BRAND REBOOT

November 12, 2013  by in Business Strategy, Industry   

Eight years ago, South Florida retailer City Furniture had come far from its beginnings as a waterbed retailer in the 1970s, evolving from a specialty store into a full-line home furnishings powerhouse in the highly competitive South Florida market, concentrating on value pricing and bringing services such as one-day delivery to customers ranging from Key Biscayne, up the Atlantic Coast to Stuart, and west to customers in Fort Myers and Naples.

 

That was when the Tamarac, Fla.-based retailer began another transformation that’s coming to fruition this year. The process involved renovating the brand through revamped stores and bright footprints at new locations, a move toward more upscale and unique product, and national-quality advertising that projected emotional appeal—plus attention to detail on all consumer touch points to carry through on that brand promise. And now, City is set to open its first stores in Central Florida this month, two locations in The Villages shopping area, which lies between Orlando and Ocala. What commands attention here is that City was doing all this during a period when a lot of its retail counterparts were retrenching or going out of business. At City Furniture, an investment that President Keith Koenig said is well above $100 million reflected a faith in its markets, the business model it envisioned, and its team.

Koenig sat down with Home Furnishings Business during the October High Point Market and later on the phone to discuss his company’s direction and how it pointed itself that way.

NEW TALENT, LONG EXPERIENCE

“We have fundamental belief in our business model, our team and our marketplace,” he said.

That team has leadership from old hands with a sense of the company’s roots, but also has an infusion of fresh faces with bright ideas that City goes out of its way to find. City actively recruits among colleges for sales management trainees, but while it goes to great lengths to find fresh talent, City’s core executive group has been together for a long time.

Mike Lennon, senior vice president of marketing, and Koenig have known each other since sixth grade and roomed together in college—they came on board in 1978. Garry Ikola, senior vice president of sales, has been with the operation since its days as a waterbed retailer, joining in 1973.

CFO Steve Wilder came on board in 1980; Senior Vice President of New Markets Curt Nichols and Vice President of Human Resources Janet Wincko have 20 years in the company, Vice President of Finance Kevin Riggott, 10 years; and Andrew Koenig, Keith’s son and managing director of operations, grew up in the business.

“We have experience, but also a young team, and they’re ready for the responsibility of working new stores,” Koenig said.

DEVELOPING A MODEL

In 2005, City decided it needed to make a deeper connection with consumers in the markets it serves. “Our real estate, our brand wasn’t where we wanted it to be,” Koenig said. “Too much of the industry is transactional. The customer wants to be emotionally connected to the furniture in her home and the brand she buys from.

“The goal has to be a real emotional connection with that consumer that essentially gets her to prefer our store to any other—who we are, what we do, and why it matters.”

The questions were: Where does City want to be? How does it build an emotional connection, a brand that makes consumers want to choose its stores?

“From that, we wanted to build all the touch points,” Koenig said. “We put the most investment into the stores, but we also put a lot of investment and time into the Web site.

“We had to learn how to shoot world-class photography that competes with the best online merchandisers in home furnishings, the Crate & Barrels, the Restoration Hardwares—and we had to do it at a lower price. That’s those others’ Achilles heel.” Television ads, which can be viewed on City Furniture’s Web site, were remade to resonate on emotional levels with the consumer and connect in a way that made her want to come to the retailer’s showrooms.

“The brand, whether it’s in an ad or the Web site, has to be aligned with every touch point in that customer relationship—store appearance, delivery, you name it,”

Koenig said. “That relationship is very fragile and has to be nurtured. “To do that, first, we’ve invested in our stores to create the shopping experience that’s consistent with what she’ll find appealing.”

On the Web site, City invested in new architecture, and in its own photography. “It’s not enough just to throw a manufacturer’s shot up there,” Koenig said. “Our television ads are shot in beautiful South Florida homes. Our advertising is national quality.”

IN-STORE SIZZLE

This year, City Furniture added Bernhardt as its primary high-end vendor. “We have Bernhardt galleries in all City stores now,” he said. “Bernhardt is the best fit for us at the high end for value and service.”

Those galleries range from 3,000 to 4,000 square feet. Since the first opened in March, the galleries already produce high dollars per square foot, Koenig said.

“It definitely opened some new doors for us and created a favorable shopping experience for our customers, whether or not they’re a Bernhardt customer,” Koenig said. “It makes everything look better.

