RTA makers fight for space
By Tom Edmonds -- Furniture Today, December 29, 2002
The portions may be smaller these days, but flat-pack furniture makers are as hungry as ever.
With no single category driving their business and with major distribution channels shrinking, ready-to-assemble furniture producers are casting about not just for the next hot thing but for any incremental gain in their sales.
Although a few small factories are no longer on the scene, the outlook is not entirely grim — after all, there's always the hope of gaining placements in the latest round of retail resets. But the segment is not buoyantly optimistic, either. This is, after all, the third year since the air went out of SOHO and major retailers started closing stores or just plain closing. For an industry that had spent most of the past 25 years in a growth mode, it's been quite an adjustment.
"With the consolidation at retail, if you were to take a look at the number of doors available to purchase RTA furniture four years ago and today, you'd see quite a bit of change," said Phil Miller, Thomasville's vice president and general manager in charge of the Virginia operations, including Creative Interiors.
"The business saw such explosive growth in the last 10 years," Miller continued. "In my estimation, some of that now has to be considered artificial growth driven by the expansion of channel customers rather than retail sales. It's real hard to gauge comp sales year-to-year if you have so many new stores coming on line."
Strategic shifts
Now that there aren't so many new stores coming on line, flat-pack manufacturers deserve credit for making that adjustment — and for not doing it in a lockstep fashion. They are probing for success with new ideas covering what would seem to be the entire spectrum of possibilities.
Three years ago, it looked like the sky was the limit, but the focus was more narrow than it is today. Home office was hotter than the Fourth of July, and it looked as though RTA furniture might be viable at price points of $500 retail and above. At the High Point markets in 2000, several manufacturers introduced bigger and beefier collections and pieces, with massive decorative treatments and endless functional features.
But as it turned out, flat-pack computer armoires have a place in the market at $299 and maybe at $399, but not often at $499 and rarely at any price above that.
Late in 2000 — when PC sales came to a skidding halt, the dot-com sector started tanking and national retail chains started cutting back — the flat-pack community went back to its promotional roots. The product was certainly more sophisticated than the basic carts, cabinets and desks that hit the same price points 15 to 20 years ago, but it was designed to do much the same thing — provide affordable and quick furniture solutions.
The renewed emphasis on promotional price points turned out to be more than a temporary solution to help retailers drum up traffic. While different channels demand differing levels of quality and price, the emphasis for most has been at the lower end of their particular dollar range, and few have been setting the world on fire with the pace of their unit sales.
This has inspired — or forced — factories to look for new ideas, especially new ways to penetrate the marketplace with their products without stealing floor space from themselves. Each of the majors has pursued a different strategy.
For Sauder Woodworking, an affiliation with the television designer Lynette Jennings has spawned two collections: Qbits, a modular do-anything cube program introduced last year and, from this October's market, Closits, a modular storage system for closets.
"These programs play to our strengths and Lynette's talent," said Susan Dountas, vice president for merchandising. "They provide practical solutions for people."
Sauder still has perhaps the broadest distribution across channels, but the new Closits collection is designed to give the company a foothold in departments other than furniture.
Broadening distribution
O'Sullivan Furniture has expanded imports at the high-end — solid wood from Scandinavia — and at the low end — mixed media from Asia. The company also has broadened its sales effort, targeting furniture retailers, not just the big-box national and regional chains.
Bush Furniture, the most successful of the RTA majors in developing furniture for small-office consumers, is focusing more on higher-end entertainment furniture. Recently, the company has been importing from its German factory assembled furniture for young adults and youth.
Ameriwood, the Dorel division, is hitting imports harder, stressing youth bedroom more and experimenting with some step-up designs at higher price points. The most promotional of the majors, Ameriwood is hoping that enhanced designs will give it a foothold into some channels that don't want to compete with discounters.
Examples of such change can be found among nearly all the players in the RTA arena, as producers experiment with new materials, imports, styles or categories. Some of this has been driven by retailers who want new looks that represent more than just a tweaking of the same old panel configurations.
Design, innovation and first-to-market — "These are the challenges everyone is facing," said Michael Simon, who leads the U.S. sales and marketing effort for Schieder, a group of European factories with strong flat-pack capabilities.
Very few retailers, if any, are setting records. But, Simon said, "If a product is right it sells."
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