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FUTON LIFE
SUMMER 1996
VOL 8 NO2
Inside Futon Life This Month:
Cover
Story
Big Tree-Riding The
Wave To Success
by Joe Tatulli
OK, I'll admit it; this was my first
trip to Los Angeles. Hollywood, the beach, the laid back California
lifestyle.
I'd met the guys from Big Tree four
years ago at the San Francisco Market. The company has grown
considerably since those early days and is now a major domestic
futon furniture manufacturer. Specializing in oak and alder
futon furniture, Big Tree is making a splash with new retailers
on the West Coast, as well as contacts all over the country
who are looking for middle to higher-end domestic product
in solid (oak and alder) hardwoods.
History: Four years of growing
Prior to California's economic downturn
in 1991, Bob Glade and Bob Pecoraro had made their living
peddling antique reproductions and selling an assortment of
wood and furniture products to mass merchants like Costco
and Sam's Clubs. "We had a ten year run with the oak
reproductions here on the West Coast," said Bob Glade
during a recent trip to LA, where we visited the Big Tree
and Big Sleep factories. "It was only four years ago
that Bob (Pecoraro) and I hooked up with Young Lim at Big
Tree," he said. "We started with a simple thirty
inch bookcase for Sam's," said Pecoraro. Young Lim, Jr.,
and his father Young Lim, Sr., had started the company several
years earlier. Big Tree, up to that point, had been a small
case
goods manufacturer operating out of
a 10,000 sq. ft. plant. "They had been making hutches,
china cupboards, and bookcases for ten years," said Glade.
The company was experienced at quickly developing new products
at the request of their customers, who would see trends and
then call upon Big Tree to make the products they needed.
"We had always been able to turn out just what our customers
needed on a dime because of the skills of the people we employ,"
said Glade. As Paul Harvey would say, their entrée
into the futon furniture category is "The rest of the
story".
"The request for a futon mattress
and frame came from one of our best customers at the time,
Jim Storms, the buyer from PACE," said Glade. (PACE was
eventually bought out by Sam's Club.) At that point in time,
they looked at each other and asked the age old question,
"What's a futon?" Not a group prone to miss out
on an opportunity, Glade, Pecoraro, and Lim went on an educational
trip to some local futon vendors. "We
decided we would give this category
a try," said Glade. "Jim (Storm) told us that if
the product worked at retail, he would be buying truckloads."
The new product was a real test for
the Big Tree workshop. They started by making several design
changes that focused on improvements to some of the designs
that were already on the market. "After we sat down on
our first futon sofa, we decided that the angle was all wrong
for comfortable seating," said Pecoraro. Because of their
inexperience with the category, they thought nothing of raising
the back end of the seat a full two inches. "Sofa-height"
seating is now a Big Tree trademark. "If we had known
more about this category we might not have made this obvious
improvement," said Glade. Right after shipping the first
truckload of futon sofa samples to PACE, Big Tree stopped
production on all other products and focused just on futon
furniture. That first shipment included both the frame and
the mattress in one box, a system they still use today for
much of their "club" business. Another innovation,
putting drawers under the frame seat, was the next logical
add on. "After we raised the seat to sofa height, we
realized there was more than enough room for a couple of drawers,"
said Pecoraro. The drawers have become another great value-added
feature on most Big Tree frames. "Retailers love the
opportunity of offering their customers something no one else
has," said Glade, and the under-drawers are just that.
A year ago, due to a doubling of their
orders, the company moved into a new 60,000 sq. ft. plant
in Commerce, CA. "When we started, we were making one
frame for PACE," said Glade. "We were packing the
frame and the futon in one box, and shipping out thousands
per month," he said. Today, with a production staff of
over one hundred in the wood plant, Big Tree can now ship
thousands of frames per week, in several different styles,
to their growing list of satisfied customers.
Domestic vs. Imports
In an industry that has thrived on
imports, Big Tree has chosen another path to success. "We
all grew up in the import business," said Glade, who
added that it would be very easy for Big Tree to go the import
route. "For the last five years, I went to Taiwan six
times per year," said Pecoraro. Yet Big Tree remains
a domestic-only manufacturer. "When you look at both
worlds, importing vs. making it yourself, making it here is
just plain easier &emdash; if you have the capability to do
it," said Glade. Pecoraro pointed out that the frustrations
of missing parts, shipping delays, and long distance quality
control are all eliminated by making it right here at home.
"Yeah, those import price points look real good, but
the benefits of making it here in California vastly outweighany
advantage those points would give us in this current marketplace,"
said Glade. "A marketplace which seems to be moving towards
a higher quality, higher price level at retail," added
Pecoraro.
One Stop Shopping
This past March Big Tree began the
process of becoming a full program manufacturer with the introduction
of The Big Sleep, their own futon mattress manufacturing company.
The Big Sleep manufactures a complete line of futons and covers
at its own plant in Los Angeles, CA. "Our futon production
includes a number of SKU's for both the Clubs and our more
conventional furniture and bedding customers," said Glade.
"This mattress manufacturing capability also allows us
to offer our dealers a great cost savings on freight when
they combine furniture and mattress orders," said Pecoraro.
