Costco bows out of furniture store business

April 2, 2009

In a press release about the planned closings this summer of the two Costco Home stores in Kirkland, Wash., and Tempe, Ariz., Costco CEO Jim Sinegal said the Home stores were a “valuable experiment” and that the company “learned a great deal about home furnishings in the process.”

Apparently one of those lessons was that this furniture store business is a lot harder than it looks. And it’s not as if Costco pulled the plug prematurely. The first home store opened in Kirkland in late 2002.

While Costco will continue to sell millions of dollars of home furnishings at its 500-plus warehouses in the United States and other countries, it joins the ranks of Wal-Mart, Sears, and other big box/mass merchants/department stores that have tried and failed at the dedicated furniture store experiment.

Surely the economy and weakness in home furnishings sales didn’t help the experiment as Sinegal points out, but what is it about this format that’s so difficult to copy for non-furniture store types? Is it the back-end headaches? You’d think Wal-Mart and Costco could overcome those. Is it the profit margins? I thought these guys were working on thin margins to begin with. Is it the competition? Since when has competition slowed down these giants?

My guess is it’s all of the above. I think non-furniture store operators see the markup at furniture stores and they think, “Easy pickin’s!” They’re a bit blind to all the costs that eat away at the markup and the dedicated talent it takes in the showroom, in the warehouse and in the corporate office to make it all work.

What do you think?

Posted by Clint Engel on April 2, 2009 | Comments (9)

Industries: Furniture Retailing , Homepage

August 25, 2009

In response to: Costco bows out of furniture store business
Woody commented:

If you don't have good technicians to fix this imported crap your pretty much OB before you even open the doors. Most good technicians won't work for peanuts anymore when you can make $50 per/hour just riding around giving estimates.

May 21, 2009

In response to: Costco bows out of furniture store business
Cesario commented:

Its not surprising to me. Even large furniture chains like Levitz have gone out of business.
-Cesario www.directfactoryfurniture.com

April 16, 2009

In response to: Costco bows out of furniture store business
Clint Engel commented:

Thanks to everyone for your comments. I do need to point out one error, though. In the original post (since corrected), I named JCPenney among the big boxes that had tried and failed at the furniture store game. That was obviously wrong, as one JCPenney Homestore employee pointed out to me in an email. He works at one of the 29 Homestores still operating! I apologize for this error.

April 13, 2009

In response to: Costco bows out of furniture store business
dave lewis commented:

there is no way any furniture retailer can operate a brick and mortar store and take less than a 36 margin and still make money in the long run. I have been in various major sectors of the furniture business for 31 years and I know of no multi-store operation that has succeeded.

April 13, 2009

In response to: Costco bows out of furniture store business
Sarah LM commented:

Thank-you for using the words, "dedicated talent in the showroom". I've worked at many places, mainly high-end where Mgt. simply forgot to say "Thank-you". I've seen extremely qualified design sales people work 6

April 7, 2009

In response to: Costco bows out of furniture store business
Jeff Bacon commented:

It truly is different with furniture. You need to focus on furniture and only furniture to do it right. Furniture is high maintenance. From uncartoning to marketing to design and making the product look good with lighting and accessories, every aspect eats at the margins. Many green furniture experimenters learn this the hard way.

April 6, 2009

In response to: Costco bows out of furniture store business
motives commented:

I agree with you even highend retailers profits are gobbled up by service, freight ,delivery and commissions. Everyone thinks it is so easy. Over the years I have had various employees open up stores only to be closed within 5 years! How could Costco think that the customer wants to pay and go with furniture?

April 4, 2009

In response to: Costco bows out of furniture store business
William commented:

It is all of the above, the reasons for Costco leaving the home store business. There maybe one other reason: When they compared furniture turns to commodity household item turns, I am sure they were stunned in disbelief and out go the lights in the home stores.

April 2, 2009

In response to: Costco bows out of furniture store business
gary kain commented:

hello,interesting,but no surprise.being in the office furniture industry for decades,we've seen many come and go..big and small.
the furniture industry is a personalised one.costco,walmart,etc.. should,in my opinion go the route of forming divisional partnerships with established companies in their respective furniture fields,office,home,etc.. that way,i can assure you given their monetary rescources and our experience as furniture distributor/retail leaders, they would,without a doubt become #1. that's my free advice for the day!
gary kain
www.kainsofficefurniture.com