Whoops!

May 31, 2008  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on June 2008 Of course, in the furniture industry, mistakes can have far more dramatic consequences than a flubbed lyric, a missed note or, even, an affair with Ava Gardner. You only have to look at the spectacular flameouts of chains like Wickes and Sofa Express to see the results that strategic errors—coupled with a difficult economy—can have in today’s complex business climate.

Yet, furniture store owners who shared the biggest mistakes of their careers with Home Furnishings Business echoed Sinatra’s philosophical approach to overcoming business hurdles, with virtually every respondent focusing more on the lessons offered by their miscalculation than the mistake itself. Even in cases where the errors carried multi-million-dollar price tags, the retailers involved are able to look back and focus more on the lessons that were learned—and continue to shape decision making—rather than agonize over short-term losses.

The retailers Home Furnishings Business contacted were surprisingly forthcoming in discussing career mistakes that had occurred, in some cases, quite recently. All of the participants have been highly successful over a period of years, and each addressed a different area of their respective businesses. Topics ranged from buying a competitor to showing too much loyalty to employees. The responses from a dozen top retailers were edited for clarity and space limitations.

Andrew Tepperman
Tepperman’s Furniture, Windsor, Ontario, Canada (four stores)

Keeping Up with Expanded Duties

“On the people side of the business, a mistake that has occurred a couple of times involves leaving people in a position after (the job) outgrows them,” said Andrew Tepperman, president of the 83-year-old family business that has significantly expanded a couple of locations and added a 85,000-square-foot store in recent years.

“In most cases, these were good people who had hit their ceiling. In other cases, these were great people who excelled in a specific area and who were promoted, but received minimal training to excel in the new position,” he said. “While (negative) financial and operational issues are an aspect of what can occur in those situations, it’s also not fair to the person. My personal mistake in these situations comes both from being sympathetic to the person and seeing the situation as one where I had failed by not being able to develop those employees.

“What has happened in every case where the person moved out is that results and morale improve,” he said. “... While drive, ambition and a willingness to learn is important, we also see that the company must take on a greater role in a continuous development program. As a company, we are much quicker to act when there’s smoke. We’re also more aware and in tune in training internally promoted individuals.”

Jake Jabs
American Furniture Warehouse, Denver (11 stores)

‘If We’d Had A Little More Time To Investigate ...’

In about 1997, American Furniture Warehouse of Denver purchased a dozen Webergs and Rhodes stores from Heilig-Meyers in what Owner Jake Jabs recalls was a take-it-or-leave-it proposition on an extremely short timetable. The plan was to buy and close a least nine of the 12 stores, giving AFW a bigger share of the market.

“If we’d had a little bit more time to really investigate the operation, I wouldn’t have bought it,” said Jabs, who now operates 11 AFW stores. “I didn’t realize how poor of an operation it was and how much junk (inventory) they had. ... We walked all the Denver stores, but we should have also gone to those other stores” elsewhere in Colorado, he said. “They had trailers sitting outside they couldn’t unload because of all the customer returns, damaged merchandise and other junk that was packed inside. ... There were also a lot of leases involved, including one we just got out of over in Westminister. ... Two years ago we bought Homestead House’s three stores in Denver. We just sort of low-balled that offer, and kept two of the three stores. We had learned a lesson from (Webergs/Rhodes) to tread more lightly and make sure it’s a good deal. We had lost quite a bit of money, plus there was the heartache of a lawsuit on the one of the leases. That was a huge mistake. They went bankrupt three years later, and that would have wiped out all the leases we got hung with.”

Ken Loring
Boston Interiors. Stoughton, Mass. (six stores)

Test-Driving Merchandise

Not every collection or sofa that’s gone on one of Boston Interiors’ six showroom floors has been successful, but Ken Loring doesn’t think of those duds as “mistakes.”

“I prefer to call them ‘tests,’” said Loring, president of the Stoughton, Mass.-based retailer. “You have to have some strikes to get a hit, and one or two are home runs.”

The key to keeping too many tests that don’t pan out from taking too big a bite is to have detailed, accurate performance measurements for each slot. “See what characteristics are in common in the best sellers, and what characteristics are in common with those that aren’t,” Loring said. “We always analyze a slot for its production. You should constantly test merchandise on the floor to see if it’s above the mean or below the mean.”

