Patio furniture to grow at cost of price hikes, low margins

Discount Store News, August 21, 1995 by Richard Halverson

NATIONWIDE DSN REPORT -- After two years of flat sales in patio furniture, '96 could be a turning point.

Vendors predict growth next year of anywhere from a modest 2% to 3%, adjusted for inflation, to as much as 10%. That contrasts with two to three years of fairly flat sales, estimated at around $1 billion to $1.1 billion at retail for the '94 to '95 season.

The gain will come at a cost, however, because all vendors are pushing for cost increases. And that will raise the cost of goods sold and reduce margins, unless the cost increases are passed along at retail. Also, Wal-Mart is telling the industry that it is taking a more aggressive position in the category and wants to move away from its item approach to the category to one that offers more selection to its customers.

Increases in raw products will mean that consumers will end up paying 15% more next season, predicted Philipe Ubaghs, vp, sales and marketing for Bemis, which produces its Festival line of patio furniture for discount stores. At the Hardware Show in Chicago last week, Bemis introduced in the Festival line a high-back sling chair to retail for $90.

John Fravel, president and ceo of Syroco, also predicted a 15% hike in consumer prices. Vendors need cost relief," he said. "They had to eat a tremendous bite over the past year."

The '96 price hikes come on the heels of a difficult '95 season in outdoor patio: spring came late and soft consumer sales in general conspired to hold down volume. The industry was socked with higher vendor prices, flat sales for resin, tough new standards for mono-bloc chairs and industry consolidation at the manufacturer level. On the upside, consumers seem to be moving toward higher-end merchandise; wrought iron goods were popular and in fashion. There has been a muting of bold fashion colors in favor of softer hues. In style, bigger chairs for the middle age spread have piqued interest.

Despite overall industry woes, some discounters are doing good business in patio.

"They're all kinds of opportunities in patio," said Ames buyer Neil Gleason, noting that patio growth has been in the double digits for the past four years.

With display space a premium at Ames--stores are about 55,000 sq. ft.--the chain has had "to make space out of nothing," he said. Ames used a new display table rack that Bemis provided. It displayed six table tops without legs, with chairs stacked next to it, in addition to the Sunbeam Vignette display, which displayed three styles of tables, chairs and umbrellas in one table, with one-third of the display devoted to each style.

Last season, Ames displayed pressure-treated wood products, such as glider swings on the sidewalk in front of its stores, said Gleason, hinting that the chain might do the same next year with patio. In wrought iron, Ames tripled its business this past season, and sold through completely.

In contrast, Kmart prefers the conventional method of displaying complete sets, said Maxine Lauer, director of hard lines fashion development.

Kmart enjoyed "good growth" in resin this year, Lauer said, with most of it directly imported. Wrought iron showed "some growth" and in aluminum, "prices have gone sky high," she said.

For a wrought iron vendor, Kmart primarily uses Plantation Patterns, but also imports.

In fashion trends, Kmart is seeing a strong move toward florals, which now is a major player in both cushions and sets. While hunter green is still king in color, Kmart customers now are returning to neutrals and a color combination of cobalt blue and yellow.

"Neutrals are becoming important again," Lauer said, so retailers have to offer a wide range of florals, neutrals, hunter green, blue and yellow for those who still favor stronger colors.

The big news in resin furniture, however, is the pressure that new construction standards from the American Society for Testing Materials have placed on one-piece chairs, either promotional or high-back.

To meet the three standards developed, for static load, stability when tilted back and from a drop test, a promotional monobloc chair at $5.99 would have to cost $7 to $8 at retail, said Bemis' Ubaghs.

The standards stem in part from a number of recalls over the past year, said Fravel of Syroco.

Although the standards are not government mandated, any manufacturer that doesn't meet them will be at a marketing disadvantage.

Despite the new standards, which most vendors said they already meet, new product introductions were not hampered. Among them:

* Syroco expanded on its line of kids' chairs, including a kids' chaise line and animal chairs patterned after an elephant, panda bear and a lion. Syroco is seeing more cross-merchandising such as at Bradlees, which is mixing and matching aluminum chairs with the Syroco PVC glass-topped table.

* Grosfillex introduced a three-piece line of Miami King-Size chairs (retail price $14.99), plus a chaise lounge, since consumers like the wider seat chairs, said Scott Crumrine, director of mass retail sales.

* Sunbeam introduced two collections of resin, a wicker, open-mesh design called Alpine and a slatted-back chair line called SeaCliff. The comdany sees a consumer shift to lighter shades of green, which it calls Sage and Sand.