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As leather upholstery manufacturers continue to pick their way through an obstacle course crowded with new competitors, 2003 will see more leather manufacturers trying their own hand with Asian sourcing.
Domestic and European leather producers are battling to maintain market share while facing down a growing swarm of serious Asian entries. Asia's low-labor costs are a huge advantage, but some say that the higher cost of shipping out of China is an equally weighty downside.
For those manufacturers feeling the squeeze of Far East pressure and price deflation, the best relief will be to either strengthen what they have or seek out their own offshore assist.
"Everyone has an oar in the water," said Fred Starr, president and chief executive officer of Natuzzi Americas.
Striking a balance
Jim Richardson, senior vice president of marketing for Flexsteel, is among those trying to sort out "this global thing."
"We're trying to figure out how to play the China card without overplaying it," Richardson said. "It certainly has a place in the equation, but we are struggling with it."
Flexsteel has been involved in offshore business for seven years but continually reevaluates its approach.
"In terms of what makes sense to your company, there are more options available to us than ever before," Richardson said. "We are trying to be in step, not necessarily with low, low pricing, but in terms of creativity and quality."
Asia is a plus for Flexsteel, Richardson added. "It levels the playing field and brings us closer to mainstream pricing."
Flexsteel continues efforts to integrate its outsourcing of Asian cut-and-sew with its ability to ship in four weeks.
Broyhill, too, is getting more active in Asia.
"We are enhancing our efforts by pursuing our offshore opportunities as a direct result of what is taking place in Asia and China, not only in terms of cut-and-sew but also finished goods," said Mike Delgatti, Broyhill's executive vice president of marketing.
New players
Category newcomer Emerald Home Furnishings decided to take advantage of its import sourcing expertise in 2002 by folding a leather seating component into its established case goods line.
"The leather business is just booming," said David Beckmann, president of Emerald. "There is a wonderful future for leather from China, and we are fully committed. The demand is there at retail and there are a lot of people jumping into it." Another five frames join the Emerald lineup for San Francisco in February.
Casapelle, the warehouse division of Italian Leather Seating, is addressing Asia by "warehousing product from that area," said Scott Davis, president of the High Point-based warehouse operation.
Casapelle will add Chinese product to its warehouse mix as early as April 2003, Davis said.
Meanwhile, the year-old startup is striving to develop a consistent, two-week delivery program. "Currently, any inventory is basically sold before it can be stocked," Davis said.
Service advantages
Mark Parris, vice president of sales and marketing for Coja, said he toyed with Asian prototypes but found them too risky, particularly in terms of delivery.
So, in order to compete head-on with big-volume Asian container endeavors, the Canadian manufacturer developed its own Coja Value Pack, a special-order strategy with 14-day delivery (at retails of $799 to $1,499).
"This is aimed straight at the container guys," Parris said.
Coja also continues to mine nontraditional distribution venues. "The normal direction of doing business through the regular retail community is not vital," Parris said. "It is rewarding but does not give you volume."
From a numbers standpoint, the challenge for American Leather remains creating styles that will provide volume but still offer cutting-edge design.
"Finding that happy medium has become increasingly difficult," said Cary Benson, vice president of sales and marketing. "We continue to try to find innovative and functional products."
At De Coro, President Luca Ricci said he boldly predicted that his Chinese-based operation will increase its sales to $150 million by the end of 2003, a 50% increase over this year.
"If you consider that these goals have been done in a market that faces a very tough economic situation, this means our strategy and collections are exactly what customers need at this moment — value, style, price," said Ricci.
Brand power
Natuzzi will continue to build its consumer brand in 2003.
"With our position in leather, it makes sense to leverage it in the marketplace and to introduce more consumers to our brand and our product," Starr said. "There is a consumer need out there for identifiable brands, and we are the people who can do it."
In addition, Natuzzi will focus on dealer structure via its delivery, distribution and gallery concept (25 units were expected to be open by the end of this year).
For Richard Brodlieb, president of Italian producer Leatherline's U.S. unit, the goal is simple. "We need to offer different looks to catch the buyer's eye," Brodlieb said. "They want the next big item, while we are seeking a bigger share of the pie."
As more leather producers weigh opportunities in Asia, Natuzzi is already fimly grounded there with Italsofa, its pormotional line.
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