Canadian store carves out fashion niche
By Michael J. Knell -- Furniture Today, March 2, 2003
Waterloo, Ontario — Repeat customers account for 46% of sales at fast-growing independent retailer Home Fashion Market here, and owners Stan and Ella West are convinced that's because they and their staff truly care about consumers.
But there's more the single-store retailer has going for it — a well-thought-out business model focused on discipline, organization and structure.
"You have to have the marketing plan, the merchandise program, the advertising strategy, the operations manual, the selling system and the technology to run it all, or your independent store just won't make it," Stan West said.
Located in the north end of this city in southwestern Ontario, not far from the site of the original store in the village of St. Jacobs, the 20,000-square-foot destination store is nearing $10 million in annual volume. Sales have tripled since moving to the new store nearly three years ago.
The Wests approach is unusual in the Canadian market, something that's reflected in the store name. When the couple started out in August 1992, the store was called the Almira Furniture Gallery. Expansion and relocation in July 2000 prompted the name change.
"We try to practice differentiation in everything we do," Stan West said. "The old name carried a typical independent family store image. We wanted something that had more of a national ring to it."
The goal was to create a brand, so they looked at retailers like Home Depot, Circuit City, Future Shop, Radio Shack and others.
"We use the words 'home fashion' to communicate our emphasis on style and design," West said. "We don't consider ourselves to be in the furniture business. We're in the fashion business. We're not selling furniture. We're selling environments.
"Although furniture is the core component, it's the co-ordination with window, wall and floor finishes as well as accessories that creates the finished product. We believe this brings the consumer out of an item-buying mindset and helps her think about the bigger picture.
"The word 'market' was chosen to imply diversity and value," he continued. "Home Fashion Market represents over 25,000 furniture products at mid- to upper price points. We feel this scope of merchandise is necessary when providing a comprehensive in-home design service.
"Normally, the level and type of service we provide is associated with higher-end stores. We've streamlined our process with proven systems and technology so that we can accomplish better results with less time invested."
The move to the new store also allowed Home Fashion Market to adopt an everyday-low-price strategy, a rarity on the Canadian retailing scene, and which the Wests refer to as EDLP.
"We took a lot of risks when we moved to this store and created our new business model, and this definitely was the biggest risk of all," West said. "We want to build relationships with our customers. We want to build a level of trust."
He believes that promoting price and financing doesn't inspire trust. "Every furniture retailer is out there screaming sale, sale, sale," he said. "How long can you do that and retain your credibility?"
EDLP creates a comfort zone for consumers, he said, who never have to postpone a purchase believing it will be offered for less money later. Promoting its EDLP policy gives HFM another way to differentiate itself from competitors.
West said HFM sales associates spend lots of time working to create the home environment customers want, even if they don't sell the entire package all at once. The aim is to build lifetime relationships with customers.
"Home Fashion Market believes furniture shopping for most people is a reactive process," he said. "Buying this way causes people to be left with an assortment of furnishings that doesn't reflect a cohesive decorating plan. We've put accredited interior designers in the role of sales associates to correctly advise and educate customers on how to plan, budget and prioritize the furnishing and decorating of their home."
Each associate maintains client files that include floor plans of the home, digital photographs and finish samples that easily can be accessed during a customer visit. This way, each sale builds on the one before and lays the groundwork for the next.
HFM is neither an item house nor an instant-gratification store, West said. Sales associates work with clients to create entire rooms, not merely sell a sofa or bed. This helps build customer loyalty and boosts the average ticket. It's sometimes three weeks before a decision to buy is made, he said, and delivery of special-order goods averages 50 days. There have been very few complaints.
The EDLP strategy produces challenges. HFM needs to stay aware of prices in the trading area to ensure they remain competitive. This is done through research. Consumers that find a lower price on any item sold at HFM are given a C$100 finder's fee. West said it is rarely paid.
EDLP also affects margins, which the store sometimes is willing to sacrifice to maintain competitiveness. "Our margins vary from vendor to vendor," West said, adding that ensuring profitability means paying careful attention to turn rates.
HFM uses software vendor ProfitSystems, and any product flagged as not achieving a certain GMROI is dropped. "ProfitSystems is a very powerful tool when you use it properly," West said, adding HFM has been using the technology for eight years and is only now realizing its full potential.
On the first of the month, every item is reviewed. "We look at each product on our floor as a tenant in our space," he said. "If it's a tenant, it has to pay rent. If it hasn't paid rent in 60 days, we move it to another space to see if we can create interest. If it still hasn't paid rent in 90 days, it will be evicted. That is, it's marked down and we'll clear it out."
This constant monitoring is the only way EDLP can be effective, he said. "It's all about finding the top sellers.... One in five prove to be the top sellers, and you have to stay on top of that."
West believes he and his wife and partner, Ella, have built a business model that works. It's something they eventually would like to see in other markets in Canada.
"We believe the model will outperform most furniture stores and we intend to take it national. Not this year and maybe not next year, but as our momentum builds we will go to other markets."
Before getting into retail a decade ago, the Wests were active in manufacturing, working with Stan's younger brother Paul to produce a full line of solid-wood case goods. Stan still is the primary designer of the West Bros. Furniture line, and Paul is responsible for day-to-day operation of the factory in nearby Hanover, Ontario.
The Rudyard Kipling Collection, designed by Stan, won this year's Canadian Home Furnishings Award in the adult bedroom category.
Stan and Ella West always have worked side-by-side. At Home Fashion Market, Stan is responsible for marketing and merchandising, while Ella takes what her husband describes as a "detailed and disciplined" approach to administration.
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