Ashley dealers maintain an edge
HomeStore model stays strong in challenging marketplace
By Clint Engel -- Furniture Today, June 30, 2008
ARCADIA, Wis. — In this very challenging economic climate, Ashley Furniture HomeStores dealers say their business model offers all the right tools to keep sales chugging until better times arrive.
No one is calling Ashley HomeStores a panacea capable of curing all business ills, healing the consumer's empty wallet from $4-a-gallon fill-ups and relieving fears of foreclosures and falling home prices. But the company's business model is providing an edge in the battle for the consumer's disposable dollar, dealers say, by limiting the cost of operations and targeting consumers with the type of affordable products they want more than ever.
And the ever-increasing brand recognition that comes from a network of stores that has grown to more than 350 units isn't hurting either. For the second consecutive year, Ashley Furniture HomeStores ranked No. 1 on Furniture/Today's list of Top 100 retailers, with furniture, bedding and accessories sales last year of $2.48 billion. That's a robust 19% increase over 2006.
When asked what accounts for this success, dealers cite Ashley's focus on improving gross margin return on inventory (GMROI) and the supplier's quick- ship strengths, which keep stores from having to stock a lot of goods. For some retailers, their distribution centers end up serving more as cross docks, not stocking warehouses.
Pressure relief
So when business slows as it has for nearly everyone this year, HomeStores dealers aren't stuck sitting on goods, including out-of-date styles “that other retailers still have to find a way to sell,” said Roy Corn, co-owner of California Furniture Solutions. Corn just opened his fifth HomeStore location in Concord, Calif., near San Francisco.
“As sales slow, so does our purchasing of new inventory, so we don't have our financing tied up in the backroom,” said Corn.
Ashley also has managed to hold the line fairly well on price increases, which enables its dealers to maintain their own prices and margins, he added.
“With the HomeStores model, the product that Ashley comes out with is very well priced and a great value to the consumer, especially in these hard times,” said Larry Klaben, president and CEO of Fairborn, Ohio-based Morris Furniture. “That value story is even more important now because people are thinking about how or even if they should be spending their (disposable) dollars.”
In a downturn like this, companies like Morris “want to get as lean and clean in inventory as we can be,” said Klaben. “The Ashley model is really predicated on having display models and selling against those display models, then getting the merchandise quickly from the closest Ashley distribution center.”
This approach minimizes costs and makes it easier for retailers to move in and out of items quickly as business conditions and demand change.
Klaben said Ashley also has done a great job of reading the market — both retailers' and consumers' needs. About a year ago, the company came out with a concept called Extreme Value Centers — special displays to showcase some of the value-priced bedroom that Ashley was coming out with, particularly from its domestic factories.
“It allows us to display more bedrooms in less space, giving us great dollars per square foot and higher GMROI,” Klaben said.
Another winner was the introduction of the “Studio a” program. The concept targets younger consumers — ages 20 to 35 — with a cooler, hipper approach and involves more mixing and matching than is typical for Ashley displays.
“Studio a” was introduced about nine months ago, and Klaben rolled it out to all his HomeStores from December through March. The response from consumers has been great, he said, and has helped create excitement in his stores.
“They are just continuing to introduce new marketing and advertising concepts,” Klaben said. “Not everything is a home run, but the sharing of ideas and willingness to try new things helps foster additional business.”
Morris will open its eighth HomeStore next month in Columbus, Ohio's Easton Town Center. One of the first lifestyle centers built in the United States, Easton Town Center attracts some 20 million customer visits a year.
Even in this economy, the opportunity — taking over a former Sofa Express space — was too good to pass up, Klaben said.
“I continue to be very bullish and aggressive about Ashley continuing its strength and dominance in home furnishings,” he said.
Leveraging the brand
Howard Fineman, who just opened his second Jacksonville, Fla., HomeStore, said growing consumer awareness of the Ashley brand name is proving to be an important asset in this down economy. Fineman played off this awareness to great effect this past fall with an “I'm Ashley” talent audition and contest, in which the winner gets to star in a national HomeStores advertising campaign.
With a charitable tie to the American Cancer Society and the fight against breast cancer, the event drew 1,000 people, who lined up outside the showroom for their shot at fame.
“Traffic due to the Ashley brand is helping us lower costs to drive customers into the showrooms,” Fineman said. “We have started to build such momentum and awareness … over the past few years that we are now the first destination of choice. So we are still getting traffic — even if it is recognizably less than prior years” because of the weak economy.
When it comes to the downturn, Florida is among the hardest-hit states in the country, but in South Florida, City Furniture President Keith Koenig remains bullish on the HomeStore concept, too. On July 19, the company will open its seventh and eighth HomeStores — and first two on the Gulf Coast — in Naples and Fort Myers (attached to its first City Furniture stores in those markets).
The retailer also has acquired property that will lead to two more Ashley stores in Cutler Bay (southern Miami) and Fort Lauderdale.
“I'm a long-term player, and Ashley is a fabulous company with an exceptional business strategy and strong competitive advantage,” Koenig said about the partnership.
Ashley's highly efficient supply chain helps keep Koenig's stores in stock, but unlike many other HomeStore dealers, City stocks everything in its own massive distribution center so that it can offer same-day delivery — just as it does with its City Furniture products.
Koenig agreed with Fineman that Ashley has a growing brand presence and “we're excited about some of the brand development ideas we hear we are going to learn of in Las Vegas.”
A focused approach
Jackson, Miss.-based Miskelly Furniture will be new to the HomeStore fold this summer, when it opens its first Ashley showroom. Like many dealers, it considers Ashley's logistics capabilities and store network among its key strengths.
And while Miskelly sells Ashley in its full-line showroom, the new store will enable the retailer to offer consumers a more focused selection of product, said Tommy Miskelly, a partner in the business.
“Another plus — and this was a big plus — you're dealing with one manufacturer,” he said. “The savings are enormous in terms of time and communications.”
This may not be true of many other dedicated-store concepts, he said, because the product of Ashley's competitors often “don't match up with today's consumers — what they're able to put in their homes and what they're able to afford.”
“(Ashley doesn't) come out with $6,000 bedrooms suites that aren't tested. They make sense. I think they get a lot more dealer input than other brands I'm associated with. They really seem to listen to their dealer network better than anybody that carries that scope of product.”
HomeStore dealers contacted for this story say they are confident in Ashley President and CEO Todd Wanek and Chairman Ron Wanek and their management team, and that their businesses will grow together.
“We're all a little disappointed the marketplace is not more active, but (we're) very hopeful that's going to turn around sooner rather than later,” said City's Koenig.
