Take 5: Fred Starr

July 24, 2018  by HFBusiness Staff in Business Strategy, Industry   

Home Furnishings Business: In regard to the Thomasville Stores, the goal was to sell more furniture. However, what was the strategy that you believed would be a win for both manufacturers and retailers?

• In late ’70s, there was an industry need to strengthen the relationship between larger manufacturers and retailers. Manufacturing was dominated by great companies such as Broyhill, Lexington, Bassett, Henredon, Drexel-Heritage, and Thomasville, serving a highly fragmented retail base of 15,000 retail companies with over 40,000 retail outlets.

Manufacturing companies were run by experienced, talented leaders, who focused on product development and manufacturing. Their world revolved around new products, designed in secrecy and introduced at restricted showrooms. Product success was defined by store placements, sales results, and group longevity.

Dealers wanted manufacturer agreements to product exclusivity in their market

Larger retailers had some product development and design influence, but at the end of the day, manufacturers drove the train up to the marketplace.

Our strategy was to create, introduce, and maintain Thomasville tools and systems, which created synergies between our company and selected retailers.

To begin, we had to have an in-store stage for each retail partner, and so Thomasville Galleries and ultimately Thomasville Stores were developed.

This idea of driving a business through integrated supplier and retailer teamwork was new and different. We had to have product design discipline, so we took standard good-better-best product categorization and styles and organized the spaces with the best groups for each box.

Early on, we confirmed that we had to have a Thomasville Upholstery to make marketing sense to our retail partners and attract and sell consumers. So we began with the acquisition of an excellent, mid-market upholstery company in Statesville (N.C.) in 1984, adding three more upholstery companies over the next five years.

In both wood and upholstery, each group went through a development process that included strong marketplace input through our talented Sales Representative Advisory Groups and very important summer retailer meetings. This input from the marketplace was essential, while also serving to strengthen our teamwork.

To attack manufacturing costs, we introduced a quality management program, which evolved into our highly effective process improvement program. Costs were dramatically reduced, manufacturing cycles shortened, and high-quality products became even better.

Here again, teamwork was the driver, as employees were trained in team culture and measurement, and work cells took over plant management. In fact, as our business grew, we were able to increase capacity and reduce costs through fewer mistakes and greater efficiencies, while not investing in new plants. And our retailer partners were happy to have even better product quality and faster delivery.

Early on, it became evident that our factories and warehouses were saddled with obsolete inventories, as discontinued product groups left a trail of parts and finished goods. We had product groups that had been dropped months, even years, earlier, tying up space and cash. Here was a wonderful example of our Thomasville-retailer partnership, as our retailers jumped at the chance to sell huge amounts of discontinued Thomasville goods at significant discounts. And we could now put into inventory what was selling rather than what was not selling and take the second logistical step by starting our inventory management program.

The inventory management program was among our most significant Thomasville partnership assets. In the true spirit of Thomasville-retailer teamwork, we were eventually able to become the retailer’s warehouse with data-driven forecasting leading to a shipping average of over 95 percent of 1,400 SKUs in no more than 10 days (most shipments were within 48 hours). The retailer’s inventory investment in Thomasville became primarily, if not solely, in floor samples.

When we began our retailer partnership program, the Thomasville brand was in fourth position nationally in brand awareness among furniture manufacturers. We believed that we had to take our brand to number one in support of our retailer partnership. This would be a great way to pool the Thomasville brand advertising dollars, so we budgeted the cost around three investment sources and uses. Thomasville with a national advertising budget, Thomasville retailers with their 5-8 percent allocated advertising budgets, and retailers with Thomasville Gallery and Store signage budgets.

With this as the plan, we built advertising around this team action. Thomasville created and implemented the national program around upper-end home furnishings magazines network advertising. The theme was, “Thomasville, So Nice to Come Home To”, expressing fashion and warmth. All ads were shot in beautiful, luxury homes, loaded with customer aspiration.

Our retail partners were fantastic in their advertising support of the Thomasville brand. As we grew, their budgeted advertising dollars increased to remarkable levels. To fuel this, we provided co-op ad dollars and a steady flow of high-end advertising materials for local usage. And we re-did our Thomasville logo to give our Store and Gallery signage a new, eye-catching look.

It took seven years of steady advertising pressure, but we did reach a tie for the number one brand with another full line manufacturer. And the number one brand awareness and home expert image drove quality retail traffic and sales success. This was a great competitive advantage for our retail partners.

Thomasville Galleries and Store merchandising was built around in-store room displays, showing good-better-best wood and upholstery groups in beautifully accessorized displays. Again, we always displayed our five style categories with other groups shown in each style segment through highly attractive room photography. Our Gallery and Store traffic and display layouts, piece selections, and accessories were designed by our exceptional Gallery and Store designers.

The most important part of any retail operation is the sales associate—the warm store greeting of customers and knowing when and how to approach them, coupled with a strong, firsthand knowledge of Thomasville manufacturing commitments to quality.

To support our retail sales associates, we developed and ran 10 sales training classes, averaging 20-25 sales associates, in one-and-a-half-day periods. The results were exceptional, not only with the learning and results, but also the opportunity to directly strengthen the bond between Thomasville and retailer.

HFB: Why did the expansion of the concept to other FBI companies not succeed? Was it more than just execution?

Starr: The other FBI companies were loaded with talent and had an excellent knowledge of the home furnishings industry, but with Thomasville committed to galleries and stores, the other companies elected to stay with their traditional manufacturing focus.

HFB: In the past 20 years, the power balance has shifted to retailers. What would the industry look like today if that had not occurred?

Starr: It’s a natural conclusion that some type(s) of nexus between manufacturer, retailer, and consumer would have been created. In fact, back in the 2001 dot.com bust, several start-ups attempted to create a more efficient home furnishings sale, where the consumer shopped, chose, and ordered from an e-commerce site. None of these survived, primarily to 31percent-33 percent returns. Wayfair is taking another shot at this, and certainly has the investment funding to prove or disprove the concept. Time will tell.

Market proximity is quite an advantage for American manufacturers, and we’re seeing this working with motion upholstery in Mississippi! Imagine manufacturers building cost structures comparable to Asian manufacturing-freight costs in wood furniture.

HFB: What are some ways manufacturers have innovated since the 1980s, such as manufacturer-direct stores?

Starr: Not sure if there’s much, if any, serious manufacturer-retailer activity in innovation. Ethan Allen is surviving, but Farooq seems to be fighting a headwind.