Banking on a Brand

October 31, 2008  by in UnCategorized   

By Home Furnishings Business in on November 2008 When new ownership led by CEO Anthony Mehran acquired the rights to the Huffman Koos name three years ago, the team took its time with bringing back a well-known Northeastern furniture retail brand to the market.

It was two years before the first store opened in its new incarnation, but the intervening time appears to have been well-spent, as Huffman Koos embarked on a business model that sought to meet consumers’ expectations for the mid- to upper-end brand while creating more value.

The key? A private label line geared toward quality at a value. After acquiring rights to the Huffman Koos name, the new management spent two years developing its own sourced product line before relaunching the brand at retail.

Huffman Koos was a household name for more than 40 years in the Tri-State area of New York, New Jersey and Connecticut, operating up to 22 stores in the region.

“We acquired the name out of bankruptcy in 2005, and spent the first couple of years developing our own Huffman Koos product line,” said Mike Salazar, vice president of operations. “The goal was to meet the quality expectations of Huffman Koos’ customer base.”

That private label now accounts for around 60 percent of the merchandise on the retailer’s showrooms floors.

The “new” Huffman Koos launched its retail operation in March 2007.

“We started with two locations—the old Huffman Koos on Route 4 in River Edge, N.J.; and a store in Fairfield, N.J.,” Salazar said. “Based on the response there, and our ability to serve customers, we decided to open more stores.”

Huffman Koos currently has six stores: Elmhurst/Queens and Middletown, N.Y.; the two original New Jersey stores plus another in Paramus; and High Point, N.C., which also serves as a showroom for Huffman Koos’ growing wholesale business selling its private label line to other retailers.

A seventh, 65,000-square-foot store is set to open late this month in Rockaway, N.J. It’s a growth cycle almost unheard of in the past couple of years among independent furniture retailers.

“When there’s a great concept and good people taking care of customers, people are going to buy,” Salazar said.

Huffman Koos projects retail sales of around $29 million for 2008, and is shooting for $44 million next year—ambitious growth plans for any retailer in today’s economic environment.



PRIVATE PARTY A strong private label was part of the new Huffman Koos’ business plan from the start.

“We wanted to bring back Huffman Koos not only at retail, but also as a way for other retailers to take advantage of a powerful brand name through our wholesale business,” Salazar said.

Huffman Koos serves its wholesale customers through direct containers, including mixed shipments, and its high-cube warehouse in Passaic. Parts are available, as well as backup out of the warehouse for container accounts who might need quick replenishment. Right now the company has 15 retail accounts from Maine to as far south as South Carolina.

Taking time to develop the new line paid off.

“There were several factors, but the biggest concern obviously was to ensure the quality,” Salazar said. “We overcame (problems) through trial and error. We examined product before it even went to our warehouse. We choose several factories in China, Vietnam and Italy, and worked hand-in-hand with them from the development stage and CAD drawings through the packaging specs. Rather than shying away after the first cut, we worked with them to improve on it.”

Huffman Koos today works with seven plants in China, five in Vietnam and two in Italy to supply its namesake line.

A weak U.S. dollar and rising production costs in source countries are just as much of an issue for private retail labels as they are for vendors bringing in goods from overseas. Not having a middle man has helped Huffman Koos put its money where it counts, Salazar noted.

“What we can’t afford to do is cut costs in product and quality control. We have to put the money in to make sure the goods meet expectations people have for the Huffman Koos name,” he said. “If you spend X number of dollars per container and you’re looking to save five to 10 points, you can’t afford to back off the quality of the goods you’re importing.”

Salazar added that slow furniture retail sales stateside still make it fairly easy to find deals in Asia, but Huffman Koos prefers not to shop around too much once it establishes the desired quality and service levels with a factory.

“A lot more of these factories are out there looking for more business,” Salazar said. “It’s natural for us to expect better pricing, but they aren’t going to commit for an extended period, because business is going to get better. Once we’ve developed these relationships, and you go out and outsource somewhere else for the sake of a few dollars, it might cost you in the end.”

RETAILER AND WHOLESALER Huffman Koos aims to pass the savings of going to direct sourcing with its proprietary line not only to shoppers in its stores, but also to a growing lineup of other retailers who are wholesale customers.

Huffman Koos’ wholesale business should grow by another 20 percent in revenue to this year’s retail sales, and next year it’s budgeted for between 25 percent and 30 percent.

Salazar said that being a retailer has its advantages when developing business as a vendor.

“We know what we as a retailer expect from a wholesaler when we’re talking about quality, delivery, even packaging,” he said. “We know what retailers expect and how to back that up with spare parts and timely delivery. We’ll do direct containers and warehouse. We’ll bridge containers, if you will, and do one-at-a-times out of the warehouse when we have to. We can mix containers, which has been a real benefit.

“We’re asking ourselves, what would make it easier for us to do business with a vendor, showing that and passing it on to our wholesale customers. Because we understand retail, we know what we expect from vendors from quality to packaging.”

Huffman Koos extends some of the same quality and service measurements it uses in its wholesale business to its retail business, and vice versa.

“We came up with a better, simpler way of forecasting based on what sells at what time of year in our consumer business, and what, say, the fourth quarter means for a wholesale customer’s buying patterns,” Salazar said. “We measure everything—the time it takes to load a trailer, how long it takes to deliver a shipment to a wholesale customer—it’s the same for measuring our retail operation.”

Measurement has helped the operation flow containers and product to customers, and cut lead times without increasing costs. Delivery performance for both retail and wholesale customers are tracked on a daily, weekly and monthly basis.

“We’re 99.9 percent accurate on lead times to wholesale customers, and that fraction of a percentage is related to weather, which we have to take into account serving customers up and down the East Coast,” Salazar said. “We really look to measure our performance and how well we’re doing. One area where we focus is in exceeding customer expectations when it comes to service. “ HFB