Daily News Archive
Brought to you by Home Furnishings Business
November 30,
2007 by in UnCategorized 
By Home Furnishings Business in on December 2007
When Jerry Epperson talks, the furniture industry listens.
And well it should. Epperson, a financial analyst for investment banking and corporate advisory firm Mann, Armistead & Epperson, Ltd., is an acknowledged authority on the furniture industry noted for his insightful analysis on its financial past, present and future.
And it’s that focus on what’s ahead for the industry that drew a capacity crowd to his seminar entitled “The Outlook for the U.S. Furniture Industry” at High Point Market in October.
In Epperson’s view, the biggest challenge facing furniture retailers in years to come will be speaking to the different generations of shoppers. Generation X—a term referring to people born between the early 1960s and the late 1970s—as well as Generation Y (born between the early 1980s and late 1990s) are the primary audiences home furnishings sellers are going to have to reach out to.
The Generation Gap
“We as an industry need to recognize we are at a cusp in terms of where opportunities lie for us,” Epperson said. “None of us have faced where we are in our business cycle.” Where we are in that cycle, he said, is at a sort of stopgap between generations. Baby boomers (born between 1948 and 1964) are beginning to get close to retirement age and aren’t buying furniture like they used to.
“There’s a bit of a lull now, with baby boomers buying less,” Epperson said. “There are 77 million of us (baby boomers). And once you get past (age) 55, you’re thinking retirement. Your priorities change. You want to see your grandkids more often.
“The real kicker is our children,” he added. “There are 73 million of those, 11 to 23 in age. The growth in the (furniture) business with my generation is going to decline every year. Generation X is not a big market—the next generation is not up to spending (on furniture) yet.
“You have to look at what you’re doing in our business,” he continued, “and you can’t just grow old with us. The only spending that goes up after age 55 is (on) mattresses. My generation wants comfort, size, and—to a lesser degree—we want fashion. One category that’s grown (in the over-55 group) besides mattresses is recliners. Our kids like gaming.”
And it’s those kids—the children of Generations X and Y—who are going to be buying furniture in upcoming years—but not so much just yet. That’s why the current phase is so challenging, Epperson said, because the big spenders are pretty much done spending, while the next group of consumers isn’t ready to jump into the driver’s seat of furniture buying.
Still, Epperson foresees good things for the future, saying “the next big wave is gonna be our kids. We’ll have a tremendous opportunity with our kids.”
The question is: how do we catch that wave?
Get ‘Em While They’re Young
Epperson thinks the key to “breeding” the next generation of furniture buyers is to draw them into the industry’s culture—in a sense, “educate” them—at a young age. “Kid-oriented stores like Pottery Barn (do a good job of this),” he said, mentioning the many youth-oriented products and designs that are attractive to younger browsers. “That’s how you reach this new generation early,” he added, implying that children who grow up with a sense of furniture will be seasoned purchasers when they purchase homes and have families of their own.
He also stressed promoting products that appeal to the hobbies of youth—such as gaming, computing and hi-tech multimedia including big-screen TVs.
Tune In
That same highfalutin’ media that Epperson believes will be a key element of selling furniture to future generations is also having an impact on the industry of today.
“Consumers are taking a lot of money out of their discretionary income to buy TV sets,” he said. “You can buy a plasma TV for $1,100 these days. But once (consumers) have the flat screen set, what are they going to do—tear apart their walls to hang it? No. You’ve got to set (the TV) on something—hopefully not the floor. We can sell them something (tables, multimedia centers, etc.) to set it on.”
Sell the Value
Beyond gearing product offerings to the needs of our younger generations, Epperson spoke of another way for furniture retailers to build business now and into the future: trumpeting the good things you’re already doing.
“Who’s talking about how low our prices are?,” he asked the capacity crowd. “We’ve got to get the message (across) that we bring so much value to the consumers. Wood (furniture) prices are cheaper now than they were 20 years ago. Are you telling your customers that?”
Time may be running out to get that message across, he said, stating, “Your prices are already so much better, and now we’re going to see a reversal. Two years from now you’re going to see. Prices are going to go up. Expect it.”
