Big national chains eye RTA differentiation - ready-to-assemble furniture

Discount Store News, Oct 5, 1992 by Mary Ellen Kelly

Sears, Wal-Mart, Kmart and Target are in the process of redefining their ready to assemble furniture departments with an eye toward offering shoppers differentiated assortments, presentations and services.

As the retailers operate more and more stores in one another's market territory, each of these giant national chains is particularly aware that they must vary their assortments from their competitors to avoid gross margin-eroding price wars in RTA and all other categories.

These efforts are intensifying as RTA furniture again is becoming a hotbed of competition. Market observers note that the prolonged recession is pushing more consumers who had delayed purchases of preassembled furniture to consider an RTA alternative, and full-line discounters continue to be the first retailer consumers think of when it comes to buying RTA.

At the same time, leading RTA furniture manufacturers are reporting a renewed flexibility among some chain buyers for higher price points.

Wal-Mart's latest thinking in RTA, reflected in the chain-wide rollout of a new assortment initiated about three months ago, features a beefed-up number of mid-priced goods (those between $70 and $100) and scaling back of some of the opening price point skus that it traditionally carried.

In a more comprehensive selection of entertainment furniture in its refocussed departments, Wal-Mart took away space from coffee tables and other occasional furniture. Office furniture was also de-emphasized in the new RTA mix. The current program is the first of several waves of changes slated for the Wal-Mart RTA furniture department.

Kmart, on the other hand, has see-sawed with its RTA department - going from an all-out explosion of the category at its Sayville, N.Y., test store (dubbed Oak Park II, after the chains original new prototype for the |90s which opened in Oak Park, Mich.) last year to a greatly reduced assortment at more recent store openings like its store which opened in Southbury, Conn., four months ago.

The Troy, Mich.-based discounter is expected to find a middle ground between these two extremes in 1993, or possibly as early as this fall when it opens a new prototype store in Auburn Hill, Mich. (Oak Park III).

The RTA presentation at the Sayville store, with prices as high as $300, was found to be beyond the budgets of most Kmart customers and clearance sales are underway at stores in which the extended assortment was offered. Floor space for the category is also being cut back and inventories reduced, or at least until the chain repositions the department.

Sears, which has been gradually expanding RTA in its Furniture Express departments and Homelife furniture stores, is said to be looking into cross-merchandising experiments involving RTA within the next 12 to 24 months.

Domestics is among the departments which might be included in the cross-merchandising of RTA furniture. If executed, the national mass merchandiser would create a home goods destination center. A Sears spokesman said that the importance of RTA to its furniture business continues to gain momentum.

Target is long overdue to take a stand in RTA. Its current assortment offers little more than a whole aisle of bar stools and a smattering of its private label occasional furniture and other small furniture pieces.

The reason for this limited selection hinges on Target's 70-pound weight limit in the category, which excludes what are frequently top-selling skus like entertainment centers.

Trade observers speculate that the chain is reconsidering its approach to RTA furniture, but not its weight restrictions. As a result, some manufacturers have hit the drawing boards, trying to design entertainment centers and other larger storage pieces without the usual heft.

Many manufacturers preparing for this month's International Market in High Point, N.C., agree that the RTA category is enjoying a solid year of growth, despite the recession, and have found retailers willing to once again reach to higher price points.

Kevin Sauder, director of marketing at Sauder Woodworking, Alrchbold, Ohio, said he has found "several retailers willing to take some major risks," and that some are, "passing pricing plateaus" as chains move beyond merely price promotions of the category.

Kurt Gelke, vice president, marketing and strategic planning at Bush Industries, Jamestown, N.Y., said he has seen interest among national chains for RTA skus beyond the promotionally price pieces.

"Over the past six months we had seen a step backward to very low ticket wall systems, but there has been a drive among national chains to offer step-up product ... The demographics of national discounters is moving toward those who would buy step-up RTA," said Gelke.

Bir Agnew, marketing and sales manager for RTA with Armstrong Furniture, Thomasville, N.C., agreed with Gelke's assessment. He added that many volume retailers are among the better risk-takers in the category.

"Discounters are willing to take more chances in RTA," said Agnew, especially when compared with relative newcomers to RTA like traditional furniture stores.