It was a good year, not a great year, for patio furniture manufacturers, but no one is complaining. It started like Michael Phelps at the buzzer, then slowed substantially like most of the pack in the marathon – and no one knows why.

We could call it a normal year.

Seldom (ever?) do the stars (economy, weather, stock market, politics, suppliers, materials, delivery) align to create a perfect sales year.

But Gary McCray and Theresa Buelin were able to take their dealer count from 200 to 400.

Tom Murray now has a much smoother and more efficient infrastructure and operations system.

Bill Herren tells us that more retailers are showing bright colors on their floors, and Herren knows color.

Bob Gaylord is keeping his eye on the dot.com business. He knows it’s huge, but not how huge – and that bothers him.

Godfrey, Winnie and Lawrence tell us that Ratana has a perfect mix of volume – 50 percent in U.S. sales, and 50 percent in Canada.

Dudley Flanders introduced three new collections in July and, for the first time, retailers found all three to be winners (he’s happy).

Wes Stewart made gains this year, as he continues to break out from Southern California, into Arizona, Texas and Florida.

Charles Hessler didn’t introduce collections this year, but a number of his new products are cutting edge and very appealing.

Joseph Cilio introduced eight (8) new collections and, he tells us, five are winners (take that, Dudley!).

And Terri Lee Rogers continues to push her dealers to begin selling online. Perhaps every patio retailer should listen to her.

Quick Links

Joseph Cilio	Bill Herren	Bob Gaylord
Godfrey Leung	Dudley Flanders	Wes Stewart
Tom Murray	Gary McCray	Charles Hessler
Terri Lee Rogers

Cambridge Dining Arm Chair.

Alfresco Home not only provides beautiful garden accessories for its customers in various channels, but also the appliances and cabinets for outdoor kitchens, and furniture for outdoor living.

Hearth & Home: How do your sales at this point compare to last year’s?

Joseph Cilio: “Our sales are up very nicely. They’re up around 12 percent actually.”

Which regions of the U.S. were your strongest and which the weakest?

Cilio: “I think our strongest are the Northeast, the Midwest, and California and the West Coast. We could do better in Texas. We could do better in Florida and Georgia. We do a nice job in Carolina. Our East Coast is strong. I would say Florida is our biggest potential and the Midwest and California are strong. Washington and Oregon are nice. Different parts of the business do a little better in different places, but we definitely have some pockets where we can grow, absolutely.”

Have you ventured into Canada at all?

Cilio: “Yes, in eastern Canada. We don’t have a ton of accounts there. We don’t have an active sales force up there, but we have some wonderful customers that we manage internally, and they do a very nice job. Our gourmet business is very strong in eastern Canada. We sell a lot of Fervors (grill) and Fornettos (pizza oven) up in Canada. Our garden business is nice. They like that Mediterranean feel that we bring to it, and we have seen growth with our casual furniture.”

Last year was your first year with a real outdoor kitchen where you had the cabinets, countertops, etc. How well did you do placing that?

Cilio: “We did okay. We had a good number of placements, but not as many placements as we had projected. But we saw a huge increase in the Fornetto outdoor built-in. It allowed us to show our outdoor kitchen with the Fornetto in it and people finally could see it at the different trade shows or in our magazines or in our catalog that, yes, the Fornetto has a built-in option. That was the real benefit of the introduction of the sectional outdoor kitchen.”

I suspect the Fervor and Fornetto both continued their strong growth. What was it, double-digits again?

Cilio: “Certainly the Fornetto had that growth. The Fervor grill had a very good first year, and I will just say this – the grill category is extremely competitive and the dealers who learned how the Fervor is different from other brands, and actually made an effort to sell them, did really well.”

What are the top two or three sales points of why the Fervor is different from other grills?

Cilio: “Number one is that it’s designed to cook food properly while draining away the fats and oils from the food itself, creating fewer flare-ups and therefore not creating a dried-out piece of meat or fish cooked on a cast-iron grate. It has very high Btus, and performs exceptionally well.”

What percent of your business at this point is outdoor cooking versus patio furnishings?

Cilio: “Our casual furniture business is about 65 percent of our total sales. The garden piece of our business is about 25 percent, and the gourmet business is only 10 percent of our business at this stage.”

Explain the garden portion, if you will.

Cilio: “We have our garden accents division, which is our pottery, our garden benches. It’s more of our accessories, ceramic fountains and statuary, which we don’t show in Chicago.”

Have you been successful getting your dealers to demonstrate the grill and pizza oven on a regular basis? Last year you were trying to move them in that direction.

Cilio: “Yes. We offer a burn credit for those who are using our grills and ovens. There are customers who demonstrate and there are customers who don’t, and that ties into the sales success of the product, much like our furniture division. When people are trying and sitting in our product we’re selling more of it, and when they are trying and using our grills and ovens and demonstrating for the consumer what the features and benefits are, it really is a deal closer. It solidifies a lot of sales.”

What percent of your business were early-buys for 2016? I’m asking you to look back a little bit.

Cilio: “A total number is right around 55 percent of our business was done at the early end of the season, somewhere between June and November.”

Last year you told us that about 20 percent of your patio dealers were working very hard to grow their business, but their sales remained flat. Is that still the case today?

Cilio: “I feel like it was a pretty darn good year for our dealers on the patio side. I do feel like the greater percentage of them had a more successful season this year. Absolutely.”

What advice would you give the retailers who are struggling? Is there a commonality there, things they may be doing incorrectly or things they are not doing at all that they should be doing?

Cilio: “Each retailer has their own set of challenges, their own set of competitive players they are working hard to beat. Number one is to make sure they have the right product for their retail environment. That means style, selection and, maybe most of all, price. Every one of those retailers needs to pull the service piece of the puzzle through after that.

“Being present and willing to do almost anything for your customer is a very powerful tool that a lot of other retailers in different market segments – that do sell casual – can’t offer. They can’t give their customers the same service a brick and mortar specialty retailer can. If you are giving them attention and care and love, as well as a nice selection of products priced correctly for their market, that should lead to success.

“But at times dealers forget the marketing piece of the puzzle – letting the people know that they have the product is one of the biggest things that a retailer can’t forget about. Are you doing some social media? Are you advertising locally and even pushing the boundaries of your territory? Are you reconnecting with your current customers with e-blasts monthly, or offers, or opportunities for them to walk back into your store? Are you marketing not only to their outdoor living needs, but also to a broader segment of home decor accents and other products that will keep bringing them back into your store instead of a one-and-done type of shopping opportunity?

“Give your customers more than one reason to keep coming back into your store, to become a part of their home. That’s a very strong model in my opinion.”

I wish more and more retailers would recognize that their opportunity goes beyond just selling furniture.

Cilio: “Yes. In reality it’s just a simple personal decision. If you have a really strong casual furniture business and you do your accent pillows and your accent pieces, you would probably have a rather full operation and maybe you just don’t want to or can’t expand into these other categories.”

What trends have you noticed that are impacting the industry?

Cilio: “Well, if you walk around The Mart in Chicago, it’s extruded aluminum, modern, more contemporary, not only in style. It’s in the curve of the extrusions or it’s in the color of the frames. It was clearer than ever that at least the manufacturers are pushing toward contemporary lines overall – not everywhere and not everyone.

“The fabric manufacturers continue to knock it out of the park with their colors and patterns and textures. They are a very wonderful part of our industry and they continue to bring great things that keep our products exciting, comfortable – and sometimes dry.

“The Millennials are getting older; the oldest is around 36 by now. They are starting to buy their first home and really outfit that home. It’s going to be great for business as they get older.

“The older folks may be slowing down, or retiring, or perhaps downsizing or moving into the city. City dwelling is becoming bigger and bigger. A lot of city living is going on and we see a great amount of our products in certain areas being that sized product. Call it loft living, or small backyard living, or whatever marketing name you want to give it. We have some nice products that fit that market and they have been well received.”

Have you noticed that the volume of cast products being shown is waning?

Cilio: “Yes, however, our cast business went up significantly last year. I don’t know if cast is going down in sales so much as woven or other materials are being mixed in. Cast is still pretty darn good for us.”

How many new furniture collections do you have this year?

Cilio: “This year we introduced eight new collections overall. It was a big introduction for us, and we had a really tremendous response to a solid five of them. One of them happened to be a cast collection, and the others were mixed materials of varying types, more toward a transitional, clean look.”

Which ones will be the winners?

Cilio: “The Marco Bay collection was really well received, as well as the La Lima. Then our Barcelona cast collection is going to be a strong introduction as well. So we were pleased.”

Is there anything I haven’t asked that you would like to get out?

Cilio: “Just that I’m proud to be part of this industry. I think we do a really nice job overall as an industry in terms of bringing North America and the world such gorgeous outdoor furniture and products.”

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Anniversary Rocker.

Bill Herren is one of a team of three managing the iconic 150-year-old Woodard brand; join them in celebrating that accomplishment at Market in September.