Good News and Bad News
Addressing the home furnishing industry’s current financial state, Epperson painted it as a mixture of sweet and sour. First, the bad news: “Our industry is having a tough year, partly because of the bad housing market in 2006,” he stated. “What percentage of our business comes from housing turnover? New homes? About 20 percent. Housing turnover is down about 25 percent from its peak. It’s going to come back, but it won’t come back this year. It’s too late.”
Other factors are playing into the current situation, he said, citing an excess of furniture inventories at the import, domestic and retail levels; consumer anxiety over high credit levels, a lackluster job market and a rollercoaster stock market; and overall weak consumer demand.
Now onto the good news: “We’re going to see business pick up in the second half of 2008, with a stronger economy and people coming back from the war. We currently have a very strong core economy, and things are going to get better. The federal government has put in big incentives to spur housing activity.”
Before the upturn however, he predicted a flat first half of the year, but after things pick up, he expected a “meaningful recovery” in 2009.
Epperson cited one product type that’s recently been seeing a sales upturn: mattresses. “Domestic sales of mattresses are up in retail,” he said, urging furniture retailers to capitalize on their excellence in this area. “Typically your average furniture store has a bigger bedding department than a bedding speciality store. Promote it. (Consumers) tend to think speciality stores have bigger bedding departments. That’s not true!”
Epperson also encouraged furniture retailers to emphasize their store in their marketing efforts instead of the brands they carry, saying “You have to promote your name. Your name is the brand now.”
Finally, Epperson pinpointed the high end of the business as a segment that’s showing growth in the past year, stating “The high end’s doing better because the stock market’s doing better. The wealthy are still spending. They don’t have mortgage worries or a lot of credit card debt.” He recommended that furniture stores focus on this segment to take advantage of the discretionary income provided by the current economic situation.
November 30,
2007 by in UnCategorized
By Home Furnishings Business in on December 2007
It’s all too easy to overlook the importance of the U.S. furniture market to one of our largest trading partners: Canada. For years, the import story has focused on the rise of the Asian furniture vendor. The importance of the Canadian furniture market to the U.S. furniture market—and vice versa—has been virtually ignored.
Canadian upholstered furniture exports to the U.S. exceeded upholstered imports in four of the last five years, making it a desirable destination for Canadian vendors. In the fifth year, 2006, the tables turned, with the upholstered furniture trade
balance of $18.4 million turning in the favor of Canadian vendors.
In 2003, Canadian upholstery exports to the U.S. were large enough
to give the Canadians the overall lead in total furniture exports.
The winning margin, however, was less than $1 million. Since that time, Canada imported more furniture from the U.S. than it exported.
It’s not just the desirability of U.S. furniture imports that is turning the Canadian market into a valuable destination country. Year by year, currency exchange rates have turned, making the Canadian market even more attractive.
At the end of 2002, one U.S. dollar was equal to $1.58 Canadian dollars, making U.S. furniture more expensive for Canadian consumers. At the end of 2006, that same U.S. dollar was equal to $1.17 Canadian dollars. By the end of June of this year, the U.S.-Canadian exchange rate was nearly equal, with one U.S. dollar having the purchasing power of $1.06 Canadian dollars.
As currency exchange rates equalize, the design, cost and desirability of furniture on both sides of the U.S.-Canada border become the dominant factors in which country is winning the furniture trade balance.
In 2006, Canadian furniture exports to the U.S. exceeded imports by $239.5 million. Five years earlier, the difference, also in Canada’s favor, was $21.9 million. The one furniture product with the greatest effect on the balance of trade was upholstered furniture. 2006 was the only year in the past five in which upholstery exports out of Canada exceeded upholstery imports into the country.
It’s not just upholstered furniture exports that have improved, from the Canadian point of view. Compared with 2002, the 2006 case goods trade balance was virtually flat. In that same five-year period, the trade balance of other types of furniture increased 9 percent, and bedding exports exceeded imports by 274 percent.
In the five-year march of time from 2002 to 2006, Canadian imports of U.S. upholstered furniture more than doubled, from $127.3 million to $265.8 million. Case goods shipments for the same period fell by three percent, from $104.4 million to $101.7 million.
