On the shift from asset-rich to asset-free business models
Jerry Epperson, An insider's view -- Furniture Today, January 11, 2009
One of the industry's more interesting challenges of the past 30 years has been the shift from asset-rich companies to nearly asset-free companies.
In the 1970s, many of our more dominant furniture manufacturers not only owned their factories, inventories and receivables, they were cash-rich — giving them endless opportunities, or so we thought. Lane, Bassett and Henredon were all publicly owned then and had no debt and many millions in cash. How could you argue with their success?
As imports grew and challenged the dominance of these asset-rich companies, new models began to achieve different levels of growth and recognition. Many domestic factories began importing components, then items, then entire collections, reducing their need for large domestic plants.
Some became pure importers and others have become hybrids, while a very few remain purely domestic.
Meanwhile, others developed pure import models often tied to specific offshore sources, or the offshore sources developed a U.S. sales force and their own product lines. The combinations are too many to describe.
Recently, we had exposure to yet another model, one that is so different that it was hard to believe at first: a “virtual” furniture company.
It would be impossible to be in the residential furniture industry today and not be aware of Lifestyle Enterprise. This company has the most distinctive showroom in High Point, the most aggressive advertising campaign in the trade publications, and a leader who is one of our industry's most flamboyant and recognized personalities.
I have known William Hsieh since the early 1980s, but until very recently I did not recognize how Lifestyle was different. It has no factories but contracts with more than 60, giving them assured volume, accelerated cash flow, and often savings from raw materials suppliers. Lifestyle offers global access to dealers at 14 markets on five continents, with mainstream designs engineered to fit specific factories' strengths.
Lifestyle prides itself on the fast turnaround of its designs and its ability to offer what most agree are exceptional prices to retailers who can buy in large quantities and pay their bills. With its “virtual” existence, the company operates with no inventories and minimal receivables. It is about as different from our industry's traditional model as you can imagine and is not for everyone, but William and his strong, lean management team make it work. The company even hosts its own furniture show in High Point in January that is so exclusive it requires an invitation.
Thanks to the times we live in, we expect so see more new business models in our industry that use minimal cash.
Lifestyle Enterprise plans show for Beijing
03/21/2010What markets must do to draw buyers
01/28/2006Lifestyle Enterprise buys H.P. site
10/28/2006
