By Richard Wright
The 2017 sales year for patio furniture varied considerably among the seven manufacturers we interviewed toward the end of July – from basically flat, to 20% over the prior year. But everyone appeared to be bullish on the industry, and the fact that consumers continue to embrace outdoor products.
Most mentioned they were coming out with collections of smaller-size furniture suitable for balcony and urban living, but not at the expense of the usual large-size pieces. There’s a movement toward mixing of media with, say, a teak coffee table next to a woven sofa, and most brought up the Outdoor Room as a trend that continues to propel growth.
|Jan Trinkley||Joanna Leung||Bill Herren||Terri Lee Rogers|
|Bob Gaylord||Dudley Flanders||Wes Stewart|
|Lounge chair from the Wave Collection.|
Jan Trinkley joined Gensun in its formative years as VP of Marketing & Sales. Fourteen years later it has become a major player in the casual furnishings industry, and Trinkley has added the title of President to his business cards.
Hearth & Home: Would you please give me some background on the company?
Jan Trinkley: “The company started with Lisa Zhou (CEO) & David Liu, owners, and husband and wife. That was back in 2001 and they were doing primarily cast aluminum. I came on board in 2003. They were primarily attending shows, and working from temporary booths. They were interested in taking it to the next level.
“At that time I had just left Homecrest and was building a business as a sales rep; I had a number of lines that were very good. I wanted a cast line because I saw the growth of that category in the market and looked at Gensun. I met with their Sales manager and, not too long after that, got a call from Lisa and she said, ‘Would you mind flying out here and meeting with my husband and me?’
“After a few months of going back and forth I ended up coming here as the vice president of Marketing & Sales, and we started going after the market aggressively. I hired a lot of sales reps, got a showroom at the Merchandise Mart in Chicago, and all good things started to happen.
“We came out with a lot of new products. Again, we’re mainly a cast-aluminum company, but we married a bit of extruded aluminum with it at that time. We kept growing year-after-year-after-year.
Now, are Lisa and David from China?
Trinkley: “They are from China; they are both American citizens. David is involved primarily in buying and building land, and a number of other ventures in the U.S., and some in China, but primarily working at building apartment complexes and everything that goes along with them in a number of states here in the U.S. Lisa runs this company.
“The factory is in Tianjin, China, and we produce all our own product at the foundry. We do all the casting and all of the rest of the manufacturing process. We do all the cushions here in Rancho Cucamonga starting this year.
“We still do sling and padded sling here as well as in China, but trying to get a good selection of fabrics sent to China is a difficult logistical nightmare. Doing it all here will be a real plus. We’re looking forward to that.”
Do you sell into Canada or any other countries?
Trinkley: “Yes, we do. We sell into Canada extensively. We have a distributor in Australia. We just signed up a distributor in the Middle East. That’s primarily where we’re at right now.”
How do your sales at this point compare to your sales last year at this time, both in the U.S. and Canada?
Trinkley: “We’re enjoying a really good year. Right now through June are the last numbers I have; we’re up right about 20% over last year.”
How many dealers do you have now?
Trinkley: “It’s been a while since I’ve gone over that list. It’s most likely between 450 and 500 dealers; that is not counting multiple stores.”
Now, you obviously work with cast aluminum, extruded aluminum a bit, and woven goods. Any other materials?
Trinkley: “We do a little bit of wrought aluminum, expecially in shelving for our kitchens. This year we added HPL composite tops, which are high-pressure laminate with solid cores for the outdoor tabletop and fire pit tops.”
Pretend I’m a dealer and I’m not carrying your product. Tell me why I should carry your product.
Trinkley: “Well, you’re going to deal with a family-owned company. You’re not going to be dealing with what a lot of companies are becoming, being run by a boardroom. You’re going to be dealing with somebody who will listen to you, talk to you, and get back to you right away with an answer. You will be dealing with a company that prides itself in taking care of a problem right away.
“We have always been customer-service friendly, and that’s the heart of our company. We make our own product. We’re not buying from a different foundry. So if we make a mistake it’s our fault and we’ll fix it. You will be buying from a company that works with the specialty retailers. We don’t sell to mass merchants or the Big Box stores. So we’re not going to have any excuses.
“If we don’t deliver, it’s because we had a problem. It’s not going to be because your product went somewhere else. We make a quality product because we are the supplier, the manufacturer. We make a great product at a very good value.”
Where would you position your company in terms of pricing? Are you a mid-range company?
Trinkley: “I would say we’re mid to high. We’re not like some of those companies that are in the high range with very good quality, but we’re a very good quality company with a price point that is probably 20% below what a lot of those companies are. We don’t have a head of every department. My title probably says it best. I’m president and director of Marketing and Sales. I take the calls from the sales reps and from the dealers. That keeps us on our toes, but it also allows us to get things done, and done right away.”
Which areas of the U.S. were the strongest for you?
Trinkley: “We do a little over 60% of our business on the East Coast; that’s where the population is. There are so many more people east of the Mississippi River. Plus we have great programs that provide guaranteed freight rates; that is really a positive. Dealers know where their costs are and know what they can do. They don’t have to worry about the cost of freight going up or down.
“We do well in the South. We’re looking at some good growth on the West Coast, although the West Coast has had its particular problems, especially California, over the last number of years. Dealer attrition seems to have hit California worse than most areas.”
There is a little trend called the Outdoor Room that’s having a pretty strong impact on the industry. Are you noticing that, in talks with your dealers, more people are buying outdoor kitchens and creating Outdoor Rooms?
Trinkley: “We have dealers that are stepping into that category. It’s new. We are one of the few that really is going to the retailer with outdoor kitchens. We’re going into our fourth year with outdoor kitchens. We primarily had traditional design cabinetry underneath our outdoor kitchens, and this year we introduced contemporary cabinetry. I see that being a real positive for growth and an opportunity for retailers to jump in and enjoy some great sales and some great margins.”
How well did you do with your early-buys for 2017?
Trinkley: “We have never done an early-buy. We were a new company, and decided to get rid of early-buys. We tell the dealer, Decide what you want, decide how many floor slots you’re going to do, and then let’s put an order together for the whole year. You can bring in what you want to have early, what you want to set your floors with and have some stock, and then you can back up that stock by container or out of our warehouse; we stock a lot of product here in Rancho Cucamonga.