Other residential furniture imports into Canada from the U.S. increased 9 percent from 2002 to 2006 and bedding shipments nearly quadrupled, reaching $45.4 million in 2006.
Overall, U.S. furniture imports into Canada grew by 56 percent from 2002 to 2006.
For that same five-year stretch of time, upholstered furniture exports from Canada to the U.S. slipped 15 percent, falling from $289.7 million in 2002 to $247.4 million in 2006. Case goods exports in 2006 were $854.8 million, off 5 percent from 2002’s $904.1 million.
Canadian exports of other residential furniture to the U.S. increased 2 percent from 2002 to 2006 and bedding shipments grew 74 percent, from $28.3 million to $49.4 million.
Total Canadian furniture exports to the U.S. in 2006 were off 5 percent from 2002 totals.
One of the major advantages that both the U.S. and Canada have over their Asian competitors is their geographical location. Shipping furniture between the countries is usually easier than moving it from Asia to North America.
Once you remove currency exchange rates from the furniture trade equation, the implication is clear—vendors on both sides of the border must remain sharp in order to keep furniture shipments flowing between the two nations. No longer can U.S. vendors depend on a favorable Canada-U.S. exchange rate. Their goods are no longer the bargain in the Canadian market that they used to be.
The good news is that U.S. furniture vendors are used to keeping costs down and quality up. Running lean and mean is a fact in today’s global economy. The wise U.S. vendor understands that Asian imports are a major factor in both the U.S. and Canadian markets, but the trade ties between the two nations are as strong as ever.
November 30,
2007 by in UnCategorized
By Home Furnishings Business in Case Goods on December 2007
Harden Furniture has faced what manufacturers in places such as North Carolina and Virginia call “globalization issues” for decades. Located in the upstate New York town of McConnellsville, the company, whose roots date to a saw-milling operation, committed its fortunes to making furniture in 1884, drawing from timberlands it owned and had under contract for raw materials.
Just as furniture-making counterparts in the Upper Midwest did, Harden saw its home region decline as a furniture-making hub as low wage rates and ready access to southern Appalachian hardwoods drew the bulk of the case goods industry south in the last century.
Happily for Harden, now in its fifth generation of family management under the leadership of President and CEO Greg Harden, the company keeps ticking along in a place where most manufacturers of any stripe fear to tread. It hasn’t been easy, but capital expenditures over the past five years in a new sawmill, CNC technology and a new upholstery frame facility have helped. That, and a dynamic retail scheme: Harden Home Studio—which now counts 34 retail partners in the United States, and two in Canada, according to the company’s Web site—that puts a spotlight on Harden’s customization capability for upholstery and case goods.
Harden also was heading “green” before sustainability became an industry buzzword, certifying its hardwoods under the Sustainable Forestry Initiative five years ago, and heating its entire facility with wood waste. Harden’s company cars? The hybrid Prius.
Greg Harden took time out from business travel in late October to answer some questions from
Home Furnishings Business.
Upstate New York is by no means the least expensive place to make furniture in terms of labor cost, but companies such as Harden and Stickley are still humming along there. Why is that, and can you talk about how your manufacturing operation has changed compared to, say, five years ago?
New York State has a well-deserved reputation as the least business-friendly state in the nation, a state that is ranked at, or near the bottom, in nearly every measurement of cost of doing business, and the situation is even more disadvantageous for manufacturers. We have had to design our operations to be as lean as possible, while constantly looking for opportunities to add value to our product. If we are going to be successful, we have to be the best at what we do, and reward those consumers who support our brand with outstanding quality and design.
To put the dilemma faced by New York State manufacturers in perspective, a recent Public Policy Institute report awarded 27 counties in the upstate region a grade of F for economic performance. The remaining 10 counties were awarded a D. To earn that distinction, those counties failed to achieve the national average on any one of five criteria (F) or achieved only one out of five criteria (D). The state as a whole earned a D.
While Harden and Stickley have survived in that environment, it should be noted that we are the only two furniture manufacturers of any significance left in a state that once had scores of such businesses. Stickley’s most recent investment was in a facility in Vietnam, no doubt a result of the low cost of doing business there.