Boston Interiors sometimes even “overbooks” when it comes to ordering at markets.

“We’ve ordered product that never got made, and I’ve had vendors tell me they couldn’t send me something I ordered” because of distribution issues, Loring said. “We shop a lot of the smaller guys since sometimes (larger companies) have already tied up something I like.”

Sometimes a product arriving at the store just doesn’t measure up to what Loring saw at Market. In those cases, it’s best just to unload it in a hurry to make room for a winner.

“We had some beds come in that we couldn’t assemble” due to faulty connectors, Loring said. “Our repair guys are as good as people in the factory, so we repaired it and got rid of it. Sometimes you have to run it at clearance. We’re testing some goods from Brazil right now. If it doesn’t work out we won’t reorder it.”

Dean Embler
Direct Furniture Factory Outlet, Shelby, N.C. (three stores)

Hoping Things Get Better

“Right now, I have two giant tent sales going on in Lexington and Greensboro, and I’m spending $10,000 a week advertising them, and I should have spent, maybe, $5,000,” said Dean Embler, who operates out of three former Wal-Mart buildings with a combined size of 300,000 square feet. “Last week (right before income taxes were due on April 15), I should have spent nothing. It’s just the economy is so far off. ... The mistake I make is chasing the consumer with advertisements that cost so much. The mistake is spending too much on advertising in the hope things will get better, and they just don’t.”

On the positive side, Embler said the furniture industry downturn is making it easier to find the closeout deals he specializes in. “So many of the major (manufacturers and importers) have so much excess inventory, we’re able to get truckloads of closeouts and discontinued items on 50 percent to 70 percent off. Closeouts (are) what I’ve done for 30 years, and the market is flooded with them right now. I was just helping a lady in the store who was looking at a (name-brand) painted table. The factory wholesale price was $187, and I was selling it at $149, so it’s nearly $40 cheaper than wholesale, and she tells me, she’ll have to think about it. People don’t realize a deal when they see one, but if she looks for that table at any other store, she’ll be right back here in a hurry.”

Doug Kays
President of the National Home Furnishings Association

Holding on Too Long

Seven years ago, Doug Kays was a senior vice president at Heilig-Meyers, and after the chain’s liquidation, he joined with a partner in 2001 to lease eight stores and lined up $14.4 million to finance a business plan that called for opening up to 34 Premiere Home Furnishings stores up and down the West Coast. Unfortunately, that credit deal fell thorugh in the wake of the attack on the World Trade Center, which was eight blocks from the financiers that had backed his business plan. So, he had eight operating stores, but lacked the financing to grow bigger as planned.

“For the next four years, we operated the business out of cash flow, and the eight stores were positioned across the West Coast (including Washington) in a way that didn’t make a lot of sense without more fill-in stores,” he explained. “From a personnel standpoint, we had a general manager and three regional supervisors who I didn’t really need unless the company was expanded as we had planned. There were a lot of mistakes, but most of it was circumstances that couldn’t have been anticipated, but I think the main mistake was holding on to those very good, very loyal employees when I didn’t have the store structure to justify it. ... They were fairly heavy payroll positions, and I held on to them for way too long because they were great people and I wanted to show the same loyalty and support they had shown me. ... When it became clear early on that we would have to start over again on the financing, it would have been better to have made the dramatic cuts.”

In the end, Premiere operated with eight stores for about two years, and then wound down gradually as stores were liquidated one by one over a four-year period to pay creditors off without resorting to bankruptcy.

Peggy Burns
Circle Furniture , Acton, Mass. (five stores)

What’s in a Name?

Back in 1989, Circle Furniture operated three locations when, as Peggy Burns recalls, the management team decided to re-brand as Choice Seating, a concept that was a forerunner to today’s factory-supplied franchise stores.

“It sounded like a great idea at the time to go with a concept that was all special order, so we would have no inventory,” she said. “We were going to close all three Circle stores to go to the Choice (nameplate). But, instead of closing all three, we kept the Cambridge store as Circle Furniture, and we opened a third (Choice) store right as there was a recession.”