“That has really, really worked well for us, and it has really worked well for the dealer. Every year we pretty much have no inventory in the marketplace. They didn’t have to buy all that stuff and then watch the weather turn bad. They didn’t have to buy all that stuff and find they chose the wrong color. They didn’t have to buy all that stuff and then not be able to special order because they had to get rid of the stuff that was in their warehouse. Every year we pretty much go to market clean.”
What trends have you observed that are presently impacting the industry? It could be something like frames or fabric color or the size of a chair or demographics or Millennials or whatever.
Trinkley: “The Internet is a growing equation. Millennials like to shop online and compare online. Millennials do not like to go to stores. Millennials don’t like to talk to you, they text.
“I think color is a huge plus in the industry, both from a standpoint of finishes on products, which are beautiful, to fabrics. The fabric companies are all doing a wonderful job.
“I think the alternative materials that are coming out are a plus, whether it be different types of wicker or rope that does well outdoors, to different table top materials. I think design from a standpoint that traditional is still very big and by far the biggest percentage in the market, but there is a nice move toward cleaner lines, simpler lines. You can call it transitional or contemporary or modern, depending on whom you’re talking to, but I see that as continuing to grow and help the industry. Fire is huge. Outdoor fire is an absolutely huge category.
How many new collections do you have this year?
Trinkley: “We came out with four new seating collections under the Gensun brand. One collection has both a cast-back design and woven back. We came out with new HPL tops for a complete table collection and fire pit collection. Then we came out with what I call a Private Label brand that we’re offering to any retailer looking for a collection that won’t be in our catalog, won’t be on the Internet, and that they can have exclusively in their market. That included, we’ve got 10 collections.
“That was the product. Then we came out with four brand new finishes that are beautiful; I’ll call them more contemporary finishes. We also added about 1,000 fabrics. We started working this year a lot more with Outdura, doing their whole stock program. We also brought in Parà Tempotest and their entire stock program, and we worked with Bella-Dura, Sunbrella, Trivantage and Phifer.”
|Cape Town Club chair.|
Joanna Leung is now in charge of Business Development and Media Relations for Ratana. She is a lawyer, lives in Hong Kong, spends quite a bit of time in Vancouver and, not surprisingly, travels a lot.
Hearth & Home:How do your sales at this point compare to your sales last year, both in the U.S. and then in Canada?
Joanna Leung: “As you know, we’ve been in business for 37 years, and part of the reason why I joined the family business is because year-after-year we continue to grow, and this year is no different. Our sales are up overall in North America despite a bit of a late start in the season, because we had a very long winter on the East Coast.
“Part of this growth can be attributed to our customers. We have been spending a lot more time understanding the needs of our retailers, and trying to help them by giving them the support and servicing for the product lines that they carry, as well as just general customer support. The training we provide helps them understand our products better. We understand them more and they understand us better; the partnership grows and naturally the business grows as well.”
I assume the currency differential between the U.S. and Canada continues to be a positive factor for you where you can pick up more dealers in Canada and business is better there. Is that pretty accurate?
Leung: “Actually, we’ve been in business in Canada for many, many years and it has always been a great market for us. We’ve also seen the U.S. pick up a lot as we develop and grow the relationships we have with our retailers. We are doing quite well in the U.S. and that is where the real growth is for us. It’s a growing market.”
What percent of your business this year is in the U.S. versus Canada?
Leung: “Our retail in North America is pretty extensive and our business is growing both in Canada and in the U.S. I don’t have an exact number, but we are very well established in the Canadian market. Some of our retailers have been working with us for over 30 years.
“We’re working with second and third generations and that is something we would like to replicate in the U.S. We have these really long-standing great partnerships, and in the U.S. we’re starting to see 10 or 15 years of business. We’re focusing on working with our retailers in the U.S., trying to grow those relationships and becoming partners.”
Do you sell in any other countries?
Leung: “We do. We’re expanding in Asia and in Europe, and we do sell in Mexico and the Caribbean as well.”
What percent of your business did early-buys account for this year?
Leung: “About 30%. It’s definitely a part of the business we would like to grow, and we’re already focused on that.”
For many manufacturers the early-buys are key to keeping their factories running on a regular schedule. Ever since the recession it has been difficult for manufacturers to get those numbers up. Retailers are nervous about stocking too much in a warehouse.
Leung: “I think that’s true. I think we’ve been really fortunate because we have really good relationships with our customers.”
Designer business is very important for Ratana, so can you tell me what your experience was this year? Was it a good year for your designer trade?
Leung: “The designer business picked up since the recession. The economy is stronger so people have more money in their pockets and are spending more money on designers across the board. We see that with home renovations. A lot of people are doing home renovations using designers, but also on a larger scale with communities and developers, all of them are using designers as well.
“It’s a part of the business that we see growing, and for us it’s great news because we’re all set for designers. We have a great range of products from very traditional to more contemporary collections, and we do a lot of customization. Designers love customization and we have all the customized upholstery, and now something we launched this year is a customized umbrella order. All of our umbrella fabric can match all of our furniture. We do all of that locally in North America.”
What percent of your total business is now going through online sales?
Leung: “On the online side we’re definitely seeing a growth trend, but what we’ve been doing is really focusing on our retailers. Our retailers all do online business and we’ve been helping them with the pictures, different media to help them support their online business.”
But very few of them have online businesses, right?
Leung: “Actually we’re seeing more and more. A lot of retailers are starting to do online because everyone sees that as the future. We’re definitely seeing more of them.”
Do you go through some dealers who are strictly online and don’t have a brick and mortar presence?
Leung: “No, no. We really value our relationships with our retailers and we want to support them.”
That’s a very good stand to take. What percent of your total business is the specialty retail channel?
Leung: “I don’t have a specific percentage, but it’s a key market for us. We really try to develop our relationships with them.”
Do you have much business going through interior furniture stores, the mainstream furniture stores?
Leung: “We do business with interior furniture stores that are in the mid to high end, but our percentage is not that high with the category. What we’re seeing is that the outdoor space becomes a second living room, and more interior furniture stores are now selling outdoor furniture.”
They are now accounting for a large bit of product being sold. But you’re right, it’s generally at lower price points.
