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RTA revival

Licensing programs, new twists in design sparking good growth

By Gary James -- Furniture Today, February 19, 2006

Product differentiation
Double-barreled branding
Renewed focus
Instant access

High Point — Major ready-to-assemble furniture producers are working hard to strengthen relationships with key retailers by beefing up design teams, developing licensing programs and staying on top of the latest trends in consumer electronics.

Home entertainment is proving to be a bright spot for the RTA category, as consumers look for new consoles, stands and cabinets to house flat-screen TVs. The home and commercial office segment also is showing signs of life after several years of sluggishness.

And new categories such as craft, storage and garage furniture are expanding the category's reach.

Product differentiation

Sauder, North America's largest RTA furniture producer, had a good year in 2005, with sales a "few percentage points up" from 2004, said President and CEO Kevin Sauder. "We also improved our profitability."

Sauder had "a very strong year with a couple of key retailers," he said, "although we lost a little floor space on a handful of other floors due to imports."

According to Sauder, the biggest change in RTA in the last two years has been the push by discount mass merchants and the office and electronics superstores for more product differentiation on their floors. Much of this activity is taking the form of private-label product and exclusive designs.

"Intense competition has created a commodity-type situation at the opening price points for these retailers," said Sauder. "To set themselves apart, major retailers are insisting on exclusive products."

In the past, he said, retailers used to ask their vendors "just to change the molding or the door handle. That was all the differentiation they required. Now, they want products that are completely unique to their floors."

Examples of this trend include the Martha Stewart Everyday line at Kmart, the Lexington collection at Staples and the Christopher Lowell home office program at Office Depot.

The Christopher Lowell line, sourced by Sauder, has been a "tremendous success," said Sauder. "It's a different look for Office Depot and consumers have responded very positively. Not every one of the four collections has been a home run, but we continue to tweak the presentation."

In fact, the big retail chains expect their sources to continually update lines such as the Christopher Lowell line, no matter how successful they are, he said.

"They like to have a transition plan for replacing collections in two or three years. Having product on the floor for more than a couple of years is rare these days," said Sauder.

To meet its customers' growing demands for fresh product, Sauder has beefed up its product development team. A recent addition is Mark Strayer, formerly a designer with competitor O'Sullivan Furniture. Sauder now has six full-time product designers, headed by Doug Krieger.

These designers work closely with Sauder's account managers and the merchants' design teams to develop product.

"We're not seeing much growth in the amount of retail floor space being devoted to RTA," said Sauder. "We need to do everything we can to protect the space we have, and gain new slots. Our competition isn't backing off, so we need to maintain our edge."

He noted the company has been working hard to broaden its style range, adding more sophisticated laminates as well as other materials, such as wood veneers, metal and glass. It also works closely with its two sister companies, Studio RTA and Progressive, to tap global sourcing capabilities.

In recognition of Sauder's efforts in product development and service, Wal-Mart and Office Depot recently named the company their vendor of the year for home furnishings. In addition, last fall, Sauder's call center earned BenchmarkPortal certification from Purdue University.

Double-barreled branding

At Z-Line Designs, sales rose by double digits in 2005, according to CEO Jim Sexton. He attributes the company's success to product innovation and import expertise.

"We rolled out our Lexington program at all of Staples' stores last year and that's been a huge success," said Sexton. "It's an RTA product that doesn't look like RTA."

Sourced by Z-Line under the Lexington brand name, the line includes four collections of desks, hutches, file systems and bookcases. The furniture has many upscale touches, including hand-rubbed finishes, solid wood and decorative veneers and inlays, crown moldings, custom-designed hardware and heavy-duty glides and hinges.

Z-Line also has done very well with a second venture, a line of home office and entertainment furniture licensed by Maxim magazine. The collection ranges from contemporary metal and glass groups to traditional veneers. Retailers carrying the line include Circuit City, Tweeter, Fry's, Wal-Mart and Sears.

