Ashley unveils plans for China stores

Furniture Today Staff -- Furniture Today, April 28, 2011

Ashley product is shown in a spacious setting at a Chinese furniture show.HIGH POINT — Ashley Furniture Inds. is planning a rollout of retail stores in China, following in the footsteps of other vertically integrated U.S.-based companies such as Ethan Allen, which opened its first store in China in 2003.

To find out more, Ray Allegrezza, editor in chief of Furniture/Today, spoke to Todd Wanek, CEO of Arcadia, Wis.-based Ashley.

FT: Obviously, the opportunities that the Asian market affords Ashley are substantial enough to prompt this initiative. How lucrative do you believe Asia can be for your company?

Wanek: We believe the Asia market is still developing. The middle class in China and many other countries is just starting to evolve and wages are increasing. As economies develop, the consumers' first purchases will be cars, houses, electronics and then they will begin purchasing items like furniture. There will be significant opportunities for growth in Asia and the world markets in years to come.

FT: To facilitate this move, how many stores do you currently own/operate in Asia, and how many are on the drawing board? Also, what is your target number of storefronts?

Wanek: We currently have licensed stores opened or slated to open soon in Vietnam, Japan, Costa Rica, Mexico, Guatemala, Jordan, Indonesia and many other world markets. We are just completing our demographic studies for Ashley impressed retailers at the Guangzhou, China, show with its large display of product and distinctive architecture.the China and world market. This information will give us an idea of the number of store numbers for each city, province and country.

FT: How many manufacturing facilities are you currently operating in or sourcing from in China? What types of furniture do the factories produce?

Wanek: Ashley has been doing business in Asia since 1984. We currently have many "best in class" vendors throughout Asia that produce finished goods for our company. We also have three large Ashley-owned production facilities in China and Vietnam.

FT: How big do you envision these stores to be? Will you have multiple footprints for the stores and if so, what sizes might they be?

Wanek: Our targeted store size is 20,000 to 30,000 square feet. We will develop multiple footprints that will be developed to accommodate the real estate availability in each city.

FT: Will all of the products you intend to sell in the stores in China consist of products you will make there? Do you plan to bring any of your American-made furniture to the Chinese consumer?

Wanek: We have two channels of distribution throughout the world. The first distribution channel is companies that sell our U.S. designs. We currently have a good business with companies such as Alexandre Furniture in China that sell our U.S.-designed products. This distribution channel targets a consumer that desires U.S. designs.

The second distribution channel will be the Ashley Furniture stores. A majority of the product that will be displayed Gathering at the Ashley booth are Zen Zheny, left, executive president of the newly founded China Furniture Retailers Assn; Chuck Spang of Ashley; Che Jianfang, vice president of Chinese home furnishings retailer Redstar Macalline; Yang Yazhong, president of the China Furniture Retailers Assn.; Todd Wanek of Ashley and Nancy Yu, publisher of Furniture/ Today China.and sold in these stores will be produced in our facilities in China and Vietnam. We have adapted the product designs to accommodate the desires and lifestyles of the worldwide consumers.

FT: Speaking about design, what styles, categories and price points will you sell in the Asian stores?

Wanek: We are designing furniture to meets the needs and desires of the Asia and worldwide consumers. We have hired an international design and sales team. We have conducted thorough consumer research to determine the wants and needs of the worldwide consumer. Our target market is the mass market and we will have a merchandised product line to service this market segment.

FT: What will the stores in China be called?

Wanek: The retail stores will go under the Ashley Furniture name.

FT: How many people do you expect to employ to facilitate this retail initiative?

Wanek: When these stores are successful, we will have services that will be required to meet the needs to support the stores. We expect to be adding several thousand additional employees in positions from production to marketing.

FT: Moving forward, how much of your retail business might China represent to you?

Wanek: We are not just expanding our retail business in China. This effort is to diversify our company's sales. It is a worldwide expansion of our company. We have been developing our international sales strategy and building our brand worldwide for many years. To give an estimate of the size of our international business at this stage would be premature.

FT: Will the stores be company- owned, franchised or a combination of the two?

Wanek: The store development plan calls for licensed stores to be in the high 90% range. Our ownership of stores will be minimal.

FT: Which country, the United States or China, will give you your best retail margins? Why?
Yang Yazhong, left, president of the China Furniture Retailers Assn., meets with Chuck Spang and Todd Wanek of Ashley.

Wanek: All markets are extremely competitive. We expect China and the world markets to be as competitive as the U.S. market. We must provide competitively priced products to all markets. Our philosophy is to meet the needs of the consumers and to continue to operate with lean principals to provide competitive products in all markets.

FT: What market idiosyncrasies does the China market present? How will you capitalize on them?

Wanek: The obvious difference between Asia and the U.S. market is (the Asian consumers') need for space conservation. In the U.S., our houses and rooms are large. In Asia, the average house/apartment size is 800 square feet. This means that we must focus our designs on space optimization. The furniture is smaller and more functional than U.S. product.

FT: How substantial an investment will this retail initiative represent for your company?

Wanek: Our worldwide expansion is a major initiative and we will be making substantial investments in factories, supply chain and the retail support team. Our investment will be in the range of several hundred million dollars over the next 10 years.

FT: Where will the Ashley brand be positioned in China? Promotional? Midpriced? Something higher?

Wanek: We are focusing on the mass market.