Hearth & Home: At this point how do your sales compare to those of the prior year?

Bill Herren: “Our year ended at the end of February and we were up. Right now, March, April and May were a little soft mostly because of the weather, but since the Preview Show it started picking up again.”

What percent of your business is aluminum vs. woven vs. iron?

Herren: “We probably have about 50 percent aluminum, 25 percent woven and 25 percent iron.”

We’ve heard some scuttlebutt around the Preview Show that there’s been a real decline in cast products, cast aluminum. Are you experiencing the same thing?

Herren: “No. In fact, this year we came out with two new cast collections, and for next year we’re working on two more.”

In which areas of the country were you the strongest, and then the weakest?

Herren: “Florida was our strongest market. We also do really well in the Midwest. Probably the West Coast is the weakest and it has to do with freight. It’s not in the major shipping lanes so it costs a bit more to get it all the way out to the West Coast.”

You’re doing all your aluminum in Owasso, correct?

Herren: “All the aluminum and all the iron and some older woven stuff. Not much in woven. The majority of our woven ships from Texas and, actually, the majority of it is made in the Philippines.”

You mentioned the West Coast as being kind of weak; I imagine that includes California.

Herren: “Yes, but it’s the least weakest of the West Coast. The Northwest is a little bit less. I went traveling with a California sales rep back in June, and spent a week up there going out to different stores and they do okay. It’s just that, if you look at California, the size and the population, and you look at Florida, and the size and the population, they should be doing the same amount. It’s the same kind of weather. California would do much more if we could figure out how to get it there for a lot less.”

How well do you do in your backyard, Texas?

Herren: “We do good here.”

Are you finding that there are certain areas where it’s so darn hot that the heat affects sales in a negative way? I’m thinking of places such as Phoenix.

Herren: “No. One of our largest customers is in Phoenix.”

How well do you do in Canada? I’m assuming you’re up there.

Herren: “Yes. We have a warehouse in the East and on the West Coast. The East does a little bit better just because it’s easier to ship there. The West does more of the direct container program as opposed to the special order stuff.”

How well did you do on early-buys for the 2016 season? Many manufacturers complain that it’s still not the volume of orders they were seeing prior to the downturn.

Herren:“I really don’t keep track of those numbers, but we will give the factory a forecast and have them start working on it. When the orders come in they are already prepared. We do that before we even introduce new product.”

That seems a smart thing to do. Through your experience you probably can come up with pretty good guesstimates of what you’re going to do.

Herren: “Yes, for the most part it’s pretty good. Obviously July is when we come out with new stuff, so after we’ve done all the final versions of the new products we will sit down and do a forecast in June, place the POs for the parts, then after the September show we will go back and look at what we forecasted and usually we’re pretty good. Last year we had a new group that we thought would sell one way and it sold a different way. We blew the forecast by 500 percent. That was a bit of a nightmare, but a good nightmare.”

Are custom orders a major part of your business?

Herren: “Huge. It’s got to be about 75 percent.”

I would expect that designers are a hefty part of your total business.

Herren: “Yes, they are, especially with our High Point showroom.”

What percent of your total business does hospitality represent?

Herren: “It’s working its way up. I think right now it’s at about 15 percent. Our hospitality guys are doing really well right now.”

I’m interested in your opinion of Restoration Hardware. I’ve always thought that what they were doing was very good for the patio industry, and I thought they were doing a tremendous job showing interior furniture stores how to display and how to sell furniture. But in the last year their market capitalization has plummeted 63 percent. Why do you think such a shining star has been weakened to that extent? The floor just fell out.

Herren: “I never got it. I never understood the appeal of Restoration Hardware. I thought everything looked exactly the same. I thought it was very boring. It wasn’t even that it was safe. In my opinion it was just ugly. I still don’t get it. People talk about it all the time in the outdoor world because there’s a huge one here in Dallas. I go there, walk around and still don’t get it. It’s too expensive. I don’t get what the appeal is.

“Have you ever ordered their catalogs?”

I haven’t ordered, but for the last two years I received their whole stack in one package.

Herren: “It must have weighed 50 pounds.”

No. I weighed it and it was actually only 17 pounds (laughing).

Talk to me a bit about the specialty patio network and your understanding of it right now. Is it gaining strength? It was hurt dramatically through the downturn. Are dealers getting financially stronger? Are any new ones entering the market?

Herren: “Yes, there are some that are getting financially stronger. There were a lot that were hurt, especially the smaller Mom and Pop ones. I know that there are some new ones popping up because we’ve had some new customers that we didn’t have before. I think the ones that have one store are still having a bit of a hard time. People who have more than one store seem to be doing a bit better.

“By the way, if I could do anything I would open a patio store.”

Well, do you think you will one of these days?

Herren: “Probably not, unless somebody wants to back me (laughs).”

Last year many manufacturers mentioned that color was finally returning to the casual industry. Do you agree that color came back last year? Did you find that most dealers did show colorful fabrics? Did that make a difference in sales?

Herren: “There has been an upswing in color that dealers are putting on their floors. You can never get away from canvas and beige. But this past year we did have some people who did a wilder look on their floor and did quite well with it. There were a few who were a little bit out of their comfort zone, picking a few things and putting them on their floor, and actually special ordering it for customers the same way. So I do see that people are doing a little bit more color.”

What trends have you noticed recently that are affecting the patio industry?

Herren: “There are two and they are contradictory to each other. One is that people are looking for more intimately-styled furniture, a smaller scale for two people instead of a whole big family that has a more urban feel to it, for balconies and smaller areas. Yet they still want great big, comfortable, cushioned furniture. They are either going to one or the other; there is no in-between.”

What about contemporary styling? A number of manufacturers came out with it for the first time at the Preview Show.

Herren: “We have something that is more contemporary. The more contemporary it is, the less comfortable it is. Part of the whole reason that people buy Woodard is how comfortable it is. So we have to translate some of that comfort into the more contemporary products.”

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

Herren: “We’re still waiting on that. We already did all the introductions. We did two complete cast-aluminum groups. We did some additions to some other extruded-aluminum groups, and then we introduced two new woven groups. Right now it’s like 50/50 between the woven and the two cast groups. We all have a different idea of which one is going to do the best, but I think it’s the cast group called Spartan. It’s either that, or it’s going to be Harper in the woven – it’s so cool.”

This is Woodard’s 150th anniversary. That is really impressive. How do you plan on celebrating it at the September market? Let’s tell retailers what to expect.

Herren: “We’re having a big cocktail party on September 21 at The Mart. We’re making an anniversary rocker and what we found is that, when it comes to outdoor vintage furniture, Woodard is the number one most collected brand. We made two of the anniversaries, of which there will be only 150. We’re doing a raffle for Rocker #1 and all the proceeds go to Habitat for Humanity.”

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Lake House chair.

From his vantage point, Bob Gaylord can see most channels selling patio furniture. It’s the volume of patio furniture going through the dot.coms that has him wondering.

Hearth & Home: How do your sales this year compare to last year’s sales?

Bob Gaylord: “Our sales this year are up about five percent. There’s nothing overly thrilling going on, except that we hear a lot of good things about the high end. I don’t know if the specialty manufacturers are saying they had a great year, but it’s people with money who are spending money. I heard a story yesterday about somebody online selling 400 to 500 sets over $5,000 in a five-day period. That was online, by the way.

“I ignored the online business too long, at least as far as us getting directly involved in warehousing. We see many companies that have an online presence, from the home centers to Macy’s, and obviously quite a few of the indoor guys are there, and they are all stocking it.

“I’m seeing a lot of high-end domestic goods are there. They may not be branded, but you know it’s coming out of the top 10 specialty manufacturers and I can’t blame them. There doesn’t seem to be any end to what people will spend. I guess if that weren’t true, Frontgate wouldn’t exist.”

There is no such thing as an inexpensive, quality Outdoor Room anymore.

Gaylord: “Oh, no! Twenty years ago only a small, small fraction of people even had such a thing on their wish list. With all due respect, it trickles down. That’s the way it happens. Somebody’s $500,000 Outdoor Room may be another person’s $50,000 or $20,000 Outdoor Room. They are all huge factors in making our industry healthy.”

Before we get too far down the road, can you once again break down how well the mass merchants did and the clubs and the DIY organizations? You’re the only one with a good grasp on that.

Gaylord: “Right. First of all, mass is weak, at least in their brick and mortar operations. The reason is more about the demographics of their customer. After having a hard time paying the bills, outdoor furniture is not the most important thing on their customers’ lists, and that hurts them.

“On the other side of the mass coin, their dot.com sales are doing quite well, thank you very much. That’s because they get totally away from their brick and mortar offerings; they will offer sets virtually at any price point. The bigger your name, you’re going to get more than your fair share of business because you’ve probably taken the steps to get yourself on the first page of the searches. That’s where that is.

