Ed Grund

June 30, 2008  by in UnCategorized   

By Home Furnishings Business in Case Goods on July 2008 Ed Grund’s been around the block and around the world in the furniture industry. After leaving Levitz Furniture and taking some time off, he went to China to launch a joint retail effort between Chinese manufacturing powerhouse Markor and Ethan Allen. After wrapping that up, Grund teamed with Markor to start A.R.T. Furniture in 2003. The company’s seen steady growth and has been building its service infrastructure stateside to complement a mixed-container program out of China. Grund took time during a June visit to A.R.T.’s Hight Point showroom to discuss A.R.T.’s business and some of the challenges facing furniture industry players both in the United States and in Asian source countries.

A.R.T. Furniture’s source plant is one of China’s largest furniture manufacturers, Markor. What’s your take on the current environment in China for furniture manufacturing?

There’s no question that furniture manufacturing is in a state of flux in China, particularly Southern China. Hundreds of manufacturers have gone out of business, with the owners just closing the doors. The stronger ones, and Markor is one, with the capital structure in place, will keep going.

Raw material costs, wages, increases in energy and fuel prices are all challenges. I think all manufacturers, (in China) not just Markor, are looking to make inroads into higher-price product. A lot of the opening price points have moved to other countries, which are not without their own challenges.

Vietnam, for example, was faced with no infrastructure or deep-water port, and that’s been coupled with 25-percent inflation and workers striking for more money.

We think our arrangement with Markor is a good one because of the quality and finishing capability they have, and the fact they’re going to be in business.

With rising costs for overseas production and transportation costs, along with the logistical issues of importing, some retailers stateside are taking a closer look at domestic producers. How is A.R.T. reacting to that?

I think you’ll find retailers that always look to domestic suppliers, but to be honest, I’m not sure how a domestic resource can compete with the prices, even with cost increases, that a Far East manufacturer can provide. It’s probably more of a factor in the upholstery business.

Our plan is to make sure we’re servicing the retailers with a 150,000-square-foot warehouse in China capable of mixing five collections in one container. That significantly lowers the investment on the retailer’s part.

We just expanded our warehouse from 40,000 square feet to 90,000 square feet in Ontario, Calif., and we just opened a 35,000-square-foot warehouse in North Carolina managed for us by Zenith Logistics for servicing East Coast retailers.

We give retailers the flexibility to order small quantities in one container, and if they need product quickly, they can get it from our East Coast or West Coast warehouses. The thing we’re focused on is continuity of flow.

We’ve also revamped our sales organization. Bill Sibbick came on board and brought new representation. We’ve added reps because we want to service accounts at the level they expect.

A.R.T.’s been on a pretty strong growth track. Is there anything you can share on how you plan to maintain and build your market share in a difficult retail environment?

We’ve done several things. We have a good base of the top 100 furniture retailers, and we enjoy good business with Berkshire Hathaway Group, Art Van, City Furniture, Macy’s and some others.

We see an opportunity to continue doing business with those types of accounts, but we can grow with small to mid-range retailers through mixed containers and the warehouses. We’ve reached agreements that we think will be very important. One’s with FMG, the other with Furniture First. They represent those kinds of dealers, and we think there’s a real opportunity for us.

We also believe that brands, while still important in the furniture business, are becoming less significant and certainly command less customer loyalty than they did in the past. Consumers today are interested in value, style and quality, and I believe that’s the sequence in which they shop, not starting with a brand.

As a relatively young company—we’ll be five years old in July—our focus has been to provide complete collections of bedroom, dining and occasional with features and benefits tied to our construction and superior finishing that would be 30 percent below comparable branded merchandise.

We believe that retailers as well as consumers continue to realize the value in A.R.T. products, hence the reasons for our fairly rapid growth.

An example of what’s happening is, two weeks ago, I was visiting in Tennessee with Knoxville Wholesale Furniture. Tim Harris, the founder and president, is opening a second store, and he shared with us that A.R.T. is his most profitable line. As a result, he’s putting A.R.T. galleries into both locations, which will present 12 of our collections. To us, that’s a real testament to the success of our line.

You spent years on the retail side of the furniture industry. Could you talk about how you went from working in retail to A.R.T.? Also, what are your thoughts on the current situation at furniture stores and what retailers need to do to not only survive, but also flourish?

I was originally a trainee when I began my retail career in the ’70s when I was with J. Homestock, a warehouse furniture showroom division of R.H, Macy’s, which was eventually sold to Levitz.

