Tight credit also impacting producers, importers
By Furniture Today Staff -- Furniture Today, February 24, 2008
High Point — The credit crunch is having an impact on producers and importers as well as retailers.
Don Morrison, executive vice president of GMAC Commercial Finance, Commercial Services Division, which provides financing to manufacturers and importers, said that the downturn in the housing market has been a drag on the entire furniture industry.
"We're seeing a slowdown in what is happening at the retail end and that is trickling down to our clients and affecting their business," said Morrison. "What we are recommending to our clients is extreme caution in terms of what financial and loan structures they move into."
Morrison said that credit is still available to well-run, well-capitalized companies, but those that are struggling or can't prove their business model to lenders will face an uphill battle, because in such cases, the sources for funding are beginning to dry up.
Retailers say the effect of the credit crunch depends on such factors as merchandise mix and the relative strength of the local economies where companies are located.
Irwin Greenberg oversees a group of five Thomasville stores that his family owns in Southern California. He said that the amount of financing he sees has stayed consistent, although credit standards have become a little more difficult.
But Greenberg said that customers who qualify for credit at the Thomasville level are usually well-heeled and are buying the use of money, not borrowing money so that they can afford to make a purchase. Greenberg said that almost all borrow the money for a year with no interest and no payments — but virtually all pay their balances off in time.
"People like using other people's money and more affluent people are very good at using other people's money," said Greenberg. "That's how they became affluent."
Greenberg said that such customers may want, for example, to purchase a media center, because they have just purchased a new plasma television. They want the media center today — and being able to finance it today seals the deal.
Staying competitive
Mike Muzny, who along with his father owns Arkansas Furniture, which operates three stores within walking distance of each other in Hot Springs, Ark., said he could see some tightening in credit, but to counter that, his financing firm, GE Money, has been working aggressively to keep potential customers in the market.
"With their promotions, they are not running the prices up or anything of that nature. They are very ... competitive and their discount rates are very aggressive," said Muzny.
Overall, Muzny said, his store is running a little ahead of the same time last year, with most of his sales coming from cash, check or credit cards like Visa or MasterCard. Store financing through GE Money generally tends toward 12 months and no interest or interest deferred for periods ranging from six months to a year. Muzny said that's by design, because customers tend to come back and buy more frequently when credit terms are shorter.
Muzny also benefits on two other counts. Hot Springs is a retirement community and a resort destination, which means there is still housing going up; and because the store's merchandise mix runs the gamut from promotional to low high-end selections, there is furniture to appeal to everyone.
"I feel like we are able to stay away from most of the trend nationally," said Muzny. "In the credit crunch, it matters where you are."
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