“As far as the wholesale clubs go, they’ve had a very healthy year. They cleaned out very early, which is what they’re supposed to do. Wholesale clubs can’t have clearances; they don’t have the margins to work with. From day one, the wholesale club motto has been ‘Buy less than you need’ because you don’t want to head into the off-season with overstock. They’ve done a really good job the last couple of years of not having to go into markdowns, because markdowns kill wholesale clubs. For the last two years they’ve really been selling everything that they had and selling out quite early, virtually around Memorial Day. Remember that these guys are only in business for about four months of the year, and two of them are usually cold and rainy.

“The indoor furniture guys are still a work in progress. I say that because so many of them have gotten into the business in the last five years and they are still paying their dues. The indoor guys who have been in the business for a while are doing just great. Those guys out in the Midwest and the Rocky Mountain states like R. C. William and NFM, they’ve been set up for a long, long time and they are doing very well.

“Those who have just entered the business in the last five years sometimes show a bit of impatience. Obviously there are people who drop out. This thing that we started six or seven years ago is taking off for real here. Again I consider the fact Ashley made it huge, really huge. Because obviously their outdoor furniture is going to have a legitimate presence in their 500 locations, and they are also going to be wholesaling to dealers.

“With the specialty patio shops, I don’t see a tremendous amount of growth. Overall they are doing well because they are selling to the high end. For us, specialty is not the healthiest group out there. The ones who are the best at it, yeah, they’re growing and everything is fine.”

Are you continuing to add stores at the specialty level?

Gaylord: “Yes, we are. Every year we will add 25 new ones, and about 10 don’t buy for a year because of leftover inventory or something like that. For the smaller guys it’s tough to balance stock doing direct import; it’s a learning curve.

“One of the biggest steps we’re taking, of course, is our warehouse program. We virtually introduced it in the middle of spring. Our company will now allow any retailer in the country, whether it is indoor or specialty, to get in the business without buying containers. That’s a big step for us, and the reason we did it is that we were starting to warehouse for dot.com considerations, so we might as well start warehousing for brick and mortar stores as well.

“We use a 3PL (third-party logistics) company. We figured it was the best route to go, to let the experts do it. Right now we’re warehousing about 12 collections. We probably have 150 or so dealers right now, and if warehousing can allow us to double that, it could be very significant.

“Now the category that I left out is the dot.com business. It’s a category in itself and we’ve tracked it for many years. Mainly we’ve tracked it by Home Depot. They buy from us for brick and mortar and they have a separate buyer for dot.com business. That’s the biggest growth factor for us in terms of percentage.”

Roughly how many other patio manufacturers are in a HomeDepot.com or a Costco.com? Many most likely go in with different brand names for their products, correct?

Gaylord: “Yes, I would assume so. I would venture to say anywhere from a dozen to maybe 30.”

So one heck of a lot of patio furniture is moving through the dot.coms.

Gaylord: “Yes. Some of them are really ugly and there’s a lot of duplication. Some of these mass guys and home centers have way too many offerings, and it’s just very, very confusing.”

A few years back, you mentioned that part of the problem that year was the lack of housing starts and home sales. Right now we’re still around 50 percent of what we were at in 2007. That’s a glass half full, and I think the next two or three years could be absolutely outstanding as we start to make those numbers climb.

Gaylord: “Pretty much. New home sales and housing starts aren’t bad, but existing home sales are nowhere near where they need to be. In 2007 we had 7.5 million existing home sales, and now they talk about reaching 5.2 million.”

The point is there is a built-in upside that is going to come to fruition over the next two or three years, correct?

Gaylord: “No doubt about it. When somebody buys a home, sales of indoor products usually come within six to nine months. But our industry has always lagged by two or three years. So we’re still on hold and will be.”

Frankly there’s no reason why we should be sitting around for two or three years before outdoor sales kick in. Again, that speaks to our inability as an industry to get the word out regarding the value of outdoor living.

Gaylord: “Yes. But I will say this. Even in the mid ’90s, when somebody bought a home, outdoor furniture and outside space was not on their radar. It’s on their radar today.

“I don’t think it will be three years in this thriving market. I think it will be a lot quicker than that. Quite honestly, we have a rough time figuring out volume because these dot.com sales are huge and I don’t think anybody has a handle on it. As a company, we don’t have a handle on it nationwide by any stretch of the imagination.

“I have no idea how much business Amazon does (in patio furniture), and what statistics I do know I can’t really repeat. But I will tell you this - a very large customer of mine that I thought was doing about $40 million in dot.com sales at retail, well, they’re doing over $200 million. It’s a good customer of mine and I should have known that, but I didn’t.”

You’re absolutely right. There’s an awful lot more patio furniture being sold than we are aware of. And if you’re not aware of it, no one is aware of it. You’ve got a finger in every pie.

Gaylord: “Yes. Except for the fact that our participation in dot.coms has only been because some of our brick and mortar customers have the dot.com and they buy inventory for the dot.coms. Right now we’re doing about $36 million in dot.com business over about nine sites.”

It’s been about 15 years since you started the fire pit craze. Will that category continue to have legs and just keep growing?

Gaylord: “Oh, yeah. Everybody has got it now, and I can honestly see where it could become the number one category in outdoor furniture. Bigger than dining, bigger than deep seating in the same way that everybody has got a gas grill or a Weber or a Green Egg or whatever.”

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Bolano chair.

Ratana has achieved an enviable balance of sales – 50 percent in Canada, and 50 percent in the U.S. That equality served the company well this year, as it coped with a weak loonie and a robust dollar.

Hearth & Home: How were your sales this year, in both the U.S. and Canada?

Winnie Ng: “They were flat in the U.S., but in Canada we had a double-digit increase.”

Were your Canadian sales positively affected by the difference in the two currencies, where it was more expensive for Canadian dealers to buy through U.S. manufacturers?

(Ed. Note: At this writing, the Canadian dollar is valued at 0.77 US.)

Ng: “Yes, that definitely was one of the big factors. It was just easier for the Canadian customer to purchase through us.”

Which areas were your strongest, and where did you see the weakest sales?

Ng: “When we look at the sales as a whole, so far Canada is the strongest, and the weakest is probably in Florida.”

How well did you do in California?

Lawrence Wong: “Our California sales were a little bit lower than our expectations this year. California can be considered a snowbird state so, with the currency difference, Canadian consumers found it more expensive to purchase in California.”

What percent of your business is now in Canada versus the U.S.?

Godfrey Leung: “I would say that Canada and the U.S. are about 50/50. We’re happy about that because it gives us more room to plan and move. These days things change tremendously just with the exchange rate. That is the biggest difference. I think we are in a pretty good position.”

Let’s talk about early-buys. I think that’s an important aspect of your business. How well did you do this year with early-buys for product that would be sold in 2016?

Wong: “For the year that just passed, it was good. Our dealers were able to get through the product decently, and early-buy was better than for the 2015 season, and repeat orders were about the same.”

Custom orders have been an important aspect of your business. Does that remain true this year?

Leung: “Yes. Let me explain why people buy from us in Canada. First, our inventory control is good. If you were to ask our customers in the U.S. and Canada, they would tell you that whenever they place an order in season, whether it’s a custom order or they just need more stock for their store, we manage to ship it out within 10 days.

“A lot of our business has increased, and I think that is why people like to deal with Ratana. Also we take care of the relationship. We don’t sell to everybody. We pick and choose, meaning we build a good relationship with our customers, we work with them, we protect them. So people like to deal with us, and custom orders play a big role in our business.”

Well said. The next question concerns your designer business, which is also an area that you work at very hard. What kind of an increase did you see in your designer business?

Wong: “It’s a double-digit increase for our designer business as well. It’s a growing segment in the outdoor category. We have our showrooms in Atlanta, Las Vegas, Dallas and Chicago, and throughout the year they cater to a lot of designer business.”

Do you think the Outdoor Room trend, where people are creating living rooms and outdoor kitchens and more in their backyard, is a major factor in both Canada and the U.S.?

Wong: “Yes. It’s a reality that is happening as new home building goes up in Canada and in the United States. The outdoor space is being designed just like any other functional room in the building. So that extension of living space is something that is continuing to grow strongly.”

Leung: “When we walk in residential areas of the U.S. or Canada, I see people eating outside of their dining room more and more. They have a patio section and it is getting larger and larger. That is what I have noticed.”

Is it a major trend even in the freezing cold area called Canada?

Ng: “Well, we’re not living in igloos right now!”

(Laughter)

Ng: “In Canada I see it especially, because a lot of Canadians like nature, especially in Vancouver and on the West Coast, so they would love anything to do with the outdoors. So an additional room – an Outdoor Room – has become a part of their home. They build patios and they add furniture.”

Wong: “Yes, it is very much a part of the Canadian lifestyle nowadays.”

One thing that bodes very well for the patio furniture business in the States is that new construction is still a bit under 50 percent of what it was back in 2006-2007. So there is a huge upside here. There is a shortage of homes, and over the next three or four years that gap is going to be closed. There will be a lot of opportunity as new homes are built, people move into those homes, and they start furnishing them and furnishing the outdoors as well.