Governor Spitzer and his economic development team are making progress in improving the economic environment, but it will be a long process. For decades the momentum has been in the wrong direction, and it may take decades for the legislative part of the solution to evolve.
Harden is a member of the Sustainable Furniture Council (SFC), but before that organization was formed, Harden had initiated its own “green” efforts through Sustainable Forest Initiative (SFI) guidelines. SFC leans toward Forest Stewardship Council certification. Is this an issue for the organization, and if so, how do you see it being resolved moving ahead?
I think SFC has been very sensitive to, and sensible about, the benefits of SFI certification and the petty rivalry that FSC and SFI have been party to. Many of the well-known conservation organizations are closely allied with FSC, and perpetuate the myth that SFI participants, and the 133 million acres certified by SFI, are not worthy of recognition as leaders in forest management and sustainability. The SFC needs to ignore the politics and recognize that the science supports full SFI inclusion in SFC.
SFI certification is specific to North American forests and as a result is not as rigorous as FSC on issues that are unique to third-world tropical rain forests, such as illegal logging. Assuming that, at worst, SFI is 98 percent as rigorous as FSC, it will still be tremendously beneficial for the environment for more SFI lumber to be used in the manufacture of home furnishings.
Harden has owned timber properties for generations, and our 10,000 acres have been enrolled in SFI for five years. Our practices and compliance were recently field audited, and we passed the most recent SFI standard—the third time our program has been certified by an independent audit.
Speaking of “green,” we understand you’d given some thought to taking Harden off the grid, i.e., making the company self-sustaining for most or all of its operations. That’s a tall order, but has anything happened on that front?
For better or worse, Harden has always been highly vertically integrated. We heat our entire facility with wood waste, and at one time generated electricity that was sold to our local electric utility. It is technically possible to exit the grid and generate all our electrical energy, but practically speaking it would not be a good business decision. We rarely experience power outages, and when we do it is nice to leave the repairs to someone else.
The anti-dumping petition against wood bedroom furniture from China created a huge split in the industry a couple of years ago. What are your thoughts on how that issue continues to play out, and what’s your response to those who say the petition was all about Byrd Amendment money and hasn’t saved any furniture manufacturing jobs stateside?
The most important aspect of the anti-dumping petition was the conclusion that many Chinese companies were selling bedroom furniture at prices below their cost to manufacture. We never approached the issue from a Byrd perspective, and at the onset of the action we were convinced that any Byrd recovery would not be sufficient to recover our legal expenses.
While Chinese products continue to claim greater market share, there seems to be some rationalization of share occurring. Retailers appear to have a better understanding of what products are more advantageous to purchase from offshore sources, and those of us who remain on the domestic side better understand our niche and opportunities. The acrimony appears to have subsided, and the voices that represented the extreme positions in the debate have realized that the petition was not the end of the world.
We’re resigned to the fact that we have to live with competition from low-wage nations, despite the fact that their cost advantage is significantly more than the wage differential. At some point the world is going to have to address the environmental, product safety and social equity issues that are currently ignored. When that day arrives, we can define fair trade and free trade as essentially equal, and American manufacturers will enjoy a level playing field.
It is impossible to say whether any jobs were saved as a result of the petition, but perhaps the action will bring some honesty to the process and allow those of us who have chosen to remain domestic an opportunity to survive. Our industry needs to realize that consumers want variety, choice and quality, and domestic manufacturers are an important part of that equation.
How and where does sourcing fit into Harden’s product line now?
We currently source about 10 percent of our products offshore, and I anticipate that number will remain in that neighborhood for the next few years. There are some products or components that we either choose to source off-shore due to price, or that are no longer produced domestically. Occasionally we will source some bedroom and dining room, but that represents a tiny percentage of our revenues.
In addition, virtually all our production is special order, and that dictates that we remain predominantly a domestic producer. I doubt we ship the same upholstered fabric and frame combination more than a few times a year, and our case goods are available in 36 standard finishes.
Contract and hospitality are also important categories for Harden, representing about 20 percent of our annual revenue. Almost all this product is customized to some degree. We recently installed a court-house project where we manufactured the judge’s bench and all the mill work for the courtroom.
