BDO - Furniture Insight

Back To Basics

Discipline and a point of view are the name of the game in upholstery now. While many in the furniture industry are sweating profusely as they head into the summer months, those in the custom upholstery category appear to be somewhat insulated from the heat. Take Paladin Industries for example. Launched by furniture vets Tim and Elaine Bolick in 2002, the company enjoyed a 33 percent increase last year. This year, Paladin was named in the June issue of Entrepreneur Magazine as one of the fastest growing businesses in the country. Given the rise in petroleum prices, upholstery manufacturers across the board are paying more for materials such as foam this summer. Yet customers seeking the kind of quality, customization and fast delivery that a company such as Paladin provides, appear relatively unfazed. The success of the custom upholstery houses, at a time when business is at best sluggish for most in the furniture business, means that there is hope yet for domestic mills, which have been struggling mightily with overseas competition. As Bolick said during a Showtime panel discussion last month, "We have to have a good flow of goods to make our business work and to deliver our goods to the retailers on time. We can't wait four months for fabric coming in on a container that's stuck in Charleston. That just doesn't work for us. So, we try as much as we can to stay with the domestic mills. Valdese in particular has done a tremendous job for us. The quality that they offer, along with the service and the delivery that they give us, certainly keeps us looking domestically. The prices may be great [overseas], but the delivery situation in China has its ups and downs." "Most of us use a mix of imported and domestically made fabrics today," said panelist Rocky Holscher, president and chief executive of Southwood Furniture. "We keep harping on China, but there's also Indonesia and the Philippines, Turkey and a lot of other countries that come into play in this thing. Even so, we still try to focus on the domestic mills as much as we possibly can, and domestic goods still account for an extremely high percentage of what we do. If the domestic mills continue to update their equipment, and to come out with the right designs, and offer consistent service, they can stay competitive and stay in business." For a company like Southwood, timely delivery of the goods is critical. "We're in the high end and it used to be that the consumer would wait 12 weeks for a sofa, but today, they don't want to wait a month," Holscher described. "We own a frame company, so we build our own frames, and while we buy a few on the outside, it's not much of an issue anymore because we get pretty good service out of our suppliers. So, if you go down the line, we can get filling materials in three days. We can get everything we need to build a piece of upholstered furniture within a week at the outside, except for one thing: fabric. And this is something we have to evaluate all the time. I've got an appointment with a mill this morning and I've got to tell them that we will not buy part of their line anymore because the promised lead time is eight weeks, but they are consistently 12 weeks out. I've got to drop a good-selling fabric because of it, but why should I be the one to take the phone calls? Because we all know they don't stop at customer service. They eventually get to our desks and by the time they do, they are not happy campers." According to Holscher, the ongoing turbulence in the textiles business means such issues are not likely to be solved anytime soon. "Last week, I was looking at a line from a supplier of ours, and he told me that in the last six months they had lost 60 percent of their yarn supply and they had to go other places to get their yarn," described the executive. "Obviously, that then impacts their service. They suddenly went from being able to deliver in four or five weeks to seven weeks." One way to fix the problem, Holscher suggested, is to cut down on the number of fabrics the mills introduce at Showtime. "The domestic mills will survive if they can continue on this path of restructuring and become more service-oriented. But that means they've got to cut down on the number of introductions. We don't need to look at 1,200 patterns at Showtime from a mill. We need to look at an amount that they can produce and supply to us in four weeks. That's what they really need to look at, because for our business, four week delivery is the key to the deal." Unfortunately, the executive said, "I've seen mills come out with 600 patterns and each pattern may have eight or 10 color ways. Think of the developmental costs that go into that! They are investing all that money in design, but it's too easy for somebody sitting down the road to copy what they do. And the company doing the cherry picking doesn't have any developmental costs tied up in the thing. The point is, we don't need to look at 600 new fabrics from a mill. We can look at 300. We may buy 10 or 12 skus in a season from them, but we know that whenever we call them, we'll get what we need. That's becoming the primary thing. There's too much look-a-like in the fabric business. It would make more sense to invest the money that's being spent on design in the machinery." Although Holscher "tried some things with China a couple of years ago," he says, "we're working from a platform of a small to medium-sized company, and it did not work well for us. The quality was really not that great in a lot of the stuff that I first saw over there." Raising his coffee cup to the attendees, he added, "It's clear by some of the things I am seeing now that they've made tremendous progress, but in a lot of cases, it's 'this style, this way.' You want this cup in green or blue? Fine. But if you want to add a little silver around the rim, then you've got a problem. And as a semi-custom upholstery maker, that's what we do, that's what Tim does, and that's what sets us apart." Bolick agreed. "I believe that the American mills still have the advantage because of the design factor. China does a great job at interpreting designs, and they are getting better. They are learning. But, from a delivery and quality standpoint, the domestic mills still are, in my opinion, head and shoulders above what I'm seeing from China." When it comes to fabric, "there's a place for China and a place for America," Holscher said. "Southwood got into the leather business in 1990. When all the imported leather started coming in, it was married in full containers and they were selling the sofas for about the price of my ottomans. I was scared. I thought, 'Boy, this is really going to impact my leather business.' But, it worked the opposite way, because what it did was put an awareness of leather in the marketplace that was probably not there before. When all this stuff started coming in, I had a slight dip, but my leather business is up now and I'm doing more leather business than I've ever done. "I think the competition from China has made the American mills better. It's killed the case goods business, no question, and I pray that the high-end case goods companies like Henkle-Harris and Harden survive because for as long as I've been in the business those companies have been the standards by which everyone else was judged. You want them to survive, and it's the same with the mills. We're going to do everything we can to try to support them as much as we possibly can if they will do the same thing for us."