Retail Industry
Industry: Email Alert RSS FeedAssembling a growth niche - ready-to-assemble furniture - RTA furniture
Discount Store News, Oct 16, 1995
Five years ago, the industry called it knockdown. Today, ready-to-assemble furniture business is on an upswing. Some discounters saw the industry flatten out a bit this year, after an enormous year in 1994, but most in the retail trade are optimistic about good things to come.
"Furnishings and domestics--that's where people spend their money," said Joe Ettore, Ames president and ceo. "In 75 of our 307 stores, we've cut 25% to 30% of space from our crafts department, which was oversized, and gave it over to domestics and furniture," he said.
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Other regional discount chains concur. "RTA is a strong growth area." said Jack Smailes, president and acting ceo of Hills, the 159-unit, Canton, Mass.-based retailer. "We bundle RTA into the housewares category, and presently, housewares is the No. 1 growth area in the company," he said.
Furniture sales at the discount store level last year soared 25% from the previous year, according to DSVS Annual Productivity Report. The $3.35 billion category accounted for 2.5% of store sales, and gross margins of the category averaged out to 29%.
Some of the factors fueling the consumer interest in RTA range from changes in product surfaces to changing consumer lifestyles.
On the merchandise side, product is more attractive now than it has probably ever been.
"The quality of RTA has improved, the appearance of the merchandise has improved, and customers are rewarding the new standards," said Hills' Smailes.
Some retailers testify that the look of RTA pieces at times has had more appeal than real wood.
"We spend a lot of time and effort with focus groups," explained Patrick Henkel, director of merchandising for Richmond, Va.-based Best Products, a 167-unit specialty retailer that on average devotes 6,000 sq. ft. per unit to the RTA furnishings category.
In one such consumer research project held in Atlanta, the participants were shown two pieces of similar types of furniture, side by side. One was an already-assembled piece with cherry wood finish made by a leading RTA manufacturer, Sauder Woodworking Co., and the other was a piece from a case-goods retailer.
"The majority of people liked the RTA piece better," Henkel said, suggesting that the inherent absence of flaws in paper finishes appealed more to consumers than the character of real wood product.
The focus group results appear to mirror the fact that consumer acceptance of RTA furniture has risen dramatically over the past few years. The industry tends to tip its hat to IKEA, the Scandinavian furnishings store, for making RTA fashionable, but other factors are also at play. Newly formed families, perhaps tighter on cash than more-established households, are prime targets for value-oriented retailers, which have declared the home goods business as the central focus of their stores.
Venture and Service Merchandise have announced a major focus on RTA as a key category in their repositioning strategies, as Best Products did several years ago when it reorganized.
The big do-it-yourself trend that emerged in the early '90s is still hanging tough, especially since the economy is still fairly soft. There seems to be some intrinsic added value in putting things together by hand, manufacturers and retailers believe. Blending the DIY aspect with a home furnishing project could lead to significant sales potential.
Discounters and other retailers are learning for themselves just how far they can push the price point envelope with RTA merchandise.
At one time, $99 used to be the limit for any assembly-required piece. This year, tags on multi-featured entertainment centers frequently tipped the $200 mark and some specialty hard lines went as high as $300.
On promotion this fall, Northeastern regional Bradlees, with 139 stores, advertised a $199.99 entertainment center in light pine from the Sauder Coventry collection. Glass, raised panel doors and side storage for CDs and videos are some of the features that allow a $200 ticket.
Other retailers, especially those with the luxury of space, can move price points to even higher levels. Service Merchandise, a Nashville, Tenn.-based 406-unit retailer, is one example. In addition to $50 video storage cabinets featured in the RTA section of this year's fall catalog, the book promotes O'Sullivan entertainment centers (in walnut and cherry finishes) priced at $299.97 and a three-piece oak entertainment center from Bush for $399.
Entertainment centers continue to get bigger in physical size and higher in price point as the television industry continues to produce larger-screen Tvs. The advent of the home theater boom will also push RTA makers to create more customized and feature-intensive units for consumers.
"With entertainment centers, sizes and prices just keep getting bigger and bigger, and we've seen no problem with consumers accepting [higher price points]," said Best's Henkel. "We have no problem selling pieces for $299.97, as long there is space to display them.
"We find that on our `$300-for-$200' promotions, we can sell in excess of 1,000 pieces in a day," Henkel said.
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