Leather sofa sources expect price increases
Larry Thomas -- Furniture Today, May 2, 2011
HIGH POINT — 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 shoes and cars, that means significantly higher prices for the hides that wind up on upholstered furniture.
Most exhibitors showing at market said 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 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% price increase.
Benson and other executives here said dealers clearly weren't happy about price hikes, but said most understood and accepted the situation.
At market, the effects of the leather price hikes were more noticeable on promotionally priced goods. In order to maintain the popular opening retail price points of $799 to $999, vendors said they used larger quantities of leather splits, bonded leather or a leather/vinyl matching cover to keep wholesale 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 took 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 Flexsteel sales representatives were careful to market the Culp covers as fabric.
"We're not selling this as a leather product," stressed Lee Fautsch, vice president of home furnishings sales. "We're selling this as a fabric product."
He said sofas with the Culp cover, 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 moved 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 focused on lighter color palettes and more stylish designs in hopes of making their product stand apart from the competition.
Category major Natuzzi, for example, added 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, focused on the $999 to $1,499 price points, while Palliser targeted $1,399 to $2,699 with its new Portfolio brand, which features numerous pieces with traditional styling.
The new Heirlooms brand from Simon Li Furniture also featured sofas with traditional styling - a move President Jackson Carpenter believes will gain the company more floor space with dealers who now carry contemporary and transitional pieces from Simon Li.
"We absolutely sold it," Carpenter said of the new line, which has retail price points of roughly $999 to $1,599.
He and others said dealers, for the most part, were upbeat in spite of continued sluggish business conditions.
"We're seeing more optimism from our retailers," said Bob Duncan, CEO of upper- end producer American Leather. "The market had a very positive tone."