Retail competition heats up

Heath E. Combs, July 19, 2013

Workers use a craneWorkers use a crane to raise the first of 412 wall panels at Nebraska Furniture Mart of Texas, which is expected to open near Dallas in spring 2015.
HIGH POINT - Bankruptcies and closings in the past several years have left gaps in the furniture retail landscape, paving the way for new competition in markets across the United States.
     Some of the industry's most successful business models are facing off each other as top companies expand into new turf. Metro areas including Dallas, Phoenix and Chicago have become prime targets for expansion.
     Expansion is reflection of a better economy and opportunities created during the recession - which happens during every recovery cycle, said Jerry Epperson, an industry analyst with Mann, Armistead & Epperson in Richmond, Va.
     The recession that began five years ago gave retailers a chance to grab market share in places where retail fallout left customers underserved, he said.
     "There are just some obvious incremental markets that are going to be very, very profitable for these companies to come into and leverage what they're already doing," Epperson said.
     Source: Furniture/Today market research and Easy Analytic Software.While it's not easy moving to a new market, a number of strong regional retailers are familiar with the process. Omaha, Neb.-based Nebraska Furniture Mart expanded to the Kansas City area in 2003 and Rooms To Go ventured into Richmond last year.
     Epperson said new competition changes the dynamic in established markets - but different markets have different customer bases and expectations and competition from market to market is not the same. For example, retailers like the late Richmond-based Heilig-Meyers expanded into different parts of the country and struggled in areas that weren't as dependent on its credit oriented model.
     Epperson said that in Dallas, NFM will bring a unique presence with a product assortment including electronics, appliances and furniture when it opens in spring 2015.
     "They're going to face completely different competition going into Dallas than they did going into Kansas City. So I'm sure their promotions and approach will be a little bit different," Epperson said. "The way they will flood and approach the market is different than anybody there now."
     Jeff Seaman, CEO of the Seffner, Fla.-based Rooms To Go - no stranger to entering new markets - said all retailers have to step their games when new competition arrives.Source: Furniture/Today market research and Easy Analytic Software.
     "The economy's been better for a year and a half or so. And I think there's more confidence out there, among most people. So people are feeling more aggressive and want to expand," Seaman said.
     NFM has said its new Dallas store will attract over 8 million visitors annually. Rooms To Go, which already operates in the in the Dallas area, expects to siphon off some of that traffic.
     "In our case we bought 50 acres across the street from their new store. So we're going to be building our largest store, right across the street. We think they're going to bring a lot of traffic," Seaman said.
     "It's good for us to be as close as possible," he added.
     Epperson said retailers like Rooms To Go are already changing the dynamic of his home market in Richmond, which it entered last year. As other retailers react and change how they do business, he said, the added competition helps everyone by creating a sense of urgency in furniture purchases.
     Smart retailers want to go into markets where good retailers are already operating, he said - "You don't want to be the only one that has to create all the demand."
     Epperson added that in most major markets there's usually a local chain that does great business and continues to do well as competition increases, because they know their local market.
     Source: Furniture/Today market research and Easy Analytic Software.Ashley Furniture has built that local expertise into its retail business model since most of the Home Stores ownership is local, making the local stores nimble and adaptable. Ashley has multiple locations in Phoenix, Chicago and Dallas.
     Universal, Legacy Classic and Craft master parent Samson Marketing CEO Kevin O'Connor noted that going back to his days working for Ethan Allen, adding a second or third store to a major market tended to increase overall furniture sales locally - sparking more promotions and marketing.
     Suppliers may have to adjust to distribution issues as regionals enter new markets to compete with established players. But that's not necessarily a bad thing, O'Connor said.
     "Over the last four or five years we've all lost distribution someplace. It's not like things are over-distributed," he said. "The reality is you've got to deal with the problems."
     O'Connor also said dealers tend to realize that if they enter a new major market where an existing store has locked in distribution on certain products, compromises may be needed.

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