Leung: “I like your forecast.”

One last area of your business is hospitality. Is that a strong area for you right now in 2016?

Ng: “It is. We’re very consistent with our sales.”

And you work that in both Canada and the U.S.?

Ng: “That’s correct.”

How many employees do you have?

Leung: “In our head office we have about 70 to 80 people working. We have an office in Hong Kong, and an office in China. We have our Quality Control, and our designer team in Indonesia and China as well. So the 80 people does not include the people overseas or the reps we have.”

What trends do you see in the industry right now? I noticed a lot of contemporary styling at the Preview Show and you were showing a mid-century modern chair.

Ng: “Production-wise, the trend that we’ve been noticing is a lot of fully upholstered patio furniture, again highlighting the concept of inside to outside. There’s a lot of mixed media being used now, a mixing of aluminum and resin for example. With respect to resin weave, it is not the typical flat weave or a standard weave that we see. The trend is that everybody is trying to have more of a natural look, perhaps something with more of a 3-D dimension to it.

“Then there’s definitely the contemporary with the mid-century modern type of furniture that has been popular. It’s a different technique where you notice that there is not much in a straight line, yet it is functional.”

Last year manufacturers at market were saying, “Finally bright colors are back.” Did you find that to be true and, if so, did you see much more color in the specialty retailer shops this year?

Wong: “Yes, I think color is in play this year. It just opens up the creativity of what you can do with a space and the room. It’s been growing over the last couple of years. We are seeing more color.”

Do you think bright colors have made any difference in terms of sales? In other words, was it more appealing to consumers?

Wong: “It’s definitely more eye-catching, right? As you walk through any typical showroom it catches your eye. Does it affect our sales? We offer quite a large selection of different fabric colors, so after it catches their eye they can be creative and go with something specific.”

Do you find that more specialty shops are getting financially healthy, because a lot of them, as you well know, got hurt badly through the downturn?

Wong: “Yes, it is a healthier business environment now. There definitely is some order now. The dealers now know when to buy and what to buy. They are gaining more experience every year.”

Did any of your retailers go out of business this past year?

Wong: “Some did. Of course, every year some stores enter and some exit. This year like any other we did have some stores exiting. A lot of it was also due to retirement. As the Baby Boomer owners reach a certain age they may find that now is the time to retire as well.”

How many new collections are you introducing this year?

Wong: “This year we’ve introduced three new collections – the Lucia, the Bolano and the Boston collection.”

Which one will be the winner?

Wong: “We think we’ve covered a wide spectrum, so we feel there really is something for everybody in each of the dealers’ showrooms. So it’s hard to pick a winner right now. All three had a positive reception at the Preview Show and we’re just going to continue with the momentum.”

Obviously, Chicago has got to be your biggest market, but is Las Vegas good for you? Is that a very strong show for you?

Wong: “Yes. We’ve had a showroom in Las Vegas for the last 10 years, and with the launch of the two floors of casual furniture one year ago, now it’s been positive. We think it should be especially strong for our West Coast dealers who have closer access.”

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Catalina seating.

If you didn’t see Lloyd Flanders’ show room in July at the Preview Show, make sure you do in September. The woven king introduced three new collections – one in teak, one in vinyl, and one in wicker. Dealers loved all three.

Hearth & Home: At this point, how do your sales compare to those of the prior year?

Dudley Flanders: “We are pretty much dead-even with the year before. May and June were very slow months.”

Any idea why? It wasn’t the weather. It wasn’t the economy. What was it?

Flanders: “I don’t know. The stock market had a major dip in May, but that seems to happen all the time these days. I don’t really have an explanation. I think part of it is everybody is so sick of this election they just don’t care to go out and do anything.”

(Laughs) You may be right. Which areas of the country were your strongest and which the weakest?

Flanders: “My reps always shoot me when I answer that question. Florida had a really good season early. Then it tapered off pretty quickly. New England was also strong for us. California was good. We’re doing a lot with our container program out there.

“It really wasn’t an area of the country that was decidedly weak. When it slowed down, it just kind of slowed down all over.”

Did anything change for you in Canada, or was business there still at about the same level?

Flanders: “We grew our business in Canada a little bit last year for the first time in a while.”

That surprises me because with the difference in the currencies you would think you would have had a tougher year in Canada.

Flanders: “Well, we’ve had some tough years there. Our Canada sales declined a couple of years ago, so it doesn’t take a whole lot of good to make up if you weren’t real strong to begin with.”

On early-buys this year, did you do better than your usual 25 percent?

Flanders: “It seems to be stuck there. Our dealers are not hesitant to give us container orders early because they know they have to do that in order to get it, but getting them to take stock of domestic product is still a challenge, and that obviously makes it a real challenge for us to keep the factory running.”

Last year I think you told me your container program represented about 20 percent of your business. Is that number still holding?

Flanders: “Yes. It’s a very healthy number for us, particularly when it helps us with the cash flow that we need with the soft early-buys. It may not help us keep the factory running, but it helps us keep paying the bills.”

What about your designer business? I think every year you tell me that it’s solid, it’s strong, you’ve been doing it forever and have strong relationships. But is it back to where it was prior to the downturn?

Flanders: “No, I don’t think it is. It’s much better than it was and it’s growing with us every year, and the size of the orders is growing. A $20,000 order is not that unusual. That’s a lot of outdoor furniture.”

Let’s go down a side road a bit. The market cap for Restoration Hardware is down 63 percent from this time last year. Can you shed any light or opinion on why such a shining star has been weakened to this extent?

Flanders: “Well, the first thing it would lead me to believe is they were overvalued to begin with. I haven’t studied it, but they may not have been able to keep up the growth rate they had. Their marketing efforts are extremely expensive, and that has to be hurting their profitability. There’s no telling what the value is of all the catalogs they mailed me, and I’ve never bought anything from them. When that stuff comes in the mail you measure it in pounds.

Ed. Note: Seventeen lbs. to be precise.

“They have special programs for designers, but we’ve had several designers come to us for outdoor furniture after they used Restoration Hardware the first time and they were disappointed in the quality and the longevity and cushioning and all sorts of things. I have a great deal of respect for Restoration Hardware. They have created a monster market for outdoor furniture, but the product they deliver is not always as good as the sizzle they use to sell it.”

Talk to us a bit about the specialty network. Do you see it gaining in strength? Are the dealers getting financially stronger? Do you see any new ones coming into the market?

Flanders: “We see a few new ones coming into the market, or at least expanding. Great Gatherings added three stores this year. The people who bought Offenbacher’s are strengthening their stores.”

I’ve had a few manufacturers say there is probably 80 percent of the specialty network that is doing quite well and they are happy, or as happy as they can be, and 20 percent that are still struggling. Does that ring bells with you?

Flanders: “I think that is probably fair, and it sure beats a few years ago when it was probably more like 40/60. Obviously in 2008 and 2009 the credit-worthiness of the dealer was a real issue for us, and now a lot of these people don’t pass the AAA banker rating, but they are paying their bills. Our bad debts in the last several years have been miniscule.”

If you had to give any advice to specialty dealers in general, what would that be?

Flanders: “I think they need to be extremely selective in their suppliers. They need to work with suppliers who are going to work with them. They need to work with suppliers who are known to take care of problems. Problems are going to happen. It’s not a question of ‘if.’ It’s just a question of ‘how’ they are going to be dealt with. I think a lot of these people who are container-only are just middlemen between some Chinese factory and the retailer. If something goes haywire, they just step out of the way.”

In talking about trends last year, you expressed happiness that color was finally returning to the industry. Did that make a difference in sales last year? Do you find that most dealers showed more colorful fabrics?

Flanders: “Yes, they did, and I think it added excitement to their floor. I think it added appeal. For a few years, every time you walked into a patio store it was nothing but drab brown stuff, and outdoor furniture should be more fun than that.”

What other trends, if any, have you noticed that is something new or impactful for the industry?

Flanders: “It has been going on a while, but the five-piece dining set is not much of a focus anymore. First they look to the deep seating, and then maybe they look to the chat group. Dining is almost the third or fourth consideration.”

Is that more of a trend toward casual outdoor living, and sitting upright in a dining chair is still a little too formal?

Flanders: “Well, it goes to Outdoor Rooms. You’re sitting around a fireplace. You’re not sitting around a dining table. Or if you’re sitting around a fire table, you’re typically not sitting at a dining table. Dining is not what it once was.”

Are you actively designing for the Millennial group of consumers? Is it a focus of some of your collections that you’re going after those 18-35?

Flanders: “We are not actively producing groups that will only appeal to the Millennials. We went out a few years ago with a very aggressive plan of contemporary design; it was what we felt would appeal to the Millennials. It wasn’t embraced the way we expected it to be.

“I don’t think our dealer base was ready for it, but I believe our new contemporary wicker group, the Catalina, has a real attraction for the Millennials, but also to the older, more sophisticated contemporary consumer.”

