Focus Is On Furniture At CES

January 31, 2007  by in UnCategorized   

By Home Furnishings Business in Case Goods on February 2007 It’s too early to tell whether any of the technological breakthroughs unveiled during January’s Consumer Electronics Show (CES) will one day rival past CES intros such as the VCR (1970), the camcorder (1981) or DVD movies (1996).

As soon as CES opened its doors on Jan. 8, the products that generated the most excitement were new flat-screen TVs that have grown to enormous proportions—with screen sizes of up to 108 inches on one SUV-sized, $70,000 set by Sharp. At the same time, industry observers were voicing concerns that intense competition between rivals like Best Buy and Circuit City is pushing down the prices and profit margins for hot-selling TV technologies, including plasma and LCD sets.

According to the Consumer Electronics Association, more than 13.5 million flat-panel TVs were sold in 2006, and retailers can expect to sell more than 20 million LCD and plasma screens this year. Many of the dozen or so furniture manufacturers and importers in Las Vegas for CES say those numbers represent big opportunities since nearly 70 percent of entertainment furniture purchases are prompted by a new TV purchase.

The situation has electronics retailers looking to furniture as a promising source of add-on margins. “If you go to an electronics chain to buy a $3,000 television and a $300 stand, that retailer is getting nearly the same amount of margin (in dollars) on the TV that they get on the (furniture),” said Jeff Morris, a spokesman for Minneapolis-based Sanus Systems, which sells to big-box electronics stores and specialty audio-video dealers.

Bush Industries, a long-time CES exhibitor based in Jamestown, N.Y., gave up its spot at the Las Vegas Convention Center and instead worked to attract electronics dealers to its permanent furniture showroom in the World Market Center. James Schmidt II, vice president of sales, said the move was successful both in lowering the company’s exhibiting costs and allowing for more focused meetings without all the distractions of the CES show.

In light of the dramatic price cuts on flat-screen TV technologies in recent months, Schmidt said electronics dealers were receptive to Bush’s message that add-on furniture purchases can help recapture lost profits. “The message is, ‘Getting attachment (or add-on) sales on the furniture that has higher margins is a strategy for how you’re going to achieve higher margins,’” he said.

As a result, big-box dealers are starting to stock higher-priced furniture costing over $499, which has long been a top price point in those stores, according to several manufacturers at CES. In addition, big-box retailers that typically favored ready-to-assemble furniture are adding more fully assembled pieces and are seeking to provide more stylish wood cabinets.

Competition Heats Up

Increasingly, the offerings at electronics stores are starting to rival those of traditional furniture stores. At Martin Furniture, which was exhibiting at CES for the first time, Vice President of Sales Karl Eulberg said, “The consumer is confused about where to go because at the consumer electronics stores, the furniture is really sharp and contemporary, and the furniture stores have the lifestyle looks they want in entertainment furniture, but the function is not state-of-the-art.”

Gil Martin, the company’s owner, said he opted to exhibit at CES for the first time to reach the companies that supply furniture to electronics stores and to learn about emerging technologies. “Getting the cabinet right with all of the latest features and functions is our main goal, and I think we’re learning a lot from the electronics dealers who face those consumers every day.”

In both electronics and furniture stores, there’s also been a shift away from large five-piece entertainment walls in favor of one-piece TV consoles that can easily house today’s TVs, which are both narrower and lighter than older technologies. Since the smaller TV stands typically cost far less, traditional furniture retailers have been fighting an erosion in sales-per-square-foot figures in their home entertainment departments, Eulberg said. To help retailers battle that trend, Martin was showing TV stands in a stacked formation that shows shoppers more choices without taking up more floor space—and boosting sales-per-square-foot figures as a result.

At Bush, Schmidt said traditional furniture retailers need to fight to “communicate to the customer that you have entertainment furniture that’s relevant to today’s technology. A lot of (furniture retailers) still have armories that are designed for old-format TVs” that are much more square and heavier than new wide-screen TVs.

Pointing to the company’s best-selling TV stand, Schmidt said traditional furniture stores face challenges in selling it because it can easily be mistaken for a coffee table when it’s not displayed with a TV on top. As a result, Bush created its own prop TVs and, over the past year, has built a gallery program called E-Zone. More than 50 retailers now have E-Zone galleries devoted to top-selling entertainment and furniture products, including consoles that are specially designed for the latest videogame consoles.

At the same time, electronics specialists like Sanus and Bell’O are developing more casegoods with designs that hold appeal for the Pottery Barn customer, but are “engineered to appeal to serious audiophiles” with features that included advanced heat dissipation to protect expensive amplifiers and other components, said Morris, the Sanus spokesman.