Traditional furniture makers buying RTA vendors to share in sales boom - ready-to-assemble office furniture

Discount Store News, Oct 18, 1993

As big business reports more and more layoffs and small business start-ups mushroom, manufacturers and retailers of ready-to-assemble furniture are expected to reap the benefits of this shift in office furniture demand.

In response, RTA and lower priced furniture manufacturers with an emphasis in office furniture have been targeted for acquisition by traditional furniture suppliers as a way to swiftly enter the RTA furniture category.

Haworth, the $650 million office furniture and seating manufacturer based in Holland, Mich., has just purchased $100 million vendor Globe Business Furniture, based in Hendersonville, Tenn. The terms of the acquisition were undisclosed Globe describes itself as an RTA supplier although, unlike vendors such as Bush, O'Sullivan and Sauder, it sells mostly items like partially assembled chairs rather than particle board desks and credenzas.

Robert Bockheim, director of market development for Haworth, said that while "Haworth's growth has continued, market growth is slowing down," in traditional office furniture sales, dropping from as high as 20% annual sales growth during the 1980s to lower double-digit percentage growth during the current decade. "Haworth will continue to serve larger offices and furniture dealers...Globe will run independently," continuing to sell to dealers, wholesalers, catalogers, warehouse clubs and office superstores.

Globe, in contrast, has averaged 25% growth since 1981, noted Daryl Anne Park, vice president of marketing with the new Globe Business Furniture subsidiary of Haworth.

In another example of traditional manufacturers trying to enter the RTA category through acquisition, traditional furniture giant Masco Corp. is rumored to be interested in purchasing O'Sullivan Industries from its parent, Tandy. At press time, O'Sullivan family members were working to gain ownership.

Another dominant case goods supplier, LADD, had entered the RTA market about two years ago through its acquisition of Fournier.

Interest in RTA suppliers, especially those already producing office furniture, is expected to increase.

Kurt Gelke, vice president, marketing and strategic planning at Bush Industries, noted, "I think you're going to see more and more traditional furniture companies trying to enter the RTA business. They're continuing to see how much better we're doing. However, the grass is always greener on the other side of the fence; being successful in the RTA business is not like a light switch they can just flip on."

Likewise, Phil Banas, director of marketing at Ameriwood Industries said, "The big shake-up in the contract furniture industry is really causing a big stir and leading some vendors to re-think their strategy but RTA requires a totally different cost structure than what they're used to."

While established RTA suppliers have a firm grasp on home office furniture sales, the development of RTA furniture with greater emphasis on ergonomics--but still at RTA prices--has the potential to undermine the usual RTA offerings.

For instance, Quebec, Canada-based Forminco has developed what it calls "people compatible computer furniture" which at $300 and $40, does not compete with established suppliers on a dollar for dollar basis. But a new family of work stations at $100 and $200 could tempt people who spend a lot of time at the computer to purchase one of these ergonomic alternatives.

Forminco will introduce the new workstations at the upcoming Stationery and Home Office Products Association (SHOPA) show and at the Consumer Electronics Show.

Mark Gold, president and ceo of Forminco, noted that, "Consumers are more aware of the potential damage improper computer work environments can have on their health and productivity. They are prepared to invest in quality, affordable solutions."

Sears Canada, which unlike its U.S. parent still has catalog sales, will be offering a full page of Forminco products in its spring catalog. Among them are three desks, an ergonomic leather chair and the Mouse Arena, a mouse pad with an adjustable palm support.

Booming office furniture demand also prompted Rubbermaid to enter the RTA business earlier this year with a Snap-Ease workstation, printer cart and computer desk. Unlike most RTA furniture, the basic construction is snapped together without tools or hardware. It is also one of the only RTA products made of plastic (a trademarked "steel-reinforced Resinite composite").