Ashley to open stores globally
Furniture Today Staff -- Furniture Today, May 21, 2012
HIGH POINT - Vertically integrated home furnishings powerhouse Ashley Furniture heads our list of Top 100 U.S. Furniture Stores as well as our ranking of the Top Sources for the U.S. Furniture Market.
Last week, with the opening of a freestanding store in Shanghai, China - the city often called the gateway to the world - Ashley underscored its commitment to global expansion as well.
According to Ashley CEO Todd Wanek, the Shanghai store signals the rollout of the company's global strategy that includes 1,000 stores in China during the next decade as well as stores elsewhere in Asia and in the Americas, Africa and the Middle East.
To get a better understanding of Ashley's global initiatives, Furniture/Today Editor-in-Chief Ray Allegrezza interviewed Todd Wanek.
Furniture/Today: Since Shanghai is called "the gateway to the world," is the opening of an Ashley store there a precursor to a larger
Todd Wanek: The Shanghai store location was chosen as our first store because of the international nature of the city. It is the gateway to the world and it is a great place to launch our global retail strategy. Shanghai is known as a progressive city that has the best retail shopping in the world. We believe the Ashley retail store model will offer our Shanghai customers and the entire China market a new level of convenience as they shop for furniture that fits their individual tastes.
Shanghai is also easily accessible by airplane and it has excellent accommodations for our current and prospective retail customers to visit and see not only our store, but also, our large, state of the art manufacturing facilities about one hour outside of Shanghai.
F/T: What is the rationale for a global network of stores?
TW: Ashley has a tremendous amount of experience in the global market. Over the years, we have developed strong customer relationships with furniture retailers in 123 countries across the globe. We have a good understanding of the product requirements in each of these countries and have adapted our product lines to the lifestyle needs of the global market. We have also developed multi-lingual computer capability for our fully integrated point of sale and supply chain management systems. Together, these provide our retail customers 24/7 access to the information they need to run their business.
These retail systems leverage our manufacturing and distribution capabilities, including a 500,000-squarefoot warehousing facility in China that mixes all product categories for the home. We now have the ability to mix bedroom, dining room, living rooms, entertainment centers, upholstery and accessories on the same container.
Our international operations employ the same processes and systems as our U.S. supply chain to help our retail customers improve their GMROI and provide a great store experience for their customers.
F/T: Ashley is known for doing extensive market research before any major initiative. What was the cost, depth and scope of research you do did that prompted you to launch stores globally?
TW: We spent a considerable amount of time and money carrying out extensive consumer research in China and several other target countries. For example, we conducted over 15,000 interviews with targeted consumers. This research project gave us a more clear understanding of how people live and what styles of furniture they prefer, and it allowed us to have a targeted approach to product development and store design.
In addition to the consumer research, we have been doing business in Asia for over 30 years. During this time, we gained an understanding of the culture and how to conduct business in these countries. Through this process we have also developed a talented group of nationals that work for us throughout China and Asia. These team members were able to provide valuable input into the design and development process for our global stores.
As you know, doing business internationally is not only about creating products and a store concept; we must also protect our intellectual property. Over the last 20 years, we have been registering our trade names, patenting our products and trademarking our materials throughout the world. We have spent considerable time, energy and resources protecting our intellectual property in anticipation of this global initiative.
F/T: What were the key findings of that research?
TW: The key findings were that some consumers like American styles; however, the size of the furniture does not "fit" into their homes. We also learned about the average price the consumers were willing to pay for furniture. This information allowed us to target specific styles and price points of furniture. It also became apparent that we would not be able to survive in China on furniture alone. With the low level of disposable income in China and other countries, accessories for the home become a necessity. The purpose of accessories is not only to make the home beautiful, but also to drive more transactions and volume in the store.
F/T: Besides China, where to you plan to open stores - how many countries and how many stores? Do you have a timetable?
TW: We currently have stores in Japan, Vietnam, Jordan, Costa Rica and Mexico. We also have store openings planned in many other countries over the next 12 months. The product and store concept that was developed is truly global in nature. The store will have a heavy emphasis on smaller scale contemporary furniture, as well as American traditional and transitional furniture. We plan to open stores in every major country throughout Asia, including 1,000 stores in China over the next 10 years. We also plan to open stores in Central America, South America, Africa and the Middle East.
The projected number of store openings will be based upon the market potential in each country. The only caveat to opening a store in a certain market is based upon the current retail relationship in that country. If we have a strong relationship, we may choose to work through that partner to sell our products instead of opening a store.
