The furniture industry, no surprise, is hurting. But at least one Gulf Coast entrepreneur has found a way to thrive in the industry despite the dire circumstances.
Business. The Furniture Warehouse, Sarasota
Key. Company has expanded in the recession by staying in the mid-to-lower price point and retaining key employees.
Here's a factoid that's bound to make a recession-strapped executive gag: Furniture store operator Mark Richmond spends $50 in marketing just to get one customer to walk through the door.
It's jarring, but necessary.
So much so that Richmond, founder of the Furniture Warehouse, a chain of four stores in Sarasota, Manatee and Charlotte counties, says the investment he makes in marketing, advertising and customer service is the key reason he has thrived, not just survived the recession. It's a message he thinks all entrepreneurs should heed — despite its contradictory nature.
“When things [in the economy] get very bad, that's when you should spend more,” says Richmond, who says he spends at least $100,000 a month on newspaper and cable TV ads. “The time to spend is when your competition is sitting on its hands.”
No doubt that philosophy could be a tough sell for the dozens of Gulf Coast executives who live on the edge of making payrolls and monthly rents.
But for Richmond, it's the backbone of the success at the Furniture Warehouse. In fact, sales are up 20% year over year at the company, which pushed annual revenues into the $15-$20 million range in 2009. Richmond declines to release specific revenue figures.
Richmond founded the Sarasota-based chain in 1988 when he bought a foreclosed warehouse a few miles south of the Sarasota-Bradenton International Airport. The building, built out of metal, was once home to a local farmer's market.
He has since expanded the chain through a similar opportunistic buying mentality. The Furniture Warehouse in Venice, for example, is also in a onetime foreclosed property while the Bradenton store is connected to an Office Depot that was bought out of bankruptcy in the mid-1990s.
A fourth Furniture Warehouse is in Port Charlotte, which Richmond says draws customers from as far south as Naples. And in yet another counterintuitive move, Richmond is in the permitting process to build a fifth Furniture Warehouse on land the company owns in northern Manatee County, next to the Ellenton outlet mall.
All of the stores are stocked with couches, love seats, mattresses and nightstands, in addition to lamps and area rugs. The company sells a variety of well-known brand names, from Simmons to Ashley. Many times, Richmond buys truckloads of merchandise from furniture dealers or manufacturers that are either oversells or canceled orders.
Just like the real estate deals, Richmond buys those shipments at a steep discount. For instance, Richmond bought a load of oversold American of Martinsville furniture for 20 cents on the dollar in early April.
Of course, Richmond realizes it takes more than a big ad budget and savvy commercial real estate deals to grow 20% amid a recession. The fact that the Furniture Warehouse has always hit the low-to-medium price points in the market is a key contributor to the success, too.
“Our business is up double digits because people are buying down market,” says Richmond. “It's now fashionable to live at or even below your means.”
The Furniture Warehouse isn't the only Gulf Coast-based furniture chain that seeks to capture more market share during the downturn.
Seffner-based Rooms to Go, which dwarfs the Furniture Warehouse in terms of stores, is in the middle stages of a plan to replace, upgrade and expand its 130 stores in the Southeast. The new stores are 28,000 square feet, more than double many old locations.
While the company has a national presence, it has focused some of its transformation plans on the Gulf Coast. It opened a new store in Naples last year, for instance, and it also remodeled its Fort Myers location. A store in northeast Tampa, meanwhile, was replaced by a larger store in Wesley Chapel.
Rooms to Go's restart project also hit Richmond closer to home.
For one, Rooms to Go is currently remodeling its Bradenton store, which is less than half-a-mile away from a Furniture Warehouse on U.S. 41. And late last year Rooms to Go bought a shuttered auto dealership in Sarasota, where it plans to build a bigger store for that market.
Richmond says the competition fuels him, even if it comes from considerably bigger chains like Rooms to Go and Fort Myers-based Robb & Stucky.
