Kathwari: At last, the ads he's always wanted
By Clint Engel -- Furniture Today, August 19, 2007
Danbury, Conn. — Ethan Allen Chairman and CEO Farooq Kathwari says the retailer's new TV commercials are its best in at least 15 years, and they are something he's been waiting patiently to do for over 20 years.
The theme: Ethan Allan's design service is complimentary, and "We can help as much or as little as you like."
The spots feature consumers in beautifully furnished rooms, with voice-overs and images suggesting where they needed help and how they got it at one of Ethan Allen's more than 300 stores. Typical statements: "I wanted a new look without changing everything." "I just wanted to watch TV." "We needed somewhere to eat. They gave us a place to dine." "I wanted it all."
"I've been held back from doing these spots because, once you go on national television, you create expectations," said Kathwari. You're in trouble if don't live up to those expectations, he said, adding, "But I'm confident now."
For over 20 years, has been building and reinventing the nation's oldest single-source dedicated store network. In the past few years, Ethan Allen has invested heavily to position itself for the next 10 years.
Despite turmoil in the industry, business for the publicly held, vertically integrated, upscale business, with a mix of company- and dealer—owned stores, is holding up fairly nicely. Sales and earnings slipped in the fiscal year ended June 30, but there were plenty of plusses. And although the numbers were down, they were better than those of many of its peers.
In June, comparable-store sales were up 1% even though Ethan Allen was up against an 8% increase from the previous year. By fiscal year end, inventories had been cut by $7.8 million despite the opening of 19 new design centers during the year. The company's four domestic case goods factories were back up to 40-hour work weeks after several months of 32-hour schedules.
Kathwari, Furniture/Today's first Leader of the Year honoree in 1997, said the work Ethan Allen has put into differentiating itself from other furniture stores, and empowering its designers and project managers, is paying off.
"A business based on providing great solutions in a simplified manner, in my view, is the ideal way to go," he said. But doing it takes time. "Our ability to go from a concept ... to delivery anywhere in the United States to a consumer's home, with white-glove service and at an everyday best price, everything included, is a very effective way to differentiate Ethan Allen."
And difficult to duplicate. "To make that happen has taken us ... 20 to 23 years," Kathwari said.
Roughly 60% of Ethan Allen's design centers are new since the company went public in 1993. Some 80% of its product has been changed in the past five years, and it has redefined the product under seven lifestyle themes. The plan is to introduce new product four times a year.
In addition to the new commercials, the company has just launched a designer newsletter, mailed to both clients and prospects, with the goal of increasing traffic. The first one includes an explanation of a new financing program, with an interest rate that varies depending on the length of time customers choose to pay off their purchases.
"I think it's a sensible way for people to budget and plan, and also not end up going into those crazy financing plans," Kathwari said in a recent conference call with the investment community.
Today, Ethan Allen has 3,000 professionals on the retail side, and Kathwari said they are much stronger than they were just a few years ago. It avoids sales and sticks to an "everyday best price" strategy. Its Web sits is in the midst an overhaul that will be completed early next year, making it more interactive and fully e-commerce capable, with the exception of some custom-order business.
"All of these factors are making it possible for us to do well in a somewhat tough environment out there," Kathwari said.
About two years ago, Kathwari went around to the stores and told employees the company was going to start promoting from within. At least two designers from each store would become project managers, taken off commission and put on salary, and their job would be to work with other designers and their clients as a team.
"That really was a revolution for us," he said, adding there now are about 500 project managers.
The next step was to upgrade the company's design consultants. Again, Kathwari made it his mission, becoming "chief recruitment officer" and reviewing and signing off on some 1,500 designers hired over a 16- to 18-month period.
At about the same time, Ethan Allen introduced everyday best pricing, moving away from sales at a time when business across the country was slowing. "It's had a positive impact on (our sales) and even profitability," Kathwari said.
Over the next year, the company will bring about 200 designers/project managers at a time to its Danbury headquarters for two-days meetings filled with educational programs, motivational messages and feedback.
Kathwari will continue to drive home his message: They are the key to Ethan Allen's success. He also will stress the importance of accountability across the company and its general transparency.
"Our message is consistent," he said. "They realize they are part of the team. I respect them."
And that's vital in Ethan Allen's pursuit of reinvention, which Kathwari said has to be executed from the ground up. Otherwise, he said, it's nothing more than public relations and theory.
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