The owners embraced the concept so strongly that the Cambridge Circle store dropped upholstery to focus on case goods. “It became really complicated to market both concepts,” Burns said. “It’s very expensive to advertise in Boston, so we tried to market Circle and Choice together in our ads in different ways for several years, and it just confused people.”

After struggling with those complications for more than five years, the ownership team decided to again embrace the Circle Furniture nameplate across all four stores.

“We switched back, and business improved 50 percent almost overnight,” she said. “Since we had been in business (as Circle) for such a long time, people remembered us. The concept was something that looked good on paper. The whole idea was that customers would order a sofa, love it and keep it, but they didn’t always love it and sometimes didn’t keep it, and the marketing became so confusing with the two names.”

Keith Koenig
City Furniture, Tamarac, Fla. (15 stores)

Not Getting Out of the Comfortable Waterbed

“My biggest mistake back when we were in the waterbed business was not listening to Bill Lindler, who is a consultant (based in Atlanta) and a dear friend. He said, ‘You guys ought to get into the furniture business. You could be a lot more successful,’” said Koenig, who ran the 37-year-old retail chain as Waterbed City with his late brother, Kevin Koenig.

“We finally opened our first City Furniture store in 1994, but it was several years after Bill had told us we could sell a lot more in furniture than in waterbeds, which was a business we knew and thought we could continue to be successful in. As it turned out, he was right and furniture was a lot better business than waterbeds. If I had to do it again, I would have figured out a way to get into the furniture business earlier. Even though furniture sales are down across the industry right now, it would have been quite a bit tougher for us if we had stayed in waterbeds.”

Todd Lehman
Inter!ors, Lancaster, Pa. (one store)

‘It Was Pretty Ugly!’

“I think my biggest mistakes in this business have been around the ‘people’ part of the business, including in interactions with customers that have ranged from me being too much of a pushover to not taking time to think things over long enough,” said Todd Lehman, president of the family-owned Inter!ors. “As much as I believe that all of our people are doing the best they can and being totally open, when there’s an issue I should be sure to speak to the customer and not just listen to our people.

“As an example, we had a situation where a customer had custom-ordered a $5,000 sofa and after it arrived, they didn’t like it and wanted us to take it back,” he said. “We normally charge a (30 percent) re-stocking fee for that, which they weren’t willing to pay. After the issue went through the designer to the sales manager to me, I’d heard that it looked fine, so in my conversations with the customer I defended the designer. After an hour-long phone conversation with the customer and her husband, we took it back, but I wasn’t happy about it and the customer wasn’t either. Then, when the sofa came back to our warehouse a couple of days later, the manager there called me and asked, ‘Who in the world ordered this ugly sofa?’ I kind of chuckled to myself about it as I realized that in a situation like that, it would have been much better if I had taken it to the next step and actually gone to the customer’s house to see it. If I had done that, I probably would have looked at it and said, ‘You’re right; it is ugly and you shouldn’t have to pay for it.’ The way it turned out, it got to be a pretty heated discussion when it shouldn’t have been, but, in the end, they came back to us.”

Jim McIngvale
Gallery Furniture, Houston (one store)

‘It’s Like Drugs; You Have to Wean Yourself Off’

“I’d say my biggest mistake in furniture retailing is getting enamored with buying containers of furniture from China,” said Jim “Mattress Mac” McIngvale. “By that, I mean buying too many (directly) versus buying domestic or buying from a wholesaler. It kills the inventory turns, and all of the sudden you have 10 containers spaced out over four or five months. When the product (sales) slow down, you have 40 sets of something you can’t give away. The high margins are enticing and look great on the front end, but they aren’t so great when you figure out the total cost. The complexity is overwhelming. This is a lesson I’ve learned over the past couple of years. It’s like drugs; you have to wean yourself off of it. I think the entire American furniture industry is fixing to learn the same lesson.”

Gerard Kvasnovsky
Danker Furniture, Gaithersburg, Md. (five stores)

Round-the-Clock Fire Drill

A small retail organization can have the same atmosphere as a hospital emergency room, and that hectic environment can affect the quality of management’s decisions, said Gerard Kvasnovsky, a partner and the key buyer for Danker Furniture, a five-store retailer based in Gaithersburg, Md.

