Daily News Archive
Brought to you by Home Furnishings Business
September 4,
2006 by in UnCategorized 
By Home Furnishings Business in Case Goods on September 2006
Chromcraft Revington Inc. said on Friday said it would shut down its case goods plant in Sumter, S.C., Oct. 31, as it moves toward outsourcing more goods in Asia.
The 521,000-square-foot plant produced Sumter brand bedroom and dining room furniture. The move will result in the layoff of around 200 employees.
Chromcraft also plans to consolidate its Silver and Peters-Revington lines, which will result in the closure of the 160,000-square-foot Silver warehouse and distribution center in Knoxville, Tenn., by the end of the year. That will result in another 16 employees losing their jobs.
The actions, which will involve restructuring charges of between $6 million and $7.5 million pre-tax, mostly in the third quarter, will cut Sumter’s workforce by around 17 percent. Chromcraft hopes to sell both facilities.
Chromcraft said the restructuring aimed at reducing fixed costs and improving overall asset utilization.
In July, the company had reported lower second-quarter shipments of occasional, bedroom, dining room and commercial furniture compared with the prior year.
Chief Executive Officer Benjamin Anderson-Ray had said the company was looking at greater global sourcing and value added U.S. assembly and distribution operations.
September 4,
2006 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on September 2006
Bassett Furniture is in the catalog business now that it has unveiled its inaugural book that was distributed to 1.2 million households in 21 markets.
The catalog, created to enhance communication with consumers, presents the company’s Bassett Furniture Direct stores as leaders in home decor, custom furniture solutions and personal service. The goal is to drive shoppers into the stores while improving the company’s brand image, brand preference and Web site traffic.
“Bassett’s number one priority has always been to provide the best possible products and service,” said Michael Satterfield, vice president of marketing.
“By developing this direct-to-consumer catalog, we believe we will be able to reach out more easily not only to our existing customers, but introduce Bassett to a whole new generation of consumers.”
Consumers will be able to log on to Bassett’s Website, bassettfurniture.com, to view the catalog and to request a copy through the mail. Following the debut catalog, Bassett plans to issue four catalogs in 2007. Price points in the catalog range from $40 to $3,000.
August 31,
2006 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on September 2006
Citizens of Hispanic origin have been a part of U.S. culture for hundreds of years, predating many other population segments in large parts of what’s now the United States by centuries. And while some furniture retailers have made Hispanics a key customer group for years, some are just now exploring the potential for nation’s fastest growing the demographic.
Retailers with experience among Hispanic consumers, though, warn that it’s not a one-size-fits-all proposition by any means. The overall demographic varies hugely in terms of language use, cultural attitudes and the extent to which they blend with so-called mainstream American life.
Especially for more recent Hispanic arrivals, country of origin is another variable. You only have to look at how Americans of, say, Scottish, Irish or Italian descent retain a sense of pride and community with their mother countries to understand the way Hispanics can vary greatly in terms of cultural attitudes.
Encountering Hispanic customers is certainly a new experience for many furniture retailers. Philip Williams, manager of Williams Furniture in Gilmer, Texas, for instance, described selling some furniture to a woman who spoke no English, but had her 13-year-old daughter translating for her.
“Since then, I’ve had other adults come in our store who apparently spoke only Spanish or Chinese,” he said. “I speak virtually no Spanish, and no Chinese whatsoever. Our area of East Texas had a very small Hispanic population when I was growing up here in Gilmer in the 1950s, ’60s, and early ’70s. But today, we have a burgeoning population of these folks, and we’d probably be well-served to learn at least some conversational Spanish, and to use a bit of Spanish in our advertising.”
Fact is, the whole language issue can be a hot button these days. The news media has put a spotlight on illegal immigration, and Williams voiced concerns about that issue when considering advertising in Spanish, but still hopes to appeal to a new prospective customer base.
Commitment Counts
Some retailers have a clear head start on attracting the business of Hispanic consumers. Dearden’s, for example, has targeted the Hispanic market in Los Angeles since the 1960s, said Ronny Bensimon, president and chief operating officer. He estimates that Hispanics account for close to 90 percent of the business at Dearden’s seven stores in the greater Los Angeles area.
