Hobby Lobby tests furnishings - adds home furnishings to its sales repertoire - Brief Article

DSN Retailing Today, Oct 22, 2001 by Debbie Howell

High-end Hemispheres concept marries luxury with mass

OKLAHOMA CITY -- Making the leap from selling packets of beads, craft supplies, fabric and home accents to grandiose home furnishings from around the world was too tempting an experiment for craft retailer Hobby Lobby to resist. After all, the privately-held company had been dabbling in affordable home accents for several years with positive results and feedback from customers. So when a company-owned store near its headquarters in Oklahoma City relocated, the chain decided to use the move to test the waters of the $65 billion home furnishings market and open Hemispheres, a 75,000-sq.-ft. store stocked with 10,000 skus of upscale home furnishings.

If successful, the test, which was launched Oct. 1 in an affluent section of Oklahoma City, could become a profitable growth vehicle for Hobby Lobby, which operates more than 260 craft stores in 24 states and a series of related manufacturing subsidiaries. To make the new venture work, the company will have to tap into a whole new demographic because Hemispheres is definitely not a store for those of modest income; items in its first test store, for examples, range from $15,000 bedroom suites to $25,000 Persian rugs.

"These are unique pieces from all over the world. You might be able to get a dining room set from Thailand and go around the corner to find a unique piece from England," said cfo Pat Jones, who gave DSN Retailing Today a preview tour of the new store a few days before its official grand opening.

Jones said about 80% of the products are imported, so don't expect to see the modern living room groups found at a chain like The Room Store. Instead, it has a definite old-world ambience, with emphasis on eclectic, unusual, reproduction antique and formal style pieces for any room of the house. Beyond traditional furnishings, the store also sells oil prints, numerous accent pieces, decorator pillows, candles and garden decor, such as fountains.

In the center of the store is a cluster of room vignettes, each outfitted with complementary pieces for a variety of tastes. Along the back, furniture is grouped by type, so shoppers can browse for a specific item, such as a chair or desk. In a diversion from a typical furniture showroom, here pieces are stacked high on heavy-duty shelves in an economical use of open storeroom space.

Large area rugs ranging from $799 to $25,000 take up several sections of floor just inside, adjacent to a wall of oil paintings. Behind rugs are several rows of mirrors and decorative screens on long-running parallel shelves, again a departure from the merchandising tactics of traditional furniture chains.

Home accents on small four-sided displays, like the ones found in Hobby Lobby's craft stores, line the racetrack that encircles the vignette displays. On an outside patio, garden decor and fountains are expanded from an interior display.

Hobby Lobby buyers, including ceo David Green and his wife Barbara, combed the world to find unique products from more than 20 countries in Asia, Africa and Europe.

"There's a lot of hand-carved furniture from Asia and different woods you don't typically see. You'll find a lot of teaks and very ornate desks," Jones said.

Many of the pieces are definitely eye-catching, but they require deep pockets. A true afficionado of fine furnishings would be at home in Hemispheres. Ornate formal mirrors, $9,000 marble fountains, wrought-iron baker's racks from the Phillipines and a hand-painted Chinese secretary desk costing $4,199 are a few of the offerings. Visitors can even buy an antique metal window from an English castle for $8,000.

Just inside the entrance to the left are premium bedroom linens, such as beaded and richly colored decorator pillows ranging in price from $99 to $600. Other unique finds are $1,200 candles the size of a small filing cabinet and a glass beaded ghana mask for $3,119.

"It's just kind of stunning to walk into," Jones said. "It's been on David's mind for about 10 years. About a year ago we decided to do this."

Should Hemispheres prove itself profitable within the next six months, Hobby Lobby will consider expansion. Because of its upscale niche, most markets like Oklahoma City would probably only support one store, Jones estimated.

Whether the market for upscale home furnishings is large enough to support this concept isn't known. Overall, the home furnishings industry hasn't enjoyed a very good year, with sales expected to decline 3% from last year's $64.8 billion. The outlook for 2002 is a little better, with the American Furniture Manufacturers Association forecasting a 3.9% rise in retail sales.

While Hobby Lobby doesn't release its profits, it is considered a highly sophisticated and conservative company that doesn't take on risky ventures without doing its homework. Last year, the company saw its sales rise 13.4% to $905.0 million. Though not as big as leading craft chain Michaels Stores, a $2.3 billion competitor, Hobby Lobby has earned praise for its visually inspiring merchandise displays and the cost savings it gains through manufacturing many of its own products and by using lower-cost leased sites.