One lesson Richmond says he's learned over the years is that keenly studying competitors can be an insight into what to do and what not to do at his own business.
“The key to competition with the big guys is to respect them,” he says. “But you also need to understand their strengths and weaknesses.”
In a salute to Richmond's strengths, he outdid those chains and other competitors when the Florida Home Furnishings Representatives Association recently named him its Distinguished Retailer of the Year. The award has only been given 10 times since 1981.
The association cited Richmond's ability to grow during the downturn. It also cited two factors of Richmond's business model at the Furniture Warehouse that stand out.
First, he pays the company's six delivery teams and many of the warehouse employees by commission — a rare move in a field dominated by hourly wages. The teams of drivers and helpers now get paid a percentage of each load delivered, which means some Furniture Warehouse drivers haul home annual salaries of up to $60,000.
Richmond made the switch a few years ago and says it's one of the best things he's ever done. In the past, drivers and helpers would show up late, be dressed sloppily and complain constantly. Richmond also found himself playing the role of time-cop, to make sure employees weren't dragging out shifts to milk overtime.
“Now they come in early, are dressed clean and have a great attitude,” Richmond says.
The second key modification to the business model also happened a few years ago. That's when the company implemented a customized electronic inventory system that mirrors the technology used by car rental companies when vehicles are returned at an airport.
The system allows the Furniture Warehouse to precisely monitor its merchandise supply, so it can make good on its next-day delivery promise. Furniture Warehouse staff check the inventory in the company's 60,000-square-foot distribution center every three weeks.
The distribution center itself is a similar work of precision. It has $400,000 worth of custom-built racks, which are floor-to-ceiling stocked with boxed furniture pieces and parts. Richmond also upgraded the facility's fire sprinkler system when he moved in five years ago, spending $170,000 to retrofit each individual rack with a sprinkler head.
Richmond's ability to craftily alter his business model likely comes from spending a lifetime in the furniture industry. He grew up in Coral Gables, where his dad worked at a Levitz furniture store. Richmond himself began working in the industry when he was a teenager.
In college, at the University of South Florida, Richmond took marketing and business classes, all with an eye toward getting back to the industry after graduation. At USF, Richmond also met his wife Stephany, an accounting major.
Richmond worked in sales for a wholesale furniture distributor after college. He spent most workweeks travelling across Florida and to the Bahamas and the Caribbean. By 1987, when Richmond was 32 years old and had two young children, the constant travel began to wear him out.
Around the same time Richmond began to look into the abandoned metal-built warehouse on U.S. 301 in Sarasota. He eventually went to the bank that held the property, where he cobbled together an offer to buy it.
Richmond used his industry contacts to begin stocking the store. Success came quickly: He surpassed $1 million in sales in the first year.
The Venice store came next, then Bradenton and then Port Charlotte, which was the first one Richmond had built from scratch. The timing of that store, in the first few months after Hurricane Charley ravaged the area, was perfect. Hundreds of homeowners flocked to the store in the fall of 2004 to restock their homes.
The Port Charlotte store also marked a shift for Richmond. He had the store built in traditional concrete, with lots of big windows and sunlight instead of the metal look of the older stores. Says Richmond: “It really elevated our image.”
That store has been so successful, in fact, that Richmond decided to rebuild the Sarasota store the same way. He had the old one torn down in 2008 and immediately began to build the new one on the same land. It was a $3 million project.
“After 20 years, the Sarasota store was ready for a facelift,” says Richmond. “We made it larger and we made it nicer.”
Through all the years and stores, Richmond has run the business alongside his wife. The couple's right brain-left brain mix, where Stephany handles accounting and finance and Mark handles sales and marketing, has been the ideal combination. The Richmonds' son, Morgan, joined the company last year.
Richmond says he'd like to grow past even the fifth the store in Ellenton. He has seen competitors, peers and other entrepreneurs fail for growing too fast, however, so he plans to be cautious.
“We don't take business lightly,” says Richmond. “But we are hungry.”