More aggressive buying, merchandising needed in RTA

Discount Store News, August 4, 1997

RTA furniture, an up-and-coming department in most discount stores just a few years ago, is showing signs of becoming a mature business, even though too many chains treat it as another commodity category. Turn and margin could plateau without more aggressive buying and merchandising.

Discounters like ShopKo that have lavished attention on furniture are still reaping higher turn and margin rates. On-the-floor merchandising is not the answer for every chain, but untapped opportunities exist in power presentations and in cross-merchandising RTA with housewares, kitchen accessories and giftware, and even with soft lines categories from decorative pillows to slipcovers.

Caldor has pushed price points to the $500 level in RTA furniture, but without pronounced in-store emphasis this position has several times turned into a major price promotion. Consumers reap good value, but the tactic raises the question of how much upscale business the mass channel can support.

Rather than depending on hot items, Ames gets results by moving quickly in and out of featured sets or related room pieces offered as promotional focal points.

Among discounters, only Target has evolved its private label RTA business into product lines that are readily understandable to the shopper as style-based families of items delivering easy room-by-room coordination and reasonable price/value. Other discounters need not cede this type of trade to one chain; even regional mass merchants can make a more meaningful commitment to product development, packaging and execution.

Total home merchandising yields results in juvenile furniture, as coordinated displays combine everything from cribs and changing tables to domestics and decorative wall borders. Discounters can approach kitchen RTA in a similar manner.

Discounters tapping a "merchandising to lifestyle" approach in soft home categories could test this approach in RTA furniture, where a wide array of styles and items tuned to different demographics and life stages are provided by vendors.

Furniture departments in discount stores face broader and deeper competition from the mid-tier chains as Sears improves its assortment and rolls out more off-mall home furnishings stores.

Mass merchants have turned to direct imports to guard against margin erosion. Another strategy is to show fully accessorized, coordinated lines in-store to stimulate multiple purchases.

Accent pieces, such as baker's racks or TV dinner trays, and add-one, such as computer desk file cabinets, are providing good margin opportunities when merchandised aggressively in-store.

Major vendors are raising RTA quality and value to new heights with better engineering and finishing technologies as well as inclusion of more features and imaginative RTA interpretations of case goods. The profusion of innovation and better design could lead to increased differentiation opportunities within the price range of discount retailers.

The computer workstation/home office segment of RTA is in a robust expansion, with much vendor attention to all-in-one and armoire units as solutions for clutter-challenged, space-constrained consumers.

Rounded edges and ultra-durable surface finishes are delivering newness to the mass channel. These elements bring especially good style points in home entertainment and home office applications.

Hardwood table and chair sets, differentiated by such elements as fabric-covered seat cushions and hidden extendable leaf systems, have earned a permanent place in kitchen RTA assortments.

Fashion-driven finishes, such as pickled white for coastal areas, are providing more regional micromarketing opportunities. These will be increasingly tapped as furniture vendors make advances in category management systems.

Furniture Productivity

Department size                      2,494 sq. ft.
Sales per sq. ft.                          $201.68
Turns                                         3.32
Initial markup                              37.10%
Gross march                                 32.66%