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From Home Furnishing Business

Kevin O’Connor: Samson Marketing President and Chief Executive Officer

By Home Furnishings Business in on April 2007 Kevin O€™Connor is president and chief executive officer of Samson Marketing, the entity formed last year by its parent company, Chinese manufacturer Lacquer Craft, to oversee U.S. marketing and operations for Craftmaster, Legacy Classic and Universal.

O€™Connor sat down with Home Furnishings Business to discuss Samson€™s goals for its respective marketing companies, as well as the company€™s focus on logistics.

He also had some reassuring thoughts for retailers on Samson€™s interest€”or lack thereof€”in opening stores stateside, and opinions on current dynamics among competing furniture markets.

Samson Marketing has two distinct U.S. marketing units: Universal Furniture and Legacy Classic Furniture. What are Samson€™s particular goals with those two businesses in terms of price point, distribution and overall strategy?

We see those two companies as distinctly different. They are positioned today so if you€™re looking at a good-better-best model, the good is Legacy, and the better is Universal. We don€™t really have a company addressing €œbest,€ though Universal hits the better end of €œbetter€ and maybe the start of €œbest.€

With Legacy Classic, we€™re focusing on bedrooms and dining rooms from $1,499 to $2,499, though that could go to $2.999 if you go the biggest way. Legacy Kids has grown significantly from zero in three years, and it€™s more in the better range of that category. We also have a casual dining segment retailing from $499 to $599 that could generate significant business.

Legacy€™s targeted customer is the top end for promotional stores and the starting range of the €œbetter€ stores. That€™s a good place to be because you€™re addressing both markets.

Universal addresses the heart of the €œbetter€ stores€™ business, and the starting range at the €œbest€ stores with bedrooms and dining rooms retailing from $2,499 to $3,999. At Universal, we€™ve also started a solid wood program, Simply Solid, retailing from $1,799 to $2,499. The casual dining program there is largely undeveloped, but we€™ve retained Jeff Stone, who€™ll develop that in the $799 to $1,299 range, along with occasional, walls and home office.

We also just introduced Better Homes & Gardens at Universal, which we see as a separate business. We think it€™s the best licensing opportunity that€™s ever been introduced in the home furnishings business€”it€™s a franchise of 38 million readers per month picking up the magazine. It€™s dedicated to middle America, which is right where we want to be.

We€™re launching that with 300 locations around the United States, so that it€™s in the stores in early August if everything goes well, but the real promotional kickoff is Labor Day.

In order to meet that service and delivery commitment, we€™ve focused initial production on around 50 percent of the (250-plus SKU) line in the first six months, and roll the rest out later.

Samson Marketing€™s primary source plant in China, Lacquer Craft, has been exempted from duties on Chinese-made wood bedroom furniture. How has that played out when it comes to attracting new customers and building share with existing retailers?

I think it€™s provided us with a strong selling point and an incentive for our retail partners to grow with our companies.

Frankly, the high-duty companies are having to take existing product and either drop them or move them elsewhere, and in that case it sometimes doesn€™t look the same.

The real key for us remains in logistics. We have warehousing in Jiashan (Lacquer Craft€™s Shanghai-area plant) to hold 3,800 containers of product.

When that is actualized, when business improves, those nine production lines feeding those gigantic, automated warehouses, it will be like 10 years ago when you picked up the phone and ordered a Broyhill container from Lenoir for mixed product.

We€™re 85 percent of the way there. The systems are now in place to tell our customers what€™s in stock and what isn€™t. If you have a compelling value in direct containers, and you can buy what you need three to four weeks out based on rate of sales, you minimize the potential for mistakes.

As a backup, we have the two 300,000-square-foot U.S. warehouses. If you have containers on order for a product, you can buy it for a price between containers and everyday warehouse price.

Until we developed the U.S. warehousing and a second Jaishan warehouse, we always had outsold our capacity.

The recent High Point Market was your first major trade show since the opening of Case & Cushion, a retail outlet in Greensboro, N.C., carrying Lacquer Craft product. This has been described as an €œoutlet€ store, but fact is, it€™s on a major retail corridor where companies pay top dollar for real estate. We€™ve heard from several retailers who window-shopped at Market, and I gave it a look myself. It doesn€™t look like any scratch-and-dent operation I€™ve seen. What kind of feedback did you get from Samson customers on this project at Market, and what are Case & Cushion€™s implications for Samson€™s future, if any, retail activity stateside?

That€™s a sensitive question. Most of our retail partners visited that store during market, and it would be dishonest to say we didn€™t get any comments.

Let€™s cut to the bottom line€”we don€™t plan to be in the retail business. We feel it€™s a totally different discipline, and I think all of the (vendors) who have retail stores right now would divest themselves of those in an instant if they could.