F/T: Will you enter multiple countries simultaneously, or go country by country?
TW: We will enter multiple countries simultaneously. We have a strong supply chain and we are confident that we can handle the business growth. We will not grow just to grow. We will make sure that our organization is prepared for the growth from a supply chain and operations perspective.
F/T: Will these be company-owned stores? Licensed? Franchised? A combination of these?
TW: We will have a combination of company-owned and licensed stores. We have developed legal agreements for many countries.
F/T: How big will the stores be? Will they be modeled after your HomeStore formats, or will they be country-centric?
TW: The size of each store will be determined by the market potential and available real estate. Our ideal store size is 35,000 square feet, which is the size of the showroom of our Shanghai store. We realize that many markets will not require a large footprint.
F/T: Will they be standalone stores?
TW: The Shanghai store is a standalone store. We expect that we will have a combination of standalone stores and stores that are connected to existing buildings. Our criterion is that the store needs to be in a high traffic area that is visible and accessible.
F/T: Will the furniture for these pending stores be customized to mirror the customer base? How will the furniture differ in style, design and price from what you offer to the U.S. market?
TW: The styles of furniture have been completely customized for the global market. We have adapted to the styles, sizing and comfort of the global market. The price points are based on market research and we are confident that our product offering and price points will be very compelling for our target customers.
F/T: Of the furniture and accessories displayed in your global stores, what will you make?
TW: We will be producing bedroom, upholstery, entertainment centers and dining room furniture in our own factories, while leveraging our global supply chain to supply additional products to our retailers.
F/T: Are you set in terms of manufacturing capacity to supply the pending international stores with furniture?
TW: We are confident that our international manufacturing and distribution operations will continue to supply our global retail partners with the products they need with the level of service they have come to expect from Ashley. As business grows, we will do as we have always done, which is to build and grow our capacity to service our customers.
F/T: What percent of your overall volume do you see a global retail initiative representing?
TW: Over the next five years, we expect our international sales to represent 15% to 20% of our overall revenues. This will not change our approach to investing in our facilities and operations that support the United States, Canada and the other markets that we currently serve.
F/T: What are the target number of countries - and target number of stores?
TW: We will take it one step at a time. I cannot give you an accurate number. Please refer to the target countries listed above.
F/T: Will you incorporate things you've learned from the HomeStores here in the States at the pending international stores? If so, what?
TW: We will incorporate the profound knowledge we have gained with our Home-Stores into our global stores. We learned that partners are very important and that the front end and back end of the stores need continual focus. We have a strong visual presentation in our global stores and the resources and infrastructure to support our retail partners.
F/T: Will you modify existing retail initiatives, Furnish 123 for example, to use within the international stores?
TW: Our global stores incorporate ideas from Furnish 123, HomeStores and other retail models that we've developed over the years. The Shanghai store has a unique personality and many of the display concepts are different from other furniture stores. It is a much more transactional business model and the SKU count is much more intensive. The store is also heavily focused on the utilization of small space and storage. The average apartment in China is less than 780 square feet and this required us to "think differently" on how to properly utilize space.
F/T: Where do you see your long-term retail growth - here or abroad? Why?
TW: We have always invested in and believed in the U.S. and Canadian market. We just announced a large investment in North Carolina and we believe that the long term growth opportunities in these markets are very significant over the next 10 years. We also have a large and capable international sales and operations team that is ready to focus on global expansion. We have been training our global team over the last 30 years and they are ready for the opportunity to grow.
F/T: What kind of investment are you committed to in order to get this imitative up and running?
TW: We will continue to invest into our U.S. and global operations. Every year, over the last five years, we have invested over $100 million back into our U.S. and international operations. We foresee this pace of investment continuing for this year and into the future. We have a long-term approach to our company and we are investing back into our team and we are working hard to create opportunities for our company, our employees and our retail partners.
F/T: Who will have responsibility for the international stores?
TW: As the CEO of the company, I am responsible for leading Ashley's U.S. and global initiatives, including the international retail segment of our business.
F/T: In doing your research for this initiative, what have you learned that might help you overall in terms of design, merchandising and coordinating accessories and furniture?
TW: First of all, this process began over two years ago and the level of organizational understanding for room sizes, small space living and contemporary designs has greatly improved. This learning and understanding is having - and will have - a great influence on our designs for the U.S., Canadian and other markets that we serve. We are also gaining a deeper understanding of proper room planning and the coordination of accessories with our furniture designs. We are excited about the knowledge that has been gained by our organization. These concepts and lessons learned will make us a better supplier and partner for all of our retail partners.