The retailer sells not only furniture, but also appliances and electronics. Bensimon said running a few ads in Spanish is not enough to guarantee access to Hispanic consumers. It takes long-term strategic commitment.
“Don’t do it halfway—everyone wants a piece of the Hispanic market, but not many want to make the commitment,” Bensimon said.
The effort involved in developing Spanish-language advertising, a key especially among newcomers to the states, bilingual capability on the sales floor, and merchandising geared toward Hispanics, in fact, could well lead many retailers to pass on a major effort in that direction.
At Dearden’s, though, that commitment even includes shipping to Mexico, El Salvador and Guatamala at no extra charge.
“You can’t go after everyone, so if we go after a group, we make sure it’s one that’s growing” Bensimon said. “I think you really have to pick your targets, and if you’re serious about approaching this segment, you almost have to decide to do business in Spanish or English.”
Addressing the Culture
Continental Furniture has three 25,000-square-foot Chicago-area stores, and has catered to the Hispanic market for decades. Founder Ray Portugal extended the sewing machine sales business he began in the 1951 to open storefronts where furniture—plus appliances and electronics—have comprised most of the product offerings since the late ‘60s.
From its first store, Continental has followed the Hispanic market as that demographic spread throughout Chicago-land, always with a focus on offering credit to a consumer base that was in need of purchasing power. Credit on Continental’s own paper remains a mainstay of the business, which still counts on Hispanic consumers for 85 percent of its sales, but the retailer has adjusted over the years to accommodating the needs of varying segments of its targeted demographic.
Continental’s original customer base primarily consisted of first-generation Hispanics, mostly Puerto Rican in origin, who were moving to the Chicago area in the ‘50s and ‘60s. Now that consumer base includes the children of those immigrants and their offspring, many of whom are fully acclimated to life in the United States.
Mitch Portugal, president of Continental Furniture, said the company’s targeted audience has changed a lot in the 30 years he’s worked in the business. He has the advantage of having lived for a year-and-a-half in Mexico, where he not only learned Spanish, but gained an understanding and appreciation for the culture and the people.
“Now we’re faced with second- and third-generation Hispanics,” he said. “They’re bilingual at least, and the third generation is more comfortable coming into the store and speaking English. They’re more educated, they’ve established credit, bought homes, and they’re moving to the suburbs.”
That’s a far cry from 40 years ago, when most of Chicago’s Hispanic community lived within a 10-mile radius of center city.
While there’s a generation of Hispanic consumers who pretty much follow the same media and advertising influences as other U.S. consumers, Portugal said retailers who hope to attract this segment had better pay attention to its distinct culture.
“Even the younger (Hispanic) consumers here are still very attached to their culture, especially the music,” he said. “A lot of our advertising goes to those radio stations they’re listening to.”
Continental, following market research tracking its consumer base, opened a second store on Chicago’s south side, then a third location in the suburb of Melrose.
“We’re still going after that Spanish-speaking or bilingual customer who relies on credit—I haven’t changed the way we do business creditwise,” Portugal said. “We’ve never done ‘no-no-no’ like you typically see it—it’s always been four months, no interest.”
He cited Harlem Furniture as another Chicago area retailer that’s done a good job building business in the Hispanic community.
“Harlem Furniture has gone after both groups, those newer arrivals and people who’ve been here a long time, and it’s easier for them because they have so many stores,” Portugal noted. “They’ve captured some of the more sophisticated Hispanic customers.”
Portugal said retailers hoping to build business among Hispanic consumers need to build a connection that goes beyond just selling furniture.
“You have to understand the culture and the people,” said. “If they don’t feel the Hispanic culture has a place in a store, they don’t connect.”
Retailers can do all the advertising in Spanish they want, but the real key is involvement in the local Hispanic community, Portugal said.
“We take part in all the local celebrations such as Cinco de Mayo,” he said. “We also host a health fair in each of our stores every summer with blood pressure testing and all sorts of health screenings. We sponsor soccer and baseball teams in local leagues. We’ve committed ourselves to participating in the culture. If you want to address that consumer segment you have to make a paradigm shift—putting a couple of Spanish speakers on the sales floor just isn’t enough.”
The reward for Continental is strong word-of-mouth out in the community.
