufacturing areas of the world.
Forget about labeling your product as primarily domestic or import. Throughout our industry there are an infinite number of companies that tag themselves domestic, when in fact significant portions of the manufacturing and distribution chain occur overseas. And this trend will continue. Direct importing is all about cutting out unnecessary margins, loads and profits including "domestic manufacturers," who actually import their products, or other importers who are not prime manufacturers. It is all about low-cost labor, lower government interference in manufacturing, cheaper construction costs, lower overheads and lower taxes. Hence lower product costs. As far as prime domestic manufacturers go, my good friends, it is just a matter of time.
With the advent of the Internet and the growth of mass retailers and catalogers, consumers are more value-conscious and savvy than ever. Specialty retailers need to realize we are part of a global marketplace and create every opportunity to give customers access to more and better value. Exclusively domestic manufacturers and retailers have long used scare tactics to maintain hold of the market. If you are buying into this, you are in the wrong line. Some retailers sitting on the fence may choose to stick to domestic product. And that might just be where they stay as direct imports continue sailing over the fence and continue to satisfy consumers at every economic level and price point. Proactively creating innovation and value IS the future of casual retailing, and we invite you to be part of it.
Is there opportunity for specialty retailers to compete against Internet, big box and catalog retailers? There is no doubt your sales can incrementally match the industry boom in outdoor sales. And they should. If you are not having the same boom in your numbers that the industry is overall, it's time to get in the game. Bottom line is if you give your customers a unique buying experience and a product mix that represents a realistic value, you have a unique opportunity to build something with your customers that is at the core of the specialty retail tradition — a profitable and lasting relationship.
Whether your product is domestic or imported, the truth is that if the market says a set is worth $5,000, you're not going to be able to sell it for $10,000 for much longer. And the truth is technology, productivity and competition — whether overseas or here in North America — are what have driven prices down and consumer interest up. I realize there are retailers who have had at least one bad experience with direct importing. But remember, as the market has become more sophisticated, so too have some offshore manufacturers, some of which have the capacity, flexibility and special programs customized for specialty retailers.
The soothsayers say direct importing will cause you to lower your price points and your average sales ticket. There is no reason this should be the case. You can pick your spec, quality standards and price points. Declare your own exclusives. Choose margins that work to your favor. You want a homerun $2,000 retail set of furniture at a 75% markup? No problem. You want a showroom-stopping $10,000 collection that looks like a great buy to the consumer? No problem. Direct importing does not have to mean lower price points, but it will ensure much better value at whatever price point you pick. And that, along with increased margins, is the name of the game. Only utilizing direct import product as your opening price point could leave your customers looking elsewhere for the quality and value available through Internet, catalog and big box retailers.
Creative, value-driven marketing is the key to survival. And you'll be pleased to find when you offer your market a globally diverse product line, you'll have many more customers happier with the selection and value you offer. You'll also find you're attracting the ever-growing group of those who are creating complete outdoor living environments — not just affluent baby boomers, but also the X and Y generations finding their way into the marketplace.
Specialty retailers can and should be enjoying the huge growth in our industry. More consumers than ever are buying casual furniture and they are not really satisfied with the mass retailer's spec, selection of product, available accessories, lack of service and/or trained sales associates. But mass represents at least 60% of the market today and continues to grow. Most big box guys are afraid of retails over $500–$1,000 for a dining set. This gives specialty retailers a unique and potentially more lucrative position in the market, but the values on your floor have to make market sense. Remember, consumers will always move themselves up in price point if the value makes any sense at all. So I urge you not to dismiss direct importing where you can give your customer even more reasons to move up. I am calling on retailers to embrace the global economy so that everyone will continue to collectively push our industry to its peak. Am I anti-American, as some of your sources tell you? No, my good friends, I am a realist, from Detroit!
In the past 10 to 20 years, the consuming public has especially embraced the global marketplace. Try buying a TV, computer or piece of clothing that was made in America, or almost anything for that matter. Likewise, the casual industry has made the move to offer the quality and value direct importing offers to both the retailer and consumer. But, specialty retailers have to use direct imports for higher price points. If you're going to continue to be around in 10 years, you will have to embrace this fact and move with the trends, change with the times. The reality is direct importing can lead you to higher-end offerings at much better value, more sales and higher margins. What's so scary about that? It's time to get off the fence and lead the pack.
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