What is your favorite piece of furniture in the Harden line and why?
That might be the toughest question of the interview. I can easily identify my least favorite pieces, but the favorite has to be one of our upholstery designs. The 2600 sofa, part of our Legacy program, would be my favorite. A seven-inch cushion band allows for a lot of down fill, combined with enough depth and length that I can enjoy it exactly the way most males do—turn on the television, lie down and generally fall asleep. When we first developed the collection we had a prototype in the office in the High Point showroom. I never sleep at market—well, almost never.
How do you spend your spare time?
I enjoy almost any outdoor activity. Northern New York summers are fantastic, and I spend as much time as possible on a bike or on the golf course.
Harden Furniture owns a golf course, but I am not responsible for that decision, as it was founded by my grandfather in 1941. If your readers think furniture is a tough business, they should try operating a golf course in a part of the country where the season is painfully short.
Having grown up in this part of the country, I have to admit that winter is my favorite season. My wife, Lorie, and I have three children who grew up ski racing, and all are competing at the college level this year. We have had a home in Lake Placid for a number of years, and I still coach 13- and 14-year-old junior racers in the NYSEF program.
November 30,
2007 by in UnCategorized
By Home Furnishings Business in on December 2007
For a very long time, residents of the United States of America have pretty much taken for granted their relationship with their neighbors to the north. Other than Mexico, Canada is the only country sharing a land border with the U.S., a border that is largely unguarded or lightly guarded due to the similarities between the two nations and the historically positive relationship the two have had.
Added to the similarities is the fact that, with the exception of the province of Quebec, Canada is also populated by English-speakers, facilitating trade between the two countries. And many, if not most, Quebecois speak English in addition to their native French. The two countries also share a mostly European heritage and modern histories comprised of just decades, not the centuries of many countries throughout the world.
It has been easy to assume over the years that the similarities between the two nations would lead to parallel economies. But, just as Canadians are fiercely independent thinkers when it comes to world events, social activism and politics in general, the Canadian economy is not bound to any other nation, despite geographical proximity. To ignore the inter-relationships and also the differences between the U.S. and Canadian economies is to sell both countries short.
Easily shipped between the nations via rail or road, home furnishings have an advantage over many other internationally produced goods, due to their size and established distribution channels. Buyers and sellers on both sides of the Canadian-U.S. border keep a watchful eye on each other’s economy, looking for future bargains on which to capitalize.
Home Is Where the Economy Is
In 2007, much attention has been focused on housing statistics in the U.S. Monthly data on new home sales, housing starts and sales of existing homes have been eagerly awaited by consumers and economists alike. The reason for this intent interest is the ongoing decline—usually a significant one—in the U.S. housing market. Economists and others point to housing statistics as a reliable measure of the strength of the national economy and avidly watch for the monthly figures.
The Canadian housing market, specifically housing starts, isn’t suffering a comparable fall. According to Statistics Canada, the branch of the Canadian government that collects economic data, housing starts in September increased 19.3 percent over August results. In the same time period, U.S. housing starts fell 10.2 percent and were off 30.8 percent from September 2006 results.
Another noticeable difference between the two nations is in their mortgage industries. The standard “conventional” mortgage rate in the U.S. is the 30-year fixed-rate, although adjustable-rate mortgages (ARMs) have surged in popularity in the last half-decade. Traditionally, home buyers were expected to have a home down payment of 20 percent, with the balance financed by a fixed rate mortgage.
In Canada, the traditional down payment has been 25 percent, with a conventional mortgage loan term of 25 years, just five fewer years than what used to be the norm in the U.S. Both countries have seen an upswing in recent years of ARMs, some with a term as short as six months in Canada. At present, both countries are seeing mortgage rates in the 5 percent to 7 percent range.
The Two ‘I’s’—Interest and Inflation Rates
Another interest rate attracting attention is the prime interest rate. In September, the Canadian prime interest rate stood at 6.25 percent, off more than a full percentage point from the U.S. rate of 7.5 percent. In 1998, the Canadian prime rate was 6.64 percent measured against 8.0 percent in the U.S.
