Mfrs. banking on consumers' lust for leather
By Joan Gunin -- Furniture Today, August 26, 2002
Stationary leather upholstery continues to be an industry hot ticket despite unstable market conditions.
Consumers' lust for leather remains unabated at retail, while the manufacturing side continues to brim with new contenders. The marketplace is being hit from all sides.
Leather seating is now produced in Argentina, Brazil, Canada, China, France, Germany, Mexico, Poland, Romania and Thailand as well as Italy and the United States.
Furniture/Today's estimated retail sales in the United States for 2001 put upholstery sales (mostly stationary) at $21.4 billion. The leather category represents about 26% of that total market share or an estimated $5.6 billion.
In 1997, leather's market share stood at about $3.3 billion. The fact that the category has almost doubled in size in the past five years further underscores the fast pace the category has set within the sometimes sluggish furniture marketplace.
Some leather manufacturers deal solely in the promotional trade and, amid such a crowded field, they have nowhere to turn but upscale. This aspect, in turn, has ratcheted up the quality.
Each market brings new players as well as existing companies expanding into leather. Recent newcomers this year include Soft Line and Campbell debuting at San Francisco and Tupelo, respectively, while Mississippi-based United Furniture launched its own dedicated (promotional) leather program at the Tupelo show.
Admittedly, leather manufacturers are exceedingly difficult to rank because most are privately held. Natuzzi is singled out as the only publicly held company listed on the New York Stock Exchange. Other prominent players (but difficult to quantify) include Soft Line and View Point (both private) as well as Ethan Allen and La-Z-Boy, which do not break out leather numbers separately.
Both Nicoletti and Divania are taking preliminary steps to go public in their native Italy.
Facing the issues
Anyone involved in leather today is being tested by issues of encroachment, pricing, competition and some high-profile producers in Italian and China.
Undoubtedly, one of the major challenges facing the leather industry is encroachment. Imports — most notably from China, but elsewhere, too — are beating U.S. manufacturers on price. Competitors are fighting them off with fashion, style and value. In addition, BenchCraft, Campbell, Klaussner and Leather Bella, are among those manufacturers importing already finished products into their warehouses scattered nationwide.
Another chief concern involves price fluctuations. The supply/demand cycle is buffeted by not only the economy, but such other unpredictable issues as vegetarianism or mad cow that can work to make leather an erratic prospect.
Many manufacturers brought in microfiber during leaner times to keep plants running. Some, including Natuzzi and Nicoletti, have succeeded exceptionally well with this alternate faux suede covering.
As a hedge against possible competition, manufacturers are striving to differentiate their products and to set themselves apart with pricing, style, labor, materials, location and fashion. Each is charged with chiseling out its own individual commercial niche.
Natuzzi represents a threat in its own right as the most recognized brand name in leather worldwide. Italian-owned DeCoro, based in China, has made waves of late by offering sofas with retails as low as $899.
In their own defense, leather producers have a choice of options to turn to including cut-and-sew, global diversity, continued growth at both the manufacturing and retail level, broadened brand identity, and some overlapping.
Going offshore to China, Thailand, Italy and South America to bring in hides to cut-and-sew and assemble in the United States is open to quality control issues.
A variety of new global sourcing locations are still to be tapped for hides and labor. In addition to Italy and South America, potential sourcing includes Thailand, Korea and Vietnam. Also on a contract basis, Asian-based HTL is making covers while Italian-owned Divania is producing finished products for others.
Room to grow
The leather upholstery category has not yet "plateaued;" there is room for growth. Leather has already benefited from a growth spurt over the last five years, and yet, leather guys remain bullish. Bob Wilson, president of Anthem Leather (South American tannery/supplier) still sees 5% to 10% growth over the next five to 10 years. Wilson says 35% share is not out of the question.
In building brand recognition at retail, Natuzzi is there with Chateau d'Ax, LeatherTrend and American Leather now attempting to follow suit. La-Z-Boy and Ethan Allen are already there, but leather did not bring them to that dance.
As far as retail opportunities, Natuzzi — already entrenched in successful free-standing franchises in Europe, Australia and Asia — rolls out a new version of its gallery program this fall.
Taking a new direction, some companies have diversified their product lines by crossing stationary with motion components (Omnia). Conversely, Berkline and El Ran have added stationary frames to blend with existing motion/recliner groups. Similarly, Mexican-based LeatherTrend, is bulking up its successful leather offerings with the launch of a fabric upholstery complement this fall.
Companies to watch include Dallas-based American Leather, which is gaining name recognition and building its brand through shelter books. This 10-year-old company offers a fashion-savvy line-up with licensed looks from John Mascioni, Vladimir Kagan and Rick Lee.
Not to be confused with some flashier competitors, Omnia Leather, of Chino, Calif., has carved out for itself a steady course of calculated growth.
Italia Leather USA by Campbell Leather Sales was among the first with the idea to parlay imported finished product into this country. While neither a Klaussner nor a BenchCraft in size, Michael Campbell and crew are fun to watch grow if only for their enthusiasm.
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| Leather-covered upholstery at a glance: Market size at retail in billions |