I was in a number of retail businesses—department stores, apparel stores and specialty stores—before I rejoined the furniture industry with Levitz, where I became chairman. I brought Levitz out of bankruptcy the second time.

I took some time off, and accepted an assignment to open furniture stores in China through an agreement between Ethan Allen and Markor. It’s now approaching 30 stores.

I spent three years in China and had the opportunity to meet some acquaintances of Markor who are what we’d call venture capitalists here. After discussions over a one year period as my assignment in China was winding down, we talked about founding a business in the U.S. that would import product from China.

Along with Greg Beckman, I put together the business plan to found A.R.T., and we opened the company with five initial collections in a showroom in Market Square. We’ve continued to grow since then.

My retail background and familiarity with the challenges of running a furniture retail operation have really helped us focus at A.R.T. Our vice president of product development, John Isiallo, also has a retail background. As a result, we always focus on product and services we know will help a retailer be successful. We pride ourselves on the fact that our line is typically one of the most profitable our retailers carry.

As far as challenges, as the housing market has slumped and full prices have risen, furniture has sometimes become a deferred purchase. The strongest challenge is at the opening price points, as evidenced by the demise of companies like Wickes and Levitz.

Furniture retailers are challenged with eliminating unnecessary costs from their business while at the same time improving the value and uniqueness of the product they offer their customers. The retailers who will survive are the ones who have a clear mission and are close to their customers.

I believe, too, that the upper moderate and better price point retailers have a market that’s challenging, but viable.

Do you foresee A.R.T. entering any new categories in the near future. If so, which ones are of interest? If not, why?

We’ve looked for quite a while and continue to look at moving into the upholstery business. It’s not on the imminent horizon, but we do see it as an important opportunity for us at some point in the future.

Right now we’re concentrating on our case goods and want to do a better job in occasional and entertainment furniture. We feel now is just not the time to launch a new portion of A.R.T., but to concentrate on what we have and make it better.

A.R.T. has a strong presence in both High Point and Las Vegas? How do those respective Markets fit into the company’s business plan?

Both Markets are essential to the development of our business. As a young company, we feel we can’t afford not to be in front of any retailer who might potentially purchase the line.

Our founding was here in High Point in Market Square. Tom Mitchell and Chris Kennedy (of Merchandise Mart Properties) have been very helpful as we grew in Market Square and now in Plaza Suites. We recognize High Point as the place we founded the company and certainly as important to the furniture industry and a number of our retailers.

Yet at the same time, Las Vegas has provided a growth vehicle for our company. Or presence in Vegas gave us exposure to retailers who might not shop High Point, who are in that small to middle range I talked about earlier, so our business has grown significantly by being in Vegas.

And with our warehouse and corporate office in California, Vegas strategically makes a lot of sense for us. The challenge is to maintain two showrooms and the costs associated with that, but we feel we need to be where potential customers are.

What’s your favorite piece of furniture in A.R.T.’s line, and why?

I have a number of favorites, but one is unique. It’s a sofa table with a gate leg that flips over and provides versatility to the consumer, We use it in a number of our collections. It’s this kind of hidden function that John Isiallo tries to put into every collection that gives the A.R.T. line some uniqueness in the marketplace.

What’s the last book you read, and what did you learn from it?

I’m a voracious reader, so I always have something going. The thing is, I like to re-read a lot of books as well. For example, I’m on my fifth read-through of the Bible, and I always learn something else about life by that.

I’ve read Peter Drucker for years, even though he’s deceased now, and there’s a quote that always leaps out: “If you allow it to happen, then you are responsible.” That’s served me well for years and years.

I’m currently reading Clive Cussler. It’s easy reading, but what intrigues me about his main characters is the attention to detail in their planning.

You’ve spent a lot of time traveling between Asia and America. Any suggestions for others making that run on how to pass the hours on those long flights?

I’ve flown more than 5 million miles in my business career—I guess my longest flight was 18 hours. It’s important that you use that time to prepare for what you’ll do once you arrive, and use the return to recap what you accomplished.

I always try to sleep on long flights, not always successfully, to avoid jet lag both ways. I avoid eating too much and drink lots of fluids, but those are givens.

When you have time away from work, how do you like to spend it?

I certainly enjoy my family. My wife is a very special and understanding person—we’ve been married 39 years. I enjoy being with my daughter immensely. I also enjoy boating, antique cars and history. I’m always reading about what happened in the past and how we can learn from it.