We usually begin the Sitting Pretty interviews by asking manufacturers how the year is shaping up. In other words, are they up in sales, or down, or are they flat – even with the past year?

This year was no different, and the answers from the six manufacturers with whom we spoke went like this – flat, low double-digits, up 18 percent, up 40 percent, and sky high through the roof! That latter comment is mine, not Gary McCray’s, but it certainly mirrors the results of starting from nothing.

McCray, if you don’t know, is president of Klaussner Outdoor, a new division of Klaussner Home Furnishings, one of the top five indoor furniture manufacturers in the country. 

So you see, sales results were all over the board this year, perhaps complicated a bit by the impact of severe rainfall in most areas of the country – though not all at the same time.

As you read through the six interviews on the following pages, reflect on how much these manufacturers agree on various topics and issues, such as the fact that much of the specialty retail network is having difficulty growing their business, or that competition is much greater today than it was prior to the recession, or the fact that a hefty number of interior furniture stores will try the category and fail to keep it on. 

The list could go on and on, but scroll down and see for yourself.

Quick Links

Gary McCray	Wes Stewart	Tom Murray
Dudley Flanders	Joseph Cilio	Mark Bottemiller

 

The Cassley chair.

From the point that he joined Klaussner in March 2014, Gary McCray has been building a line of furniture from the ground up. Now he’s ready to make Klaussner Outdoor a force in the industry.

Hearth & Home: You’ve just joined Klaussner and created its first Outdoor Division. Like most others in the outdoor field, what I know about Klaussner I’ve read on the Internet – and that’s pretty impressive. 

Gary McCray: “Yes, Klaussner was pretty impressive to me when we first started our conversation. First of all, it has been around for a while. It started as Stewart Furniture back 51 years ago here in Asheboro, and ultimately was purchased by Hans Klaussner, hence the current name. He held it for several decades and then, in 2010, Bill Wittenberg, who is our CEO, came on as president of the company and, during a transition phase, he and his partner, Dave Bryant, who is our executive vice president, put together an offer, along with the key managers, and bought the company from Hans. 

“So we are now totally management-owned and everybody else who is an owner works here today (except one who may have retired). It’s a very pleasant situation. It’s a large company, and one of the top four or five indoor furniture manufacturers in the U.S. 

“The foundation of the company is domestic upholstery that is made here in our facility in Asheboro. We have just under 2,000 employees in the area focused not only on that, but on some of the other add-on businesses, such as the Outdoor, that we do various levels of work on and warehouse a lot here in our distribution centers.”

What I read online is that the company has 10 manufacturing plants in Asheboro. That’s stunning! Who has 10 furniture manufacturing plants in the U.S. right now? Are all of the products that Klaussner sells made right there in Asheboro?

McCray: “No, that is the core business, the upholstery business. In addition to that they have entered several other businesses, such as leather products and refined products that they do bring in complete and sell. Then they added the bedding category. They have a mattress division called Enso and that is an import product. From there they got involved in case goods, and that also is an import product. Then, ultimately, they got into outdoor. 

“Until they got into outdoor, everything was either a domestic product primarily or an import product. Because we bring our frames in and then, in most cases, we do our cushions here, we were the first hybrid product that was a combination of import and domestic.”

When did you actually begin selling Klaussner? I know you moved over in March of 2014. 

McCray: “Yes. I started in March. We went to Premarket with just a handful of things that we were sampling. But we didn’t start selling anything until the September market last year.”

How did you handle the rep force? Are you primarily Klaussner reps who do both?

McCray: “We are. We have three territories that are former Lane Venture reps and then the rest of the salesforce is Klaussner. They typically have a lead rep, and those reps will have associates so they can divide and conquer – whether it’s geography that they are dividing and conquering or it’s different product lines – they can specialize.”

Am I correct that you have 60 reps? 

McCray: “Yes. It’s actually more than that when you count in all the associates, but we have a lot.”

Frame materials – you’re doing woven, and you’re doing aluminum products. Any plans to add anything else, such as wood, marine-grade polymer or whatever?

McCray: “We’re doing some of the synthetic wood products, for the most part in combination with our woven products, but we introduced a handful of tables in what I call a synthetic teak. It’s a different look than the polywood and some of the other materials out there, and we think that is going to be really good. I’m working now on a collection in that for next year that is seating and tables and the whole nine yards. Then we also do the outdoor upholstery. ’

How is that going for you?

McCray: “We’re new to it and we’ve struggled with it a bit to start, but we did a new collection for July, which was a little more transitional. I think we made the mistake of doing some product that was a little too indoor looking, too traditional, in our first two collections. But this one seemed to get a lot of interest in Chicago, and I think we’re going to get some pretty nice sales on it, at least at the wholesale level.”

How many U.S. dealers do you have already?

McCray: “We’re up around 200 right now.”

How about other channels? Do you expect designers will be a very important part of your business?

McCray: “I think they will be a good part of our business. They won’t be the size or share of the business here that they were when I was over at Lane Venture.”

So when I read in your release that Klaussner Outdoor is really going for the top half of the market with a good, better, best approach, even your best is not going to be at a price point quite like Lane Venture.

McCray: “No. I basically carved out a window that I want to be in from a price point standpoint. What business we do in the design channel will be with the product that is focused on specialty stores and furniture stores. I think we will do a sizeable amount of business with designers, but I’m not going for those looks that are on the leading edge. I want to be innovative, but I want to be in the middle of the market.”

If I didn’t know better, I would say you’re trying to make money.

McCray: “(Laughs) That’s kind of what I’m trying to do.”  

If I asked you to put the good, better, best into monetary terms, where would it begin and end?

McCray: “If you’re looking at sofas, we’re around $1,299 retail to start and around $2,499 before we top out. A five-piece set would be really around the same point, $1,299 and then it would go up as high as $2,999.”

