From Home Furnishing Business
TAKE 5: ALEX SARRATT
2017 by Jane Chero in Business Strategy, Industry
In 1965, recent college graduate Alex Sarratt and two fraternity brothers from the University of North Carolina set sail -- literally -- for Spain. They weren't quite sure what they would be doing when they got there, but they had a hunch that it would be a good place to start a business since the country had been opened to outside investment only six years earlier.
One of the three decided this Spanish adventure wasn't for him and returned to the U.S. about six weeks later. But by 1967, Sarratt and Walter Reid had formed a company called Sarreid and were exporting accessories and accent furniture to North America.
After a couple of lean years, the business took off. And the rest, as they say, is history.
Fifty years later, Sarratt is still a partner in Sarreid. He and Reid sold the company in 1985, but Sarratt teamed up with Charles Hoffman and Charles Mauze to buy it back in 1990. And the company's business remains healthy -- buoyed by a product line that includes a lot more than accent furniture.
Sarratt recently spoke with Larry Thomas, senior business editor of Home Furnishings Business, about the company's history and its future.
Home Furnishings Business: What made you decide to go to Spain to start your business?
Alex Sarratt: Rather than go to law school, which maybe all three of us would have done, we just had an inkling to go to Spain. And we had a friend whose father was in the freight leasing business. He said he would let us go to Spain on one of his freighters at no cost. So all three of us left from Richmond, Va. We had a car and a dog that we took with us.
When we went there, it was a second-world country. Spain hadn't been open to outside investment until 1959, so we were early arrivals to try to do business there. If we had gone to Italy, France or Germany, it would have been totally different.
HFB: What led you and Walter Reid to get into the furniture business?
Sarratt: I guess you could say it was fate that led us into the sourcing hand-crafted accessories and accent furniture. The giftware business was big then, but there really wasn't a commercial category for these types of larger items. We were young and wore sport coats and ties, and everybody thought we were Americans who had a lot of money.
HFB: What were the reasons for its early success?
Sarratt: We were doing things offshore with people who were artisans, which was a category you couldn't find in America. We were working with wood carvers, sculptors and painters. We were able to create a product that was not available in America. We went offshore not to save money, but to create a certain type of product.
An example of that would be in Spain or Italy, the craftsmen did a lot of carved religious figures and things like that. We were able to take those skills and have them make early American folk art. We started making objects like beautiful horses, and other animals that were all hand-carved and finished. I'm pretty sure we were the first to do that.
We went to Italy in 1970 and opened an office there. Italy and Spain were our resource countries until the early 80s. Then Italy and Spain applied for membership in the European Union in 1985. And one of the criteria was that wages had to rise until they equaled French and German wages. So that killed the export industry in about four or five years.
At that point, we went to Mexico, and we went to the Philippines. And then in 1990, we went to India and Hong Kong, where we could source product from (mainland) China.
HFB: So Sarried was one of the first furniture companies to source product from China?
Sarratt: Yes. Back in those days, we didn't have any competition from domestic companies. But when they all went offshore, we were basically just like them, even though we had more experience. But also, when the major manufacturers went to India, China and Vietnam, they brought expertise with them. And they brought suppliers of chemicals and wood finishes and kiln dried wood, and all the machinery that's needed to make fine furniture.
So by 2000, we were gearing up to be a furniture manufacturer. And now, we sell everything but bedroom. It's still hand crafted, still hand-made, still hand-finished. We're at the high end.
HFB: What are Sarried's strongest furniture categories today?
Sarratt: In furniture, it's coffee tables and dining tables. There's a lot of value in each, and they don't take up much freight. We make everything with KD legs in a very sophisticated assembly process, so they're strong.
I'd also say our leather upholstery is strong.
HFB: In 50 years, Sarried has weathered at least four recessions. What's your secret to success during these times?
Sarratt: There are times during recessions when you have to go into a survival mode. We have put money back into the company during those periods. The 1980 recession was pretty tough. The 1987 recession was really tough. The 2000 recession wasn't so bad, but certainly the 2008 -2009 Great Recession was the worst thing anybody had been through. Most people's business fell off by 50% overnight. In September 2008, people just stopped buying, and they didn't buy anything in 2009. And of course, a lot of stores went out of business -- big and little.
Since that time, stores have not chosen to stock. Resources like Sarried have to have the inventory. Somebody will buy one dining room set and put it on their floor, and they want us to ship when they sell one. It's almost like people who lived through the Great Depression in the 1930s. They can't forget what happened, and they're afraid it's going to happen again.
HFB: What's the biggest technological advance you've seen in recent years?
Sarratt: The advent of e-commerce was enhanced dramatically by the iPad, which is only five or six years old. Prior to that, the only way our industry could sell was through photographs that a sales rep had to carry. And we probably had 2,000 photos, and they weighed 120 pounds. (laughs). So a rep would have all these photos in his car, and he would have to select what he wanted to show a certain retailer.
Now on the iPad, it's all there and (the categories) are all divided electronically.
Plus, reps can now see the inventory, so they tend to sell things that are available. (The rep) wants to get paid a commission and a buyer doesn't want to purchase something he can't have right away. That has made things very, very efficient, and we can update things constantly.
HFB: Does Sarried do a lot of business through e-commerce today?
Sarratt: The majority of our sales are still from brick-and-mortar stores. The category that has grown more than any other is interior designers, because they become our best sales people. Our better dealers have interior design departments, too. But when you do business with an interior designer, you're placing furniture rather than waiting for somebody to come pick it out and take it home.
The population under 40 isn't used to shopping at a mall or in a store. If they want something, they look on their phone ... and they feel comfortable buying it that way.
The challenge for our dealers, of course, is to have an extremely good website. And whatever you did last month, you want to make sure it's improved a little bit this month.
But on the other hand, having customer service people in our office that can receive a phone call or an email or text, and take care of that customer is critical. That's no matter who is it. It can be the store that’s our customer or it can be the consumer. We have to take care of them, too. We can't say 'call your dealer.'
That has changed the whole dynamics of how you become a manufacturer and distributor of home furnishings.