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Leather remains a winner despite costs, competition

Larry Thomas -- Furniture Today, January 2, 2012

Premier Furniture recently expanded its stationary lineup to include this 84-inch sofa with a full aniline leather cover that retails for about $1,299HIGH POINT - Amid significantly higher leather prices and major market share gains by bonded leather and other leather-like covers, upholstery producers believe leather can maintain its status as the top cover choice for upholstered furniture.
     Executives say leather adds to the perceived value of an upholstered piece and lends an upscale look and feel that can't be replicated with fabric.
     That's why few were surprised when the latest Furniture/Today upholstery style survey revealed that 36% of all upholstery pieces were covered with leather (including leather/vinyl combinations, bicast and bonded leather).
     "It just seems to add some excitement to the (upholstery) category, and it captures people's imaginations," said J.T. O'Rourke, national sales manager at W. Schillig, an upper-end leather upholstery resource.
     Leather's market share was even greater at upper middle and high price points. It garnered 41% of unit sales for stationary sofas retailing for $2,000 and up, and a whopping 58% of the market for motion sofas at $2,200 and up.
     And evenThe Mars sofa from the Parker Living division of Parker House features a pair of reclining seats and a center console. at upper-middle motion sofa price points of $1,400 to $2,199, leather captured 48% of the market, according to the survey.
     "We're getting great placements on just about everything in our motion line," said Roberta Woodard, vice president of merchandising for Parker House, which added motion to its Parker Living leather upholstery line a little more than a year ago.
     O'Rourke said he doesn't expect leather to return to its hyper-growth days of the early 2000s, but is convinced the category will easily remain the top cover choice - and could even show modest growth in the months ahead.
     "Our (retail) customers are taking a little more time to make their buying decisions. They're a little more cautious than they were in the past," he said. "But I still think we could see some nice, steady growth."
     Heath Corso, vice president of U.S. sales and marketing for Premier Furniture, agreOne of Franklin’s best-selling sectionals is this contemporary model with automotive-style bucket seating and a bonded leather cover.ed, and said he believes recent market share gains by bonded leather may actually help companies such as Premier that use only all-leather covers. That's because recent increases in leather prices have forced up price points for all-leather products - and opened the door for bonded leather on entry-level items.
     "Now, there is more of a definitive gap between bonded and all-leather," he said.
     Corso and others said that while they believe leather prices will remain stable in the coming months, their biggest challenge may be increasing labor costs in China - still the source of most leather upholstery.
     "Wage inflation in China is a definite concern," said Corso. "And with the high attrition in the work force, it just adds to our costs of hiring and training new people."
     He said Premier recently opened a leather upholstery factory in Vietnam that could eventually equal or exceed the production capacity of its Chinese plant. If labor costs in China continue to spiral upward, the company won't hesitate to shift additional production to Vietnam.This track arm sofa from Comfort Design features loose back and seat cushions with blend down encasements. It retails for $2,599 to $3,599, depending on the grade of leather.
     "We don't have all of our eggs in one basket anymore," Corso said.
     But regardless of whether they source from Vietnam or China, all companies relying on imported products continue to face the challenge of keeping the right amount of inventory in stock domestically.
     And executives say it's not likely to be any easier this year because retailers remain cautious and want to keep little, if any, inventory of their own.
     "It's a double-edge sword. You want to be innovative, but you also want to be in stock," said Woodard. "That's why there's a tendency to be safe with your designs." She said Parker House also has opted to stick exclusively with allleather covers and not compete at entry-level price points.
     "We're trying to make our products better, not cheaper," she said. "We want to communicate the value of real leather."

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