So you’re not even within 75 percent of what Lane Venture was. You were way up, around $10,000 or $12,000. 

McCray: “Yes, we had gotten to the point where we were pretty expensive. The main thing we’re focusing on here is out of the warehouse and stocking, and we’ve put a lot of inventory in here to start off with in all three categories, and then in the upper two categories, the domestic cushions. But as we do that we’ve got to have those turns to be able to support that inventory.”

I think Klaussner says they deliver in 21 days. Do you fall under that sort of guarantee?

McCray: “We do. We typically are quicker, but one of the other things that we tout is that basically any of these lines can go on one truck. So if you bought Klaussner Outdoor only, we would actually ship quicker than 21 days, but we don’t say that because if you buy Klaussner Upholstery, for example, and get it on the same truck as the outdoor, then we’re going to be that 21 days.

“One of the things we’re looking at as we go into our second spring selling season is to speed up our delivery. In April or May, there are a lot of folks that want their outdoor furniture in 10 or 12 days, and we’re in a position to accommodate that.” 

Some manufacturers still feel that the vast majority of patio dealers are not growing their business. They are just breaking even or hanging on. They worry about the health of that whole channel. Do you feel the same way?

McCray: “Yes, I think we all have to be concerned about that. It’s certainly not what we’ve been used to in the past as far as growth and stability. But on the positive side, I think the ones that have made it through the last five or six years are solid. They are just not growing as fast as we would like to see them, and we’re not seeing other players get involved in that distribution. I think that’s why we’re all looking for other areas of distribution. There are some pretty big boys out there in this country.”

What trends within the casual furniture business have you noticed over the past year or so? Whether it’s frame materials, colors, design, consumer interest, anything at all.

McCray: “I’m seeing the fabrics styling better, the frame materials and the wicker fiber that we use getting more and more fashion forward. But the thing that makes me a little nervous is we’re driving a lot of innovation and a lot of style, and comfort is getting better, and I’m seeing a little bit of that at retail and a lot of product that is pretty much the same, not very much color and strictly a price proposition. There’s a bigger share of that in the market today than I can ever recall and it’s a concern.

 “The specially stores are better than furniture stores sometimes in that they will embrace some of the forward looking things we do, while the furniture stores often times will continue to do the same old thing over and over. The fabrics are just amazing. It has been interesting to come into Klaussner because the woman who is doing our fabrics is one of two fabric merchants for them, and she just loves doing outdoor fabrics because there are so many. Even a line like Sunbury, she says, ‘Why can’t the indoor Sunbury line look like the outdoor Sunbury line?’

“If we can get it out there in front of the customers, I think we can drive a lot more business than we’re driving today.”

How many new collections are you introducing this year and which one will be the big winner?

McCray: “We’re doing four full collections and then three smaller groups. What I learned from last year was I needed to strengthen the Better price point that we had, so we did two new woven groups and a new aluminum group in that category. Both of those woven groups did extremely well at Premarket, so I’m kind of hard pressed to pick which one is going to be the best. One is called Sycamore and the other is called Cascade.”

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The Coronado chair.

Wes Stewart was literally brought up in the furniture business. His grandmother, mother and father were all in it, and he “was babysat on a cutting table.” Now in his tenth year with his own company, he’s hitting his stride. 

Hearth & Home: How do your U.S. sales compare to last year?

Wes Stewart: “We’re up a little more than 40 percent over last year. We’re very, very excited about it.”

Are you able to keep up? 

Stewart: “We are. We’ve been very fortunate. We actually started a Chinese warehousing program this year and that allowed us to prepare goods offshore in advance to keep up with demand.”

Once you put a container on a ship, how long does it take to get to the West Coast? 

Stewart: “To the West Coast is about three weeks. It’s seven weeks to get a container over to the East Coast.” 

Being based in California, I assume your strength is in California and in the western states. What about other regions of the country? Where were your sales the strongest and where were they the weakest?

Stewart: “Yes, you’re right. We started on the West Coast and our strength is in California, Arizona, Nevada. We do very well here. We’re established with all the big retail players you want to be established with here in California. Today’s Patio owns Arizona and they are our client. That really gives us a base of operations. 

“We’re finding some success in Texas and in Florida, and those are areas that we have been focused on in the last year or so. We hope Florida really starts to come on board this year. It would be a great counter-cyclical territory for us, which would further help us grow the company in a non-stressful manner, if you will.

“But as far as the Midwest, the upper Midwest, we really haven’t had a ton of exposure there. We’ve done a little bit here and there. We’ve got a couple of good accounts, some independents here and there that do really well with the line.”

How do you see your line? Where are you positioned in terms of a price point? Are you at a mid- to upper-mid-price point?

Stewart: “We’re probably middle to lower-upper, if there is such a price point? In whatever I’ve done, I’ve always tried to present a value. Sometimes we can compare it to the upper end brands with the better price points. Sometimes we can compare it to the middle price point brands with a better look. Beauty is really in the eye of the beholder. Whoever is looking at the line does his or her own comparison, and it’s either an upper end look with a better price point, or we’re a middle price point with a better look. 

“We just try to give a lot of look for the dollar that we’re asking. I guess the dollar that we’re asking is probably the middle of the road.”

How would you describe the look of your line?

Stewart: “We ended up with a West Coast casual look, I guess, and probably by accident. I grew up on the indoor side of things, and the West Coast upholstery was always a little bit cleaner in terms of the lines and the styling than the East Coast. 

“The East Coast looks were always very traditional and very detailed. On the West Coast they rounded off some of those sharp edges and had this West Coast casual look to it. I think that look is playing very well in the outdoor market.” 

I understand that you are in Chicago, Las Vegas and the Design District in Dallas. How long have you been in Las Vegas? 

