Factories will earn, not buy, retail slots
By Michael J. Knell -- Furniture Today, January 4, 2004
TORONTO — Value and innovation will be the keys to winning and keeping retail floor space, manufacturers exhibiting at this year's Canadian Home Furnishing Market believe.
While buyers attending market will find show specials, they shouldn't expect deep discounts, extra-generous terms or other super-incentives seen at previous markets.
Not so long ago, manufacturers virtually bought retail floor space with such incentives. But those days are gone, a victim of the high cost of doing business and, more importantly, because of shifts in the priorities of manufacturers and retailers. Most of those incentives were predicated on container-load buying, and that's fallen out of favor with shorter production runs at factories and the "one to show, one to go" inventory approach of most stores.
"I think we are past (those super-incentives)," said Karim Kurji, vice president of sales and marketing for case goods producer Dynamic Furniture. "Nowadays, people want something on the floor that is priced competitively and gives value to the consumer."
The Asian factor
Also influencing the shift to value and innovation is the emergence of China and the Far East as low-cost producers, not only in case goods but increasingly in leather and fabric upholstery.
"To earn the business, we have to be innovative," Kurji said. "We have to bring out products the Chinese cannot make. That's how we can keep and get even more floor space. If we don't come up with the styling and value retailers want, we could lose it. That's what's happening today."
"Innovation is the key," said Robert Vlessing, president of upholstery house Coja Leatherline. "We're not going to compete with the Chinese. We're going to stay ahead of them because we're going to be more innovative with our product lines. We're also going to target markets that the Chinese simply can't go after."
Roger Friesen, vice president of sales and marketing for Canadian powerhouse Palliser, noted that, in the current business environment, quality and service are only the opening retail requirements. The key is in the development of innovative product.
"Quality is now required, as is service," he said. "The manufacturer who continues to offer a strong value equation — by value I mean product design and price — will carry the day. The market is definitely moving towards a better appreciation of good design."
"Quality will only get you so far," said Gerry Themens, national sales director for motion specialist Berkline Canada. "There's been a huge shift in what people are buying…. People are looking for something different, for something that will excite the consumer."
It's also very much a buyers' market, Friesen believes.
"The supply is greater than the number of floor spots available," he said. "The choices are so much greater, making the proposition of value so much stronger. We're seeing better product coming to the market and that bodes well for the consumer."
Flexibility is key
Domestic factory executives believe their key advantage is flexibility, which they see as their ability to deliver goods in a more timely manner than the importers.
"Our advantage is we can ship quickly — when the retailer wants it and with up-to-date styling," said Dynamic's Kurji. "If you buy product from the Chinese, you have to be sure it will sell. We have to improve out service and delivery and we have to be more creative with out styling."
Most executives believe this winter's Toronto market will be well attended. While they say 2003 wasn't as strong as it could have been, they are confident retailers realize they need product and service solutions to grow their business in 2004.
"For many people, their business has been good and they need to buy merchandise," Coja's Vlessing said. "The economy is turning around and people seem to be more confident."
"We're going to market expecting attendance to be quite good," Palliser's Friesen said. "Business has been improving, and it will be driven by the good values we'll see at market in all product categories."
While 2003 was largely lackluster, 2004 should show improvement, although few factory executives expect fast-paced growth.
"The whole of 2003 was spotty, and the closing months weren't as strong as we expected," Berkline Canada's Themens said. "Business isn't going to take off. It's going to be a slow climb. It's going to be tough for the first six months or so."
"2003 was nothing to write home about," Kurji said, "but 2004 should see a return to better times."
"Our outlook for 2004 is certainly more positive," Friesen said. "The Canadian market will give us strong growth. We'll simply have to work harder to get the business."
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