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Rising hides spell higher leather prices at High Point Market

Larry Thomas -- Furniture Today, April 5, 2011

The St. Andrews sofa is a key element of Palliser’s new Portfolio brand, which features sofas with traditional styling that retail for $1,399 to $2,699.AT THE MARKET - Although increased sales of shoes and cars may be a healthy sign for the economy, it hasn't been good news for leather upholstery resources.
Those products soak up the vast majority of the world's leather supplies, and as more people buy new shoes and new cars, that means significantly higher prices for the hides that wind up on upholstered furniture.
Most exhibitors showing at market say they've seen multiple price hikes from leather suppliers during the past six months, and with hide supplies expected to remain tight for the foreseeable future, they have no reason to believe that pattern won't continue.
That means many vendors will be raising prices on finished goods - if they haven't done so already.
"I tell dealers I want to stay in business a while longer, so I don't have any other choice," said Cary Benson, president of sales and marketing at Palliser, which recently implemented a 5%
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price increase.
Benson and other executives here said dealers clearly aren't happy about price hikes, but said most have been understanding and accepting of the situation.
At market, the effects of the leather price hikes are more noticeable on promotionally priced goods. In order to maintain the popular opening retail price points of $799 to $999, vendors say they're forced to use larger quantities of leather splits, bonded leather or a leather/vinyl matching cover to keep costs down.
"For most of us, leather is about 50% of the cost of the product," said Lane President Greg Roy. "It's not nearly that much of the cost of a pair of shoes or a new car, so it doesn't have as big an effect on those companies."
Flexsteel has taken a slightly different approach with the use of a faux leather fabric from Culp on its opening price point goods.
The company has long been opposed to the use of bonded leather, and at market, Flexsteel sales representatives are being careful to market the Culp covers as fabric.
"We're not selling this as a leather product," stressed Lee Fautsch, senior vice president of home furnishings sales. "We're selling this as a fabric product."
He said sofas with the Culp product, which is called Embrace, will retail for $200 to $400 below a comparable sofa with a leather cover.
Mike Delgatti, executive vice president of sales and marketing for Hooker Furniture's upholstery division, said the company's Bradington-Young unit is moving in the opposite direction by emphasizing higher-end goods with all-leather covers at market.
"We have up-covered," Delgatti said. "We're trying to give the consumer a good value, rather than simply focusing on certain price points."
Price points aside, a silver lining to the price increases will be the repositioning of leather upholstery as a category, some executives believe.
"Leather will become a premium product again, and that's a good thing, in my opinion," Roy said.
Besides price hikes, leather upholstery showrooms are focusing on lighter color pallets and more stylish designs in hopes of making their product stand apart from the competition.
Category major Natuzzi, for example, is adding several sofas with chrome legs and other modern styling features to its Natuzzi Editions brand, which targets sofa retail price points of $1,399 to $1,699.
Importer Leather Italia, meanwhile, is focusing on the $999 to $1,499 price points, while
Palliser is targeting $1,399 to $2,699 with its new Portfolio brand, which features numerous pieces with traditional styling.
"We've had several people already order our new frames," said Dwight Hardison, vice president of merchandising at Leather Italia. "The response has been great."

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Leather sofa sources expect price increases

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