Furniture factors say business improving in 2012
Heath E Combs -- Casual Living, 7/1/2012 2:00:00 AM
Accounts receivable purchasing factors report that they're seeing business improve this year.
Quality and value goods are helping drive business, as well as alternative channels of distribution that are increasingly selling furniture at places they might not have been a decade ago.
Retailers also are becoming more comfortable with ordering containers, observers say.
Michael Hudgens, senior VP and business development manager at CIT Commercial Credit, said some suppliers have seen sales gains of 10% to 20% this year.
That's largely being driven by two factors, whether companies are domestic manufacturers or importers and one of those areas is offering a value priced product, he said.
"I'd say retail from our perspective has stabilized. We're hearing from the retailers that traffic is up. People are buying again. Not like they were buying before," Hudgens said. "I think there's been some pent up demand and the clients that have been able to sell a value priced product seem to be doing very well."
Gail McKenzie, a marketing representative with Eagle Capital, said the company's factoring volume is up.
As for where the movement is in shipments, while Eagle sees an average order size of about $20,000 from suppliers, many orders are trending in the $14,000 to $17,000 range, up from previous trending in the $12,000 to $14,000 range, McKenzie said.
The company's lower tier of orders is about $2,500 with an upper range of $30,000 to $40,000.
Howard Tolsky, president of DSA Factors, said that there's still some $22,000 orders but definitely the average is closer to $5,000."
Tolsky said DSA's receivables are up this year, about 13% for the first quarter of 2012. One of the areas doing well are furniture accessories, he said.
"That might be partly due to the fact that the real estate market is real slow and people aren't really looking to move. They're sort of staying put because they have to," Tolsky said. "They've decided that they're going to be in their homes longer and they're going to start doing some accessorizing."
Rick Mantin, president of trade finance supplier Lyon Capital, said it's hard to tell whether business is improving, but the company's factoring department is "booming."
"We're busier than ever. But it's hard for me to tell if that's more overall business or just more business that's coming to us," Mantin said. "I tend to think things are getting a little better."
An area where Hudgens said CIT has seen growth is suppliers' increasing sales through alternative distribution channels. With fewer traditional chain or "mom and pop" furniture stores to shop these days, places like home improvement centers, office supply stores, discount clubs and online retailers are driving growth.
"There are not as many places to buy furniture from traditional retailers now as once there was. So these alternatives have become very important to the industry," Hudgens said.
Several years ago that might not have been true, he said.
"You just didn't see furniture in a Target store," Hudgens said. "Costco had some specials but not like they do now."
And online retailers continue to pick up a big part of the business, since traditional retailers overall haven't established a major online presence.
"That's just not their DNA," Hudgens said.
Whether suppliers are doing it by creative packaging, unique styling, price or some combination of the three, Hudgens said those who have figured out how to crack alternative stores are doing very well.
And because CIT's experience is across a range of industries, it has some insight into the alternative channel business, he said.
"The (furniture) clients that we work with that are able to sell to alternative retailers have a big advantage because we know more than just the furniture industry," Hudgens said.
Eagle, meanwhile, has seen an uptick with Canadian customers and big box retailers, McKenzie said. Mid priced product is doing very well along with container case goods. Promotional stationary upholstery is steady, she said.
"We see growth with our manufacturers who can offer a quality product in a mid-price range, who can deliver quickly. The warehouse shipping programs reduce delays and have offered an increase in sales volume to the manufacturers who have been able to cater to the need," she said.
Suppliers who cater to customers wanting quality, flexibility and speed are doing well, McKenzie said.
"The manufacturers who continue to work with non creditworthy customers or have failed to adjust to the needs of their customers continue to find themselves fighting the same battles they have fought for years," McKenzie said.
"The name of the game is quality - across the board. Offering a quality product, with quality service, to quality customers is the key to success and growth."
DSA's Tolsky said there is an advantage for domestic manufacturers in an age that's seen some movement away from importing.
The once-large pricing advantage that smaller stores sought from a $20,000 container suffered as shipping problems and damage became more common overseas.
"We've found there's been more freight damage with the full containers companies are buying and obviously you don't have all that freight damage when it's coming from U.S. manufacturing," he said.
Damaged merchandise can also be a problem for suppliers who don't have deep pockets, because if the factor can't get reimbursed from a retailer for the invoice, the factoring company has to charge those items back or find a way to get reimbursed, Tolsky said. It could take six to 12 weeks for a factory overseas to replace that merchandise, he said, adding that good quality control protocols are a key to avoiding these problems.
Tolsky said there's been a shift toward more conservative buying.
There hasn't been as much demand for purchase order financing - in which the financing firm pays the manufacturer for an order - in the past three or four months, he said.
CIT's Hudgens said the container segment of the business is improving.
Many retailers have been more willing to pay suppliers for warehouse operations, moving beyond the smaller order sizes, truckloads and half-truckloads they sought about four years ago, he said.
"It's starting to swing back a little bit; there's more container business now than there has been," Hudgens said.
That's likely because retail has stabilized, financing is more assured and the value seeking consumer at retail is buying the savings from containers, he said.
"Consumers are looking for value. There's a pretty good cost advantage to buying a container versus buying out of someone's warehouse," he said.
Mantin said that Lyon is seeing more container direct business to major retailers.
"Established furniture players are looking for the discount by taking a full container direct from overseas, getting a little bit better pricing on that. The container direct business stands out as a sector that's really been growing lately," Mantin said.
While sales appear to be stabilizing, the value of factoring shouldn't be underplayed, CIT's Hudgens said.
"Companies are willing to pay for our expertise in assessing credit. We don't see that changing much," Hudgens said. "I don't think the economy is where anybody thinks it ought to be. It could turn around quickly and the folks we deal with want to be protected."
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