Mass maintains dominance in thriving RTA segment - Home - Home furnishings gorwing in discounters and warehouse clubs - Statistical Data Included

DSN Retailing Today, August 12, 2002 by Mike Duff

With more expansive selections, better quality goods, a greater commitment of space, and more aggressive merchandising and marketing, mass-market retailers seem poised to become the dominant force in another home goods category: furniture.

Discounters and warehouse clubs especially built on improvements in RTA quality and, increasingly, inexpensive wood or wood-accented furniture to take a larger proportion of a business that was dominated by case goods.

Furniture is a particularly ripe area for new initiatives as it is in growth mode. The American Furniture Manufacturers Association forecasts that wholesale furniture shipments will gain 4.1% overall in 2002, with upholstery showing stronger advances than wood furniture.

As for consumer purchasing, AFMA forecasts demand at the $66.39 billion level in 2002, up 3.5% from $64.12 billion last year, with an increase of 1.8% to $67.56 billion expected for next year.

As a channel, warehouse clubs are most aggressively pursuing opportunities in upholstered furniture, with all three of the majors offering upholstered sofas, chairs and related items, such as ottomans and recliners. They aren't, however, necessarily offering everything everywhere all the time.

For example, in stores in the New York City area, Costco blew out its assortment of upholstered furniture early in the year, but narrowed it more recently, at least in some units. Still, consumers can purchase items, such as a 100% leather Hudson chair with an ottoman for $699.99. BJ's and Sam's recently offered a variety of products, with Sam's the more aggressive purveyor, offering a leather sofa love seat and chair/ottoman combination for $699.98, as well as a couple of recliners and a variety of case goods, in addition to RTA items.

Bob Obernesser, an analyst with McMillan/Doolittle, said the particularities of warehouse club shopping could very well constitute an advantage in upholstered furniture operations. "One of the key things here is, people who shop these units go in recognizing that what they see, they have one chance to buy, as opposed to the smorgasbord furniture retailers offer, where you know you can come back next week and find the same things," he said.

Warehouse clubs aren't the only retailers using urgency to help grab upholstered furniture sales from traditional channels. Big Lots has been building an upholstered furniture business since 1995 and it continues to grow, said Chuck Kidder, the company's vp of furniture operations.

Today, Big Lots carries furniture in 611 stores and has 55 free-standing Big Lots furniture stores. It offers a wide variety of upholstered furniture and case goods typically at prices 50% to 80% below those of conventional furniture stores. As with the retailer s other products, the company buys on deal and sells through its product assortment quickly.

Kidder said the success Big Lots and mass merchants have had in furniture represents something of a paradigm shift, particularly in the minds of consumers.

"I think customers who are going to Big Lots stores that have furniture now have an expectation about finding home furnishings," he said. "We've trained them that in a one-stop-shopping environment, we can satisfy their home furnishings needs."

RTA is cycling into a new phase that provides fresh opportunities. Susan Dountas of Sauder Woodworking said the trend is for the flattening of the home office segment, but expansion in entertainment centers and related products, as well as product segments that mass-market retailers only recently pioneered. "Entertainment is good and growing. Bedroom also is a growing category," she said.

Home office expanded rapidly in the 1990s as consumers acquired computers, but, like computer sales, home office tailed off as the '90s ended. Simultaneously, however, the growth in less-expensive big-screen televisions and DVD players contributed to ongoing strength in entertainment furniture sales. Consumer acceptance in the home office and entertainment segments of the mass-market furniture category has paved the way for expansion into kitchen, bedroom and living room. Now, many RTA retailers are looking for new opportunities by devoting additional space to other segments, including bedroom and kitchen.

Target is among those blowing out their selection of bedroom and kitchen products and even has name-brand pine furniture. In its Country Lane by Thomasville line, Target provides a chest of drawers and a kitchen hutch in pine or pine finish--a little of the old and new mixed--and even a desk. A five-drawer, pine-finish chest retails for $159.99.

Target isn't alone in expanding its furniture business. Ames has added unpainted furniture, gaining space for it by dumping 10% to 20% of the lowest-selling hardware SKUs in each store. The company then positions unpainted furniture to link it with an existing display of stains and lacquers.

A few years ago, ShopKo began to offer assembled RTA on the floor in a showroom-type display that was designed to give customers a better sense of what the company offered, a chance to kick the tires, so to speak. ShopKo, too, is building on its furniture initiatives. "Our assortment is constantly changing," said Sheree Olsen, a spokeswoman. "Office furniture has down-trended. Our emphasis is much heavier in bedroom than in years past. We are currently testing mattresses."