You introduced three new collections this year. Wildwood is the teak collection; Havana is the vinyl collection, and Catalina is the woven collection. Which one will be the winner?

Flanders: “This is the first time all three of our introductions appealed strongly to our dealers; it’s the first time that all three will be winners.”

I think it’s a real good time right now for the patio industry, don’t you?

Flanders: “Yes, I do. The demographics have been good for years, but the economy hasn’t always cooperated. If we were building houses today at the rate we were building houses in 2006, and with all of these new Outdoor Rooms, we wouldn’t be able to keep up. If I’m not mistaken, the last time I looked we’re still at about half the number of new homes being built today compared to 2007.”

That’s right, it’s not quite half, so that is an enormous upside awaiting us. Right now there is a shortage of housing, so the next two or three years are going to be spectacular because new construction is starting to move faster.

What the builders have learned, which they probably always knew, is that we need Mexicans building houses. Out West, builders are trying to steal workers from other builders, resulting in physical clashes. Mexicans aren’t stealing our jobs; we don’t want those jobs, and we need Mexican workers.

Flanders: “We just had a big hail storm in Fort Smith (Arkansas) about three months ago, and you wouldn’t see all these roofs being put back on without them.”

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Laguna chair with a gray driftwood finish.

Wes Stewart is wrapping up another very strong year for Sunset West. It’s no wonder he has a positive outlook for the future.

Hearth & Home: At this point, how do your sales compare to those of the prior year?

Wes Stewart: “We’re up about 15 percent. Last year we were up 35 or 36 percent, so this doesn’t feel as exciting, but it’s a very good, very comfortable growth rate. Our goal is somewhere between 15 and 25. That’s really where we want to be.”

I understand you’re doing cast- and extruded, aluminum as well as woven, so no change there, right?

Stewart: “We’re still dabbling in multiple outdoor materials. We actually brought in some antique or driftwood teak product this year, just occasional tables to accent our other collections; we’ve got a beautiful, little wrought-iron group. What we’ve seen at the high end of indoor furniture is an eclectic mix of materials that all work to create a room setting. It can be aluminum with teak. It can be resin wicker with aluminum. It can be resin wicker with teak. It can be a variation of materials, but it creates a much nicer curated look – a higher-end look, a higher-end feeling.

“As the outdoor category matures and customers are exposed to a more designer feeling, or more of a curated feeling in terms of what is offered, that ability to blend and mix materials while maintaining the same genre, whether it’s a contemporary or traditional or transitional look, is going to be extremely important to the patio retailer in the next few years.”

Which areas were your strongest and which the weakest?

Stewart: “The areas we were strongest in is where our stronger reps are. We’ve certainly been strong in Southern California. We’ve had a long presence here. We’re doing well in Arizona. We’re starting to see more people along the East Coast find out about us and that’s exciting.

“I’ve really been working on our internal structure here so that I can get out on the road more. I traveled to the Texas territory and to the Florida territory prior to the Preview Show and, with the exception of one account, everybody that we saw came into that show and committed. We’re very excited about that and, if you remember our showroom, we did mix the materials up and blend collections.

“I was exposed to high-end indoor furniture for many years; customers didn’t buy this grouping or that grouping. They bought that sofa and they bought that coffee table and they bought that rug from different manufacturers and they put them all together. I hate going back to the phrase ‘curated look,’ but that’s really what the high end is all about.”

You’ve been trying to break out of the West and head over to Florida and other areas. How are you making out? I mean are you opening up all the states along the way or are you leapfrogging? How is that being done?

Stewart: “I’m looking at Florida because that is countercyclical to our current season. In order to provide a better, more consistent flow for our workers here, Florida has been a big target of ours. We’re knocking on a lot of doors there and working diligently to make sure that Florida remains a priority for us to open up. Until that point, if I add more business to our peak season I’m just exacerbating our problem.

“We already have a peak season, so our focus has been Texas. Texas really sells a lot on the shoulder months. When it’s too hot in Texas, nobody buys outdoor furniture. So they will sell on the shoulder months in the summer. Florida and Arizona, the snowbirds flutter down to those two states so they will be countercyclical. We’re really looking at our growth more strategically this year than just going out and grabbing whatever we can.”

At this point are you working hospitality or designer trade at all?

Stewart: “We do some designer trade. We do not do hospitality in any meaningful manner. We just haven’t gotten around to it. We’ve been coming off last year’s growth.”

The market capitalization for Restoration Hardware is down 63 percent from this time last year. Do you have any idea, any guess why that happened? They were on a roll. They could do no wrong. What happened?

Stewart: “My opinion? Well, maybe three, four, five years ago, I used to get a Restoration Hardware catalog every six weeks in my mailbox and it was usually a 60-page, saddle-stitched catalog and it was seasonal. I would get the new outdoor catalog right about February, and then around May I would get the sale outdoor catalog, and in August I would get the catalog with all the leather looks and occasional and bedroom and what not, then I would get one around Christmas.

“Like I said, every six to eight weeks I was getting a Restoration Hardware catalog. Then somebody in their brilliance at Restoration Hardware decided, ‘We need to forego all of our marketing efforts and wrap up all of our catalogs into one big release once a year.’ So now the catalog I get is an inch thick per category and I get a stack of five or seven of them once a year. What do you think I did with that? I looked at the ones that were interesting to me and then I tossed the rest.

“They’ve lost the number of impressions they were getting. They’ve lost the consistency of advertising. That was a fatal mistake.”

How about the specialty network? What is your view of it? Is it gaining strength? Are there many dealers that are not financially strong? Are new ones entering the market at all?

Stewart: “I believe there are strong players that will continue to do well because they are involved in the community, they are thinking outside of the box, they are doing what they need to do to grow their business.

“I’ve read where the retail business has actually picked up as a whole, but online has picked up 14 percent and brick and mortar has dropped six percent. The only reason it’s up as a whole is because the Internet is doing more than the brick and mortar. That tells me the consumers’ buying habits are changing.”

You’ve already spoken to some trends in the industry, but that’s my next question. What trends have you noticed recently that are affecting the industry? Did you see anything at the preview show?

Stewart: “I think mixed media is going to be huge. Certainly we are seeing cleaner lines, more transitional furniture. We’ve seen a lot of flat, contemporary looks. I can’t tell you if that trend is going to stick or if it will go by the wayside. I think it’s new; I think it’s sexy; I think people like it. I think people are getting tired of big and brown, which is good because now even the cheap importers have all got the big and brown look. I like the lighter colors that we’re seeing. I like the cleaner lines we’re seeing. We have a lot of that look in our catalog and so I’m happy to see the trends are moving. The wind is catching our sails, how about that?”

How many new collections are you introducing this year?

Stewart: “We introduce two collections each year. We really don’t like to go over that. We’re not a big guy. We’re still a smaller company in the sea of things and two collections are what our dealer base can digest; it’s what we feel comfortable committing to.

“For 2016 we introduced the Manhattan and the La Costa. For 2017 it will be the Laguna and the new Emerald. We have an Emerald now, but it’s more European style and scale. The new Emerald has the same weave and the same look. It’s just stylized and more traditional-American seating; it’s not as low and deep as this year’s Emerald. We are going to bring up the seat height and we’re going to shallow up the depth a little bit so it is more in keeping with American wants in terms of comfort.”

What have I not asked that you would like to get out?

Stewart: “I’m very happy with how far Sunset West has come. I’m excited about the category. The builders are building Outdoor Rooms and they’re becoming a focal point of the house, and that trend will continue. I can’t imagine anybody not being excited about the industry right now.”

Housing drives so much in this country. The number of blue-collar trades that it impacts is staggering, and the amount of product that people buy in the first and second years after they purchase a home is enormous. With new construction, we are still only about 50 percent of where we were in 2002-2007. There is an enormous upside just around the corner for all categories related to housing.

Stewart: “Many people forget that outdoor furniture does wear out. The sun beats it up. The elements get to it. The cushions will break down. It will be replaced. So not only are you looking at a huge upside in new construction with Outdoor Rooms as part of the architecture of the home, but you’re also looking back 10 years and saying, ‘Okay. Everybody who bought outdoor furniture in 2006-2007, it’s time to replace it.’

“During the downturn, homeowners were staying home rather than traveling. It was called a staycation. That movement drove the patio furnishings industry for a number of years, and those groups will need to be replaced very shortly. We could be in for a wonderful five or six years that’s right ahead of us.”

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Ridgewood Collection.

Over the past year, and in addition to his normal duties, Tom Murray streamlined his operations, hired a top designer to create four collections and visited the usual number of dealers – 100.

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

Tom Murray: “Ahead of budget. The first quarter was outrageously strong. The second quarter was on target; double-digit, but only slightly over 10 percent is probably where we will end for the year, which was better than our budget, which was about seven percent.”

In that first quarter in particular, was it the weather? There wasn’t much of a winter up here in the Northeast for example.

