Strength in Adversity

December 17, 2013  by in Business Strategy, Industry   

REPUTATION, EYE FOR OPPORTUNITY HAD WOLF FURNITURE EXPANDING AMIDST A NATIONAL AND REGIONAL DOWNTURN.

By Powell Slaughter

One might not think western Pennsylvania and Maryland would be a prime area for a furniture retailer to expand during a recession, but that’s what Wolf Furniture did. The Bellwood, Pa.-based retailer grew during the downturn, filling in its regional market presence by acquiring stores that were going out of business. In the 10 local markets in Pennsylvania and Maryland where it operated, 82 competitors went out of business, while only one new operation opened, according to CEO Doug Wolf.

This past Labor Day the retailer entered northern Virginia with a store in Leesburg. How did Wolf grow while others closed? “Some of that was simply economics,” Wolf said. “You had a lot of mom and pops with good locations and good employees who just couldn’t make a go of it for whatever reason.

“We tried to come in and inject some capital into those stores, which had a lot of residual goodwill among their customers. We’re a known name in the region, and consumers and employees actually welcomed us in those instances. We have a lot of longevity within our areas, and we’re a family business.” While the furniture retail business didn’t start until 1902, the Wolf family’s retail roots in western Pennsylvania trace back to the 1860s, when it started a hardware operation.

The furniture business is now under its fourth generation of family management—Doug’s father, John Wolf, remains active in the operation as chairman. That family touch goes a long way in the smaller and mid-size cities Wolf serves. If a customer has an issue, they get a response from someone with the same name as the one on the sign. “I get every positive or negative customer reaction in our organization,” Wolf said. “It’s an opportunity to praise an individual or get in touch with local management to make corrections. “We also tend to be a very loyal client to our suppliers, and that perhaps is not as common as it once was,” he said.

During the recession, Wolf wasn’t worried about being dropped by its suppliers, and they weren’t worried about being replaced on the floor at the drop of a hat.

ADJUSTING TO THE TIMES

Wolf was in a position to make moves during the recession, but it was no more immune to the drag on business than any other retailer. The store went the extra mile to create a positive environment for employees and customers alike. “When your business is down, that creates the danger of a high-pressure sales environment,” Wolf said. “We decided to go to non-commission compensation for our salespeople across the organization. It took away the immediate relationship between closing the sale and making a car payment; and it made for a more pleasant shopping experience for the customer.”

Speaking of the shopping experience, Wolf spent a lot of dollars on food and drinks during major traffic hours so that customers would spend more time in the store. And while Wolf expanded, it did so with prudence. “On average our preferred footprint was 60,000 to 67,000 square feet, but the last couple of years it’s been 40,000 to 50,000,” Wolf noted. “That reflects the scaled-down volume, both for ourselves and our industry.”

ESTABLISHING A BASE

Fortunately, Wolf had repositioned itself before the recession hit. “Our executive team started trying to figure out which direction we’d take in the ‘90s,” Wolf said. “We’d been a cross between a smalltown credit house and full-service retailer. Shopping was moving from downtowns out into the suburbs, and we had to think about where we wanted to be.”

By 1992, the operation had grown to 27 stores in three states. That’s when Wolf evaluated an offer for sale of 14 stores to national chain Heilig Meyers, deciding to hold onto three stores located in Altoona and Johnstown, Pa.; and Frederick, Md. Wolf’s own research found that while it was the store of choice for many consumers in its markets, as their families matured and tastes changed, they were moving away. “We decided to broaden our appeal with a quality focus and be a little more fashion forward, especially as the Value Cities and Ashley Homestores started appearing in our market,” Wolf said. “We’d buy things you might not find in a chain—Jaipur Rugs, Four Hands. We merchandise that sort of product into our assortment. We also try to merchandise where a third of our store is available in-stock for immediate delivery; and product with choices and options are on quick-ship programs. “A lot of the mom-and-pops are gone, and we’ve tried to step in and fill that void. We want to be the dominant full-service store in the market.”

SPREADING THE WORD

Wolf said another reason it made it through the recession was a decision to keep advertising.

 

Wolf Furniture at a Glance

Homebase: Bellwood, Pa.