“In any given month, 50 percent of our sales are with repeat customers, and 20 percent are referrals from existing customers,” Portugal said.
A Different Type
of Shopper
Frank Lorenzo worked on the sales floor at Leath Modernage in Miami, where he was a top producer, before going to the supplier side of the business. Now he runs a large rep operation for AICO in South Florida.
He said that addressing the Hispanic community requires a different way of thinking, and that salespeople catering to the higher end of the demographic had best be well-informed.
“To a Hispanic, especially in better price points, post-delivery service is extremely important, and they’ll give you a lot of questions on those issues prior to purchasing,” he said. “Getting all the details on quality and construction are very important. They won’t just accept that something looks good, but ask a lot of questions about how the product is made, exactly what each veneer or detail is made from. ... A lot of non-Hispanics just buy based on how an item looks and when it will arrive, but this market expects all the details.”
Portugal at Continental noted that his Hispanic customers are trading up more than in the past.
“Back in the early days, we’d advertise three rooms of furniture for $399, and we had a lot of borax promotional product, carved woods and elaborate flower prints” he said. “Now we’ve developed into carrying more contemporary looks, because that’s where the market seems to be going.”
“The Hispanic consumer now will spend extra money to buy better-quality items,” he added. “We now carry Sealy bedding and the step-up line from Ashley, Millennium, and our average sale is more than $1,600. Six or seven years ago, it was around $1,000. Since we offer credit options that let customers make a down payment, we can sell up.”
Also helping to build those tickets are packaging options that include accessories such as lamps, and bedding to add onto mattress and bedroom purchases.
Hispanic consumers tend to view furniture shopping as a family affair, said Pedro Capo, chief operating officer of El Dorado Furniture, a Miami-area retailer whose own roots lie in the Cuban community that came to the United States after Castro’s takeover of the island nation.
“The Hispanic family will come to buy furniture together,” he said. “That ties in to the whole family background that is so important to Hispanics.”
Hispanics also tend to suite up, he said, buying matching goods to outfit particular rooms.
“They also like colors—they don’t like dullness,” Capo said. “In our market, that has a lot to do with the Caribbean influence. You’ll see them looking for earth tones, but also blues and greens.”
Capo said that only recently he’s seen suppliers look to merchandise and marketing materials such as bilingual hang-tags that address the needs and tastes of Hispanic consumers.
“Until recently, the effort has been very minimal,” he said. “Ashley was among the first to have Spanish on the cartoning and give (bilingual) instructions on how to handle the merchandise.” HFB
August 31,
2006 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on September 2006
Good news, furniture sellers: America’s ever-booming Hispanic population needs you.
New reports from federal agencies, as well as the University of Georgia’s annual report on buying power by race and ethnicity, tell you what you already know: The nation’s Hispanic population is growing and buying more furniture as they settle into life in the United States.
Here are some highlights from new federal data and from “The Multicultural Economy: Minority Buying Power in 2005” report from Georgia’s business school:
• Hispanic households spend more of their income on furniture than the average household.
Over the past five years, the average Hispanic household spent 1.1 percent of its post-tax income on furniture. That’s slightly above the national average of 1 percent for all households, according to the federal Bureau of Labor Statistics’ annual Consumer Expenditure Survey.
The downside: Because the average Hispanic household earns less than the national average, the dollar value of their furniture spending is less, too. Hispanic households averaged $1,929 on furniture between 2000 and 2004. That’s about $50 less than the average American household.
The upside: “Despite their lower average income levels,” the Georgia report said, “Hispanic households spent more on groceries, telephone services, furniture, major appliances, men’s and boys’ clothing, children’s clothing, and footwear.”
• The buying power of the nation’s Hispanic population is growing faster than all other groups.
Nearly one in eight of the nation’s residents is Hispanic, and their population rose 21 percent between 2000 and 2005. Growing even faster was their inflation—adjusted buying power, up 37 percent during that same time. The University of Georgia researchers say Hispanic buying power will top that of African-Americans in 2007.
• The boom won’t slow anytime soon.
Hispanics will have 9.2 percent of the nation’s buying power by 2010, as they continue to grow in numbers and to find higher-paying jobs. (Of course, that Georgia survey was published before Congress began considering tighter border control and other immigration-related laws.)