Murray: “I think it was two things. The order cycle last fall came a little late. People were committing late, so there was a scurry to get things out. We report on a calendar year financially, so we scurried to get stuff out in the fourth quarter. I got a little bit of a bump in the first quarter because of product that just didn’t get out.

“I think the second half of the first quarter this year was because weather was good. The sales did start early. People reordered ahead of schedule, so the beginning of the second quarter was still strong and it kind of fell apart at the end.”

Talk to me about Canada, because I know you made a major effort up there with a warehouse, then you pulled back. At one point, you said you had about 52 dealers. Do you still have that many?

Murray: “Nope. When you make business decisions you’ve got to take risks. There was a calculated risk with Canada. I still think it’s a very good market long-term. It’s about the size of California from a population standpoint. It’s obviously a lot bigger geographically. Pulling the warehouse out of there was a math exercise.

“There was no way to support it with the currency swings because we’re working in U.S. dollars. That decision knocked out about half of our dealers right off the bat because they relied on small pickups from a local warehouse and the freight subsidies are a problem. So we’re going to be lucky to hold on to about half that customer base at this point.

“The bright spot is we’re making inroads into some entities that will buy a large enough volume to make the transit costs and the freight costs less of an issue not being local. But, unfortunately, it has not worked out the way any of us had hoped, but that happens.

“It doesn’t mean we’re not interested in selling in Canada. It just means that, financially, it has become a much more difficult proposition with a 25 or 30 percent currency swing. It’s hard right now for the average Canadian or above-average Canadian to stomach spending 25 percent more than they would have two or three years ago.”

But you’re in for the long haul, so at some point it may make sense.

Murray: “Absolutely. I think it will. I think we’ll figure it out.”

Which regions of the country, in the U.S., were the strongest and which the weakest last year?

Murray: “We’ve been growing. Some of our growth out West has slowed down a bit. That was a little disappointing. It’s still growth, but we depend on more growth there so we’re making some adjustments. Part of the adjustment is the Las Vegas showroom. That was a little slower than we were hoping. Florida didn’t have a great year in general.

“Parts of Texas were a bit rough this year with the weather. The Midwest seemed excellent across the board. I’m having a hard time thinking of a Midwestern entity that we did business with that didn’t have a solid year. The Northeast was okay. So I would say the Midwest was probably one of the stronger areas for us.”

Last year when we spoke you were bringing in a third-party logistics firm to streamline your operations. How did that work out?

Murray: “A bright spot. After many visits to dealers, we identified one of the things that was hurting the business the most was ourselves and our performance on several operationally-based issues.

“We had to retouch and reorganize everything we do from top to bottom operationally, whether it’s in the cushion factory or the warehouse. That was a long process. It took three times as much money as we thought it would, and twice as long as we thought it would. We went through some changes with people, a lot of reorganization of where people would go.

“Now we have systems that can help us measure the business daily. Service is dramatically improved. It’s not 100 percent done, but I’m very happy about the move. So that is a bright spot for sure.”

Are you still staying with woven, aluminum, teak and reclaimed teak?

Murray: “We’re also making a big play at outdoor upholstery on some of the Libby Langdon collections that we’re showing. Finally the appetite for outdoor upholstery that we’ve been playing around with for eight years is beginning to pay off. Some other guys in the industry have been working it, and it looks like we might finally have it right with timing and styling.”

Well seeing that you brought Libby up, why, at this point, did you feel the need for an outside designer?

Murray: “For years our dealers have added our products in larger quantities to their floors, and I’ve been hearing that they wanted to buy more, to fill a gap in the retail price range. As an example, we were very strong on sofas at retail up to either $1,000 or maybe $1,100 dollars. After that the next price point that a lot of people seemed to be successful with was $1,699 and above. That left a gap in the market from $1,100 to $1,500. Our customers were asking us to fill that gap.

“They also were saying, ‘You’ve got to give it something extra. It’s got to have more design flare. You’ve got to go outside the meat and potatoes a little bit.’ I heard that enough to say we needed help with design.

“When the Libby opportunity was presented to me I originally said no because I was afraid it was going to be more of a licensing arrangement and I wasn’t interested in that at this point. When I met her face-to-face, which was a year ago at Premarket, my first question was, ‘Where do you get your ideas?’ She said most of the ideas she had for products came from projects where she had a vision. She went out to get the product and the product didn’t exist. So she was looking to fill a gap. That lined up directly with what I wanted to do. I can tell you from an early sniff test this was a very good move for us.”

Are you still working with ScanCom?

Murray: “Absolutely.”

I believe you’re manufacturing in China, Vietnam and Indonesia. Is that still going on and if so is that preferable to keeping most work in China?

Murray: “I don’t want to say preferable, but it’s a hedge. If you’re going to be in the teak business, you really have to have a presence there (Indonesia). Vietnam allows us to hedge against problems that could arise in China. We’re still heavily dependent on China, but Vietnam gives us access to some capacity that gives us a comparable, if not cheaper, cost. We work with seven facilities across Asia that we partner with, and they all have very different sets of strengths. Our relationship with ScanCom is going to continue to grow.

“We can do things with our domestic infrastructure here in the U.S. It was a huge investment for us, much more expensive than we ever thought it would be, more difficult than we thought it would be, but now that we have it set up we want to leverage it as much as we can. We do believe that we need multiple categories of furniture, multiple price points, multiple styles and multiple suppliers. We don’t want to be dependent on one factory that could burn down or go out of business.

“The ironic thing is that the hardest thing to get made in China right now because of the labor problem is woven product. The minute Europe comes back online, all this extra weaving capacity that the American suppliers have enjoyed over the last four years will go back to Europe. We’re going to have a supply and demand problem with labor that is going to be very tricky and it’s going to come out in the form of price and inflation.”

What trends do you see that are affecting the industry?

Murray: “In woven, one of the shifts I’ve seen is the growth area in transitional. People define transitional differently. Some people call something contemporary; the next person will call it transitional.

“I’ve seen a shift a bit away from sectionals and back toward seating with sofas and love seats. We’re adding some pieces into the sectionals to make them a little bit more interesting. In woven, higher-backed products have been growing faster than the standard height. I also think there is a trend in the woven world for addressing smaller spaces. We’ve been trying to make that work. With colors, gray is the new brown (laughs).

“The fire table craze, from a growth standpoint, has eased off a bit. They are still important, but not everybody wants a fire table now. Mixing materials – we’re going to see some presentations of the Libby Langdon products mixing the upholstered with some of the woven. I think that’s an interesting trend.

“Cushion manufacturing – we all call them weather resistant and they vary by what you build. We’ve found that with Sunbrella Rain, water does not penetrate, and that becomes the best option out there.”

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Delray chair in synthetic teak.

Over the past 12 months, Klaussner Outdoor doubled the number of its dealers, from 200 to 400. (Enough said. We’ll just pause for a few minutes and let you digest that fact.)

Hearth & Home: Up to this point, how did your year go compared to last year?

Gary McCray: “We’re up, and a lot of that relates to increasing distribution and picking up some major accounts that we obviously didn’t have in our first year, and then just in general our business increased with dealers that we did have, but not dramatically.”

What about your ability to deliver? Did you do well?

McCray: “We did. The nice thing for us is that, while we grew significantly, a lot of our sales were based on introductions that we did in our first year and the inventory that was pretty heavy, so that put us in a good spot. Because of that we had absolutely no issues.”

As far as your sales structure, you’re still primarily using Klaussner reps, correct?

McCray: “We are, and it’s working well. It has been an interesting evolution. It has taken the full two years from startup to where we are now. I was really pleased at Premarket in particular, with more and more of the Klaussner reps getting an understanding of the casual business, product and dealers and all the nuances that go along with it. They’ve got a lot in their bag, but they’re seeing success now. They did seem to fully grasp what we’re doing in this business.”

I was told by one manufacturer when we were in Chicago for Premarket that interior furniture stores talk a good game about wanting to carry high-end product, but they bring it in, it doesn’t turn anywhere near as fast as the low-end merchandise, they get sick of that and they drop right back to the lower prices that we have. Is that something you are experiencing, or does that ring any bells with you?

McCray: “It is a fairly correct statement. We see that the indoor furniture stores tend to want to be on the lower end of the price spectrum, with some exceptions, but that’s where we see most of our business. But we have had good success with Nebraska Furniture Mart, in particular, on two of our better lines. But they are more the exception.”

How do they handle the custom end of it?

McCray: “One of the ways we’ve been successful with them has been to simplify that problem. We do a program where, in two particular lines we have on the floor, we have a narrower assortment of fabrics that we have already correlated. So if they move from what they are showing to one of those additional six packages that we do, then it is already correlated for them, and the pricing is the same. We just simplified everything and that seems to have worked well.”

What are the frame materials you’re working with right now?

McCray: “We’re doing woven. We’re doing aluminum. We just introduced, as you saw in Chicago, the synthetic teak. We’re doing outdoor upholstery, and I think that’s it.”