Stewart: “We actually started in the temporaries in Las Vegas when they opened. I think we skipped 2009 and 2010. But we ended up with a permanent space on the first floor of Building B in Vegas.”

Now most of the casual companies are in Building C. Will that be a problem for you?

Stewart: “I don’t know how it’s going to affect us. We’ve already built a pretty steady flow of people. We’ve got some great partners down the hall. I’ve talked to the building about it as well and they don’t really know how anything is going to be affected. So I’m keeping my fingers crossed. But, yeah, I’m a little anxious about it.”

You now have a number of years of experience in Las Vegas. We’re told that Las Vegas brings in buyers from throughout the West, as well as from Asia. Is that correct?  

Stewart: “Like High Point, there is much more international flavor versus Chicago. Chicago seems to be America, some Canada, but in Vegas you will find more international buyers.”

How many employees do you have? 

Stewart: “We now have 17 and hope to add a couple more by February.” 

I see that you design all your furniture. Do you have any formal training? 

Stewart: “No, but I’ve been around it so much, I’ve had so much exposure to shapes and sizes and scale through the years of growing up within the furniture industry. I try to take a look and see what we’re missing in the line that would be the most broadly appealing, and that’s what I work to bring out.”

How well or how poorly did you do with early-buys for 2015?

Stewart: “We really don’t do a ton with early-buys. We have set our wholesale pricing on our furniture at a thin margin to start with, and we really don’t have room to discount further for early-buys.

“Containers are actually a lesser part of our business right now. But a lot of people start with our product by buying it out of the warehouse. Once it retails for them, they will commit to containers and basically purchase out of the warehouse to fill in voids in their stock. 

“It’s a really neat program to be able to offer somebody, ‘Hey, here’s a container of goods and you’ll never be out of balance because we will always be able to fill in out of our warehouse.’ I think that in the next couple of years dealers will be looking for that hybrid-type solution for product mix where they can do both so they are not stuck with odds and ends at the end of the season.” 

What percent of your business do custom orders represent? 

Stewart: “My best guess is that custom orders represent 50 percent of our business. Of that 50 percent, I believe one-fifth is from designers, or 10 to 15 percent.

“It’s difficult to know which of the channels I should focus on first to get the most bang for my buck. Is it going after the designer, or is it going after the commercial business, or is it concentrating on our specialty retailer business or furniture stores? What we seem to be doing is furniture stores and specialty shops by showing in Vegas and Chicago, and it seems to be working well for us.

“While I’m thinking about it, one thing that bothers me is that many retailers are not taking advantage of what Google has to offer. They are trying to promote their mapping technology, so any business can register with Google and then they will show up in what’s called a local Google search for patio furniture. It blows me away that many stores have not gone on Google and registered themselves, because that is exactly where the consumer is looking to find out who sells patio furniture near them.” 

At this point, how many specialty dealers do you have? 

Stewart: “We probably have 150 to 200 doors. Next year it will be 200 to 250 and the following year it will be 250 to 300 so we’re moving right along. The key is to find the right dealers and not just have dealers.” 

You must be selling interior furniture stores, like everyone else in the category. How well are you doing? 

Stewart: “Some stores understand the opportunity and really take the ball and run with it; they are doing great. Others are trying to figure out the category. I imagine they will come around. Yet some have tried the category and it just doesn’t work for them, and they move along.” 

What advice would you give your specialty dealers that might allow them to compete against catalogs and websites?

Stewart: “I would tell them to be great at product knowledge, service and selection. I don’t think there is a customer out there who wouldn’t rather buy from a local store instead of placing an order through a catalog company or website, but when a customer wants a look, product or price point that the local retailer doesn’t have access to, that is when the customer will turn to other resources.” 

How many new collections are you introducing this year?

Stewart: “Three; we are very conservative with our introductions. We design them carefully so as not to cannibalize any of our sales while trying to appeal to a customer that we currently don’t appeal to.” 

Which one do you think will be the winner?

Stewart: “I hope the La Costa will be our winner. It’s a traditional frame done in a soft French grey wicker. The Provence collection is doing pretty well. It’s a nice little wrought-iron group with a true basket weave back. It’s nicely done. It’s well scaled.” 

What’s your outlook on the industry? 

Stewart: “I think we are in for some really fantastic years ahead of us. That’s for many reasons, not the least being that the architecture of the home is changing. Homebuilders are now starting to focus on creating and highlighting the outdoor living room or outdoor Great Room spaces. That should serve the entire industry well for many years to come, and I feel fortunate to be a part of it.” 

Ed. Note: Two articles in this issue relate directly to what Wes Stewart has just said about homebuilders. The first is “Builders of Dreams”, and the second is “The Specialists Deliver”.

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Brighton chair.

For years now, NorthCape has been a fast-growing star and a darling of the retail network. This year they have taken steps to double the business in three or four years by consolidating operations and increasing efficiency.

Hearth & Home: At this point, how do your U.S. sales compare with last year?

Tom Murray: “We’ll be up this year between eight and 10 percent total. The best surprise has been that Q2 was very good.” 

Which regions of the country this year were the strongest and which were the weakest for you?

Murray: “Early indications and early sales were most surprising, in a good way, in the Northeast and Mid-Atlantic. The Southwest was stronger for us, primarily outside of California, and I would say the drier sections of the Midwest, which are hard to find.” 

Right now you’ve got a showroom in Chicago. Do you have one in Las Vegas yet?  

Murray: “Yes. August was our first show in Las Vegas. We opted to make Chicago and Vegas our big base of operations for showrooms. That’s where we will focus.”

How many full time employees do you have right now? 

Murray: “Right now we’re going through an interesting change, which we’ll talk about in a minute. If you include all our locations in peak season, it’s probably upward of 200, but we have a longer term plan that we just implemented in Chicago. We brought in a 3PL (third-party logistics) firm. It’s a different project for them, but we needed help with operations. 

