The 1990s: who will take the catbird seat? - the future of ready-to-assemble furniture retailing - RTA Merchandising supplement

Discount Store News, June 4, 1990 by Mary Ellen Kelly

The 1990s: Who Will Take the Catbird Seat?

Vendors are of two minds about the future of ready-to-assemble furniture retailing, affecting the type of new products they are introducing and price points they are reaching.

Manufacturers that are upscaling, forsaking low-end introductions, are paving the way for RTA furniture to eventually replace at least certain kinds of case goods, becoming one of the mainstay categories of discount furniture retailers like Levitz.

At the same time, the new class of "discounters" that sell higher-end RTA - office supply superstores, membership warehouse clubs, direct mail retailers, catalog showrooms and a handful of upscale discounters - could become primary outlets for better, higher-priced RTA. "We will displace the old line players," predicted Gene Metz, vice president of sales and marketing at RTA supplier Sauder Woodworking. "Ten years from now, RTA manufacturers will be among the leading furniture suppliers in the country."

On the other side are vendors whose new offerings are strictly lower-end goods. They believe their best option in the '90s is to serve the ever-present low-end discount store customer who will never trade up to a higher quality TV cart, bookcase or end table.

Although discounters like K mart might trade up to the higher price points in RTA, these vendors believe the majority of volume will continue to be done with low-end promotional furniture at full-line discounters or home centers. Tim Wilson, vp of sales and marketing at Affordable Furniture, acknowledged that "there are fewer customers out there, fewer doors," but is convinced that full-line discounters will continue to be the volume retailers in RTA, and RTA priced under $100 will continue to constitute the primary purchase.

A number of suppliers are sitting on the fence, attempting to serve both ends of the retail spectrum. Whether it is possible for a supplier to be both a low-cost producer of promotional RTA and a detail-oriented vendor employing upper-end hardware and trendy styling is a question that remains to be answered.

One supplier that appears to be successful at this juggling act so far is Gusdorf; roughly 40 percent of its sales are through mass merchant outlets and an equal amount is through department and specialty stores.

Mike Gusdorf, marketing manager, said that while retailers of case goods have not yet embraced RTA furniture, he expects there to be greater penetration in the future. "Not having the furniture stores and mass merchandisers compete will be a key issue ... I really want to believe that it can be done," Gusdorf said.

Most suppliers of RTA and many case goods vendors are beginning to scramble, trying to "be" wherever the market is heading. The problem, however, is predicting that path given the RTA industry's mighty state of flux: the list of Chapter 11 and Chapter 7 filings among both national and regional full-line discounters was never as long as it has been during the last 12 months, with Ames the crowning touch on the list of troubled companies.

While consolidation and financial strife have resulted in fewer discount chains to sell RTA, there are more and more other types of retailers entering the business.

"Domestications," a soft home products direct mail catalog, now sells RTA as do several of Williams-Sonoma's catalogs. Office products warehouses are expanding rapidly. Department stores are less shy about offering RTA to its full-price shoppers. Home centers like Pergament and Rickel are evolving into "home stores" and RTA is targeted for expansion.

While these retailers are trying their wings at new or expanded RTA departments, others are increasing their emphasis on case goods.

Service Merchandise and other leading catalog showrooms, while still selling RTA, are taking bolder steps into case goods furniture like leather and upholstered sofas. Sam's Wholesale Clubs are said to be exiting RTA in favor of high-end case goods and other clubs like Pace and Cosco are beginning to follow suit.

All of the competition in RTA has created a burgeoning market for furniture manufactured exclusively for a given retailer. Examples include: * Agreements supplier Bush has with both K mart and Wal-Mart to manufacture special items; * Dialogue among top vendors and powerhouses such as IKEA, Conran's, Pottery Barn and Rickel.

The development of these special RTA items or collections - pursued now to avoid identical-item price wars - could become the wave of the future as retailers try to set themselves apart in RTA.