RTA segment shows signs of life
Upgraded looks, values drawing attention in SOHO following period of decline
By Tom Edmonds -- Furniture Today, July 13, 2003
High Point — For RTA furniture producers, SOHO clearly isn't what it used to be. But there are signs that the second half will bring modest gains, even if nobody is expecting the category to suddenly turn back into a growth engine.
With a series of retail failures and cutbacks driven by diminished consumer demand, the past three years have been tough for flat-pack furniture overall, but the SOHO category probably took the biggest hit. Total RTA sales are estimated to be down close to 10% since the peak of 1999 and 2000, and during the same three-year period, home office RTA sales are estimated to have fallen 20%, perhaps more, according to several industry executives.
Having gone so rapidly from a boom — driven by the explosion of personal computers into homes across the country — to near bust, flat-pack execs are breathing a sigh of relief to be on firmer footing.
"The category is doing better, of course, than it was during the worst days," said Susan Dountas, vice president of merchandising for Sauder Woodworking.
There's been no new technology to cause a jump in demand, "but (business) has been steady," Dountas said.
Although several discounters and mass merchants have disappeared since 2000, Dountas noted that the three major office-product superstores — the leading distribution channel for SOHO furniture — have not whittled away at furniture floor space even if they have cut back on their store counts and expansion plans. "We will certainly continue to work on new ideas for product and pricing."
At O'Sullivan Furniture, Mike Franks, director of strategic planning, said he believes that "business across the board, and that particularly includes office, (hit a) trough in April. The direction is up, although in a moderate fashion."
The design and style of SOHO furniture has evolved in new directions during this period, Franks added. "You've had so many alternate materials enter the marketplace that it's changed everybody's reference point."
Today's RTA is made better and looks better than ever, said Stephen Wahrhaftig, vice president of Carina. "As much as we put into the product today, it shouldn't be a huge shock that it isn't being replaced as fast as it once was."
During this downturn, producers learned that RTA desks have limited price mobility. At the height of the SOHO frenzy, it was not uncommon to see market introductions designed for $499 and $599 price points. Some of these products found their way to retail floors, where they frequently languished.
"Business has never fallen off in the more aggressive bread-and-butter price points," said Wahrhaftig. "What has declined is the better goods priced over $150. I think we experienced a temporary bubble in that product."
But the bubble on better SOHO furniture has not popped entirely, not when Bush, O'Sullivan and Sauder all have extensive modular collections designed for small-business consumers on the superstore floors and in their catalogs. A workstation from one of these collections can easily exceed $1,000, but the sales process is slow and expensive.
The office product superstores, as well as discounters and electronics superstores, still love those traffic-building desks that they can promote at $79 and $99. However, channels of distribution other than the office product superstores are not as committed to SOHO. They have other options, and since SOHO has been slow, they've plugged in new product categories, such as entertainment, bedroom and storage/kitchen items.
"Pretty much everyone has adjusted their home office assortment," said Phil Miller, vice president and general manager of Thomasville's Virginia operations, including Creative Interiors. "I would say in general that that those distribution channels might have been over-SKUed in home office, but they have corrected that."
In many cases, the promotional SOHO business has a different look now than it did 10 or even five years ago. The price points are the same, but the products, and their origins, are dramatically changed. Desks are rarely made up of several matching panels of engineered wood that cam-lock together.
"Any type of mixed media that gives a different look to the product creates more interest at retail," Miller said. "All of RTA furniture, not just SOHO, is evolving from basic function alone to include fashion as well as function."
Metal bases, plastic accents, solid-wood components, glass tops, textured and contrasting finishes, wicker looks, louver treatments — all of these touches add visual variety that triggers buying responses, and many of the desks that feature these elements are imported. While the major U.S. factories have been struggling to minimize their sales losses, several importers — such as Coaster, Z-Line Designs and the recent Sauder acquisition, Studio RTA— have been registering substantial gains.
For Z-Line, SOHO is still an "astronomical" growth category. But, according to President Jim Sexton, "That's not because we're importing. What we do is more than going to China, finding something, shipping it back and watching it work at retail."
The advantage that companies such as Z-Line enjoy, Sexton said, is the freedom to execute a variety of designs, regardless of the materials those designs require.
"We have the ability to go into different looks," he said. "We aren't locked into certain looks or materials because of the machinery in our factory. That's been a big asset to us and to our retailers."
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