“They came in and hired most of the operational people in our Illinois facility and flipped them over to their payroll; so now I get an invoice. They handle Human Resources. We are restructuring how we do business operationally. They are coming in and pointing out management improvements needed. 

“In some cases it’s just reorganizing people’s jobs and how they do it – policy and procedures. They are here to organize; they are here to improve efficiency, and they are here to increase capacity. It’s a four-stage process. They started with us in December, and when they are done building the model in Illinois, that model will be implemented in each of our facilities across the country. These are math and numbers guys. 

“Basically, the new facility in Illinois became the model. It’s a 140,000 sq. ft. facility. They then looked at the scale of New Jersey, as well as the opportunity in California, and said, ‘Those are the three spots to concentrate on; you can’t make the math work in the other locations.’ 

“So we consolidated Canada and Florida into Illinois this summer. We shifted some of that inventory around just trying to take early steps on doubling our business. We have gone from five facilities to three and we’re building bigger, better warehouses, which is the plan.” 

Your facility in Canada seemed like a winning move.

Murray: “Canada was definitely a marketing play more than an operational play. The challenge is I can’t beat Mother Nature; it truly is the shortest season of the regions we’re in. Trying to pay all your bills in four months is very difficult. With the operation in Canada we were invoicing everything in Canadian dollars and the currency change made it nearly impossible to operate. When it slid from par to 90, we could make that work. It’s now at 77 and the dealer base in Canada was not accepting of the rate increase we needed to make that work. So we had to make a tough decision. 

“We have shifted it back to a U.S. dollar-based transaction, which is much safer on our front and it seems like the U.S. dollar is going to be on a bit of a run here for a while, so that’s a better play for us.” 

How many customers do you have in Canada? 

Murray: “We have 54 active bill-to customers; that is not locations. We would like to have 75.”

Looking at your site, we noticed you have added some new materials.  

Murray: “Yes. The categories we’re in now are woven, obviously, and that’s the core. We’ve been in aluminum for a while, and we’re expanding that category. We’re into various woods – teak, reclaimed teak, some accessory shipwood products, and other stone materials, magnesium oxide materials. On other wood products, and frankly some of the other materials, we do have a strategic alliance with ScanCom.

“They have a significant presence for manufacturing in Vietnam and Indonesia. They had a less significant presence with distribution infrastructure in the United States, so we teamed up with them a year ago and that has gone well.  

“We looked at ScanCom as a company that had already taken Western Europe engineering, merged it with Asian labor, put together a very sophisticated operation in Vietnam, has roots in Vietnam and Indonesia for manufacturing and labor. It’s an opportunity for us to leverage our infrastructure and customer base. Dealers win. We win. Manufacturing in Vietnam and Indonesia win. It seems like a home run. We’re really excited about it.”

About a year ago you were talking about the importance of early-buy. That’s what makes everything go ’round, you said. What percent of your business was early-buys for 2015? 

Murray: “If you mean the early-buy orders that we get that have a lot of lead time, and we’re getting it by October 1 for the following season, that constitutes probably 50 percent of our volume. Without it we would be in trouble.” 

What advice would you give specialty dealers to help them compete with the incredible amount of competition in the category today? 

Murray: “We have a simple formula for our products, and that is style, comfort, value. We don’t make or sell a single product, even at a lower price point, if it doesn’t meet those criteria; we don’t even put it out there. Dealers should do the same, especially with the better volume products. Even if you think you’re bringing somebody in and fooling them with a cheap piece of junk, you’re really not. It’s not going to work for long.

“The one thing I’m always astonished by with stores, even when I watch the floor salespeople, is they don’t get people to sit in the furniture early on. 

“The best thing to do if your furniture is comfortable is to get them in it. The one thing that a catalog and an Internet site can’t do – and I don’t know how they will ever figure it out – is to get people to sit in the furniture.”

And if you’re a car salesman, get them in the car.

Murray: “Exactly. And if you don’t set it up so that people are going to come sit in it, I wouldn’t even show it. I feel the same way about our showroom. We try to jam so much stuff in there and I tell Kim when she sets it up, ‘If people can’t sit on it I don’t want it in here because it won’t work.’ That message will get back to our dealers.

“I spend a lot of time in the stores with my sales guys, selling on the road, and I find that every sales guy is programmed to get more slots on a floor because they think that equals more commissions, and every dealer thinks that more slots equals more sales and more profits. My argument is that, given an opportunity for 10 slots, I would rather go to a dealer and say, ‘Let’s get you the right five or six and I’ll bet you we’ll all do better.’ 

“Sales guys freak out when I do that (laughs), because they think we’re giving slots to the competition. Well, we’re not giving them anything if we have the best slots on the floor. Just jamming more stuff on a floor is not inviting. If you don’t have a great presentation and you’re not forcing people as much as possible to sit in the stuff, I don’t know why you bother being in the business.”

Interior furniture stores have become a very important category for you, correct? 

Murray: “Yep. It’s 30 percent of our revenue. I’m sensing there is more opportunity. That’s one of the reasons we’re trying Vegas, because obviously you get that traffic. I think there are some (indoor) guys that are just going to push outdoor out completely. Some of that has started already. But there are a number who haven’t even tried it yet, or they are in it and they are not necessarily in the right product, and those are the ones that we are going to go after.” 

What percent of your business is private label? 

Murray: “Most of our major guys in multi-locations who have a good brand will try to label our products. So at least 50 percent of the product that is sold of ours is private label, and volume-wise it is probably higher.”

How many new collections are you introducing this year and which one will be the winner? 

Murray: “Eleven. There is a high-back traditional set that we call Richmond. I would say, out of everything, that was the Belle of the Ball. In second place was the Bella Nova, a smaller-scale contemporary group that really is an inspiration for smaller spaces, which is an area the industry is missing.

