Leather: Finding the right blend
By Joan Gunin -- Furniture Today, February 11, 2007
High Point — As North American stationary leather upholstery resources rush to China to make use of less costly materials and labor, a handful of manufacturers are double-dipping, profiting from production both here and abroad.
This "blended strategy" appears to be working well for those involved.
That includes such U.S.-based companies as Flexsteel, Bradington-Young, Lane and Universal/Craftmaster, and Canadian-based Coja and Palliser. They make different lines on each continent. Others, like Klaussner, produce identical collections both here and abroad.
This dual approach enables resources to serve retailers ordering container loads, and stores that place custom orders.
Success in China is closely linked to strong relationships, solid quality control and competitive prices.
The price is the thing
"It's all about price," said Chuck Welch, leather product manager for Klaussner Furniture. "Back in the day, importing was designed to bring in different looks and a different feel. Today, it's for a (competitive) price point."
Klaussner began sourcing sofas from Italy in 2000, before switching its offshore production to China three years ago. Until now, the company had merchandised its domestically made lifestyle looks (Klaussner) and its Euro-influenced imported frames (Klaussner International) separately. But in a major shift unveiled at the winter Las Vegas Market, the company will now produce the same fully finished lines both here and in China.
"We will take Klaussner's domestic collection and will offer American looks made in China, but identical to our collection of U.S. frames," Welch said. "It truly is a blended strategy."
The primary difference, he said, is Chinese-made container loads versus custom capabilities here.
Sofa Express and More, the Groveport, Ohio-based Top 100 dedicated store network owned by Klaussner, sells product made in China. But, Welch said, "If a customer wants something special, we'll build it to the same specs at one of our (U.S.) plants. We can quote a price built domestically or on finished goods out of China based on containers."
Chinese product will be "a price point or two lower," he said.
This strategy also is applicable to leather specialty stores, which typically submit custom orders. "But if they need something at a promotional price, we can do that too," Welch said.
Klaussner's domestic production now represents 75% of its stationary leather upholstery business, versus 25% imported. Welch expects the percentage to shift towards imports.
"There will always been a need for domestic business, but to what level and how much, I don't know," he said.
Klaussner designs also will favor American styling. "We will offer Italian looks as needed," Welch said, "but going forward, we will offer less Italian looks overall."
Klaussner's established high-end collection, Distinctions, continues to be made domestically.
Needed: A good partner
Leather manufacturers all agree that much of their success offshore stems from aligning with a good partner.
For instance, Flexsteel benefited from its 2002 acquisition of case goods maker Wynwood. "This move was key in introducing us to the best (China) suppliers and factories," said Lee Fautsch, vice president of sales, home furnishings. "We really benefited from their experience; it helped to flatten the learning curve for us."
Flexsteel was involved in cut-and-sewn kits for 12 years before jumping into China for fully finished furniture four years ago. That leap obviously made an impact. Today, 35% of Flexsteel's leather upholstery is domestically made, while 65% is imported.
"Imported goods could continue to make an impact," Fautsch said. "The velocity in leather is in sourced goods because of the price-value relationship."
The key to success in sourcing product is having your own people on the ground, he said: "If you are going to be a quality producer and a timely deliverer of product, you need to have your own people. We have a real and significant presence in China, with 50 to 75 people on the ground — dedicated to us. That is so important."
Produced in separate factories in southern China, Flexsteel's Latitudes line is mostly sofas, while its newer Destinations line has added sofas to a chair-driven program. As with its domestic products, its Asian imports are built with Flexsteel's signature spring unit.
The company's domestic production supports consumer choice, Fautsch said. "Not everyone wants a brown sofa; some want lime green," he said. "(Leather) is still a fashion business. Leather is the hottest product in the market. Our domestic business is steady but our growth on sourced product has been handsome."
Meanwhile, Canada's Coja initially eyed China mainly as an emerging consumer market and wanted to get involved.
"We needed to be there to get educated about how to do business there, and also to keep up with changes and trends there because it would effect our manufacturing business in North America," said Mark Parris, vice president of Coja's U.S. sales and marketing arm.
He said furniture business dealings in China are "like going into a candy store. Whatever you want, they will build it for you, to any spec or standard — for a price."
Coja still is relatively new to China, with just 20% of its leather seating produced there. But, said an optimistic Parris, "I don't see how it can not grow."
In search of relationships
According to Parris, the relationship with an offshore partner is "more important than the product itself ... in terms of reliability, solidarity and trustworthiness."
Coja now is with its third manufacturing partner in China. "Each time we've made a change, it has been to increase the quality level and the scale. We are looking to make better goods," he said.
The company's China-made line is a container-only, less sophisticated line, sold under private label to selected dealers, and priced one-third less than its Canadian-made assortment.
The move to China opened new possibilities for Coja's domestic line, Parris said. "It gave us the opportunity to take our own custom manufacturing further away from China in terms of upgraded leathers, looks and details," he said.
Another Canadian-based manufacturer, Palliser, has leather upholstery production in Mexico as well as China. Almost all its Canadian-made stationary leather sofas also are produced south of the border.
"We can make them for a little less in Mexico," said Paul Martens, Palliser's general manager/creative director, marketing. Mexican production also means lower shipping charges to the southern half of the United States, as well as a more favorable currency exchange rate than Canada, he said.
Retail price points for Palliser sofas made in Canada or Mexico range from $799 to $1,499, while Chinese-made sofas are $799 to $1,099 retail.
Going to China for leather
Craftmaster, a division of Universal, had dealt exclusively in custom fabric-covered upholstery before going to China for leather. The company launched its leather import program for stationary sofas and recliners at the High Point Market in October.
The imported leather offerings, stocked in Taylorsville, N.C., can be mixed with Craftmaster's custom-order stationary fabric upholstery. "Retailers do not have to order containers," said Trae Stokes, marketing director. "That is our competitive edge."
With sofas targeting retail price points of $1,299, the leather line has five groups encompassing sofa, loveseat, chair and ottoman. Seven styles of pushback leather recliners are at $799 each retail.
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