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From Home Furnishing Business

The Branded Alternative

By Home Furnishings Business in Furniture Retailing on May 2007 While some retailers are loathe to relinquish the name they€™ve done business under for years, the growing number of store networks dedicated to single vendors do have their seductive aspects.

Those include a greatly simplified sourcing structure€”one supplier; advertising support and often exclusive or at least preferred distribution; and in some cases good name recognition among consumers.

The potential drawbacks include less control over how the product is floored, and in most cases more regimented standards for store appearance, financing and operating policies governing anything from human resources management to how the retailer handles customer service issues.

As often as not, though, dedicated furniture retail models offer store owners a way to attract new consumers through different price points and merchandising schemes. Typically the distribution preferences such agreements offer also can help retailers broaden their own business structure with an operation that often lacks the inventory demands of the typical store€”as long as the vendor in question backs up its logistical commitments.

A Different Business

That was the case for Dennis Novosel. president and founder of Stoney Creek Furniture, Stoney Creek, Ontario. Novosel has teamed up with Ashley to open Ashley Furniture HomeStores in Stoney Creek, and in the home furnishings mall he operates in Mississauga, Ontario.

€œWe€™re looking at two more€”one in Brampton, north of Mississauga, and one in Ancaster, in the Hamilton area,€ he said. The Ashley operation, run by partner Mark MacDiarmid, differs significantly from the original Stoney Creek store, but gets Novosel into another market altogether.

The first Ashley location, Stoney Creek, opened in 2000, and the Mississauga store is in its third year. Ancaster should open this summer, and Brampton next year.

€œStoney Creek has 125,000 square feet and is more of a destination store,€ Novosel said. €œWe try to do on a smaller scale something along the lines of a Nebraska Furniture Mart. The Ashley model (30,000- and 40,000-square-foot existing locations) is a very efficient operation, and we figured if someone in this area was going to put it to use it may as well be us.€

The two Ashley stores combined do about three-quarters of the volume produced at Stoney Creek€™s original operation.

€œI don€™t consider them part of the same business,€ Novosel said. €œWe€™d like to expand our Ashley business. I believe the big difference between Ashley and a lot of vertical operations is that Ashley€™s a fabulous logistics company. Ninety percent of the product we show in those stores we can have next week, so we don€™t have to touch it when you think about carrying a lot of inventory. They have a POP system that places your orders, so that€™s another thing we don€™t have to handle. The cost side of your business is very reasonable compared to an ordinary store.€

The Importance of Brand

Bill Bacon is owner of Bacon€™s Furniture Showrooms in Port Charlotte, Fla.

Bacon€™s flagship location also includes a stand-alone full-line Lane store, and the company also has a Thomasville store located in Sarasota.

€œI still believe that name brands are important€”the independents that do well carry some name brands,€ he said. €œWe have a blended strategy in that we also deal with non-brand (vendors) that give us extreme values through container programs. We feel we have a strong store brand ourselves, and we complement that with Lane and Thomasville.€

The Lane/Bacon€™s location€”the two stores are connected by a walkway€”offers a particular option to shoppers.

€œThe Lane store gives as that middle America, Ford or Chevrolet customer,€ Bacon said. €œThe Bacon€™s side is a little more upscale. We€™re pretty soup to nuts, but we don€™t deal in the low, low end. If the customer wants a more step-up product, we can take them to those different brands.€

Key vendors at the namesake Bacon€™s store include first Thomasville, as well as Lexington, Schnadig and Stanley.

Bacon€™s Sarasota Thomasville store is located around 40 miles from the original operation. Why open a separate store if Thomasville€™s already a key vendor?

€œThe Thomasville store gives you distribution and service, though that also applies at Bacon€™s, too,€ he said. €œThere are also extra discounts.€

Spreading business across branded product at multiple price point levels also broadens the retailer€™s reach, Bacon noted.

€œBecause we have the brands, we€™re able to increase our share of the customer€™s business,€ Bacon said. €œNot everyone buys those higher-end goods for their whole house. You have second bedrooms and places where they aren€™t going to spend as much as they would elsewhere.€

Not Always the Answer

Fact is, dedicated store agreements between retailers and the vendor in question don€™t always work out. Hendricks Furniture Group, for example, converted its Drexel Heritage stores to its Boyles brand in North Carolina; and to Norris Furniture in Florida.

Hendricks has indicated that Drexel was working to re-align its distribution in the markets in question.

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