“Right now the Baby Boomers are retiring and downsizing; they want to spend money on nice furniture but don’t have a lot of space. There are townhouses and residential condos throughout the country. Also, the younger generations, the Millennials in particular, are getting into townhouses. There’s a great opportunity there, but it has to be done right. Retailers have to pick the right product and present it properly in vignettes. Fire pits present another small space opportunity for four chairs.

“Another opportunity retailers have is with water-resistant cushions. We use the Sunbrella Rain program and are now in our third year with it. It’s a very good opportunity for specialty retailers if they have an outdoor sectional going into a wet area, say, in the Midwest or Pacific Northwest.”

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The Largo chair.

This year is basically flat for Lloyd Flanders, but that just means it’s even with the company’s best year in the past five or six years.  

Hearth & Home: At this point in the year, how do your sales compare with the prior year?

Dudley Flanders: “I would say we’re flat. We had some territories that were better than others, but this was very much a weather-affected season. Fortunately, it didn’t rain everywhere at the same time.” 

But are you pleased with the year? Are you happy with consumers coming out at least when the sun was shining?

Flanders: “Yes, I would say so. We saw some really nice tickets being written, so when dealers were promoting, the people were coming out and buying.”

How many full-time employees do you have, Dudley?

Flanders: “About 120.”

Does that vary a lot during the course of the year or is it pretty steady?

Flanders: “It’s pretty steady.” 

For 2015, how did your early-buy shake out? What kind of a percentage did you get? 

Flanders: “Once again, I think our early-buy numbers were more or less even with the year before, and probably about 25 percent.”

Your goal was at least 30?

Flanders: “Yes. We go to dealers and show them how much they did with us on early-buy, how much they did with us on special orders, how much they did with us on promotions and ask them to help us by increasing their early-buy up to at least 30 percent. I think most of them can sell at least 30 percent from stock and, since we’re carrying the financing until next June, there’s no reason not to go ahead and buy it in the fall. They get a discount and don’t have to pay for it for a long time.”

Which regions of the country were the strongest or the weakest for you?

Flanders: “The Mid-Atlantic was pretty strong for us this year. New England came in strong toward the end; when the snow finally melted people ran out and bought stuff.” 

What about areas of the country such as California? Is that coming back for you?

Flanders: “California is still growing for us. That’s a very ripe market for our container program because the West Coast people are used to bringing in containers and from us, they don’t have to pay the freight from our warehouse in the middle of the country to get back out to California. That program has been very successful for us in California.”

But isn’t California still a long way from what it was prior to the downturn? 

Flanders: “Well, California has never been particularly strong for us, and a lot of that is geography. It’s pretty hard to ship from where we are to California reasonably. Florida has always been our biggest market because it is somewhat less expensive to ship there. But we’re probably doing about the same in California now as we were before, and I can’t say that for all of the territories.” 

What about your designer business? I know a lot of designers went underground during the downturn; they either put a key in the door or tried doing something else. Is that end of your business coming back? 

Flanders: “Yes, it is coming back. It’s not what it once was, but a lot of times the tickets we see from the designers are $15,000 to $20,000 at the cost from us. So we still solicit that business very heavily.”

Store closures by specialty dealers. I hope you didn’t see many, if any of those this year.

Flanders: “In July we found out about two, which was disappointing. Apparently the real estate was worth a whole lot more than the business. I think the comeback in commercial real estate is going to be a real challenge for some specialty retailers. It’s hard to ignore that offer.” 

Let’s go north. Any change in your Canadian business this year?  

Flanders: “I don’t think we saw any significant up-kick in Canada this year. Our business in Canada got hit really hard a few years ago and we have yet to make it come back.”

You’ve always been in interior furniture stores, but, like everyone else, I suspect you’ve added quite a few over the past few years. How many have you added recently, and how well are they doing with your product?

Flanders: “We’ve probably added 15 or 20. When we open an upscale interior furniture store whose floor salespeople are used to selling up instead of selling down, and they are used to selling special orders and fabric upgrades and that sort of thing, then we’re successful. 

“We’re not as successful with some of the, you could almost call them Big Box furniture stores, where the bulk of their business even on the interior side is probably containers. We try to get those people in our container program, but we try to make sure we select the upscale special order retailer for the traditional Lloyd Loom line.”

Do you do anything with Restoration Hardware? 

Flanders: “No, and it’s probably something we won’t do. Number one I think it would be all imported product, all container business. The profit margin would be low and that is not Lloyd Flanders’ formula for success. What makes us successful is being the domestic source where the frames are manufactured in the U.S. or come from offshore, but all the cushions are manufactured here and we customize the product and ship it out in three weeks. 

“That’s our strength. Being a rep between a factory in China and a retailer in the U.S. is not our strength unless they are also a Lloyd Flanders customer. That way we feel like our container program is helping our dealers bridge the gap between Lloyd Flanders’ product and lower prices. We expect our container program to take business, not from Lloyd Flanders, but from other people who are in the import business.”

What percent of your total business do containers represent? 

Flanders: “Twenty.”

Well, that’s a sizeable chunk.

Flanders: “It’s not insignificant. Unfortunately the container program seems to be trying to replace early-buy. It’s easier to get a retailer to give us an early container, because they know if they don’t give you an import order early they may not get it, and they certainly may not get it before Chinese New Year, so they will give you the container order and then waffle on giving you their own domestic stock order.” 

Everyone lost a lot of dealers through the recession and downturn. Are you back to where you were prior to 2008?

Flanders: “No. We’ve still got a ways to go to get back to where we were. Now part of that is the change in product. Lloyd Flanders got out of the aluminum business just before the recession, and that changed a lot of our volume numbers. But we still have a ways to go to get back to where we were. Frankly, I think the industry gave up a lot of that volume to the people like Restoration Hardware that came on strong during the weak period.”