More importantly to the furniture business: The Hispanic population is relatively young compared to the rest of the population, and as they age they may be more likely to buy more and better furniture.
• Hispanics are buying more houses, but the homeownership gap is wide.
Hispanics own about half of the housing units they live in, according to the 2005 American Housing Survey report released in July by the U.S. Census Bureau. The national homeownership rate is 69 percent, suggesting that Hispanics have a long way to go to close that gap.
• The Hispanic homeownership gap is closing quickly.
Hispanics owned 11.7 million housing units in 2005, up 41 percent since 1999. The national growth rate for owner-occupied housing units was 9 percent during that time. What does it mean to you? People who own homes are more likely to buy more and better furniture than people who rent.
• The average Hispanic-owned house has less room for furniture.
Federal reports say Hispanic-occupied houses are typically smaller, more crowded and come with fewer amenities than the average U.S. house.
The Census report says the average Hispanic-owned home has 1,532 square feet, which is 85 percent of the size of the average owner-occupied home nationwide. About one-third of Hispanic-occupied houses have more than 1.5 people sharing a bedroom. The rate is just 11 percent among all houses nationwide, suggesting there may not be a lot of room for a lot of furniture.
Only about 15 percent of Hispanic-occupied homes have two or more living rooms or a recreation room, about half of the national average, meaning fewer sofas and entertainment centers. And only 40 percent of Hispanic-occupied houses have a separate dining room, which is below the 48 percent rate of all housing units.
• You should expect more competition.
Hispanics are opening new businesses at a rate four times faster than the national average, according to the federal Minority Business Development Agency’s survey of minority-owned businesses. The government doesn’t break down sales by categories, but furniture was part of the $40 billion spent by Hispanic retailers in 2002, the latest available data. HFB
August 31,
2006 by in UnCategorized
By Home Furnishings Business in on September 2006
Furniture remains an industry with a strong family business component on both the retail and manufacturing side. When it’s time for a change at the top, a lot of furniture company leaders won’t look to a board of outside directors or shareholders.
Likely as not, they’ll look across the dinner table.
That doesn’t mean, however, that a family business has an instant inheritor—or more typically, group of inheritors. There are plenty of furniture stores and plants whose operations have funded many a college education, often in majors that would take the benefactor into a completely different field than furniture. The next generation might decide they want to establish an identity outside the family enterprise,
On the other hand, some children seize and build upon the opportunities presented by their predecessors’ work.
The Big
Take Ashley, the biggest U.S. company in the business, where Todd Wanek already occupies the chief executive spot. He’s an individual whose father, Chairman Ron Wanek, has long been credited for the company’s commitment to technology that has made Ashley an operational leader in the industry.
“I am blessed because I have a very competent person to pass the business on to,” Ron Wanek said. “Not all family’s have a next generation that is interested in assuming the business, but I have an inheritor who’s helped to take us places already we might not have gone. You have to make sure whomever you’ll pass the business to wants to take it over. Lifestyle is a major consideration for a new generation that will take over a business—whether they’ll want to put in the kinds of hours and commitment it will demand.”
Ron Wanek’s daughter, Sherri Wanek-Wagner, also plays an important role in Ashley’s business, running the company’s extensive international sales effort. While it might be 10 percent of overall sales, Ashley’s business outside the United States represents sales in the hundreds of millions.
Still, Todd Wanek is the man who’ll run the show in the future, and he earned his place spending what amounts to years overseas developing and honing Ashley’s sourcing structure, and pushing for investment in operations technology and logistical systems that has some calling the company the “Wal-Mart” of the furniture industry.
While Ron Wanek was reluctant to share details about Ashley’s succession plan, he did identify a key financial issue for companies large and small when considering a changing of the guard.
“The biggest issue in succession is the tax implication,” he said. “It’s not necessarily on the value of the business, but what the government perceives to be its value.”
Wanek isn’t going anywhere yet, though—at least businesswise. While Todd Wanek takes over at the head office in Arcadia, Wis., Ron will be moving in the near future to Las Vegas, where Ashley will open an office based in its showroom operation at the World Market Center.
“I’ve been enduring Wisconsin winters all my life, and I’m looking forward to spending winter in a warmer state,” he said.
