In weak economy, stores seek deals
By Clint Engel -- Furniture Today, April 6, 2008
High Point — Market could prove exasperating for retailers here this week as they brace for price increases while looking hard for deals to lift their business out of the muck of a weak economy.
Furniture dealers shopping the market know price increases are coming on everything from upholstery to case goods. Indeed, they've seen vendors already push through some hikes.
But with the consumer steering clear of high-ticket purchases in an economy that many say is in recession, the emphasis here is on value and price — not stepping up, retailers are saying.
To get there, some will be paring back to their most reliable suppliers, expecting to gain clout with them. Many will be looking for other ways to drive the consumer back to their stores, too, including adding more color to their upholstery offerings and looking at "green" or sustainable furniture, which is gaining traction with consumers.
The pricing pressure from suppliers may also open the door to more domestic goods, which retailers say they can flow better and where price increases haven't been as dramatic.
"Price is always an issue," said Keith Koenig, president of Fort Lauderdale, Fla.-based City Furniture.
Business in South Florida remains "extremely tough," he said. "Our customers are more value conscious than ever, and that will continue to be a challenge because we're experiencing price increases on many fronts."
Those increases might be more pronounced on Chinese-made goods, and that will "absolutely" give a leg up to domestic sources at market, he said.
Koenig is keeping his eye on price, but, he's also looking for what's hot and new in contemporary, a style that continues to gain favor in South Florida with the influx of condominiums and high-rise residential buildings that lend themselves best to the look.
"At the same time we're encouraging our vendors to bring out collections in sustainable wood and environmentally friendly finishes, because we believe that will be well received by our consumers," he added.
Diane Daniels, president of the three-store Daniels Home Furnishings in Cleveland, will be focused here primarily on contemporary promotional upholstery — sofas and loveseats she can package for $599 to $799.
The pricing pressures are bound to make this market frustrating, she said, adding, "It's going to be a hard market and a lot of work to search for the right price."
Daniels, which has seen "pretty good" business as tax-refund season has arrived, has never carried much imported product and isn't likely to add more now, she said.
"I think the companies that get their domestic production up and going are going to be the winners in the long run," she said.
Jake Jabs, president and CEO of Englewood, Colo.-based American Furniture Warehouse, estimated that the average price increase from Chinese factories is about 5%, compared with about 3% from U.S. producers.
"I think we're going to look for companies that maybe run a little meaner and leaner and don't have to have as many price increases," he said.
Jabs said he won't drop a supplier solely because of price increases, because he realizes they face cost pressures. But AFW will concentrate on finding efficient suppliers, and he said he'll have to sit down and decide whether any increases are justified and can be absorbed.
He said business conditions are tough in his Denver market, although he saw a gain in March thanks to a tax-refund promotion AFW ran for the first time. The results are so good, "We're going to run this for another 18 months," he joked.
Tommy Miskelly, partner in Jackson, Miss.-based Miskelly Furniture, said business is possibly as tough as he has seen it. "Consumers are turning into tremendous bargain hunters," he said, adding that foot traffic is highest for Miskelly in its outlet center.
He said he believes business is going to be tough like this for the rest of the year, so the company is preparing to dig in with some "bunker type" moves.
"First of all, we're going to question our vendor structure," said Miskelly. He said the store aims to drop some vendors and strengthen its ties with those offering reliable service, providing the retailer with inventory that's not only lean, but clean. That means the flow of goods is predictable and Miskelly is always in stock on its best selling core items, he said.
That will improve cash flow and enable the retailer to take advantage of "phenomenal special purchases when they become available," he said.
In product, Miskelly will be shopping for contemporary goods, its fastest-growing style category. Also on the list: lively colors in upholstery, including greens and blues, and bonded leather — sofas that it can retail between $399 and $499.
David Israels, principal in the high-end Israels Home Furnishings and the recently acquired Klingman's of Grand Rapids, Mich., said business at the high end has held up well for the retailer despite Michigan's prolonged depressed economy.
With the acquisition of the 150,000-square-foot Klingman's, Israels is coming to market in part to get acquainted with some of that retailer's business partners, including Stickley, Rowe, Universal and Flexsteel.
"We look at value in all price (ranges)," Israels said. "We have found so much value in the American-made product that gives customers the opportunity to make it their way."
Chris Pelcher, vice president of merchandising for Levin Furniture, with stores in greater Pittsburgh and Cleveland, said that when the retailer has gotten aggressive on item pricing and advertising, sales on those items have jumped 25% to 30%.
"We're looking for deals all the time, deals to fill those circulars, ROP advertising and TV pieces," he said. "The customer knows value when they see value and that's what we're trying to continue."
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