Store networks on front burner
By Clint Engel -- Furniture Today, February 13, 2005
High Point — When Dennis Burgette takes dealers through the new Broyhill Home Collections store in Blowing Rock, N.C., one of two things often happens.
The retailer either commits to the manufacturer's dedicated store program or the dealer agrees to expand its current presentation, said Broyhill's president and CEO.
The 20,000-square-foot store was the first company-owned Home Collections unit and the first to sport a specialty format. The store, constructed largely from Carolina pine logs, features a complete mountain lodge theme, with a giant, stacked-stone fireplace and an assortment of Broyhill product edited for the mountain community, including its Yorkshire Market and Attic Heirlooms lines.
"The fact that we have gone to this measure to create such a spectacular store shows the dealers we are committed to this program," Burgette said.
In 2004, Broyhill opened nine Home Collections stores, and plans at least 12 this year, including three company-owned units in the San Francisco Bay area.
Broyhill said it prefers dealer-owned stores, but if it can't find a dealer to open stores in areas where its market share is small, it will move ahead with its own stores.
Lane, Broyhill's sister in the Furniture Brands International family, has launched a similar program, with plans for 15 new stores this year.
That's only a part of the dedicated-store movement that has rippled through this industry in recent years. Ethan Allen and La-Z-Boy are the grandparents of the movement, but many more store programs are popping up, some growing at astounding rates.
Thomasville, another Furniture Brands company, has been at it for years, but with renewed vigor recently. Today, 80% of its volume comes through Thomasville Home Furnishings stores. The company ended the year with 157 stores and plans to add a net 18 to 20 this year.
Furniture Brand's Drexel Heritage also will open 10 new stores this year, and Henredon will open four. And Bassett Furniture Direct finished the year with 116 stores and is looking to add 20 to 25 more this year. Klaussner, meanwhile, steadily has been gaining control of its distribution through expansion of its Sofa Express chain.
Then there's Ashley Furniture HomeStores, which has been on fire. In two of the three years the Ashley network has been ranked in Furniture/Today's Top 100, it has also been the fastest-growing company on the list. In 2003, with 121 units at year's end, Ashley stores did an estimated $600 million, up more than 71% from the year before.
Last year, Ashley's store format started making big inroads with other Top 100 companies. Furniture Outlets USA said it would add four Ashley stores for a total of 10, with a big push into the Twin Cities market in Minnesota. And City Furniture, which opened its first Ashley store in August 2004, plans 12 or 13 more by 2007.
"We're seeing a dramatic increase in the amount of stores being opened," said Julius Feinblum, president of Julius M. Feinblum Real Estate. Of the 350 store deals Feinblum was involved in last year, about 70% were dedicated stores, or what he calls "label stores."
This year, Feinblum expect to do 550 store deals and, again, he estimates label stores will account for about 70% of the locations. Dedicated store deals are going up, but its share of total transactions is holding steady because of the continuing success of another format: regional and super-regional retailers, such as Havertys, Robb & Stucky and Rooms To Go, which serve as their own brands.
Feinblum said dedicated store networks are thriving because the consumer likes shopping these stores, which feature beautiful facades and interiors, first-class presentations and top-notch service. "A lot of people find a level of quality and confidence in them," he said.
Another reason for the success: Feinblum said dedicated stores keep the manufacturer and retailer on the same page, working together to promote the brand, and put more emphasis on fashion, easing the pressure to promote price.
"It allows them to make a fair markup," he said. "It creates traffic on a national level so that small independent operators can be rewarded as the stores open across America."
Analyst Jerry Epperson attributes the rise in dedicated stores partly to what happened to the industry a few years ago, when giant retailers, such as Heilig-Meyers, Roberds and Montgomery Ward collapsed.
"When you lose a lot of major retailers, manufacturers usually take it on the chin every time," said Epperson, managing director of Richmond, Va.-based Mann, Armistead & Epperson. "One thing they like to be able to do is control their credit."
Store networks give manufacturers that control. And the programs are attractive to potential dealers, since many offer preferred delivery to store partners, he said. Manufacturers also help negotiate leases and provide professional advertising materials.
"They make a pretty convincing argument, and they're getting a lot of retailers around the country to go along with it," Epperson said. "All of the programs are dramatically more successful and professional than they were just five years ago."
He pointed to the growing interest in dedicated stores by Top 100 players, including Hendricks Furniture Group, which has opened several Thomasville and Drexel stores; Star Furniture, opening its first Thomasville store in Houston; and Furniture Outlets USA and City Furniture, with Ashley stores.
"They are chains that are big enough to be competitive in the marketplace on their own," Epperson said. "For them to sign on is a recognition that these programs are working."
Business at City's first Ashley store in Sunrise, Fla., has been "outstanding" since it opened last summer. And the Fort Lauderdale, Fla.-based retailer is on track to open five more units this year. While President Keith Koenig is confident in the Ashley program, he thinks the quick rise in dedicated store programs ultimately will lead to a shakeout.
"I think there is an overly optimistic approach by the industry to proprietary stores," he said. "My fear is that some people in the industry think dedicated stores guarantee success. A proprietary store full of weak value is going to have a hard time competing. I don't care how good the brand is."
Koenig said a strong partnership results when a manufacturer with great product teams up with a retailer with strong operating skills. Good communication also is critical.
A retailer with dedicated stores has to be concerned that the factory stays hot, he said. And factories should be concerned with how well a retailer executes.
"At the end of the day, if the store doesn't make money, the concept doesn't work," Koenig said.
-
Store networks on front burner
Feb 17, 2005
Featured Company
-
Brandwise Inc.
Brandwise serves a model - not just an industry - by integrating, automating, and optimizing the entire sales channel, from wholesale Suppliers to their Reps and the Retailers they service. In short, our software helps Reps and Suppliers sell more and create... more
VIEW ALL GALLERIES