The Not So Big
While there are a lot of large furniture companies that remain family owned, cases like Ashley remain the exception in the business, which has an abundance of single-store operations that in some cases have been in the same family for decades. Some of those don’t have an heir-apparent.
Blackledge Furniture in Corvallis, Ore., for example, has operated under that name for more than a century. President Eric Blackledge is in a situation where there are no family members who’ll take over the business when he retires, but he’d like the business to continue as he lessens his role in day-to-day operations.
“I have a little bit of an ego involved here,” he said. “There’s been a Blackledge Furniture here since 1901, and I’d like to see the store continue. If it does, there might be another name on it, though.”
His solution: Groom a non-family successor to take over operations, and oversee the 43,000-square-foot downtown location and 40,000-square-foot warehouse as a parent company would a branch operation, with the business helping fund what’s essentially a “working retirement.”
“For most furniture people, the store is their major asset,” Blackledge noted. “I own the property, all the real estate.”
There’s another reason Blackledge views the store as a going concern.
“A lot of these facilities in downtown areas like ours aren’t really appropriate for other uses,” he said. “They don’t lend themselves to cute little coffee shops or boutiques.”
Keeping it Rational
When they begin considering the issue of who’ll run their business after they retire, many chief executives and owners of family enterprises run into completely different sorts of decisions than the ones they faced for years running their operation.
“Most of what you do until that time involves rational business decisions—cost control, marketing strategy, operations management,” said Stanley Mandel, executive professor and director of the Angell Center for Entrepreneurship at Wake Forest University in Winston-Salem, N.C. “When you start talking about succession, other things come into play, and sometimes they’re irrational.”
Mandel’s academic expertise has a particular focus in issues affecting family businesses, and he also teaches a class on the subject at Wake Forest’s Babcock School of Management.
He pointed out that succession planning can involve extremely emotional factors such as relationships among siblings, ensuring the future of children or grandchildren, or—with life expectancies rising—even the care of aging parents.
Mandel suggests that business owners need to consider four different areas of planning when figuring out how to pass the enterprise along. The succession plan itself obviously is a critical step here, but there are other issues the owner needs to face before tackling that process.
The first planning priority, Mandel said, is to determine the level of family commitment to the business.
“Problems can arise if the next generation doesn’t have a commitment to the business,” he said. And commitment, or lack thereof, doesn’t mean a lack of interest among the business owner’s family. “The baby-boomers’ parents are dying—trillions of dollars of net worth will be passed into the baby-boomer generation over the next 10 years. A lot of that involves family businesses, so this is a huge issue.”
Another issue involving family commitment is that potential inheritors of the business might still be too young or inexperienced to take the helm.
“If the business is large enough you can have the luxury of hiring non-family professional managers till another generation is ready,” Mandel said. He gave Ford Motors as an example, which went for decades without a Ford family member at the helm of the automaker. That, however, also involves giving the non-family manager the right incentives to be willing to run the show with the understanding that family members might be groomed to assume leadership.
Once the level of the next generation’s commitment to taking on the business has been established, Mandel said the next step is to establish “strategic commitment.” That is, are the inheritors in agreement on exactly what they want from the enterprise?
“Are the family members who’ve committed to the business on the same page with respect to what they want to build this business into?” he said. “Should it be a nice income provider for the family, or do they want it to grow into a regional or even national entity? Do they want to grow the business to the point where they can sell it in 10 years?”
It’s only at the third planning stage that the actual succession plan—or as Mandel puts it, the “Family Enterprise Continuity Plan”—comes into play.
“The succession plan is a bigger plan that comes into third place after considering the first two issues,” he said. “If we have a (family) commitment and can agree on short- to medium-term strategic plans, how do we go about with the business moving forward.”
Key questions to consider include who can participate in the business from a family perspective and what kind of experience they need; the ability of non-family members in the business to make high-level decisions; compensation of family members; and the reporting structure.
Mandel’s fourth issue for succession planning involves long-term strategy, a “business strategic plan.”
“This relates to the strategy and tactics of the business, in particular the philosophy for investing in the growth of the business versus drawing off of the business for the family’s living and lifestyle,” he said. “All these issues are interrelated, and it’s difficult to make a decision in one without affecting another part of the process.” HFB