What trends have you observed that are impacting the casual furniture business right now? It could be the color of a frame. It could be fabrics. It could be the size of furniture or demographics.
Leung: “This relates back to the Outdoor Room being an extension of the family home. A big trend we’ve been seeing is the outdoor look embracing the indoor look. A lot of furniture that is inspired by indoor collections are coming outdoors. Our Lucia and Bolano collections are mid-century inspired. Until now, mid-century modern furniture has always been indoor furniture. We feel that we have taken a big step in taking that look outside, which all of our customers have really embraced.
“Another trend we are seeing is the mixed materials trend. The combination of the hand-brushed aluminum and the resin updates the look a lot. It makes it look very contemporary, very sleek. But also the resin softens it. The younger generations love it because it’s a very contemporary feel, but also the more sophisticated older generations also like it because it’s comfortable. They like resin and they like woven. They are very comfortable pieces.”
What spurred you to create mid-century modern furniture?
Leung: “It is from my Dad. He actually is the brains behind a lot of our design work and he’s very intuitive to trends. He saw this trend building up in the interior space and he was inspired to bring it to the outside.”
How many new collections do you have this year for retail?
Leung: “We have four brand new collections and we’re doing line extensions on two others because they have done so well in the past year. The Lucia and the Bolano were very successful and that is where we have added more pieces.”
What have I not asked that you would like to get out?
Leung: “Custom orders are very huge for us, and why it is important for retailers as well is twofold.
“One is because people don’t want to have the same thing as everyone else. Everyone wants to be catered to their individual styles. That is something we do locally; we have state-of-the-art upholstery facilities so that’s something we do for our customers. If they want something in a specific fabric or color we do that locally.
“Something else we have to help our retailers is our quick-ship program. If they sell something off the floor, we can get a replacement to them very quickly. Or if they don’t sell it off the floor, we can turn it quickly for them.”
What percent of your business is custom orders?
Leung: “About 70% of our orders are custom because we think that is a very important thing to do for our customers. I just want to mention that we do inventory management and we take that very seriously as well. We have a warehouse and we pre-stock it or have inventory available right before the season starts, so that way we’re helping our retailers. We’re flipping it really quickly for them as well.
“Our new introductions are the Cape Town, that is a mixed medium, mixed material collection with a stone gray resin and hand-brushed aluminum, and the Seville, which we are very proud of. It’s tailor-made cushioning and quite different from what we’ve seen. It’s quite curved, has very nice deep seating, and is hand-brushed aluminum.
“We take pride in that we have very high craftsmanship and quality, and it is definitely the workmanship and the skills that are key.”
Five years ago, Bill Herren and his two executive teammates grabbed the reins of Woodard and began what would become a very successful turnaround. This year, Woodard is up about 100% from that starting point.
Hearth & Home: How were your sales at the end of February? That’s the end of your fiscal year, right?
Bill Herren: “Yes, that’s the end of our fiscal. They were up. They were not up what we had hoped they would be, but they were still up.”
How did those figures compare to your last good year prior to the recession? In other words, 2007 or 2008?
Herren: “They are about 100% more.”
Herren: “Oh, yeah. When Belinda and James and I came on board, we turned the whole thing around. The past five years have made a huge difference.”
Which areas of the country were the strongest?
Herren: “Florida. Actually, the Midwest has done really well this past year. We do very well in the Midwest. I think it’s a combination of the factories being in Michigan, so it’s easy shipping to them, and the reps that handle the majority of the Midwest are very good, attentive reps. They are constantly visiting the stores, seeing what they’re doing, and holding sales training and all that.”
How many dealers do you have in the U.S.?
Herren: “I know we have over 600 active dealers. That’s part of the problem with trying to grow the business. If you’re a dealer selling outdoor furniture, then you sell Woodard. The only way for us to expand is to get more floor space, and that’s where the challenge lies because they’re not that many new dealers.”
What percent of your business is custom orders?
Herren: “I would guess probably 90%. That’s because our entire retail division, even our hospitality division, is ‘pick out your finish, pick out your fabric.’ We stock very little ready-made furniture and what we do stock is really just in case some restaurant needs 100 chairs right away. Well, if you need 100 chairs you’ve got this, this and this to pick from because we have them already made. But I would say at least 90% is custom.”
That’s the highest number I’ve ever heard.
Herren: “Well, we have direct and then we have mass, so maybe 80% of our entire overall company business is custom.”
How fast can you turn orders around in season?
Herren: “We actually have year-round a program called Custom Express; provided we have the frames and the fabric, you’re guaranteed to get your order out within two weeks from the day it was placed. We publish a lead-time report so dealers know when they place an order whether we have the frames and the fabric or not. If we don’t, they will be told that we’re not going to have this table base for six weeks, and they will be asked if they want to switch it, change it, or hold the order to ship complete?”
That’s all handled out of Owosso, correct?
Herren: “Yes. On February 1 we moved Order Entry up to Owosso. It used to be done down here in Texas.”
Has your designer business returned to where it was prior to the downturn?
Herren: “Oh, yes.”
Do you have a sense of whether the Outdoor Room trend is having a major impact on your sales?
Herren: “Yeah, I mean I think it does. I don’t think it has as much of an affect as I think it should. I recently started watching TV shows on topics such as building pools, and deck makeovers, then at the end they always bring in the outdoor furniture, but they never talk about it.
“I don’t think they realize that you can’t use your outdoor space if you don’t have outdoor furniture. Because so many people watch those shows, if they would talk about it, or do a show about it, that would vastly increase the business.”
I suspect that you, like every other manufacturer, have some online guys selling your product, right?
Herren: “Yes, and it’s getting to the point where it’s hard to tell whether the orders they are sending in are coming from the dealer’s store or coming from their website. We do have a couple that are website only; there are a few that do some really good business because they do it correctly.
“We go through this all the time with the sales reps, because some of the sales reps hate the online dealers, and the stores that don’t have a website hate the online dealers, and they all think there is some big fat guy in his 20s sitting on the beach with his laptop, selling furniture and making a ton of money. It’s not like that.
“We have one of the best who actually sends his telephone salespeople into the Chicago showroom so they can physically sit and feel and touch the furniture so they know what they’re talking about.”
Are you drop-shipping for these people?