“If you’re the doctor in charge, people are pulling on you for answers from all different directions,” he said. “You’re always putting out fires, and quite often you don’t realize which fire you’re extinguishing or even if it’s the right one. That’s a mistake I made for a long time.”

While the fire-hose approach can make an owner feel productive and busy, the problem is that all problems tend to get the same amount of time and depth of consideration. “Should I call Mrs. Jones about the sofa that doesn’t fit in her house or call my bank to negotiate my $1 million line of credit?” Kvasnovsky said by way of example. “You want to please your customer, but those two problems just don’t call for the same amount of time and thought.”

Kvasnovsky’s solution carries his emergency room analogy a step further: a “triage” of issues facing the store manager, preferably carried out at the end of the work day when there’s time for reflection, and listed in a memo for next-day resolution. “You put a dollar amount to each issue you’re going to resolve, and consider the time frame affected by your decision,” he said, noting that a lease, for example, might involve a 10-year commitment, whereas a bank line of credit typically covers a year. “Isolate yourself in the morning and work down through those items you prioritized the day before. I’ve found it’s best to make heavy decisions first thing in the morning when you aren’t tired.

“It sounds simple, but we sometimes don’t isolate ourselves enough to be able to think clearly.”

Terri Bowersock
Terri’s Consign & Design, Tempe, Ariz. (nine stores)

Finding Your Inner CEO

“Because of the way all of us are raised as women, I felt that I had to find a male CEO to act in a lead role. ... Plus, I remember when I opened the first store, reps would come in and, at some point, they’d always ask, ‘Where is your husband?’ They were assuming that a man was (behind the scenes) running it,” said Terri Bowersock, whose chains sells a mix of new furniture and consigned goods. “Even though I started the business and had all the creative ideas, I did hire a male CEO as we started growing. I think I hadn’t given myself permission to have power, and I thought he ran things well because he was consistent and was sort of stern with people. ... I think, as women, we tend to try to maintain a one-for-all, all-for-one kind of a family structure. (Looking back), I should have let him go five or six years before.”

In short, there was a major falling out between the pair, and Bowersock again found herself holding the CEO reins. She leads with an entirely different style. It’s more collaborative and rarely involves simply giving orders. There’s a lot of listening, too.

“I try to step back and say, ‘I hear what you’re saying. I think we’re all here to try to do our best, but I really believe my idea will work if you try it with me.’ We talk it through,” she said. “In the past, I didn’t want to be the CEO, but now I’m comfortable with it. I think the lesson is to not sell yourself short as a woman. If I had done that from the beginning, I think we would be further along today. I’m finding out that I’m a darned good CEO, and I wouldn’t have said that a year and a half ago.”

Marty Cramer
Cramer’s Home Furnishings, Ellensburg, Wash. (five stores)

‘Don’t Let Excitement for the Deal Cloud Your Judgment.’

“The first time I bought a store from someone who was retiring, I didn’t pay attention to the smaller parts of the deal. In other words, the inventory was valued at a certain number, and I just accepted that,” said Marty Cramer, owner of Cramer’s Home Furnsihings. “The reality was, probably, 30 percent of it was dead. We ended up having to sell some of it for less than what I paid just to get it out of the system. It took me a lot longer than I expected to move that inventory out, so it clogged it all up, and I couldn’t get my own inventory in there. There were just a lot of issues like that, and I learned a lot from it. I’m still in that location, and it’s a great location, but it was a bigger undertaking and it cost me quite a bit more than I expected.

“Since then, I have acquired other stores, and I’ve done a better job,” he said. “I have a checklist process, and I also have developed a way of explaining why some part of the deal may not work for me. When it comes to taking the inventory of someone who is retiring, it’s typically not all suitable for my stores. It’s higher-end, more expensive, and it has to be taken down to a sellable price or it will just sit there in my store. In fact, I still have a little bit of the inventory from that store I bought four years ago, mostly in the accessory department. What I learned mostly is don’t let your excitement for the deal cloud your judgment.”