In the past 10 years, the Canadian prime interest rate has fluctuated from a low of 4.08 percent to a high of 7.19 percent.
Inflation has also affected the countries differently. The Consumer Price Index (CPI), which measures inflation, was 1.0 percent in Canada in 1998 and was reported by Statistics Canada as 2.5 percent this past September, up from 1.7 percent in August. In the U.S., CPI was 1.2 percent in 1998 and stood at 0.3 percent in September. Neither country has recently experienced the jumps in inflation recorded in the 1970s and 1980s in the U.S.
Where the Money Is
One of the areas of greatest contrast between the two countries is the unemployment rate. In October of 1998, the U.S. unemployment rate was 4.5 percent, compared with 4.4 percent in October of 2006 and 4.7 percent in October of 2007. Unemployed people focus on food and shelter, not home furnishings, so a growing or stagnant unemployment rate isn’t good for business.
In Canada, the unemployment rate in 1998 stood at 8.3 percent, falling to 7.5 percent a year later and then to 6.9 percent in 2000. In the 10-year period between 1998 and 2007, Canada’s unemployment rate has continued to fall, with the lowest rate to date reached in October of 2007: 5.9 percent.
National debt statistics show a wide difference between Canada and its neighbor to the south. While in recent years the U.S. national debt has soared by billions, the Canadian national federal debt has dropped 14 percent from C$559.9 billion in 1998 to C$481.5 billion in 2006. The U.S. debt, ballooning under the pressure of war costs and rising fuel costs, is expected to continue to rise in the foreseeable future.
As reported in the November issue of
Home Furnishings Business, one U.S. dollar had the purchasing power of C$1.58 in 2002. That margin shrank to C$1.17 to one U.S. dollar at the end of 2006. As of Oct. 2, 2007, the Canadian and U.S. dollars reached a state of equilibrium and started to swing in favor of the Canadian loony as the U.S. dollar steadily weakened.
What this means to the economy of both countries is that Canadian consumers are finding U.S. products less and less expensive as their home currency strengthens against the American greenback. In just five short years, the exchange rate balance shifted sharply, giving U.S. exports to Canada an advantage.
Furnishings are Hot Sellers
In terms of retail sales, the Canadian economy is burgeoning. According to Statistics Canada, sales of commodities through the country’s large retailers grew 19.0 percent from 2002 to 2005, reaching C$98.9 billion in 2005. In that same period, sales of indoor furniture grew 18.5 percent, home furnishings sales increased 13.7 percent and housewares sales were up 9 percent.
In comparison, the U.S. Department of Commerce reported furniture sales through all distribution channels grew to $79.9 billion in 2005, up 15.9 percent over 2002 sales. In September of 2007, furniture sales were at an annualized rate of $86.8 billion, up 0.5 percent over August sales.
Who’s Buying
For years, savvy home furnishings sellers have known that the woman of the household is the one making the buying decisions for the home. Whether it’s furniture, home accents or home textiles, she’s got the last word.
In 2006, Statistics Canada counted 32.6 million Canadians of all ages. The balance was split 49.5 percent male and 50.5 percent female. Separated into age groups, males are the predominant gender until the 45-to-49 age group, which is evenly split between the sexes.
At that point, women become the more numerous gender. Translated, this means that at a prime home-furnishing age, there are more women than men in Canada. Whether the purchaser is downsizing a home or helping offspring set up a new home, she’s in the driver’s seat and home goods vendors and retailers need to understand that.
And the Crystal Ball Says ...
There’s not an economist out there who wouldn’t be a billionaire, in either Canadian or U.S. dollars, if s/he could accurately predict the economic future for either the U.S. or Canada. Without a doubt, interest rates, unemployment statistics, housing figures, etc., will change— possibly without a lot of notice—over the next few years. The one thing that is most likely to happen is that the two economies will continue to vary, but will certainly manage to coexist, each adapting to the other’s markets and learning how to sell to or buy from those markets.
If, however, as a noted U.S. psychologist is fond of saying, the best predictor of future behavior is past behavior, then tomorrow’s Canadian economy—and its market for U.S. goods—shouldn’t be a huge surprise. Throughout the recent past, Canada has shown itself to be a strong vendor and buyer of home furnishings products and a valuable trading partner.