Herren: “For the most part, yes. Because of the custom part of it they are not huge orders. They are a dining set, a seating group, two or three of something, so it’s not that big a deal as long as we know where it’s going and how it’s going.
“Unless you’re a multiple-store dealer, or unless there is something really hot about your store and you have continual traffic, in order to grow your business, you’re going to have to sell online.”
Are you saying there are just so many people who want to buy that way today, that you can’t afford to lose those customers? Is that what you’re saying?
Herren: “Yes. I’ve heard that, for the next four or five years, it is still the Baby Boomers who will be buying our products; they have the money. Millennials don’t have the money yet, and it’s going to be another four or five years before they can afford quality outdoor furniture. Millennials are also of the opinion that, Oh, I can just go online and buy it, because that’s how they buy everything else. Truthfully, that’s how I buy everything for the most part.”
Probably the reason that most dealers don’t want to get involved in online sales, is they don’t think that’s their job. Their job is to put the key in the door, open it up, be nice to the customers, keep the store looking fairly decent and sell that way. It’s not to do the online stuff.
Herren: “They do have the advantage. Retailers do have the advantage of the one-on-one customer service.”
If you can get the right salespeople, correct?
Herren: “Yes. Oh, yes, you have to have the right salespeople.”
What percent of your business is through the specialty retail channel?
Herren: “The vast majority of it is.”
What about interior furniture stores? Are you doing much there?
Herren: “Not as much as we would like to be. It’s growing, but I think it’s growing slowly. The challenge there is you can go into a store and buy a fully upholstered sofa for $2,000, and then you walk over to the outdoor section and you’re going to spend $4,000 for stuff. I think they don’t have the salespeople yet who can explain why the outdoor furniture costs more than the indoor furniture. That’s the biggest challenge.”
What trends have you observed that are affecting the industry, whether it’s frame colors, fabrics, size of chairs, demographics, Millennials or whatever?
Herren: “Everybody keeps saying that with Millennials, and with more urban spaces being developed, that you have to scale down in size. We’ve just been calling it ‘intimate seating or intimate dining’ where it’s smaller scale for a couple and not for a whole family. We do see a lot of that, but it hasn’t stopped the larger-scale furniture.
“I see a lot more color than what there used to be. People are getting a little bit bolder with what they are putting out there. There are still a lot of neutrals, but at least they’re throwing in some color on a couple of pieces to make it look better. We see contemporary is getting a bit more popular than the more traditional furniture.”
How many new collections are you introducing this year?
Herren: “We have about 10 new collections, and additions to six existing collections. We had a lot of new this year, a ton. They like to have a SKU count around a certain area, and I’m way over that. As they say, it’s better to ask for forgiveness than permission.”
(Laughing) Which one is going to be the winner?
Herren: “There are three that are really taking off. One of them is Rhyss, the next is Vale, and the third is Harper. The Vale is my favorite group. I love that group.”
Who designs your furniture? Are you using outside designers?
Herren: “Not any longer. For the most part, it is done by me, Belinda Lavender, VP of Sales & Marketing, and James Goff, VP of Special Accounts; we work as a team.
“Part of the issue was a designer would send us a great design, but it just couldn’t be manufactured that way. At times, when we explained that we needed to change the design, we would hear, ‘Well, that’s not my concept.’ It got to be too much of a hassle. Now we will still look at people’s designs if they send them to us, but for the most part it is done by the three of us.”
Terri Lee Rogers always has a full plate, and yet finds time to get out on the road, visiting dealers. She supports, and protects, her specialty dealers, and they in turn support her.
Hearth & Home: Let me jump right in and ask how your sales are this year compared to the prior year?
Terri Lee Rogers: “As of the end of June we were up slightly, about 5% over last year, which is good. The good news is that our backlog is up about 30%, which is even better because that means July will outperform last July and will make our numbers that much better. It’s kind of interesting. A little bit of a slow start and then, all of a sudden, it all hit in April and May and we still have plenty of orders so it’s fine.”
What about weather, did that hurt you in any place in the country?
Rogers: “The only place I heard any affect is in the Midwest and Mid-Atlantic. Those two areas went from being cold and then hot and then cold again.”
When you compare your sales in 2007 to this year’s, have you made up that gap? Are you back beyond what you were doing in 2007?
Rogers: “Yes. We’re up like 75% over that period of time. We were hit hard with that downturn, but we recovered in 2010. We were back to our regular level then, so it just took a couple of years.”
Which areas of the country were the strongest, and also which were weak in both the U.S. and Canada?
Rogers: “Texas and Oklahoma made a pretty strong comeback this year over last year. I would say the weakest states we’ve got right now are southern states and those in the Mid-Atlantic. In the Mid-Atlantic we had stores that went out of business that affected our sales, and just trying to regain market share is a bit of a process.”
How did you do in Canada?
Rogers: “I was pretty concerned about the business up there as far as early-buy commitments with the inequity of the dollar and the economics regarding oil, but we did well. We are slightly up in our Canadian sales, but we didn’t go backwards. We’ve got a couple of key dealers that actually grew and opened up a couple of new locations. So I’m pleased.”
How many dealers do you presently have in the U.S. and how many do you have in Canada?
Rogers: “I would just guess 300 storefronts in the U.S. and probably 30 in Canada.”
What percent of your business is custom orders?
Rogers: “It’s about 51%, and 30% of our business is early-buy.”
Are you still feeling the impact of the Outdoor Room trend? Do you see your dealers having larger tickets and perhaps more of them selling barbecue?
Rogers: “Yes I do. It is still growing. As long as we can come up with innovative new products to go outside, so people can go out and entertain and live outdoors, I think it will keep on growing.”
Have you been working interior furniture stores?
Rogers: “We are actively pursuing indoor furniture stores. We’re trying to be selective with the type of indoor furniture stores we target. We’re probably not a fit for larger, chain-type indoor furniture stores, but we are doing business with a number of companies with one or two, maybe even three or four locations, but they target the higher end and they target special orders.”
What percent of your business is through the specialty patio channel?
Rogers: “I’ve got to say it’s at least 80% of our business is through specialty. Then about 10% is through interior furniture stores. Contract sales are kind of funny. Our factory-direct contract sales are actually down. But our overall contract sales are up. Overall contract sales are up like 30%, so that leaves me to believe that our specialty guys are getting aggressive in the contract market, or some are at least. I think that the specialty retailers need to look at contract as a viable marketing channel in their market territories.”
