Service, communication key to building a base

By Thomas Russell -- Furniture Today, March 7, 2004

Service, delivery, quality and price are major buzzwords in the import business. For some companies, these issues remain major challenges. Others see them as opportunities.

Whatever the case, how well importers fare in these and other areas will determine their long-term success, especially given the increasing competition.

Below is a snapshot of how some importers view these upcoming challenges and opportunities.

Creating mutual understanding

Any importer can explain the importance of communication, especially as it relates to product development and relationship-building. In many cases, the Internet and fax machines have made communication a lot easier.

But officials also say that it's critical to have an overseas presence. Even if there are quality control people in the plant, it's important for executives to take time out of their schedules to visit sourcing partners.

Many U.S. executives visit their Asian sourcing partners six to eight times a year or more. That enables them to see how the product is being made and to convey necessary changes important to the demands of the American marketplace.

"I spend a lot of time working with and educating our folks overseas of the changes in the U.S. market, and the styling we need to put into the U.S. market," said Michael Campbell, president of leather upholstery importer Leather Italia USA. "Once they understand and participate in that same vision, you have success.

"It's not always about the cheapest price and what someone tells you they can do. It's about understanding the production capabilities and understanding the U.S. market and getting everyone together on that. Communication is very important."

Staying on top of quality

As with any industry, the future of the import business lies largely in the hands of its people. That's why companies seek to hire the best and the brightest.

Given some of the consolidation that's occurred on the domestic front, the furniture industry is not currently in a growth mode. But growth opportunities will exist in the future, particularly in the marketing and design end of the business.

Some of that could occur as companies get into new product categories. Along with marketing and design, companies also may hire more overseas staff to help oversee production and quality control.

"I think there will be some growth opportunities here in marketing and administrative (functions), but the big growth will be overseas," said Lee Corson, president of case goods importer Corson Furniture International. "You have to have people on the ground doing quality control."

Providing faster service

Many importers got started with a domestic warehouse or two. Many of those same companies maintain inventory in those warehouses to ship product in a timely fashion. For instance, case goods importer Jofran Inc. can ship orders within 72 hours from its Boston area warehouse.

But while domestic warehouses are important, importers see the trend moving to more direct-container shipments from Asian warehouses.

That's largely because of the cost savings involved. By cutting out the transportation and handling costs associated with domestic warehouses, importers can pass the savings along to the retailer and the consumer.

"I think going forward, it will be a given that most American supply people will have a warehouse in Asia so they can ship mixed containers to retailers," said Jofran President Bob Roy. "There will be more and more retailers buying direct from Asia."

That's a key strategy for case goods importers Legacy Classic Furniture and Universal Furniture.

Lacquer Craft, which has ownership in both companies, has built a state-of-the-art manufacturing plant and warehouse in the Shanghai area. Totaling about four million square feet, it began production in December and can hold about 2,500 containers of finished product.

Lacquer Craft also is expected to open a new plant in Dong Guan this year.

"Demand has always been greater than our ability to supply," said Legacy Classic President Kevin O'Connor. "In the next three or four months, our inventory will build because of our production capacity in Shanghai. We will be able to supply from a stocking position."

In particular, warehouses such as the Shanghai facility are important over the long term because of their ability to ship mixed containers to large and small retailers alike.

"The logistics of your business will determine how big your business gets," O'Connor added. "It will change the way we think the import business is done."

In many cases, however, importers still see domestic and foreign warehouses working hand-in-hand. For instance, product that comes in damaged can be repaired in a domestic warehouse and shipped to the retailer a lot more quickly than if it had to be sent back overseas.

"I think at the end of the day, it's all about service," said Jack DeBonis, CEO and president of case goods importer Global Furniture. "I think we will have to do an even better job providing parts, servicing products in the field quickly and being able stock goods in domestic warehouses, but also overseas."

Keeping options open

One of the main advantages that importers have had in the marketplace is price. Industry officials don't expect that to change much considering that cheap overseas labor is a major factor in competitive pricing.

