Buyers assess retail expansions
August 6, 2013,
Good economy or not, the expanding retailers are wisely planning for the future.
First, a quick rundown: In the past few months, Living Spaces and American Furniture Warehouse announced they're heading to the Phoenix market for the first time. Art Van Furniture and ZZZ's by Ashley have opened their first of several planned Chicago land stores and The Dump, owned by Haynes, is coming there at the end of August with its largest store to date.
Nebraska Furniture Mart has broken ground on a 1.86- million-square-foot store and distribution center opening in spring 2015 in north Dallas; Rooms To Go, already in that Texas market, is planning its largest store right across the street. And in California, San Diego-based Jerome's is pushing into Los Angeles from its San Diego base with a store planned for Torrance, Calif., in the fourth quarter.
Retailers here had similar takes on what's prompting all this activity.
"First of all, you have to be ahead of the curve all the time," said Howard Fineman, an Ashley Furniture Home- Stores licensee with three stores in greater Jacksonville, Fla.
"Everyone making these moves is staking a claim for the growth that's coming. Also there's a lot to be said for scale." A larger physical presence gives more operational advantages, he said.
"They're forecasting a more global retail environment," Fineman added, so the most progressive retailers are building their physical presence to supplement or go hand-in-hand with their digital or online platforms.
Whether or not current economic conditions justify the growth the industry is seeing right now, Fineman said he believes "there's a ton of opportunity." Although he wouldn't elaborate on his own plans, he added, "We're definitely in the expansion mindset."
While there has been expansion news, "don't forget that there has also been contraction, particularly on the East Coast," said Eric Blackledge of Blackledge Furniture in Corvallis, Ore.
It makes sense for the larger players with cash to infill in preparation for an improving economy, and he fully expects these Top 100 companies to expand in large markets where they gain economies of scale.
"But among independents, we probably won't see it nearly as much," he said.
"Most independents tend to operate in small, comfortable markets and are making money," Blackledge said, adding that he doesn't know of anyone in the Pacific Furniture Dealers buying group (Blackledge is a member) who is planning to expand at this time.
Ron Page, senior director of merchandising for the Furniture First buying group, said many of its members see the opportunity now and are adding more stores than he has seen in a long time. He's not so sure the economy justifies all the expansion the industry is seeing, but added, "They can't stand still. You can't let the economy totally dictate what you do."
Tony Moretti, Furniture First's vice president of merchandising, said retailers need to adjust their business strategies with the changing times, not just open new stores. It's critical that they work on ways to appeal to younger, tech-savvy consumers, for instance. And they should embrace new ideas and products, such as the large and growing outdoor furniture category, he said.
"I don't know if the economy justifies it to date," said Mike Forwood, president of Austin-based Louis Shanks of Texas. He contended there's been more media hype about economic improvements than actual sales increases.
"We're optimistic that the housing market will continue to grow, and those sales are going to translate into increase furniture sales," Forwood said, noting this is cautious optimism because even the improving housing market can stall out if interest rates climb too high off their record lows.
Forward said Shanks' business held up nicely during the extended period of weak home sales and construction.
"We live in Texas and our country has been doing better than the United States," he said smiling.
Shanks is nearly finished with a renovation of part of its 125,000-square-foot Houston store, but Forwood said it's not planning to add any more locations at this point.
Lee Goodman, president and CEO of San Diego-based Jerome's, said he can't speak to the other market expansions and players, but Los Angeles has been in Jerome's plans for years, and the retailer gradually has been moving that direction with openings in Murrieta, Corona and Rancho Cucamonga, Calif.
If anything, Goodman said, Jerome's growth push was slowed by an improving economy - not the other way around - because it led to a tightening real estate market.
For the most part, the retailer doesn't react to the economy, he said. Its moves have more to do with having the right team and systems in place to meet the expansion challenge.
"We obviously keep an eye on (the economy), but we don't make many decisions based on it," he said. "Until you show me a crystal ball, we're going to wake up every morning optimistic."
| Senior Retail Editor, Furnuture Today