With Maxim, Sexton said, "We're targeting the 20- to 35-year-old male looking for furniture to hold all his cool-looking gadgets." The Lexington line, on the other hand, is aimed at under-45 women looking for stylish furniture at a value.

In addition to the two licensing efforts, Z-Line is working harder to promote its own name. Last month, it co-sponsored a car in the Rolex 24 race at Daytona as part of a charitable initiative with Make-A-Wish.

Sexton said Z-Line has been attracting new business from a number of retailers, including independent furniture stores, that have endured "some blowups" related to Chinese import programs. Since Z-Line has been importing from Asia since its launch in 1995, Sexton said, it can offer retailers a proven program "that allows them to sleep at night."

"We have a staff of 70 to 80 people on the ground in China overseeing the production of our line at three main factories," he said. "We have a lot of control."

Renewed focus

At Bush Inds., 2005 was a "very good year," said Jim Schmidt, vice president of marketing and merchandising. "We had strong growth in the office segment — both for the home and for commercial offices — as well as in entertainment. The continued evolution of entertainment technology is sparking a lot of activity."

Bush, which emerged from Chapter 11 protection in late 2004, has done well by "renewing its focus on our core strengths — quality, innovation, design and execution," he said.

One program that has helped the company gain business involves shipping product sold at retail directly to the consumer. "This has had a big impact on our growth," said Schmidt. "It means that retailers can display our product on the floor without taking a big position in inventory."

He said Bush offers the program on larger items — such as office systems — that are not so easy to take home: "We don't put the $49 carts on that program because consumers can easily throw them in their trunks."

Like its competitors, Bush is partnering more closely with retailers to develop product and merchandising and support programs. The company currently is working with a number of dealers to help them develop their online and catalog business "so that it's more profitable and efficient."

The Internet has great potential as a complement to in-store sales, since an infinite amount of product can be displayed and promoted, said Schmidt. "But it has to be priced right, and presented right."

While the bulk of Bush's business continues to be generated by big-box and chain retailers, the company is trying to increase its penetration of conventional furniture stores. The entertainment category holds particular promise, he said, since the category is hot and RTA furniture offers a strong feature-benefit story to consumers.

At last month's Consumer Electronics Show, Bush launched a merchandising program called E-Zone, designed to help furniture retailers build their entertainment business.

"E-Zone will help retailers communicate that they are a source for technology-right furnishings," said Mark Phanco, senior vice president of sales.

"We can help them increase the in-store attachment rate between electronics and furniture, making the transaction as profitable as possible."

Bush also is striving to stay at the forefront in product design. At CES, it unveiled a video base with a remote-controlled lift called the Montclair that accommodates flat-panel TVs up to 50 inches.

"Our Montclair video base gives consumers the option to display or conceal a flat-panel TV with the simple push of a button," said Phanco.

Instant access

At Ameriwood, new technology is being incorporated directly into product development. The company has a strategic partnership with Belkin, the connectivity specialist, and has incorporated USB hookups into desk systems, including the Aviator USB Hub Desk. The desk provides integrated desktop USB access, enabling the user easily to connect any USB device.

"You don't have to spend a lot of time figuring out what to connects to where," said Steve Wahrhaftig, vice president of marketing and product development. "You can just walk up with your new digital camera or other device and plug it in."

This is going to be a busy year for Ameriwood on the product front. The company recently added several new designers, and the team is working on a number of "exciting new applications, including wireless solutions," Wahrhaftig said. "The ante is going to be 'upped' in terms of consumer expectations once these products are introduced."

In addition to making furniture more user-friendly from a technology standpoint, Ameriwood also is striving to enhance styling. Part of the Canadian-based Dorel group, Ameriwood is tapping its parent's global sourcing network to acquire more "authentic materials" to complement its laminate looks.

"There will always be demand for laminates made domestically," said Wahrhaftig. "But the demand for 'authentic materials' is growing rapidly."

He said the "level of expectation on the part of mass retailers is higher than ever before. They expect to be in the loop on all of the latest developments relating to technology and styling. Nobody wants to be at the bottom of the continuum; they all want to have something unique and compelling."

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