Is your synthetic wood doing well?

McCray: “It is. That’s new for us. We did a few tables last year because we didn’t have the development time to do anything more. But we had the one complete collection this time, and it did really well. We’re coming back in September and mixing that with a collection that is a combination of woven, aluminum and synthetic wood. I’m really excited about that one in particular, because it takes the best advantage of all three of those materials.”

A year ago when we spoke you had about 200 dealers. Where are you now?

McCray: “We doubled that, and we’re pretty happy about it.”

That must be better than you hoped, correct?

McCray: “It is. I think the first year was less than I had hoped. I thought we would have more than 250-300, but the nice thing is that we’ve been able to double it since year one. Certainly we won’t double it every year, but I think we’re looking at some significant growth in the dealer base again this year.”

How many of those would you say are specialty patio dealers as opposed to the Klaussner folks?

McCray: “Kind of half and half, but I would say, just in sheer numbers, out of the 400 or so we have 60 percent that are either Klaussner or furniture folks that aren’t Klaussner, and then the 40 percent are specialty stores.”

That seems like a healthy split, doesn’t it?

McCray: “When I say 60, we’ve got some designer business, not a tremendous amount, but I’m throwing that into the 60.”

But you’re going to actively pursue the designer trade, right?

McCray: “We are. That’s one of the benefits. In High Point we are within the Klaussner building, next door to Comfort Design, which is sort of their high-end upholstery, and leather, manufacturer. We share a handful of reps with them and, just as we’re using Klaussner on the furniture side, we’re trying to use our connection with Comfort Design to help pick up the designer part of the business.”

What other channels are you in right now?

McCray: “We’re just sticking our toe into the major e-commerce business. Klaussner has done a pretty nice job with Wayfair in particular, and Amazon, and some of those folks. Wayfair has been a big success on the indoor side. But we’re doing some things with them on the outdoor side, and I think that’s going to be a major part of the distribution as we go forward. We’re working on a project right now that is really more focused for that channel and would be different from what we do every day.”

A year ago when we spoke you were concerned about the lack of growth in the specialty channel. I assume that’s still a problem today.

McCray: “I think it has kind of stabilized at the moment. There’s not really any more decline that I see. I guess over the last year and being sort of back into the market, I’m probably more enthusiastic about it than I have been in a while. At the retail level when I talk to people there seems to be more enthusiasm and stability in the business and, on our side, we haven’t seen any real financial issues to speak of. There are still a lot of challenges, no question about it.”

What trends within the casual business have you noticed over the past year?

McCray: “It continues to go more and more contemporary. There is no question about it. Woven is going that way, but I also think the aluminum category is leading the way with design and color and just everything that ties in with the contemporary.”

Last year when I did these interviews a number of manufacturers said “We’re so thrilled to see color back.” Is it really back, and if so, did that help sales this past year?

McCray: “Honestly, I think it’s all about accent color, and I think people have gotten braver with it in accent colors, but as far as frame color and sofa color, body fabric color, I think it’s still the things that are neutral and that has allowed colors to play off of that.

“I do see a little more willingness to use patterns beyond just the chairs and accents. I’m starting to see some of that on sofas. We haven’t done a lot of that, but I think there is a move to a little bit more of it to set better goods apart from some of the lower-end products. I think color always is exciting, whether it has had a big impact on sales or not. I think if people used it right, it did.”

How many collections are you introducing this year?

McCray: “We’re doing four, and I think the synthetic teak, Del Rey, will be the winner.”

McCray: “The other thing, and I keep forgetting to mention it, but we got a great response because we did the Trisha Yearwood collection. The first time casual dealers saw it was in Chicago. Primarily it’s an aluminum group at our starting price point, with some nice marketing to go along with it, and some great product as far as finishes and the way we did the fabric.”

Premarket, by the way, is wonderful; I think everyone enjoys the slower pace of doing business. September is a bit too hectic for me. Now, do you want to say a few words about the Mid-year Conference in Scottsdale?

McCray: “Yes. I think what’s interesting to me is it’s kind of a culmination of a lot of different things that we’ve been doing with ICFA. We put together a committee within ICFA that is heavily influenced by retailers, certainly not all retailers, and have put together an agenda and a group of speakers that I think are right on target for everything we’re doing. The structure of the conference is such that, not only are we asking those folks to speak, but we’re asking them to stick around so that we can do breakout sessions where retailers can take what they have heard and ask questions in a smaller group.”

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Monterey Chair in “Chalk” colored cording.

Drop into the Barlow Tyrie showroom when you hit Chicago in a few weeks. You’ll find some stunning, unique designs that really are statement pieces. One is a frost (white) ceramic table that seats at least 12. Beautiful.

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

Charles Hessler: “We’re up. Sales increased. In some sections our retail business is not quite double digits. We’re doing a bit more on our contract work, and our trade business with designers is up slightly, about three percent.”

How many specialty patio dealers do you have?

Hessler: “It depends on how you classify them. We’ve got dealers on three different programs depending on how much they floor, how much they bring in and such. We have about 150 dealers, something like that.”

How does that relate to the number of designers or design firms that you deal with?

Hessler: “We’ve got designers that buy from us four or five times a season. We’ve got designers that buy from us once every year. We’ve got designers that pop their heads up every three years. So that’s kind of a tough question, but I would say designers that we hear from within a three-year period – 200 to 250.”

You could probably always use more.

Hessler: “Yes, and then we’ve got the whatevers who buy benches from us every three years. You know, out of the blue we’ll get an order for 12 teak benches. That’s fine; we’ll take it.”

In which areas of the country were you the strongest and then tell me in which areas you were the weakest?

Hessler: “Our strength has always been the Northeast right down to the Carolinas. The weakest is Middle America, that whole middle section. There’s not a lot going on there.”

What about California and Florida?

Hessler: “Florida was strange this past year. It was not as strong as it should have been. In fact, Florida dealers we spoke to were scratching their heads. They were surprised at the weakness in the Florida market. They were showing weakness across the board in whatever they were selling.

“Our Florida business really starts in December or November, and it hits hard in January, February and first half of March. Then it disappears pretty quickly. I did have one of my dealers say that she wasn’t seeing her Canadian customers. Perhaps that was due to the exchange rate.

“California is slowly growing for us. We’ve got some reps out there that are really starting to make things happen after a couple of seasons of planting seeds, but it is still slow. I think the people in the West are thinking that freight from New Jersey is a problem. We can offer a freight program depending on what level you buy in. It’s slow, but it’s going forward.”

Is early-buy important for you?

Hessler: “Overall, no. But it is with our retail segment. You want people to take it in so they are not relying totally on our inventory during the season, plus it shows the commitment they are going to make to the frame. Overall, we don’t live and die by early-buys.”

Here’s a little side question. I’m just looking for an opinion and it concerns Restoration Hardware. I’ve liked what they did or are doing. I think it’s healthy for the furniture industry in general in terms of somebody saying, “This is how you accessorize and display furniture. You romanticize it. You make it look beautiful.” They were doing incredibly well and opening stores on a regular basis. They were up to an average of 40,000 sq. ft. for each new building.

Then, in the last year, their market capitalization lost 70 percent of its value. Can you shed any light on why that happened? I’m just looking for your gut reaction.

Hessler: “I have no idea. But when you’re talking about capitalization and valuations and such, it’s the stock that gets a bit up in a frenzy. They think it’s really going somewhere and then the people in the know get out. Or it could be that management changed and now you don’t have the wherewithal, the people that have the ideas that got it there.”

They are still there.

Hessler: “Then I think it just had to be overvalued. Because every stock that I buy ends up six months later being worth half of what I paid for it.”

Talk to me a bit about your view of the specialty patio network. We lost a lot of stores through the downturn and a lot of them were weakened. Is that network gaining strength? Are the dealers getting financially stronger? Do you see any new dealers entering the market?

Hessler: “The ones that made it through obviously were well managed or strong financially in order to survive. There are some new ones popping up. We’re at the high end so, for every four or five that pop up, maybe one is going to handle our price point.

“We have seen more specialty retailers coming to our brand. Not so much for our teak, but because we offer a really wide range in stainless, which is contemporary and contemporary is doing very well at the high end.

“Our aluminum range, Aura, is really taking off and it’s a price point that a specialty retailer can easily put on their floor and special order two stainless or special order two teak. So it’s a positive everywhere I see it. Not as many new faces, but faces that I’ve seen in the hallways for years are finally coming in and saying, ‘We’ve been watching. We’ve been looking. Now we’re going to do it.’

“Maybe they’ve been out dating one of our competitors for a few years and the relationship just isn’t really what they want it to be. So they say, ‘Here we are. Talk to us. Tell us your story.’ Today, Barlow Tyrie has much more variety to offer those people than it did, say, 10 years ago.”

What about trends? What have you noticed about trends that are affecting the patio industry? It could be fabric color. It could be style. It could be demographics and Millennials finally buying houses. What has caught your eye?