Store Stats: Founded in 1902, Wolf Furniture operates 12 stores and a clearance center in Pennsylvania, Maryland and northern Virginia. Stores range from 40,000 to 65,000 square feet; and employ around 500 people

Key Industry Affiliations: A member of an Impact Consulting performance group and a FurnitureCore client

Key Management: Doug Wolf, CEO; Gene Stoltz, president; John Wolf, chairman; Doug Shaffer, senior vice president of store operations; Germaine Crocker, treasurer

Annual Revenue: Around $100 million

Key Vendors: La-Z-Boy, Southern Motion, Catnapper/Jackson, Smith Brothers, Restonic, Sealy, Craftmaster, Broyhill, Daniels Amish, Sunny Designs, Klaussner.

Consignment Model Gains Steam

Allegheny Furniture Consignment, a furniture consignment concept developed by Wolf Furniture CEO Doug Wolf, is picking up momentum.

Right now AFC has one existing store in Harrisburg, Pa., with another set to open in another Wolf market in next year’s first quarter. And last month, it gained its first outside license with Laurel, Del.-based Johnny Janosik. “We believe this is going to be, and not only for us, the next big move on tie breakers,” Wolf said, adding that he gives a lot of the credit for the idea to Mann, Armistead & Epperson’s Jerry Epperson. “He talked a lot about how you have to give her a way to get rid of the stuff she has to make room for new furniture.”

Wolf found that the store’s employees were referring customers to consignment outlets for unloading old goods on many occasions. “We realized that if we can provide customers with an outlet store for their old furniture, we can get two sales from the same customer,” he said (68 percent of customers consigning with AFC are Wolf customers). “You have additional gross margin revenue with no additional inventory.” Sales are up 40 percent this year at Wolf’s AFC outlet, selling more than 8,000 consigned orders so far. AFC is scheduling consignment pick-ups out almost five weeks. Wolf started pitching the concept to other stores when he took a booth in the resource center at the 2012 Home Furnishings Industry Conference in Palm Springs, Calif. Almost two dozen furniture retailers are interested in the project, and some of those are ready to commit.

“We have licensing contracts out for eight more retailers at the moment,” he said. “I don’t want to name names right now, but we have a lot of friends out there, and we’ve been able to pick and choose.”

A Look at the Markets

Wolf Furniture serves markets ranging from small to mid-size cities in Pennsylvania and Maryland to a college town (State College, Pa.), and, with the opening this year in Leesburg, Va., the outer fringe of the Washington, D.C., metro area.

Through this year’s third quarter, 10 markets totaled $1.8 billion in estimated home furnishings retail sales. That includes a new market, the D.C. area, but for the markets Wolf historically served, the total is $717.4 million. With the exception of State College, where Pennsylvania State University’s college-age population skews the count, those markets have very similar age demographics. Pie charts are virtually identical. Excepting State College, the under-25 population in Wolf’s Pennsylvania and Maryland markets ranges from 3.17 percent in Bethasda-Rockville-Frederick, Md., to 4.41 percent. Consumers age 25 to 34 vary from 11.6 percent in Johnstown, Pa., to 18.29 percent in State College. Most of the others are in mid-14s to 15s percentage in that age group. The 35 to 44 segment offers a bit more variation. That age bracket accounts for 15.4 percent of customers in Lancaster, Pa., to 16.5 percent in Altoona, with Johnstown and State College in between. Five markets for those ages range from 18 percent in Chambersburg, Pa., to 20.9 percent in Bethasda-Rockville- Frederick, Md. The income sweet spot for furniture retailers, consumers in their prime earning years, age 45 to 64, ranges from 35.2 percent in Chambersburg to 45.1 in Johnstown, Pa., in the store’s historical markets; with the only outlier from that range being 30 percent in State College.

As middle to upper-middle retailer, Wolf is well-positioned for its traditional markets’ income levels. Only three markets are below 60 percent in the middle income segment, households with annual incomes of $35,000 to $99,999. In that income demographic the range goes from 47.8 percent in Bethesda- Rockville-Frederick, Md., to 57.8 percent in State College; 59.1 percent in Johnstown; 61.5 percent in Altoona; 62.4 percent in Harrisburg-Carlisle, Pa.; 63.8 percent in Hagerstown-Martinsburg; 65.9 percent in Lancaster, Pa.; 66.2 percent in York-Hanover; and 66.4 percent in Chambersburg.

Free Time

Wolf Furniture CEO Doug Wolf is fortunate enough to be able to mix business with pleasure. “I’m an avid fisherman and snowmobiler,” he said. “I’m a very lucky guy in that there’s a broad group of home furnishings friends who share those passions, too.” It’s easy and natural to talk shop when out with friends in the winter snow or on the water. Wolf isn’t picky about what he goes after either—he just loves fishing of all sorts. “I can enjoy fishing for catfish as much as fishing for sailfish,” he said.