KFI Sr. V.P. of M’kting and Strategic Development on the Importance of Merchandising

April 30, 2006  by in UnCategorized   

By Home Furnishings Business in on May 2006 In the past couple of years, KFI has moved into retail with the Sofa Express and More format, first with company-owned stores, now with franchises? How has that changed the company’s merchandising approach toward the entire line?

Our merchandising product managers work very closely with the merchandising team at Sofa Express and More. That gives us a retail perspective from the get-go on what the needs are in the marketplace.

The growth of Sofa Express and More into full-line stores with bedroom and dining in addition to upholstery and occasional, though, was more a reflection of Klaussner’s expansion into those other categories.

We believe our relationship with SEM benefits all our customers. The input we get from that retail merchandising team is beneficial to everyone we sell across the country.

One result of Sofa Express and More’s inclusion in our company is that we have to bring more product to the marketplace so there’s plenty for everyone and fewer distribution conflicts with our independent retailers.

Klaussner has always been a leader in custom-order upholstery and speed to the marketplace with solid custom product, but our alliance with SEM forced us to become better, with more selection, better service and ultimately, better overall value.

We have to think like retailers, and even more so, like consumers.



Dedicated stores have been known to create friction between the supplier in question and its original retail base. Has Sofa Express and More resulted in flak from existing dealers, and how do you handle it?

Yes, our association with SEM has created a certain degree of tension, especially in market areas that we share with other dealers, but we believe that we have now proved to those retail partners—over time—that our initial plans and intentions are indeed a reality.

We believe that a diligent, careful and respectful expansion, as opposed to a blitzkrieg-like approach to growth, will allow us to nurture conventional buyer-seller relationships for years to come.

It does seem there’s less friction today (with our traditional dealer base) because we’ve proved to our customers that we do have their interests in mind. When we first acquired Sofa Express, everyone took a wait-and-see approach to our position.

What I believe we proved is that we’ll do what we say we’ll do, and not do what we say we won’t do.

We did lose some business, but our single biggest customer loss, as a result of our decision, was Rhodes. People might have released a slot or two of ours on their floors in anticipation of where we might be headed, but I think we’ve gotten a lot of that back.

We have no desire to have 1,000 stores, and we don’t ever envision all our production going to our dedicated channel. That’s just not on our radar screen. Part of the strategy and diligence of every decision we make is to build our distribution through conventional channels.



As you moved into case goods, what were some of the unexpected problems that arose, and how did you handle them?

When you think about importing, you think about case goods, but there’s so much more involved, and what we went through with bringing in finished bedroom and dining is nothing new to anyone who’s made that move. Currently we import many products across the board from raw materials to all sorts of finished goods.

Everything exploded all at once, so our (import) growth and learning curve directly correspond with each other.

For the most part, product is product, merchandising is merchandising and selling is selling. Importing is about the flow of all those aspects of the business and the systems that support that flow. We’re still learning, but have already invested substantial capital resources into supply chain management. That includes the addition of a brand-new, state-of-the-art West Coast warehouse and distribution facility; and the ongoing implementation of Logility’s Voyager Solution demand, inventory and replenishment-planning software modules.

The Logility system has been in development since the first of the year, and I think it will change our lives, and our customers’, in terms of import management—it’s essentially an ERP system for the purchasing function. In April, we began turning that on module by module.

Our single biggest issue with importing—keeping the pipeline efficiently full—will be addressed by this system.



With the Dick Idol license and the World Vineyards umbrella, KFI is one of the major mid-price players in branding. How has that move changed your approach to translating the dealers’ market showroom experience to the retail floor?

You hear so much about licensed lifestyle programs, but it seems a lot of them under deliver on their promise. It’s easy for us to present that vision in our showroom, and we want to make it easy on retail sales floors.

Regardless of price points, we believe that in the middle tier of the market, this is how the consumer expects to be able to shop. Klaussner is willing, able and obligated to reproduce the lifestyle-oriented presentation in our showrooms to any retail floor in the country—all we need is an invite.

We have people beating down the door to offer us lifestyle license programs, but we’ve chosen to limit ourselves to Dick Idol and World Vineyards, which is really the same licensing organization.

The two licenses share ancillary suppliers for categories such as rugs, lighting and accessories. Our licensing approach just isn’t broken, and we can’t see why we should try to fix it.

Licensing has definitely changed our overall approach to telling our story at retail. For introduction this summer, we’ll offer Klaussner-branded rugs, lamps and accessories, anything needed to set up a retail floor the way we would our showroom.

That’s a direct out-growth of our merchandising experience for licenses. We’ll draw from the same suppliers we’re already dealing with for Dick Idol and World Vineyards, and we’ll offer retailers assistance from our own designers.

It’s still difficult to get our showroom presentation translated in the real world at retail, and it’s increasingly important to do so.



Which markets do you view as opportunities for your dedicated-store program, both company-owned and franchised? Details on plans in the next couple of years?

Company-owned stores will grow in existing markets, mainly Georgia, Florida, Indiana, Ohio, Tennessee and North and South Carolina. There’s nothing on the horizon that would go beyond filling up those existing areas. Currently, our plan in the SEM corporate office in Columbus, Ohio, is to identify markets where there are existing stores that either need to be supplemented with additional stores, or re-established with new, more suitable locations, or possibly both.

Our first licensed store opened in Hattiesburg, Miss., in April, and we expect to open four more this year. We’ll be in position next year to roll out a couple (of licensed stores) a month.

Philadelphia will be the next licensed location, and that’s set to open in August. We see that market becoming a multiple-store operation over the coming years.

For licensed expansion, we’ll look first for markets that closely match our (consumers’) demographic and psycho-graphic profiles, where we are considerably underserved with regard to existing distribution and breadth of product representation. Ultimately, these markets will fall outside the scope and service radius of the SEM distribution centers currently in place.

And, a lot of the licensed growth depends on which retailers are interested. HFB