I’m of the opinion that it’s Frontgate and Restoration Hardware and Williams Sonoma and other catalog guys plus Wayfair that have all gobbled volume. In my view there is so much more competition for the specialty patio retailer, or any specialty retailer, today than there was back in 2007. 

Flanders: “I agree. They gained ground when retail was weak.”

How well are your fire pits doing?

Flanders: “This will be about our third year with fire pits and they are doing okay. We’re not the cheapest fire pit on the market. We developed fire pits to coordinate with our product. We have loom fire pits and we have vinyl fire pits, and some of them are specific to certain product lines. This year we are introducing one of the new EcoSmart fire pits. I was blown away by how easy it is, how safe it is, and the fact that you can burn it indoors.”

What trends, Dudley, within the casual furniture business, have you noticed? It could be frame material, colors or design. It could be consumer interest or lack of it, or the enormous Millennial generation. 

Flanders: “Well, thank goodness color is coming back. We’ve always tried to show color because we think it makes the furniture in the showroom pop. But now they are actually buying some color, and I think that’s a good thing for both us and the industry. The fact that people are actually coordinating Outdoor Rooms instead of just buying a dining set, or buying a seating set, is making a huge difference in the overall ticket at a specialty retailer. That’s my trend story.”

How many new collections are you introducing this year?

Flanders: “We’re bringing out three new stocking collections, one in vinyl, one in loom and one that is upholstered. Our new loom collection is a John Caldwell design. It has been very well received and it’s called Generations. The vinyl collection is also a Caldwell collection and it’s called Largo. The upholstered collection is called South Beach and it’s a contemporary sectional.”

Do you have any advice for specialty retailers for competing with the fierce and sophisticated competition they are facing today?  

Flanders: “I think they need to be very careful about picking their sources; they have to support the manufacturer who is going to support them. They also need to be very careful about not selling down to the competition. They need to spend time and effort and money training their salespeople and selling the product that they offer at a margin that they can sustain.”

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Roma Swivel Gathering chair.

It seems but a short time ago that Joseph Cilio brought a pizza oven into his mix of products. Next came a grill. Then came cabinetry to create a true outdoor kitchen. That’s in addition to his extensive line of furniture, fire pits, pottery, statuary, etc.  

Hearth & Home: At this point, how do your sales compare to the prior year? What percent are you up, down or are you flat? 

Joseph Cilio: “We’re at a low double-digit increase in the last 12 months. I think the diversity of our business helps us nicely. We had a good selling season, though not what I anticipated, but then again I’m not complaining.” 

Which regions of the country were your strongest and were there any that were particularly weak?

Cilio: “The Midwest was a little quieter this season overall, mainly due to the weather. The Northeast was strong, but the West Coast is growing for us, and that was very nice. We’re also seeing some good growth in the Southeast as well. 

“For us, California is growing. Of course, when you have a small business position in one territory, there are more opportunities to grow. One step at a time, we’ve seen some progress there.

“The Mid-Atlantic was really strong for us. as well as New York. Connecticut was okay, and Massachusetts and north were okay. It wasn’t the best. Obviously the length and strength of the winter impacted outdoor living. A lot of people spent time replacing plants and shrubs due to the harsh, harsh, harsh winter, and that put a little slow-down into patio, which I would believe will be strong next year in that territory.”

What trends within the patio furniture business have you noticed recently? 

Cilio: “From our perspective, we continue to see the importance of bringing the correct value for our product line to our retailers. We’re not a super high-end company and we’re definitely not a low-end company. We have a good value product and a very good quality across the board. So we continue to be asked for more and more of those types of products that fall into those prices and those positions. 

“Style continues to lend itself a little more toward the transitional style. I see people moving away from traditional, though it’s still a very strong category. The lines are a little bit cleaner lines across the board, from what we see and, lastly, I really do see quite a bit of interest in the mixed materials that are in the market. Of course, they have been in the marketplace for years, but people continue to like the combination, whether it’s cast and woven or woven and wood or sling and extruded aluminum or whatever it may be.” 

Talk to me a bit about how well you’re doing with the Fornetto pizza oven and Fervor grill. 

Cilio: “Our Fornetto and Fervor business has been very, very good. It really was our first ‘half season’ with the Fervor grill. The product landed in March of 2015. We opened up close to 100 dealers throughout the country with the Fervor program, and we already had about 100 Fornetto dealers, which is a very nice business. We really have just begun to scratch the surface with Fervor. I would say that probably 55 percent of our stores have placed reorders on the Fervor grill. 

“As you know, selling a grill is a huge and challenging effort. We know that we’ve designed, developed and manufactured a tremendous grill at the right price point. What we’re working on now is getting brand recognition, getting people to know what Fervor is and then getting the dealers’ sales staffs to become familiar with a new name and a new brand. 

“We’ve really seen the dealers that are true grill people, retailers that really know the outdoor cooking business; they are the ones that do best with the Fervor and Fornetto. It’s very clear to us. People who are marginally in the business, or not committed to it, walk away from the displays, don’t help sell it and don’t know the product don’t do as well with it, obviously. That is probably true with anything. 

“But we had just a great year in what we call our soft-launch year; product wasn’t here in December. So now we’re inventoried very well. We came out with our first early-buy program on the gourmet side of our business on September 1. It’s like a locomotive. You move very slowly at the beginning and you begin to turn those giant wheels. That’s what we’re doing right now.”

Are you having success getting retailers who carry that product, the Fervor, to put it outside, fire it up and demonstrate it on a regular basis?

Cilio: “Yes, we offer a burn credit so we encourage them to get out there.  Our sales reps can go out and do demos or assist in doing demos. But we encourage dealers to do demos on their own, to cook on the Fervor as much as possible. We like to invest our time and money in training the sales staff and cooking for them if the retailer lets us. It’s a building process.” 