Absolutely. I remember Doug Wheat at Hauser’s telling me that 50% of his business was contract.
Rogers: “He went after it. Specialty retailers can provide service for the contract installation, but I can’t provide service being factory-direct, so there are added values there.”
One of your pet issues is trying to move your dealers into selling online. Are you having success with that?
Rogers: “Not really. I’m not seeing anybody really embracing it on our terms. If you’re selling online you then become a national distributor. You’ve got to be worried about how your product is depicted, and whether minimum retail prices are being adhered to, and whether service is being done out in the field, and how freight is being handled, and that kind of thing.
“We have dealers moving toward that end, and some are further along than others, but I still feel a big resistance from specialty dealers about even attempting to capture their own market share in their own territory. There are a lot of specialty people who don’t feel that is a viable option for them.”
They feel it’s not their job. They signed on to run their brick and mortar store, not to do online business, and they are dragging their feet.
Rogers: “Our specialty retailers are the specialists; I would rather have somebody buy, even if its online, from somebody who is knowledgeable about our products, knows all the care and maintenance issues that need to be addressed, the freight issues, all of those kinds of things. All specialty retailers know all of this. They have so much knowledge. If they could get some of the people who don’t want to go into the store engaged somehow or another, they’ll have the sales hands down. It would be easy.”
Now do you go direct online through online sellers?
Rogers: “We have e-commerce dealers. We only have seven or so of them. That’s a growing portion of our business. Every year it has been up about 10%, and I’ve learned over the years that we don’t do so well in a mass environment, we do better in a specialty environment. It’s the same with the Internet. We do much better with somebody who specializes in outdoor furniture, fire pits, whatever, those kinds of things, versus the guy who sells a million different things and they may get a sale every so often, but they don’t know anything about the product.”
What trends have you observed that are presently impacting the industry? It could be frame colors, fabrics, size of furniture, demographics, whatever.
Rogers: “I definitely see the trend toward cleaner transitional looks and designs. I think it has partly to do with demographics. People who are a little younger coming in and being able to purchase higher-end patio furniture. Two of our collections last year were more transitional, or trendy, and they both did pretty well. We’ve brought out contemporary looks in the past and have not done very well. But these have done well, and even the older contemporary looks that we had in the line have done better.
“So it’s clearly a trend that people are looking for cleaner lines and maybe a bit more of a modern flair. Color. Gray frames seem to be all over the place. Some smaller scale options are moving. You need the large options, too, but you need smaller scale options for those that are downsizing but still want nice patio furniture.”
“We’re coming out with a smaller version of the bigger chairs, which are probably still on the bigger side in the whole spectrum of patio furniture. We’re coming out with more side chairs, some tables that will accommodate smaller chairs, table sizes where you can still seat six around, a smaller diameter fire pit, smaller deep seating, that kind of stuff, to address that segment.
“As far as materials go, it just seems like mixed materials is probably the biggest trend I can see, combining different kinds of material, metal and woven, or wood and woven, or some other kind of material.”
There are about three companies now that have mid-century modern looks, very clean, very elegant looks. In the ’70s we also called it Scandinavian furniture. Is it a coming trend?
Rogers: “Look in the shelter magazines. It’s all over; people are taking the lead and bringing it outdoors.”
How many new collections do you have this year?
Rogers: “We only introduced two new collections this year; we’re trying to keep it so we can bring it to market on time for the new season. We have one group called Pacifica, which is for dining. We used a parabolic mesh sleeve, a knitted sleeve. It’s more of a contemporary look. Some would call it modern, but I call it more contemporary. We introduced a console TV entertainment center with it to kind of bring that whole Outdoor Room idea together.
“The other collection we came out with is called Ridgewood and it’s similar to a lake house look with embossed iron with a wood grain.
At the Apollo Awards dinner some years ago (five or six?), Bob Gaylord noticed a place card at his table that listed past winners, going way back to the ’50s and ’60s. A number of them were indoor furniture stores. It was a Eureka! moment; he launched a major effort to crack that market, and this year it accounted for most of his company’s growth.
Hearth & Home: How do your sales at this point compare to those of last year?
Bob Gaylord: “Our sales for 2017 are up 9% to 22%. I’m expecting 2018 to be quite a bit more than that. It could be close to 20%.”
Which channel is responsible for most of that growth?
Gaylord: “I would say it’s indoor specialty.”
So that is working out well for you?
Gaylord: “Oh, yeah.”
Let’s talk about the indoor channel a bit. Are many of them starting and dropping out, or are they sticking with it; are they doing a good job by and large?
Gaylord: “You have people drop out. “You have people who drop out and start back in again, doing it better the next time around. And there are new people every year. We always get a pretty good start with them, too. We have been consistently advertising for the last six or seven years in Furniture Today, which is sort of the weekly bible of the indoor furniture industry.
“Our name has been in front of everybody from day one. Very few of the outdoor companies advertise in Furniture Today, so we kind of have a one-man show there.”
What happened to mass merchants this year?
Gaylord: “Mass sales are down, but we really should divide them into three’s – the K-Marts and Walmarts of the world versus the Lowe’s, Home Depot and Menard’s, and then the Clubs. The Clubs have had the most success. In fact, they have grown substantially throughout the recovery from the recession, and they are aiming higher.
“Customers of the discount mass merchandisers are being defined by low income, in my opinion. It seems that the average consumer in their places of business is just looking for price, price, price, price. So if they can sell $99 sets and $149 sets and $200 sets, they are happy.
“One of the most disturbing things for me is that the home centers could be going higher priced, but they have tried very hard to stay in the mid-hundreds of dollars, and not exceeding $999. They have a lot of Mercedes and Audis and Toyotas, in their parking lots, and not just 20-year-old Chevy’s. They had their best years, of course, when they were doing better-end furniture. But the recession scared them like it did everybody else. They are not alone.
“The indoor furniture guys – I’m not talking about outdoor – but the indoor furniture guys started bottom-feeding pretty good as well, just to sell something. Now the problem is getting the consumer who may be willing to pay more, to pay more, because they have been trained through the last eight or nine years to think very low prices. So the $3,000 and $4,000 sofas are becoming memories.
