Leather category treading water
Pressures include new competition and rising prices
By Joan Gunin -- Furniture Today, December 24, 2006
High Point — The leather upholstery category has been treading water over the course of 2006. While the category was buffeted by new competition from imports, changes in pricing and executive shifts, some see sprays of hope rising from the foam.
According to Furniture Today, retail sales of leather upholstery in the United States were estimated at $6.53 billion in 2006, holding steady over the past three years at 26% of all upholstery.
Executives involved in leather manufacturing said the price increases of about 10% on finished leather incurred in the spring have already been passed on and manufacturers are dealing with them.
Part of the leather logjam is due to supply and demand— as the rate of slaughter has diminished worldwide, fewer raw hides are available.
"The leather pricing was adjustment with (changes in) the VAT in China, but so far there has been no significant impact; it's been marginal," said John Phillips, executive vice president of sales for Palliser.
Phillips admits that business has been slow due to the economy. "Generally speaking, for most retailers, it was a tough year."
He said store traffic has been lacking and that many dealers are finding it difficult to make a profit.
Container pushback
"At the October market, we were seeing a major pushback on containers," Phillips said. "People are trying not to buy full containers."
At Palliser, a new program gives retailers the ability to buy less-than-container load quantities.
"People are looking for alternatives and we are working with them," he added.
To shore up business, some leather seating resources are working hard to combine the best of both worlds — domestic and imported production.
"Our blended strategy of sourced product at a price, and domestic product with a choice, allowed our business to remain steady through 2006," said Lee Fautsch, vice president of sales, home furnishings, at Flexsteel. "All we really need is an uptick at retail to realize the gains that we'd like to enjoy."
Import leather continues to be a key category for Flexsteel, and the industry, Fautsch said, "because leather represents the best value, which the consumer is quick to recognize."
But Flexsteel's special-order domestic leather business also remains viable because, "There is so much less competition for domestic product," Fautsch said. "There are fewer resources for domestic leather at competitive pricing."
According to Fautsch, business continues to be strongest in the Southeast and Rocky Mountain states. "It remains difficult in the East and in the North," he said.
Bradington-Young and Palliser employ a blended strategy, mining both domestic production and imports. Similarly, Italian leather upholstery stalwarts such as Natuzzi, Nicoletti, Caliaitalia, Cha-teau d'Ax and Incanto Divani also have opted for multiple production sites, sourcing out of Italy, China or South America.
High end not as volatile
High-end producers such as Century seem to be unaffected by pricing fluctuations.
"Our customer is really a want rather than a need — they want what they want," said Phil Brown, merchandise manager for Century's leather and chair programs.
"This year has been very good for us on the leather and chair side," Brown said. "Business was very good — up significantly."
Century spent this year pursuing new distribution channels. "We have had very successful growth with the design channel," Brown said.
Brown looks to Century's upholstery frames as "phenomenal jewelry creations. We're putting everything we have into these — trims, finishes, nailheads," he said.
"We have tried to make it a fashion business. We are giving (designers) a blank canvas with fabrics and trims to show off their ability. We're going after a customer that wants something very special and unique. We will continue to play off our strengths. That is to our advantage."
In terms of style, Century will continue to mix textures, leathers, fabrics and trims as collage looks.
Century uses some leathers finished in China but the majority comes from Europe or South America, Brown said.
In addition to the volatility of the economy and pricing, some leather producers experiences changes in their management teams.
At Natuzzi, former Bulgari executive Ernesto Greco took over the daily operations from founder Pasquale Natuzzi, allowing him to concentrate on product development.
American Leather, too, saw a shift, as Bruce Birnbach moved from Rowe to take over the presidency, under Chairman Bob Duncan. Also in April, co-presidents Sanjay Chandra and Cary Benson moved on to the board of directors.
This year, a lot of companies have been launched or resurrected in the leather segment, including Cheers Sofa USA/Man Wah Holdings, Euro Design, Koinor, Local Motion Only, Luana Living and Laurent Leather.
Finding a niche
Stephen Cole, a pilot instructor for Delta Airlines, and his designer wife, Donna, revitalized and reopened Laurent Leather, a high-end upholstery manufacturer based in Newton, N.C. They rehired many of the craftspeople who had worked for the founder.
The Coles pared Laurent's leather inventory, automated its tracking system and implemented a quick-ship program.
"We were looking to do something totally different from anything else," said Stephen Cole.
As more new houses are being constructed with higher ceilings, Laurent Leather is developing sofa frames with larger dimensions. "There have been a lot of requests from designers with 12-foot ceilings and the furniture is getting lost in that. So we're putting our frames on steroids and pumping them up."
This year, Laurent also will make a bigger push into the designer segment, which represents about 10% of its business.
Among the casualties of this year's tough climate were Italy's Natale. Huntington House switched its leather business to an OEM model, while Fine Furniture Design & Marketing dropped its startup leather program, focusing its efforts on high-end case goods.
-
Leather: Finding the right blend
Feb 25, 2007 -
Leather sources spotlight stepped-up covers
Apr 20, 2008 -
Leather sources look for uptick in business
Jan 9, 2005
Merinos Home Furnishings opening display room, Boyles addition
Ernest Warsaw, founder of Sheffield Corp., dies at 91
HOM Furniture adds flooring to six Twin Cities stores
‘Mega vessels' likely to boost capacity, stabilize freight rates
21 companies from Turkey, Taiwan and China to exhibit at Showtime
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