For years I’ve been flabbergasted by the low margins that barbecue manufacturers allow dealers. What’s your margin?

Cilio: “After a delivered price, after a landed price, we’re looking at 37 points for part of the country, 33 points for the West Coast, so that’s where we’re living right now. We’re looking at ways to even improve that. That can be improved on larger buys as well. So if they are buying three grills at a time, they can make some pretty nice gross margins, after landed pricing, after delivery.

“Our dealers can get 40 points. They just need to raise the prices a little bit based on our MAP price. So we give aggressive map pricing. For example, one of our customers on Long Island raised their price $100 per grill. He’s getting the margin. With our six burner at $1,899, we’re looking at raising the MAP to $2,199 because the product can sell at $2,199 based on the features and benefits and all of the characteristics of the grill. So if we can get our retailers $200 more, they are going to be making over 40 points, absolutely. 

“There is room within our retail pricing structure to give them a higher margin. Actually, when you go with our manufacturer’s suggested retail price it is 40 points plus.

“We just launched our outdoor kitchen sectional at Premarket. I was only showing the one piece there in Chicago. It’s really a beautiful piece. You can get 50 or 60 points out of that. It’s really a clean sale; it’s very easy to do that.”

Now if I ask about early-buys and how it went this past year, do you consider your container business early-buy as well?

Cilio: “You can buy a container of product from us at any time of the year. However, the majority of the container business is scheduled on getting here in the summertime, right? So yes, absolutely, early-buy is container business. We also do warehouse distribution of all our product lines, so we also have early-buys that tie into our warehouse program. 

“This year was a very, very strong early-buy for us and it’s still going on. Obviously not all the numbers are in right now, but it has been a very nice early-buy. I do find that dealers have some inventory right now. I don’t know if they just bought heavy or if they had a tougher season this year with the weather and whatever else.”

What percent of your business is early-buys?

Cilio: “About 40 to 45 percent of our business right about now.”

What percent of your business do custom orders represent?

Cilio: “We probably have about 10 percent of our business in custom orders on the furniture side of the business. That’s in-season customization. We do see that as a growing business.” 

I get conflicting reports from manufacturers concerning the health of the specialty patio network. Some believe that the weak retailers were weeded out during the downturn, and now the network is pretty healthy. Others see the vast majority of those companies struggling to stay even year after year. What do you see?

Cilio: “I think some of them are very healthy and some of them are not. It’s really that simple. I think the bigger, better ones that are managing their business correctly are doing a good job, but I think there is an overwhelmingly significant number of specialty casual retailers – and you can take it to independent garden centers as well as independent hearth and home stores – that are challenged and are working really, really hard to make sure their business is doing as well as it can, but they are staying flat.” 

The competition for these patio specialty shops is so fierce and so very sophisticated, and they’re upping their game every year. It’s really dramatically different from what it was prior to the recession. 

Cilio: “Oh yeah. The competition is fierce. It really is a competitive marketplace. You really have to be comprehensive. You need to have a very good online presence. You need to have a tremendous market. You need a multichannel marketing approach, from online services to great local retail marketing and TV and all that. 

“If you can do retail well and know how to make money and give tremendous service and great product, you can be successful, very successful in the outdoor furniture business. That’s why a lot of people are getting into it. It’s a very important category right now. People want to live outdoors. 

 “You have to constantly remind the consumer who you are and where you are and how to buy your product. If you can give them multiple ways to buy it from you, you can win in the marketplace. But you’ve got to be sharp. In today’s day and age you cannot be in the game halfway. You’re either all in or you’re going to be out.” 

Talk to me about how many new collections you have and which one do you think will be the grand winner?

Cilio: “We introduced six new woven collections and we have three new cast collections. The big winners I expect to be our Amalfi and Sorrento. That’s a little more transitional style, deep seating and sectional. Our wicker line will be quite nice. We’ve also introduced a new category, a wood and woven combination for outdoors in a vintage look; it has been super well received and will be a big winner for us.”

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Geneva collection.

Mark Bottemiller grew up in the patio industry, and it’s very obvious that he loves it. In charge of sales for Ebel, he exudes enthusiasm for the task, and has been instrumental in helping Ebel grow at a very fast pace.   

Hearth & Home: How do your U.S. sales, year-to-date, compare with those in 2014?   

Mark Bottemiller: “It’s not as good a percentage as last year, but if I kept growing by 40 percent I would be dead. So I’m OK with that. Looking at our sesason-to-date sales, we’re up 18 percent.”  

Which regions of the country were your strongest, and which weakest?  

Bottemiller: “California is still not where we need it to be. I’m not taking a shot at our rep out there because it’s not his fault. He’s busting his butt. But I would say that region is still soft for us.” 

Am I correct that it was one of your best regions for a long time?

Bottemiller: “It was one of the best, certainly. Florida has always been extremely strong for us as it is our backyard. That makes a huge difference.” 

How did you do up here in my backyard, the Northeast?

Bottemiller: “We’re doing well. I think we’re flat compared to last year in the Northeast, which I’ll take based on the percentages we had last year.  But that would probably be the place I would point to for the need to have another good year this year. I don’t want to say it was soft, but it isn’t cranking the way some other areas are cranking.” 

What trends within the casual furniture business have you noticed, if any?  

Bottemiller: “We continue to see a big expansion in the mixed media. People are not afraid of putting aluminum with wicker, or with wood. They are still less interested in matching than they are coordinating, and I think that will continue to be a trend across materials.

“When we add the GRC (glass-fibre reinforced concrete) into that mix, we are taking it a step further to get the look of aged barn wood without having to have the issues of aged barn wood.”

Where does Ebel have showrooms? Chicago, obviously, but where else?