(Laughing) “It’s surprising that we have no trouble getting $1,000 or $1,500 for an outdoor sofa, but, my God, trying to get anything over $500 is a real problem in indoor. So there is a lesson to be learned.”
Last year when we spoke you mentioned that you were warehousing about 12 different collections. Where do you stand this year, and how did that program work out for you?
Gaylord: “I would have to call it a learning curve. You think you’re picking the right stuff, but that may not be the case. Because we didn’t get the returns out of it that we wanted, we now are asking, Where do we want to put those dollars? We’re a bit undecided on what we’re going to do because you’re only going to warehouse so many millions of dollars. Do you want to do it for dot.coms? Do you want to do it for specialty dealers? Do you want to do it for retails? Who do you want to do it for?
“You can also be burned by your own success. The money may be tied up in perpetual inventory, which is the name of the game for domestic manufacturers. But it’s a whole new ball-of-wax for us. We’ll continue to offer a warehouse program, but in terms of sheer volume we can put one or two sets on Amazon and get more business than we could from the entire specialty industry.”
In terms of bringing on new specialty dealers to sell Agio, last year you said that you always get 25 new ones coming in and about 10 drop. Is that consistent?
Gaylord: “Yes it is. If you bring on 25 and you lose 20, or you bring in 30 and you lose 25, the number always grows, but you’re always gaining some and losing some. You lose them because direct import is just not for them. They run out of the most popular items, and then come to us in July and want to reorder. Well, it’s a 90-day lead-time for someone in New Hampshire. They don’t quite seem to get it.
“We have lots of different programs that allow them to place their orders with cancellation policies and all the rest of that stuff, but they just don’t think ahead. But all of a sudden they’re out of goods and it’s the first of July and they would like another container just like the one they had. Well, it’s 90 days guys.”
Do you do much business in Canada?
Gaylord: “We have a dealer base up there and we have a fellow who takes care of all our specialty business in Canada, except for the chains. We do still sell Sears Canada and Lowe’s Canada; those are big customers.”
I know you track the housing industry in the States very well. When you look at it right now do you get a sense that it’s pretty healthy?
Gaylord: “Yes, I think it’s healthy. It could be a lot stronger than what it is. The Millennials still continue to lag as buyers, but even that is starting to loosen up. Millennials who were never going to get married, never own a home, and maybe never own a car. Reality has struck them and certainly that is helping. But I think what’s healthy about this market is that the housing shortage is real, but instead of going into a building boom, like we did in 2000, it’s just going to be a steady increase.
“The biggest problem is getting help. There’s no labor out there. Just try to get a drywall contractor, or roofers and framers and even electricians. It’s almost impossible.”
What about the dot.coms? Have you figured out the amount of revenue going through dot.coms yet?
Gaylord: “We probably do $40 million right now, maybe $50 million, through dot.coms, and it is growing every year. We have some new ones that have really grown very quickly, $15 million dollars in just two or three years. It’s nice business.”
You don’t drop-ship direct to the consumer, do you?
Gaylord: “No, no. Until now we have not done that at all. We deal with people who want to warehouse themselves. We are changing that for 2018, but it will be very customer specific. It will probably be with our largest Big Box customers, the ones that we’re closest to, the ones whom we trust the most and where we have a real partnership, because it can grow very, very quickly.
“We have one customer I’ll leave unnamed for now, but we believe they can buy approximately $40 million worth of product within three years, and they are already doing a couple of hundred million in this type of thing. We have never warehoused it for them, but we’re looking forward to the opportunity.”
What trends do you see that are affecting the casual industry right now or will in the future? It could be frame or fabric colors, housing styles, demographics, whatever.
Gaylord: “The thing that I recognize most right now is that wicker dining is getting stronger all the time, and that really surprised me because as the wicker deep-seating category grew, the dining part of it was lagging behind terribly. Now we’re seeing that catch up, which again makes these collection sales that much better because we’re doing the deep-seating sales, we’re getting the fireside chat sales, and to see the growth that we’ve had over the last couple of years in wicker dining has been very refreshing.”
What have I not asked that you would like to say?
Gaylord: “Well, I’m extremely bullish on this category and this industry. The consumer out there looking to buy outdoor furniture is not the customer who was out there 40 years ago, and nobody has a lock on the business. But the pie is a hundred times bigger. It’s huge.
“Dealers have to adapt; everyone has to adapt. You have to let people know you’re there; you’ve got to let the consumer know why they should do business with you.
“Again, the opportunities are unlimited. I don’t hear the complaining as much anymore because I think people realize that complaining isn’t going to get it done. The business is out there, but you’ve got to make an effort to get it.”
Like many others, this was a flat year for Lloyd Flanders. The bright spot was its designer business, where tickets were substantial and the Outdoor Room trend was kicking in.
Hearth & Home: Why don’t we begin the way we usually do, which is asking how your sales at this point compare to those of last year?
Dudley Flanders: “I would say they are flat to a little down.”
Which regions of the country were particularly strong this year?
Flanders: “The best territory we had was in the Southeast.”
And where was the least successful region?
Flanders: “I don’t think I can tell you where the least successful was. Probably Canada.”
Because of the currency differential, correct?
Flanders: “I’m sure that has a significant amount to do with it, along with the fact that most of those people are now just bringing in direct containers. Our Canada business just seems to be going away.”
How do your sales this year compare to the last good year prior to the recession, probably 2007 or 2008?
Flanders: “We have never made it back completely to where we were in 2007. There are several reasons for that. There’s the change in landscape in retail; we have lost several substantial retailers. The increase in competition in the woven category; everybody in the business today is in woven and most of that is coming at our expense. But we’re probably 25% ahead of our low point.”
It’s still such a shock that the recovery has taken so long. Both sales of new and previously-owned homes are lagging far behind what they were.
Flanders: “Yes, I think housing starts are still 60% of what they were (in 2007).”
Has your designer business returned to where it was prior to the downturn?
Flanders: “That is probably one of our bright spots. I can’t tell you if it is as strong as it was before the recession, but it has certainly improved significantly the last two years. And the tickets in that arena are substantial.”
So consumers are putting in Outdoor Rooms, going to a designer to help them and ending up spending a lot of money on your product and others, right?