"Our industry is based on a product that is hand-crafted. Labor is part of that process," said Harvey Dondero, president of Universal Furniture. "As long as that's the case, it's clear to me that it will be made in low labor countries."

Up to this point, China has been a major part of that equation. But an antidumping lawsuit filed by domestic furniture producers concerned over the loss of American manufacturing jobs could upset that balance.

If the petitioners prevail, Chinese-produced bedroom furniture could face preliminary duties ranging from 158% to 441%. Over the long term, that could significantly impair China's price competitiveness.

But industry officials argue that the tariffs will simply move manufacturing to other Asian sources. In fact, production is already happening in countries such as Indonesia, India, Malaysia and Vietnam.

"To bring the best value to the customer, we will look at where those values are coming from," said William Kemp III, president of case goods importer Kemp Enterprises. "If those values shift to another place in the world, it is our responsibility to take a look at that."

He added that importers need to be selective about choosing their sourcing locations. Some companies simply may not have enough orders to maintain capacity in a given plant. Others could find it difficult to get the quality they need right away from a new sourcing location.

Even if duties are imposed, not many expect jobs to come back to American soil. If anything, they say, duties will only help stem the tide of continued job losses.

And even that won't last for long, unless American manufacturers become more competitive and not rely solely on government intervention.

"Antidumping won't change the American manufacturing base at all," said William Hsieh, chairman and chief executive officer of case goods importer Lifestyle Enterprise. He added that U.S. manufacturers have been slow to adapt to growing global competition.

"Because they are so conservative and stubborn, they didn't want to learn and didn't want to change," he said. "There is so much they refuse to do."

Developing the right product

Knowing what the American consumer wants isn't just about low prices. It's also about style and quality.

Just ask Michael Campbell, president of Leather Italia. He and his sales agents hold ongoing seminars with retail salespeople about what goes into its product.

"To remain successful within the next 10 years and beyond, we will need to educate retail salespeople about our vision, our program and the raw materials," Campbell said.

Presentation is also important. That's one strategy behind a new 28,000-square-foot showroom that LifeStyle has built in High Point resembling an ancient Chinese temple.

"We bring the right merchandise to the market, the right way to present it, the right showroom to attract the traffic and to give them the excitement and give them the appropriate merchandise to their store to sell and to make money," said LifeStyle CEO William Hsieh. "We have to use our marketing know-how and our people to make it happen, to bring the most saleable merchandise to help the retailer get more business and make more profit."

Creating fresh designs

Attention to quality and original designs is also a key strategy for case goods importer Containers 2 Go.

"Right now, I'd say one of the major directions we are going into is staying away from the commodity items," said President Matthew Baerg, noting the prevalence of knock-offs in the marketplace.

"We want to differentiate, we want to create looks that have high perceived value for competitive prices and produce products that are not a commodity."

Design is also an important part of occasional and casual dining importer Ligo Products' long-term vision, particularly as it seeks to gain new dealers and expand retail floor space in existing locations.

"Each category is very important," said Dan Angus, Ligo's senior vice president of sales and marketing. "We address design to get the freshest looks, keeping in mind price points at retail."

Willingness to change

The way case goods importer A-America founder Fred Rohrbach sees it, the furniture import business has changed in many ways during his 30 years in the business.

For one, communication is a lot easier thanks to fax, e-mail and other forms of electronic information sharing. But that same technology has made the marketplace more competitive as well.

If they want to stay viable, importers must embrace positive change, Rohrbach said. Whether it's locating a new sourcing partner or location, or finding a better way to warehouse or ship product, he believes companies need to stay on the cutting edge.

"If you are resistant to change you are going down," he said. "You will fail. You have to change with the environment."

The same philosophy, he said, relates to nearly every aspect of the business, from having the right product at the right time to having the right price and the right style.

"With all these things, there is very little margin for error if we want to maintain our competitiveness and be successful in the future," he said.