Bottemiller: “Chicago and Las Vegas. We were part of the inaugural casual show in Las Vegas. We are not in High Point.”

I’ll bet you’re excited about Las Vegas.

Bottemiller: “(Laughs) Seattle does very well for us. Phoenix does very well for us. Other than that, when you’re west of the Rockies there ain’t much there for us. So I’m looking forward to tapping into that marketplace. I’m not looking forward to 112 degrees in Las Vegas in August.”  

Are early-buys going up for you? Is a greater percentage of product being bought early? 

Bottemiller: “I would put containers in with early-buys because it’s their stocking order. So, yes, we saw a remarkable increase in our container business this year, up 25 percent.” 

To what would you attribute that increase? Is it that retailers are waking up and recognizing that they must keep product in the warehouse or they’re leaving money on the table?   

Bottemiller: “I certainly think that’s part of it. Also, by making container offerings as attractive as we can from a freight/dating/whatever perspective, I think that certainly has had an impact. It’s no big secret that we (Ebel) have stubbed our toes the last couple of years – unfortunately, this year as well – with deliveries, so there are some retailers who are hedging their bets and bringing product in early so they can be sure they’ve got something to sell.” 

What percent of your business do early-buys represent? 

Bottemiller: “About 30 percent. We’re definitely back up. For a while we were in the high teen’s, low 20s, and now we’re definitely moving the needle. That said, we are still known primarily as a special order company, and we really push that part of our business.”  

What percent of your business do special orders represent?

Bottemiller: “I would say between 50 and 60 percent.”

How many dealers do you have in the U.S., and then in Canada? 

Bottemiller: “Let’s see, our largest territory is the central portion of the U.S. – Texas, Colorado, Utah, New Mexico and Arizona. Then Florida, and then Canada. In the U.S. we have a little over 500 dealers. We’ve only got about 20-25 dealers in Canada. Some of those are multiple store locations. Sherator Nursery has five or six stores, but I’m counting them as one.” 

What percent of your business is in Canada? 

Bottemiller: “Ten.”

Like everyone else, I’m sure you’ve been opening some interior furniture stores. How is that going for you? 

Bottemiller: “When I look at the new dealers we’ve opened in the last three years, the largest of them, with one exception, are indoor furniture stores. The guys that are doing it well are not truncating the season. We see the sets come out on the floor in February/March depending on the location, and coming off the floor at the end of August, middle of September, first of October.”  

What about designer business? How is that doing?

Bottemiller: “Ebel has always been known as a design-oriented brand. We do a fair amount of designer business and we’re seeing an increase in it. But I haven’t seen as much as I would like. It’s very specific to territories and reps. Some of the guys work with the designers very, very well, and some don’t. That business is still primarily driven by the sales rep.” 

I suspect you still are not in any catalog, correct? 

Bottemiller: “Nope. We’re not in catalogs, not in exclusive e-tailers. We are 100 percent brick and mortar, although if that brick and mortar store has a website, they can actively sell on their website.”  

Are you still seeing a lot of retailers who are not really growing their business, but are rather stagnant?   

Bottemiller: “More than I would like to, that’s for sure. I think it’s less prevalent now than it was three or four years ago, but I definitely think we still have a way to go in terms of changing the way that we as an industry market to the end consumer. 

“Unfortunately, I think a lot of people still think the place to buy patio furniture is Home Depot or Lowe’s, and that remains an uphill battle for us.”

It seems irrefutable that specialty patio retailers are feeling the impact of greater, and more sophisticated, competition, e.g., Frontgate, Restoration Hardware and Wayfair. They, and many others, are taking the business from specialty retailers.

Bottemiller: “Oh, absolutely. There’s no question, but I really believe the majority of the business being taken is from the Big Boxes. Many people really want to buy nice stuff, but they don’t know where to buy it. The only place they know where to get it is Home Depot.

“That said, I really believe they are also increasing the pie. I think there is opportunity there. When you look at the rate of change right now, it’s remarkable. I also think we are pretty resilient. I see the value of a trained, educated, helpful sales staff delivering the product assembled and ready to use, with the service after the sale should something, heaven forbid, go wrong, with replacement parts, with follow up, with being able to add on to your collection. All of the stuff that we bring to the table is going to continue to be important for a segment of the marketplace.” 

Were the specialty dealers to disappear, you manufacturers would feel it and you would be crying in your beer. 

Bottemiller: “No. We would just be gone. Because as soon as you get into the exclusive world of the Wayfair’s and Restoration Hardware’s, it becomes a prize fight. A lot of these people are relying on the specialty retailer to be a showroom. Obviously Restoration Hardware sees the importance of showrooms. They wouldn’t be spending hundreds of millions of dollars building stores if they didn’t.  

“Nobody clicks on Wayfair and says, Oh, here’s a really nice OW Lee chair, I think I’ll buy that, if they’ve never seen or sat in an OW Lee chair.” 

Part of the salvation of the industry is that manufacturers are constantly upping their game. At the end of Market, usually someone would ask what I saw that was particularly exciting or creative. My answer would be, Not much. Now everybody’s got something of interest. 

Bottemiller: “The drawback is that there is so much new and exciting that a lot of people aren’t seeing it as new and exciting anymore. We are getting desensitized to the rate of change. If we didn’t go to market with five new collections, we would be dead in the water.” 

How many new collections are you introducing this year? 

Bottemiller: “Two full new collections plus a whole bunch of tables.” 

Which one of your new collections will be the winner?

Bottemiller: “Oh, boy. I think both Geneva and Belfort are going to do really well for us. Initial knee jerk gut reaction is that the winner will be Geneva, but I’ll tell you that new smoke color on the Belfort collection has been so well received.”

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Companies Mentioned

Alfresco Home   Ebel Klaussner Outdoor   Lloyd Flanders Northcape International   Sunset West