Flanders: “Right. I think the Outdoor Room and the outdoor kitchen are here to stay and here to grow. It’s relaxing. It gets you out from in front of the TV – unless you buy an outdoor TV, which I don’t have.”
What percent of your total business is now going through online sales?
Flanders: “Maybe 5%. We didn’t see the growth there this year that we have seen in the past two or three years, and I can’t answer why. But we had seen significant growth there a couple of years prior to this one, which pretty much follows the same flat trend.”
Now is that through online sellers that specialize like a Wayfair as opposed to a Costco or companies like that?
Flanders: “We don’t sell anybody who is not a legitimate retailer and they must abide by our MAP policy.”
What percent of your business is through the specialty patio channel?
Flanders: “Probably 70.”
What about interior furniture stores?
Flanders: “Maybe 20.”
What percent is contract sales?
Flanders: “Maybe five.”
What percent of your specialty patio channel is still struggling?
Flanders: “I think a lot of them are struggling to find their place, and they haven’t all gotten out of the habit of selling down. They may be making the same number of sales, but on lower-cost, lower-margin products. One of the areas that has grown has been low-price buyers calling on a specialty market. It always grinds me to no end that the specialty retailer will buy from the same guy that sells to Costco or Home Depot. Why do they want to support those people who are trying to put them out of business?
“I think they feel like they have to compete. I got a new Frontgate (catalog) today and their price points are $3,000 to $9,000. The specialty retailer certainly doesn’t need to be in the $699 sofa business. But we’ve lost several retailers. Offenbacher’s was a major player and they are gone. I can’t think of the name of the furniture store that was in Charleston that did such a big business in patio. Somebody came in and made them an offer for their real estate that they couldn’t refuse.
“The same thing just happened to Mr. T’s in Nashville. It has happened to several garden centers. These garden centers have 20 or 30 acres in the middle of developed property. I can’t image why Laura is still keeping Seasons Four outside of Boston open when you know she could sell that property for no telling how many millions. Fischels out of Portland, Oregon, went out of business.”
What advice would you give patio retailers who are struggling right now?
Flanders: “Trade up, and train your salespeople how to sell a luxury product. We’re not selling anything that anybody has to have, but dealers need to create the romance of the product so the people appreciate it and they are proud to have made that purchase. They can go to Home Depot and buy an outdoor dining set, but they are not going to brag about it to their friends.”
Then the other thing they ought to do is fix up their store a little bit and dust a little bit, make it look a little better. If you want to sell an upscale product you don’t put it in a dingy background?
Flanders:“That’s correct. They’ve got to have the right ambiance in their store so that you feel the product. A lot of them grew up in a business where they just covered the floor in five-piece dining sets, but that business has gone away years ago. Deep seating and modular certainly has become the bulk of the business and it has to be displayed differently.”
What other trends have you observed that presently impact the industry or might impact it down the road? Whether you’re talking about frame colors or fabrics, size of product, demographics, whatever.
Flanders: “I think there is color, which is a welcome relief that it has come back, and I believe there is more interest now in a variety of frame colors, which I think plays into our offering. I understand that Pride has had a lot of success with the gold look. It’s not my cup of tea, but at least it’s different. Size-wise, for a while we were trying to see how big we could build it, but I think now people are trying to make sure we’ve covered the waterfront so we can sell them furniture for the balcony as well as for their Outdoor Room. Not every place can take those giant chairs. It takes a lot of space.”
Companies such as Ratana, or Jensen Leisure Furniture with its Coral collection, do very well in terms of size. That one collection is really making that company, giving them a real foothold here in the States. It was properly sized and it was woven with Ipe wood for arms and legs, a nice look. So I think there certainly is a wonderful place for smaller-sized product.
Flanders: “I agree. I also think we’re seeing a whole lot more mixing of media, not just in the individual piece where you might combine woven with teak, but in putting a teak chair right next to a woven sofa. It’s just kind of a natural tie-in, and now we’re offering some teak chairs that we blend in there. We received a lot of compliments on the showroom this year because of all of the vignettes, and we’re showing two or three genres of furniture.”
You’ve got a lot of space in your showroom this year. You didn’t crowd anything in and, looking around, you can see your whole showroom fairly easily.
Flanders: “We actually took furniture out to give it a little more spacious look and that was very well received. We found out that we don’t have to show every piece of every collection.”
I’ve repeated this Richard Frinier quote many times: “What patio retailers need to do is take 50% of the product off their showroom floor and put it in the warehouse. Free up space and then treat every group as a jewel and romance it.” He was dead right. But how do you convince dealers that they will sell more by taking furniture off their showroom floor rather than putting it on. That’s counterintuitive for many people.
Flanders: “That’s the same reason they will buy similar product from three or four sources. Why do you need to do that? Why don’t you become important to one or maybe two.”
How many new collections do you have this year?
Flanders: “We have two. We have one that we decided not to go forward with after Premarket until we refine the arm styling a little bit. So that left us with one major collection and quite a bit of filling in with more generic pieces that go with all of our collections. Cayman is our new woven vinyl collection.”
|Ibiza Club Chair.|
Although Sunset West is a relatively new business (it was started in 2004), its owner, Wes Stewart, is an old pro, having grown up in the furniture business. His company is growing and expanding every year.
Hearth & Home: In what year did you start your business?
Wes Stewart: “I believe it was 2004.”
How do your sales at this point compare to the prior year?
Stewart: “We are 19.6% ahead of last year. We’ve got a lot of room to grow.”
How many reps do you presently have?
Stewart: “Probably 18. We’re slowly filling out the positions. It didn’t make sense for us to go out and hire a bunch of reps that we couldn’t then support, so we have just been slowly adding as needed. About three years ago we really started looking to Florida to help with our counter-seasonal business, and that is starting to come to fruition.”
Did the weather negatively affect any of your markets this year?
Stewart: “Sales have been up for us every month year-over-year. The sales really started kicking in after it got sunny in southern California because that’s our base. We were up 16% in Q1, and then April and May were tremendous months for us. We were up 20% in Q2.”
Have you added any new materials to your lineup of cast- and extruded-aluminum, along with some driftwood teak?