Perhaps the most noteworthy aspect of the future U.S.-Canadian trade partnership is the role currency exchange rates will play. At present, the playing field is fairly even, with neither the U.S. or Canadian dollar having the dominant position. How that plays out will definitely have an impact on the buying and selling of home furnishings in both countries.
November 30,
2007 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on December 2007
Since Larry Klaben took over Morris Furniture in 1998, the company has added 10 stores and sales have quadrupled. So you might think Klaben would stick with his winning formula.
He will, and he won’t.
The Ohio chain, celebrating its 60th anniversary this year, is on a roll with its Ashley Furniture HomeStores—now seven strong—and plans more for the coming years. But at the same time, Morris Furniture is going to try something completely different: “The Home Center,” a 100,000-square-foot furniture lifestyle mall with five entrances to invite customers into five separate stores whose interiors flow into one another.
“It has the benefit of a mall in its easy interior circulation,” says Klaben, a Congressional aide-turned-entrepreneur, “but it’s also the newest trend in consumer shopping areas, which brings back the old downtown concept.”
Site work has already begun on the lifestyle mall, which will include a Morris Home Furnishings, an Ashley Furniture HomeStore, a sleep shop, home theater store, and a children and youth furniture showplace. The mall, expected to open in late 2008, will sit at the intersection of two interstates north of Dayton. With this new venture, Klaben predicts that Morris Home Furnishings will surpass the $100 million mark in annual sales. The company now captures 35 percent of the Dayton market.
Steeped in History
Certainly before Klaben entered the picture, Morris had much going for it—stable family ownership since 1947 and a strong brand name in southeastern Ohio. Morris Lieberman and his son Burt founded Morris Furniture in downtown Dayton, and sold used and new furniture in a 3,600-square-foot store, the last to join a total of eight on downtown Dayton’s furniture row. They were also the last furniture store standing on the row in 1965 when Burt Lieberman bought a 12,000-square-foot church, built by the congregants themselves, in the growing suburbs north of Dayton, near Wright-Patterson Air Force Base.
“It was near a very large area of brick homes, and it was considered the largest area of brick homes in the United States,” says Lieberman, who today, at 81, still works every weekday in the building, though Morris Home Furnishings has a new headquarters farther outside Dayton. The store near Wright-Patterson expanded and expanded until it hit 100,000 square feet of showroom, warehouse and office space.
In 1986, Lieberman brought Larry Klaben, his son-in-law of a few years, into the family business. At the time, Klaben and his wife Marilyn were living outside Washington, DC. Klaben had worked as an aide to former Ohio Rep. Tony Hall, a Democrat, and had then owned a series of computer businesses. For Hall, Klaben handled legislation pertaining to the congressman’s work on the small business committee, and also computerized his office. Klaben’s own computer businesses were software start-ups.
Leiberman wanted to hire Klaben only partly because he thought he would make an excellent employee. The company needed a computer system—its first—and Klaben knew computers. But more than that, Klaben and Lieberman’s daughter had just had their first child, Max.
“I thought I’d like to have that grandchild close to me, in Dayton,” Lieberman says.
On the young family’s next visit to Dayton, the father-in-law asked the son-in-law if he could recommend a computer company. Klaben did his research, and dutifully reported his results to Lieberman, who had a second question:
“Why don’t you come up and install it?”
The Klabens sold their Washington house and moved to Dayton, where Larry Klaben became vice-president of operations. “The rest is history,” says Lieberman.
History for Morris Home Furnishings is a tale of fast-paced, robust growth. Klaben turned out to have the most vigorous of entrepreneurial spirits, and grand ideas for his father-in-law’s company. “Never in my wildest dreams” is Lieberman’s assessment of what his business has become.
Timely Transitions
In the decade after Klaben arrived in Dayton, the emphasis was on building the Morris brand. The company changed its name from Morris Furniture Mart to Morris Home Furnishings. It formed an executive committee of experienced leaders, and installed its first computer system.
It was time for a second location.
