Warehouses a key link
More importers relying on U.S. facilities
By Thomas Russell -- Furniture Today, January 25, 2010
HIGH POINT —
Unless business makes a dramatic comeback, case goods importers say they will likely continue to rely on domestic warehouses in the year ahead.
For many, domestic warehouse programs have helped serve small and mid-sized dealers that don't want to order full or mixed containers. But in a tough economy with limited availability of cash and credit, larger customers also have relied on them more to limit their own inventories.
Importers that have invested in U.S. warehouses say they're glad they did, given the need to provide the level of service customers have come to expect.
“I have been hearing that there has been a shift toward domestic warehousing all along because business was already down,” said Randy Brownlow, president of case goods importer Austin Group. “We just stared our warehouse program in late summer and we are seeing some good growth in that, so the demand is there.”
The company uses the 50,000-square foot Greensboro, N.C., facility primarily for bedroom product. The company still does the vast majority of its bedroom, dining and home entertainment sales container-direct, but sees the domestic program as an important part of its strategy.
“It positions us well by having both,” Brownlow said. “It gives me an auxiliary path for growth that I would not have had with container-only.”
Gene Clark, president of bedroom importer Ligna USA, said the best thing his company did in the past year was to open an East Coast warehouse. The Mount Airy, N.C., facility helped the company add 35 accounts in 2009 and is expected to account for 40% of its business by the second quarter of 2010, up from about 27% as of early December. The remainder is container-direct business from its Indonesian source factory.
“Retailers aren't carrying any more inventory than they have to,” Clark said, noting that Ligna leases roughly half of the 50,000 square feet available to it. “They are going to live off your warehouse as much as possible.”
Another company that has added domestic warehousing in recent months is Pulaski Furniture, which in October began operating out of expanded facility in Phoenix near an existing warehouse for sister company SLF.
In addition to cutting lead times for Pulaski's West Coast customers, the facility also helps improve service and lower transportation costs, officials said. The two companies also share an existing warehouse in Madison, N.C., which largely handles East Coast distribution.
Case goods importer A.R.T. Furniture ships container-direct from a Chinese manufacturer Markor Furniture International. Markor's warehouse in China is about three miles from a seaport, which helps goods get shipped in a timely fashion. The factory mixes up to five collections in a single container.
In the United States, A.R.T. has a 90,000-square-foot warehouse in Ontario, Calif., with a broad assortment, and a 35,000-square-foot operation in Conover, N.C., that carries mainly best sellers.
Company CEO Ed Grund declined to reveal what percentage of its business was container-direct versus warehouse, but said domestic warehouse business did grow in 2009.
“We find that our warehouse business is an increasing portion of our business as retailers look to keep inventories down,” he said.
“We feel like our warehouse program is a definite asset to the company,” Grund added. “It provides a service to mid-sized and smaller dealers and at the same time serves as a backup for larger accounts.”
He said he believes the container-direct and domestic warehouse strategy will continue to help A.R.T. build its business with accounts of all sizes. He said nearly all of its SKUs are in stock at any given time from the Asian or domestic facilities.
“We feel 2010 really marks an opportunity for us,” he said. “We have been able to displace branded product on the floor because we have had product available and our relationship with Markor allows us to have continuity of product flow.… To service an account correctly, you need to have the stock there when they need it.”
Case goods resource Fine Furniture Design & Marketing also has a single-source relationship with the Shanghai-area factory of its parent company. But it too has established a U.S. warehouse with a 50,000-square-foot operation in Conover, N.C.
While most of its business is still container-direct, FFDM did see a 10% increase in domestic warehouse business in 2009, said Ted Philpott, president and CEO. He said the domestic warehouse is particularly important in that it ensures that any SKU in the line is available at a given time.
“I have got stock resupplying my inventory all the time,” he said. “Sometimes I sell out of stock in the warehouse, but if I sell out, there is some stock available on the water coming in.”
He said the domestic warehouse has been “very important. Larger accounts and single-store operations that carry a broad assortment of Fine Furniture product can still flow containers, but it gives you that flexibility. There are some retailers who were buying a few containers from us and when business slowed down, they couldn't flow them quick enough so they shifted to the domestic warehouse.”
In 2010, he expects the domestic warehouse business to grow, but perhaps not at the same rate as 2009.
“At some point down the road when business picks back up again, some of these dealers will go back to containers,” Philpott said.
He added that he expects some increase in business in 2010, with various seasonal adjustments.
We are expecting a slow increase throughout the year, but that doesn't mean it will be easy,” he said. “There is still plenty of competition and the biggest competition is getting consumers in the doors and willing to buy.”
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