Stewart: “As we head into Las Vegas and then back to Chicago, our message will be that the trend is not a style, the trend is an eclectic mix. We will be beating that drum as hard as we can, and I believe it. I just think it is really difficult for the patio furniture buyer in a typical patio store to buy that way. They haven’t been buying that way for 30 years.”
But many manufacturers now are using multimedia.
Stewart: “Yes, but they are using multimedia within a single piece. What we’re trying to say is, I don’t care if you buy this coffee table from me to go with one of my sets, or go with somebody else’s set. I don’t care if you’re buying this sectional to go with one of my coffee tables. We’re trying to get a collection of items that work well with other items in our catalog to give you that cool, calm and eclectic look.”
What about custom orders? Are they growing?
Stewart: “We do a ton of custom orders. We all talk about online sales growing and growing and growing, and how do you compete with that? Well, one way is to customize your product and offer it up in a multitude of fabrics.”
Do you have your own cut-and-sew operation?
Stewart: “We do. We started one about two years ago, and we do a surprising number of cushions. I think, at wholesale, we do a million one, a million two in custom cushions. That’s what we do out of our facility. Then we still contract with a local cut-and-sew operation for cushions, and they probably do more than that for us.”
Are you selling any online companies right now?
Stewart: “We do. We sell about a dozen online companies. We look to partners that give us both exposure and support our brand equity. Some people will sell anybody online. We don’t believe in that. The partners that we sell online actually promote our products through e-mail blasts and through education of the product, so we’re not just throwing our product out there along with everything else.
“We’re strategically looking at our online partners and making sure they fit who we are as a business. They must adhere to MAP pricing. I don’t want any cost cutters. I don’t want any bunglers. I want somebody who has very good customer service and is able to pick up a phone and answer some questions.”
How many specialty patio stores do you have?
Stewart: “About 120 companies, so online is probably about a tenth of our business.”
What about interior furniture stores? Do you have any or many?
Stewart: “We’ve got a few. Those who are receptive to it do very, very well. We’ve sold furniture stores that tried, but they just couldn’t get it past the sales staff; they failed because they were not comfortable selling the product.”
Are there any other trends that really strike you concerning this industry, whether it’s fabrics or fabric colors or frames or demographics or anything that you think is somewhat new?
Stewart: “Oh, this is very interesting. Back 20 or 30 years ago when I started on the road as a full-line furniture rep, Mission furniture came and just swept the United States completely. Anything you built, if you called it Mission, would sell and you would sell a lot of it. I don’t know that we’ve had a trend like that since that time.
“With the online merchants offering up all these different looks and all these different styles and all the brown sofas, red sofas, yellow sofas, black leather sofas, contemporary, traditional, transitional, everything under the sun, it almost deflates any type of snowball effect. Twenty years ago when the Arts & Crafts, or Mission movement, took off, all the stores floored it.
“If you were a buyer you couldn’t go online because there wasn’t any online presence then. So if you went to stores A, B and C you would see Mission styles in all three, and that would reinforce your decision to buy. In a sense, the Mission movement kind of fed on itself.
“Now that people are going online to look at their options, you have guys who are still selling traditional. You have guys who are selling contemporary. You have guys who are selling transitional, and you have it in brown wicker and gray wicker and yellow wicker and all the different wicker colors. So I don’t believe there is an evolving snowball of a trend out there because there is no way to get behind it.
“What I have seen with companies like One Kings Lane, they do what is called “shop the look.” They will have a relaxed Spanish style, and then they will have a Malibu beach house style, and then they will have a Soho loft style, then they will have a southern hospitality style. They have identified that there is not one trend but many.”
But one trend we’ve seen in outdoor is the woven goods. That seems to have legs; it’s a major seller year after year after year.
Stewart: “Sure. A woven sofa looks like an indoor piece of upholstery, which makes it easy for the consumer to think, Well, it looks like a sofa, it looks like my upholstered sofa, let’s buy that look. To the point, you are absolutely right. The woven goods are a pretty good trend.”
I just wish it weren’t quite so blocky all the time. There’s got to be much more design and style that could be done with it.
Stewart: “Well, a track arm sofa is a track arm sofa. Is there a lot to be done with that? It’s hard. We have the rolled-arm resin wicker look. We’ve had that forever. It doesn’t sell well because it looks like your grandmother’s wicker, and nobody wants your grandmother’s wicker. Could there be other things in wicker? Yes. Wicker is a great material because you can make all these different shapes and forms and sizes, and you can have different textures and colors. So from the standpoint of using material wicker is a great material to work with.
“Again if the patio furniture stores are putting on their floors what they are comfortable with, they are going to put the comfortable track arm look on their floors because that’s what they are used to.”
You’ve told me before that you introduce two new collections each year. What are they for 2018?
Stewart: “We’re actually going to introduce three collections this year. The Laguna is the track arm in aluminum, which goes very well with our Montecito. The Laguna also works very well with the Coronado, and with this new collection that we haven’t named yet, but the mahogany version of the Laguna is going to work really well with our woven collection that is called Montecito. And we’re introducing our Redondo collection.”
How do you classify your company in terms of price? Do you consider yourself a mid-price company?
Stewart: “I think we are a mid-price company. We offer comfort. We offer value. We offer some style and we don’t charge a whole lot for those things. Having grown up in furniture, and selling on the road, the lines that presented a value I always sold well. And value is not strictly a price point. A brand new Mercedes for $20,000 is probably a value. But a brand new bottom-line Toyota for $30,000 probably isn’t a value. Value doesn’t always equate with just $999 or $599. You can have a value at $10,000.
“If somebody doesn’t appreciate quality, it drops right down to price point. But if somebody does appreciate quality, and they do appreciate design, then we’ll stand toe to toe with a bunch of people.”
I even wonder what percent of customers who go into a patio store really are able to tell quality from lack of quality. My guess would be very few can spot quality.
Stewart: “Well, that goes back to the salespeople on the floor. They’ve got to show people. They’ve got to educate people. When you go into Costco and pick up a club chair, you’ll notice how light it is. You can just feel that there is a lack of material being used. Obviously the more material used the higher the price points and Costco wants to hit certain price levels. I get that.
“But whenever someone picks up our furniture, they find it takes a bit of effort. It’s substantial, and that’s important in the quality story. They find that our furniture has quality because it’s a bit heavier, it’s a bit larger, it’s a bit more comfortable. We’re going to continue that.”