In 1996, Morris Home Furnishings opened a Thomasville store in the southern suburbs of Dayton and attached a Morris store to it. Klaben drew up an ambitious plan for stores throughout southeastern Ohio, and put it into play after he purchased the balance of the company’s ownership stock. Morris Home Furnishings officially passed to a third generation.
In 2000, another Morris Home Furnishings store opened south of Dayton, “our first store totally designed to meet the needs of the consumer,” according to Klaben. Shortly after its opening, the chain’s volume doubled, propelling it to first in the Dayton marketplace. Morris Home Furnishings now had the distributive capacity to tackle its aggressive growth plan.
In the late 1990s, Klaben and his executive committee watched area competitors fall like leaves in autumn—Montgomery Ward, Levitz, Sears HomeLife and Roberds among them.
“We saw all the changes in the furniture industry, and we felt we had to become a bigger player in our marketplace to survive,” says Klaben.
The openings then came fast and furious: Morris’ first Ashley Home Furnishings store, south of Dayton, in 2003, and a Dayton outlet featuring merchandise from all three of the company’s concepts—the Morris, Ashley and Thomasville stores. A second Ashley store opened east of Dayton in 2004, and that same year saw the opening of the company’s first Cincinnati store. In 2005 came the first Ashley store in Columbus. And in 2006 Klaben crossed state lines, opening an Ashley store in northern Kentucky. In 2007 came another Ashley store in Klaben’s hometown of Springfield, Ohio, as well as another Columbus-area Ashley store.
Unveiling the Plan
The grand plan is far from finished.
After the opening of the lifestyle mall next year, Klaben is looking to more than double the Ashley store count to 15 in the areas for which he is licensed. That’s the first tier of his plan: grow the Ashley and Morris brands.
“Early on, I felt that Ashley Furniture Inds., under the leadership of the Waneks, was one furniture company trying to change the status quo of the industry,” Klaben says. “They are an amasser of world and U.S. manufacturers, and their commitment to lean manufacturing has enabled them to provide extraordinary value—with an exceptionally fast distribution system.”
“To tell you how fast it is,” Klaben continues, “there are times when we have Ashley customers on a weekend, and the product will come from their Wisconsin distribution center and will be in our warehouse on Wednesday.”
As for Morris Home Furnishings, Klaben has staked its reputation on tried-and-true brands—including Berkline, Broyhill, Flexsteel, Lane, La-Z-Boy and Sealy—and extensive customization capabilities.
The second tier of Klaben’s growth plan is the development of the lifestyle malls. The first such mall, which is expected to cost $10 million, will bring in $25 to $30 million annually. Designed by New York-based Grid2, the store will be anchored by a 35,000-square-foot Ashley store and a 50,000-square-foot Morris Home Furnishings, which is itself an agglomeration of specialty stores—from dining to lighting. Each of the five stores within the Home Center will have its own advertising program. Klaben plans a second Home Center in the Columbus area, but has not yet found the right location. He’s also eyeing other Midwest markets.
As he sees it, the Home Center lifestyle malls are the future of retailing, but also a nod to the past, when stores such as the original Morris Furniture were established on furniture rows to generate customer traffic.
For a man who thought he would never move back to Ohio, Larry Klaben is remarkably involved in his community. Morris Home Furnishings supports children, education and the arts—including The Human Race Theater Company, for which his wife is education director. The company’s golf outing is organized annually to support the Children’s Medical Center of Dayton, which it did this year to the tune of an $80,000 donation. Also this year, Klaben was appointed to the board of trustees of Wright State University, where he was in the tenth graduating class.
He has also welcomed his younger brother into the business. Robert Klaben, as of two years ago, is vice president of marketing and advertising. Before joining Morris Home Furnishings, Robert worked in the retail camera business—at Click Camera, a chain founded by the Klabens’ father.
As for the possibility of a fourth generation running Morris Home Furnishings, Larry Klaben says he would welcome any of his three children into the business—but only after they found work elsewhere.
“The rule is they will work in another industry first and acquire a profession they are passionate about,” Klaben says. “If they want to come into the family business, they’ll need some kind of expertise. Then we’ll talk about it.”