From Home Furnishing Business
Kevin OâConnor: Samson Marketing President and Chief Executive Officer
By Home Furnishings Business in on April 2007
Kevin OConnor 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.
OConnor sat down with Home Furnishings Business to discuss Samsons goals for its respective marketing companies, as well as the companys focus on logistics.
He also had some reassuring thoughts for retailers on Samsons interestor lack thereofin 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 Samsons 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 youre looking at a good-better-best model, the good is Legacy, and the better is Universal. We dont really have a company addressing best, though Universal hits the better end of better and maybe the start of best.
With Legacy Classic, were 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 its 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.
Legacys targeted customer is the top end for promotional stores and the starting range of the better stores. Thats a good place to be because youre addressing both markets.
Universal addresses the heart of the better stores business, and the starting range at the best stores with bedrooms and dining rooms retailing from $2,499 to $3,999. At Universal, weve also started a solid wood program, Simply Solid, retailing from $1,799 to $2,499. The casual dining program there is largely undeveloped, but weve retained Jeff Stone, wholl 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 its the best licensing opportunity thats ever been introduced in the home furnishings businessits a franchise of 38 million readers per month picking up the magazine. Its dedicated to middle America, which is right where we want to be.
Were launching that with 300 locations around the United States, so that its 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, weve 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 Marketings 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 its 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 doesnt look the same.
The real key for us remains in logistics. We have warehousing in Jiashan (Lacquer Crafts 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.
Were 85 percent of the way there. The systems are now in place to tell our customers whats in stock and what isnt. 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 outlet store, but fact is, its on a major retail corridor where companies pay top dollar for real estate. Weve heard from several retailers who window-shopped at Market, and I gave it a look myself. It doesnt look like any scratch-and-dent operation Ive seen. What kind of feedback did you get from Samson customers on this project at Market, and what are Case & Cushions implications for Samsons future, if any, retail activity stateside?
Thats a sensitive question. Most of our retail partners visited that store during market, and it would be dishonest to say we didnt get any comments.
Lets cut to the bottom linewe dont plan to be in the retail business. We feel its 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, whyd 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 products 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 its a close-out. Its no more than that and no less than that.
If we learn something about the problems a retailer faces along the way, then thats a benefit.
The last place we want to be is running a retail business. Weve 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.
Id 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. Theres no turning back.
Its all about the human resources that address the needs of the marketplace so were the eyes and the ears of the factory, and not a distant relative saying We 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 whove stopped going to High Point. And make no mistake, I dont think theyre 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 its 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.
Theyll 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 didnt 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 youd 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 wasnt worth the retailers time to come if they were only looking at sketches.
When you get down to it, weso many of the industrys managersall 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, well be announcing that were putting up retailers in hotels for premarket, well have a nice dinner and well have some fun. Im proud to say I took a leadership role in that.
The money well spend is not insignificant, but its 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, thats 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.
Theres also the best end of the home furnishings business, which we dont really address with our current companies. Well do the legwork on any acquisitions stateside (through Samson Marketing.)Youve 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 thats 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 were 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.) Weve had a lot of illnesses in our family the last few years, and thats helped me keep grounded in whats important. My wifes aneurysm, my daughters cancerI am convinced that the prayers offered up by that congregation are why they are doing well right now. HFB