Bringing home the RTA: DIY centers build profits - ready-to-assemble furniture at do-it-yourself home center stores - RTA Merchandising supplement

Discount Store News, June 4, 1990 by Laura Liebeck

Bringing Home the RTA: DIY Centers Build Profits

Ready-to-assemble furniture is not just for discounters anymore.

All kinds of retailers now offer RTA furniture, even retailers that specialize in building materials.

Just four years ago, home centers were barely a factor. Today, some industry sources estimate that home centers ring up as much as 12 percent of all RTA sales. That figure is likely to increase in the coming years as these retailers make a greater commitment to chasing home furnishings/home decor sales.

Discount mass merchants still dominate the RTA furniture market, accounting for about one third of all sales. Mail order catalogs and catalog showrooms ring up about the same percentage of the total as home centers. Other players in the RTA arena include, in rough order of importance: Sears, JCPenney and Montgomery Ward; electronics stores; lifestyle specialists; office superstores; wholesale clubs; furniture stores, and department stores.

A good portion of the growth of RTA is attributed to the growing number of non-traditional furniture outlets that offer the product.

Home center chains are forgoing new ground with their RTA selections, particularly in home entertainment, home office and dining groupings, and for some home center operators, bedroom furniture.

Among the home center operators leading the way with RTA are Lowe's, North Wilkesboro, N.C., Pergament, Melville, N.Y., Great Ace, Chicago, and Rickel, North Plainfield, N.J. Other home center chains reportedly increasing their assortments in RTA include: Hechinger, Landover, Md.; Builders Square, San Antonio, Texas; Central Hardware, Bridgeton, Mo.; and Ernst Home Centers, Seattle.

In contrast, Home Depot, Atlanta, is exiting RTA because of competition from specialists like IKEA, illustrating that a clearly defined marketing and merchandising strategy is needed to be successful.

"We're not just a commodity house," said Michael Lurie, president of 34-unit Pergament. It is important for Pergament to offer products for the "whole household," he said, adding that Pergament's goal is to increase its customer visits, to 55 times a year from 36 times now. RTA furniture is expected to help in that endeavor.

RTA furniture is a big business for Pergament, occupying as much as 1,500 square feet in its larger stores, those exceeding 50,000 square feet, about 40 percent of its units, said Lurie. Between 85 percent and 90 percent of all Pergament stores carry some kind of RTA assortment of up to 100 sku's an increase of 20 percent over last year.

Pergament carries RTA in various furniture categories, including home office, home entertainment and bedroom and in numerous finishes: terrazo, black and white, two tones (black and marbelized), marbelized, woods and unfinished.

In addition, the chain carries an assortment of rattan furniture.

RTA prices range from $12.99 to $599 for a roll-top desk, said Lurie.

Lowe's, the second largest home center chain in the country, re-entered the RTA business after a one-year layoff.

While the selection is limited, Lowe's did pick two categories to concentrate on: home entertainment and home office, said Tom Smith, director of community relations.

Lowe's exited the RTA business last year due to poor sales, but Smith said the 304-unit chain learned a lot about RTA during its initial introduction and decided to try again but this time with a concentrated focus. Home office was chosen because the business is exploding. Home entertainment is a logical extension of Lowe's home electronics department.

"RTA is much easier to deal with now. The boxes are all square and easy to handle," said Smith.

So far, RTA is limited to Lowe's stores over 45,000 square feet, or just 30 stores. But Lowe's is currently enlarging and expanding its units to take advantage of the company's greater retail focus, and RTA will certainly be a part of that expansion.

One home center retailer that has gone all out with RTA is Great Ace. The two-unit chain dedicates 10,000 square feet of floor space to furniture, half of that is RTA, said Lora LaDew. The department features 100 sku's of RTA in home office, home entertainment, bedroom, dining, and upholstery.

Furniture is such a big part of Great Ace's business that one-third of the retailer's total sales are in furniture. One-third each is attributed to hardware and housewares/-domestics, said LaDew.

At Great Ace, RTA prices run the gamut and cap at $799 for an upholstered sofa, a little higher than for traditional home centers. The average Great Ace customer, said LaDew is not a suburbanite but rather the well-educated young professional. This customer, she said, is willing to spend more on furniture even from a home center, if the quality and styling are available.

For example, this fall, LaDew said she will increase the number of sku's in wood veneer products in the home office category and add computer desks with value-added features. These additions should double the current retail prices, which now range from $69.99 to $129.99.