American Furniture Warehouse heading for Phoenix
Clint Engel -- Furniture Today, December 4, 2012
ENGLEWOOD, Colo. — Jake Jabs will take his American Furniture Warehouse megastore to the Phoenix market next year with the opening of a 550,000-square-foot facility in Gilbert, Ariz.
AFW has acquired 73 acres of farmland off of State Route 202 Loop east of Phoenix for the complex, which will include a 150,000-square-foot showroom and a 400,000-square-foot distribution center. It's expected to open in September.
It will be the first of two planned AFW complexes for the market, Jabs, owner and CEO of the Denver-area Top 100 chain, told Furniture/Today. The second large complex will go on the west side of the market, although Jabs has yet to purchase land and couldn't discuss the timing.
He said he is investing about $30 million in the first project, which will employ about 300 people and is projected to do $120 million in sales its first year - more than a third of the $350 million AFW will do in its 12 existing Colorado stores this year.
"Gilbert is what they call the east valley, where all the new growth is," Jabs said. He and his late wife, Ann, have owned real estate in the Phoenix area and they had been visiting the market for nearly 30 years, he said. It was hard hit by the recession, but now, he said, "Phoenix is back."
Jabs said his strategy in the market will be identical to his Colorado strategy, with AFW offering the same promotional to midpriced lines at prices he said will beat all competitors.
Key suppliers will include Ashley, Affordable Furniture, Lane, Corinthian and Fusion, plus Sealy, Simmons, Serta and Therapedic and other in bedding. And while there is some distribution overlap with his new Arizona competitors - which will include Ashley Furniture HomeStores, The Dump and Mor Furniture for Less - Jabs said he's not expecting any major conflicts.
Asked why he wanted to expand to greater Phoenix, Jabs said there were several reasons, including his familiarity with the area, the fact that his trucks already are delivering to consumers in Phoenix weekly, and because "we have money laying around, and trying to get interest on money today is a joke."
"You want to invest it ... in what you know best, and I know the furniture business," he said.
Jabs said metro Phoenix has a population of more than 4 million, or a little less than the entire population of Colorado, a state that AFW has pretty well covered with stores.
He has been able to build a huge market share (70% by some measures, he said) in Denver that continues to feed off of itself and no longer requires the same large advertising budget, and he sees that same opportunity in Phoenix.
"Our modus operandi is to do it right the first time," he said. AFW doesn't have the big clearance center businesses many large retailers operate because it doesn't get merchandise back from customers, he said. Its reputation is "underpromise and overdeliver."
And it doesn't ding suppliers with the charge backs for repairs and returns that he said are all too common in the industry.
"We fix it. We take care of it," Jabs said, adding that the Phoenix operation will have a full staff of repair technicians just as AFW has in Denver.
"We get a better price (from suppliers), so it works," he said. "It's the way furniture should be sold instead of blaming factories."