Having said that, why€™d we do this? I go back to the anti-dumping issue, which we played totally straight. The idea that Lacquer Craft would pay even a scintilla of a duty was a joke.

Still, when we were under the gun of that investigation, we had no way to get rid of the kinds of volume every company in this industry has experienced when it comes to a product€™s life cycle.

The only way we could do that is to sell it above what we normally do (at wholesale). The product at that store is either greatly overstocked for whatever reason, scratch and dent, or it€™s a close-out. It€™s no more than that and no less than that.

If we learn something about the problems a retailer faces along the way, then that€™s a benefit.

The last place we want to be is running a retail business. We€™ve not built these huge warehousing facilities in the Far East to sell product to ourselves.

The industry has seen a large number of U.S. marketing arms for Chinese manufacturers set up shop at markets in High Point, Las Vegas and elsewhere.

In your opinion, what should retailers look for when dealing with those entities?

First and foremost, they need to look for a truly vertically integrated company that controls its own destiny, and that has complete control, not just a marketing partner. With a marketing partner ... there are two profit stops, versus one in a vertical model.

Manufacturing the goods is one thing, and the logistics and flow are totally another. You can have a pretty showroom and nice product, but the infrastructure behind that company is the key to whether you do business with them.

I€™d say, first, look for a large plant; second, major warehousing in the Far East; and third, warehousing in the United States.

You need a dedicated sales force and a management team that works in conjunction with a Far East management team. When you look at Samson, you see a company that has bet the ranch when it comes to logistical support. There€™s no turning back.

It€™s all about the human resources that address the needs of the marketplace so we€™re the eyes and the ears of the factory, and not a distant relative saying €œWe need a $299 sofa.€

Speaking of markets, Samson has a big presence in High Point and, more recently, has a considerable footprint in Las Vegas€™ newest building. How do you see those markets evolving?

I think that in the short term, Las Vegas will be a great regional market for all those retailers west of the Mississippi who€™ve stopped going to High Point. And make no mistake, I don€™t think they€™re going to return.

Long-term, retailers are going to make a lot of those decisions for us.

In the short term for High Point, I think it€™s still the major market for most of our major customers. All the majors come here, and most of the small to mid-size retailers east of the Mississippi.

They€™ll continue to come here if the major case goods companies use High Point for their major introductions.

I do feel, and so do most of the major case goods guys, that (High Point) premarket was always very important to us to get feedback from our customers and to iron out distribution. We got 50 to 60 people in on a regular basis for premarket at Legacy. You didn€™t have time to change a whole group, but you could add a bed, change hardware or tweak a finish.

You had a pretty good idea going into market whether you€™d do well or it would be a dud, and I believe those 30 days helped retailers sort out the values among their major vendors.

The reason premarket died was that not enough (exhibitors) were Market-ready, and it wasn€™t worth the retailers€™ time to come if they were only looking at sketches.

When you get down to it, we€”so many of the industry€™s managers€”all live here, I have hardware companies here, I have finishing companies here.

And I believe (High Point Market Authority President) Brian Casey has done a stupendous job of making High Point a better place to do business. By the time this article appears, we€™ll be announcing that we€™re putting up retailers in hotels for premarket, we€™ll have a nice dinner and we€™ll have some fun. I€™m proud to say I took a leadership role in that.

The money we€™ll spend is not insignificant, but it€™s not the key. The key is that everyone kicking in for premarket will be Market-ready.

To me, the rejuvenation of premarket is the single most important thing we can do to ensure the future of High Point.

If the right business atmosphere is provided, where retailers can make good business decisions, and we can help them make those decisions, that€™s the key.

We hear that Lacquer Craft/Samson Holdings plans another brand acquisition stateside. Looking ahead, would any such acquisition fall under Samson Marketing or operate on its own?

It depends on the type of acquisition, but in the long run it would probably fall under Samson. One of our stated goals when we went public was to raise cash for acquisitions, which we followed through on with the purchase of Craftmaster upholstery.

That was a good mix for us, providing stateside production in addition to sourcing upholstery in Asia.

There€™s also the €œbest€ end of the home furnishings business, which we don€™t really address with our current companies. We€™ll do the legwork on any acquisitions stateside (through Samson Marketing.)

You€™ve got a lot going on with your job, but how do you like to spend your free time?

We built a house on Kiawah Island (S.C.) a couple of years ago, and that€™s probably what I enjoy most. I enjoy being with my grandchildren and kids more than anything in life, and that house gives us that opportunity, whether we€™re playing golf, watching the waves roll in, or watching the birds over the marsh lands.

The other big part of my life is my church, Saint Pius (Catholic church in Greensboro, N.C.) We€™ve had a lot of illnesses in our family the last few years, and that€™s helped me keep grounded in what€™s important. My wife€™s aneurysm, my daughter€™s cancer€”I am convinced that the prayers offered up by that congregation are why they are doing well right now. HFB


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