Hessler: “I’m not one to talk about the industry. I can only talk about what we do here. Contemporary remains very strong and is increasing – clean lines, uncluttered. There is always a huge place in the marketplace for cast and ornate furniture. That is a huge section. But in our little, high-end niche, contemporary is very strong and is probably going to remain strong and get stronger.

“Maybe that’s partly because you’ve got the Millennials, and they are 34-year-old computer whizzes making $100,000, $200,000, $400,000 a year or whatever. That could be it. I don’t think they are going for flash. I think they want clean. That’s my take on it.”

Others have mentioned that contemporary styling is even coming on strong in the Northeast, a bastion of traditional design.

Hessler: “Yes. I remember when we came out with stainless steel and teak 12 to 14 years ago. One of our very good accounts in Greenwich, Connecticut, at the time, said, ‘What are you doing? I can’t sell this stuff. What are you trying to do to us?’ Within a couple of years, most of their business with Barlow was in stainless steel and teak. Consumers weren’t buying the old grandpa’s teak from them anymore.”

Exactly. Having been in your showroom in July, it doesn’t seem like you were introducing collections this year. Rather, you were introducing particular products. One was a gorgeous white table.

Hessler: “Right, the Monterey frost. It’s an extension of a two-year-old range.”

Tell us what you are introducing this year.

Hessler: “We extended our Monterey range so that the tables now come in a frost ceramic, and the chairs come in what we call chalk cording. That was really because our customers along the water said they couldn’t sell the chair in a dark brown cord and a table in an oxide dark color ceramic, so we listened. We’ve got ears and came out with that and it went over very well at the Preview Show.

“We extended our Titan rustic range with a serving table that has a hidden, extending section to it and the storage or ice bucket up on top. We came out with some new tables in our Aura aluminum range – because people were asking us for it – and that’s the long, narrow counter-height dining table, one that seats six and one that seats four.

“We flush out ranges. We don’t come out with a 23-piece range all at once. But over the course of four years we might create a 23-piece range. The more we add to it, the more interesting it becomes and the more business we do in it.”

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Aris Swivel Rocker Lounge Chair.

For some time now, Terri Lee Rogers has been encouraging her dealers to begin selling online. She may be right, and doing so may be the key to dealer longevity.

Hearth & Home: At this point, how do your sales compare to those of the prior year?

Terri Lee Rogers: “We’re about three percent behind last year, but we were up about 18 percent last year, so I feel like it’s a flat year.”

Which were your strongest areas in the country?

Rogers: “Our strongest areas were Texas and the Midwest, and that was due mostly to weather and what’s going on in the oil industry. We’ve had increases in California – it’s about time – and the Pacific Northwest did well.

“New England, New York, Pennsylvania, that area did well, as did Ohio. That area is not our strongest, so we didn’t have a huge impact, except that we had some good sales growth in those areas.”

Right now, a lot of states are experiencing high temperatures of 110 degrees or so. Are these hot, hot temperatures having a negative affect on sales?

Rogers: “It does have an impact. Today it’s going to be 108 degrees in So. Cal. You don’t even want to go to work, let alone go outside.”

What about your Canadian sales, with the currency differential? How well did you do there?

Rogers: “Surprisingly, we did okay in Canada. They had good weather and that was perhaps the silver lining in a bad situation for them. Our business in the East and the West, we did okay because the weather was good.”

But Canadian dealers are certainly paying a premium for products coming in from the U.S.

Rogers: “They absolutely are. It’s tough for them. The oil needs to get back on track and that will be their answer, but who knows when that’s going to happen?”

What about early-buys for product being sold in 2016? How well did you do with early-buy orders?

Rogers: “We did well. We had a good early-buy. The fourth quarter of 2015 was up substantially. When we got to 2016 and we were all done shipping early-buys, we weren’t seeing the reorders like we had seen in the past. So early-buy was good. This year, as we moved forward with the Preview Show, everybody was pretty cleaned out of our products. So I think going into 2017 we’ve got some good opportunities.”

In the past, I believe you said you might have 25 percent of your sales in early-buys. Do you know what percent it is for 2016?

Rogers: “It was between 20 and 25 percent, and that’s down just a tad from the prior year.”

What about designer business?

Rogers: “We do do designer business. The customer is looking for a specific look or they’ve had experience with our brand. I think our new introductions this year will attract more designer business. The designer business is still out there, but at this point in time we’re still stronger on the traditional specialty retail area.”

How do you handle the designer business, direct or through your dealers?

Rogers: “We sell direct or we sell to a designer showroom, or if we partner with a retailer we’ll refer them to the retailer. But we need to know the retailer’s program. We would prefer to go through a retailer just because they are set up to handle it.”

Well, it’s nice to give them the business. They don’t have the easiest job in the world, do they? The competition is just fierce.

Rogers: “Well you’ve got to beat down the pavement. You’ve got to really work it to make it. If you’re not willing to work hard seven days a week, it probably won’t be a fruitful endeavor.”

It wasn’t that long ago when most in the casual industry felt safe from dot.com sales because no one would buy a chair or sofa without first sitting in it. That’s no longer true at all, is it? A ton of outdoor furniture is going through dot.coms. What should specialty dealers do?

Rogers: “I try to convince our dealers to get online. They are the experts. These other guys don’t understand the product like our specialty guys do and they can be a better resource to the consumer if they would just get online. They shouldn’t be afraid of it, and just start selling.”

Talk to me about the specialty network. Is it stronger today than it was last year? Are the companies that were struggling finally getting over the hump and making money?

Rogers: “I would say yes, for most. A lot of people have put money back into their organization, which is good, to build warehouses and upgrade their computers or do an online website or perhaps an e-commerce website.The retailers that are being conservative are doing well and keeping it under control.

“I think what happened way back in the early 2000s is that everybody got out of control in their spending and it came back to bite a lot of them. They had to pull back and regroup or they went out of business. The ones that pulled back, regrouped, controlled their costs and started investing in their business instead of themselves are the ones that are doing well right now. It’s still not easy. It’s still hard, and there are still dealers going out of business.”

A year ago when we were doing Sitting Pretty and interviewing manufacturers, many were thrilled that color had finally returned to the industry. Did you see much more color in your dealers’ showrooms this year? If so, did it make a difference in sales?

Rogers: “We have a lot of special orders coming in, and we’re seeing some pretty wild stuff. On the special order side, yes, people want to have unique designs and colors and pinks and animal prints and just you name it. But as far as what is on the retailers’ floors, I don’t see them taking that risk, except in pillows.”

Generally speaking, what new trends have you noticed that are relevant to the patio industry? It could be frame colors. It could be demographics, or the fact that the lead Millennials are now buying houses, or that the grays are taking over from beige.

Rogers: “Yes, I see that. In my showroom in Chicago, we’re pushing the grays and the taupes and blacks and cements and all those different kinds of colors. I definitely see that trend and that is huge. As far as styles, we have obviously seen the cleaner lines, and the younger buyers like the Restoration Hardware look, so we want to bring that out.

“Cleaner lines and less traditional looks are in right now. But what sells for us is traditional; we’re known for that look as well, so we’re a go-to company if you want a traditional look.

“I did hear some comments at the Preview Show from retailers who are still a little scared about putting collections on their floor to target Millennials because they are worried that the Millennials aren’t to the level of price that they have or that our type of furniture needs to be.”

The contemporary look is really not just for Millennials; it’s for anyone who likes it. It’s all over the industry, from Pride to Kingsley Bate to Lloyd Flanders. How many collections are you introducing this year?

Rogers: “Let’s see, four, which is a lot for us. We did one that’s a sectional group, going after a contemporary look a little bit. We did one clean-line collection. We tried to incorporate comfort. We still feel that you need to sit in our furniture, not on our furniture, so we have the new Aris collection, which is very comfortable with straighter lines. We also came out with a new, long fire pit that goes along with it that everybody liked at market.

“Then we updated our mesh collection. It’s more targeted to contract where we’ve got stacking chairs, stacking chaises, kind of a limited collection, but we needed to update our mesh because the mesh looked like it came from the ’50s, which it probably did. We just reintroduced a traditional collection that we had taken out of the line, and updated it. We still felt that it had a price point and comfort and scale, so we brought it back in with some changes and it’s called Sienna. Then we did three more contemporary looks.”

Now which one is going to be the winner?

Rogers: “I think the comfortable, transitional group will be the winner within the retail sector. The one with the high back and cushy cushions called Aris. I think that will do well at the retail level. I think the Creighton, which is the sectional group, will do better in urban areas as well as in the designer business. It has a modern, industrial feel, along with the porcelain tops and fire pits, the clean wood look. So I think those two will be good.

“The Sienna will be our bread and butter for people looking for comfortable deep seating at a price point that is under $1,000 a club chair. The mesh also will do well. A lot of people like that when they have a vacation home and don’t want to deal with the cushions and all of that.”

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