“It fits what we want to do as a brand—fashion forward, beautiful furnishings, many of which people can’t find anywhere else.” That last part of City’s brand equation—really more than any cost savings—is what’s driven its extensive sourcing and manufacturing of private label product. In addition to its proprietary Kevin Charles upholstery line, the retailer sources exclusive case goods overseas; and works closely with key domestic vendors on product development.

Koenig credited Lennon and his team with helping City offer unique product to customers. “He’s the genius behind all our marketing, merchandising and branding,” Koenig said. “He’d put all the credit on his team, but he’s the leader.

“Mike’s developing more and more proprietary product that fits what our customers want, and to work with our vendors on that product. It’s not about saving the last nickel, it’s about getting what the customer wants.”

CUT COST, ADD VALUE

“What the customer wants” also means pulling out waste in the process so there are no unnecessary costs. “If we’re over-priced on any item, she’s going to know it, and that doesn’t add to our brand, which is quality furniture at an outstanding value, and in many cases, something she can’t find anywhere else,” Koenig said. “The operational logistics have to be place in order to deliver on all of that brand promise, not just one or two parts.”

Recycling and energy efficiency are part of that cost cutting equation. City has recycling programs for a huge amount of its packaging and paper, and it has broken ground among furniture retailers in making its stores environmentally friendly. “We just completed our sixth LEED-certified furniture store,” Koenig pointed out. LEED, or Leadership in Energy & Environmental Design, is the U.S. Green Building Council’s standard for energy efficient building design. City also is considering transitioning its truck fleet to operate on compressed natural gas; and Kevin Charles upholstery uses soy-enhanced cushioning. “We aren’t ‘tree-huggers,’ but it’s the right thing to do balanced with business sense,” Koenig said.

City Furniture at a Glance

Homebase: Tamarac, Fla.

Store Stats: 11 City Furniture stores totaling around 750,000 square feet; and 11 Ashley Furniture Homestores with around

300,000 square feet serving greater metro Miami and South Florida Atlantic Coast; and Naples/Fort Myers.

Other Holdings: 800,000-square-foot, high-cube Fort Lauderdale-area warehouse serves all locations except new central

Florida stores with same-day delivery.

Future Plans: Set to open two stores in early November in The Villages, located between Orlando and Ocala.

Key Vendors: Kevin Charles Upholstery, Cheers, Bernhardt, Serta, Casana, HTL, Lifestyle, Steve Silver, Idea Italia, Natuzzi.

Key Management

Keith Koenig, president

Mike Lennon, senior vice president of marketing

Garry Ikola, senior vice president of sales

Steve Wilder, CFO/CIO

Kevin Riggott, vice president of finance

Curt Nichols, vice president of new markets

Andrew Koenig, managing director of operations

Janet Wincko, vice president of human resources

Dave Francis, managing director of City Furniture Lean Conversion Office.

 

A Look at City Furniture’s Markets

Furniture kept expanding during an economic downturn, and a big reason is faith in its markets’ future.

“The economic data clearly shows housing will be on a growth track for the next few years,” said City President Keith Koenig. “We’re looking at 900,000 new home starts in ’13; 1.1 million in ’14; and 1.4 million in ’15.

“We’re seeing it on our South Florida market after several years of a really challenging housing environment. The demographic trends for Florida are going to be solid. You’ll still have baby boomers moving to Florida. We have a favorable economy, and I think the state will outperform the rest of the country. All that makes us very confident in investing in the future.”

Stuart, Fla., City’s northernmost location, opened in 2005, is a fair drive from Miami, but is still part of a whole.

“It’s really part of the Southeast Florida metro area,” Koenig said. “There are 6 million people in multiple (greater metropolitan areas) and television markets, but they’re all easily serviced with same-day delivery out of our Fort Lauderdale/Tamarac distribution center. Past that you really can’t do same-day.”

There’s a lot to be had there.

According to Home Furnishings Business research, City’s East Coast markets are projected to total more than $1.1 billion this year; and around $400 million in the Gulf Coast markets it serves.

While City is expanding into Central Florida at The Villages between Orlando and Ocala, the retailer is holding off on same-day delivery there—for now.

“Our long-term vision is to have stores in Tampa, Orlando and all across Florida,” he said. “The Villages is the first step, and it was a little earlier than expected … Eventually, we’ll make the investment in local distribution centers.”