The company is just coming on line and intends to be a major
supplier of high quality mattresses to both specialty stores
and the many conventional furniture stores now jumping on
the futon band wagon. "We have some real surprises for
the industry," said Glade, who added that The Big Sleep
will be introducing a higher-end line in the upcoming year.
Big Tree is also very excited over the recent addition of
two industry veterans, Bruce Sheppard and Stuart Greenberg,
to the team. "Their experience in this field has already
proven to be invaluable," said Glade. Glade also praised
Mark Mandale, the company's new production manager, and design
engineer Mr. Oh, who have already brought the company up a
couple of notches. "Let's not forget to mention our shipping
manager Ron Kim and our great office staff &emdash; Norma,
Chris, Diana, Jennifer and Tammy &emdash; who have been able
to stay normal during our tremendous growth," added Pecoraro.
"The struggle for us is convincing
new retailers to make a commitment to a comprehensive program,"
said Pecoraro. "Many of the dealers we are calling on
now want a frame on the floor so they can say they have a
futon. Our challenge is to show them that the potential for
this product, as a stand alone category, can only be realized
when they show room groupings in a gallery setting, "
said Glade. "We are now poised to give them a genuine
good, better, best program," said Pecoraro. "With
six frames and several futon mattresses all made right here
in the United States," added Glade.
My visit to LA convinced me of several
things. First, Big Tree is poised for big things &emdash;
and they've only just begun to scratch the surface. Their
furniture plant is well equipped and their production management
team is intent on delivering subtle improvements to an already
fine line of solid hardwood products in oak and alder. I am
excited by the fact that they have made the choice, i.e.,
the capital investment, to be a domestic manufacturer. This
shows a depth of commitment that only a handful of other companies
can say they have made. Second, Big Tree has either by design
or providence maintained a wonderful balance between sales/marketing
driven decision making and the more linear cost/production
side of the success equation. Glade spoke of the great working
relationship he and Bob Pecoraro, and their other sales associates,
have with owners Raymond Kim, Young Lim, Sr., and General
Manager Young Lim, Jr. This balance allows Big Tree to produce
what their dealers want and need, on time and on target. With
all the right pieces in place, Big Tree has definitely built
a great foundation for a great future.
Publisher's
Forum
We're Alive,
We're Growing:
Analyzing the
Curve
by Joe Tatulli
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In a rapidly growing category like
ours, speculation and opinions about the future of the industry's
growth curve are as abundant as the new players entering the
market. Over the past few years, many have anticipated the
entry of the more established retailers, large nationals and
smaller locals alike, into the marketplace. This is now happening.
Premier department stores like Sears, Penny's, and Montgomery
Ward, as well as mass merchants (MM) like Wal Mart, Sam's,
Price Club, BJ's, and Costco are entering the market. They
are being joined by furniture retailers like Ikea, Haverty's,
Levitz, and Art Van, in addition to many smaller regional
dealers. Each of these dealers has a slightly different customer
demographic and a different marketing strategy to bring traffic
into their store. Obviously, several scenarios could develop,
but the question remains to be addressed: how do you analyze
the current market and come up with an accurate forecast for
the curve &emdash; not to mention a marketing strategy that
intercepts it? Following are a few rules I've come up with,
as well as my forecast for what might happen.
Stay Away From Extremes.
I spoke to a well known industry innovator
at the Tempo showroom in High Point this past spring. He stated
flatly that, "When Rosalco and Powell get out of the
futon business, there will no longer be a futon business."
Now, you can count on this person to be an outspoken, pioneer
type; but, in this instance, I have to say he's been spending
too much time with his head in the "mass merchant"
clouds and not enough time with his feet on the ground. The
first rule of thumb, when making an educated guess, is to
stay away from extremes. Things never move as fast as you
think they will. Trends take years to develop before they
break onto the scene. Only then does the casual observer conclude
that the trend happened "all of a sudden."
Like most new trends, the futon furniture
category is being tried by many types of retailers. The core
of the business, however, is still the specialty store. The
mass merchants are in it for the money &emdash; as long as
the price is right. When the margins on the commodity become
more lean, the MM's will drop it. If you look at this market
with the eyes of a MM, that is all you see. The reality, though,
is that futon furniture is not just a commodity or novelty
product. It is, at any price point, a comfortable, dual-purpose
bedding alternative and, thus, a direct competitor to the
conventional sofa-bed. The better specialty retailers will
have to survive the current flux and remain true to the advantages
they offer. Selection, quality assurance, customer service,
and real value will always be the hallmark of the specialty
retailer. The basic integrity of the product will always preserve
its presence, no matter how the curve tracks.
Look at the waterbed industry. It fell
from the mountain top to the deepest valley in seven short
years. But now the category has stabilized, after a major
shakeout, and is actually showing signs of growth again. You
can attribute its recovery to intrinsic product value &emdash;
and futon furniture has it, too.
Look At The Big Picture
From reading the trade press and from
talking with the many key players in this industry, I am able
to see the big picture from a vantage point that, perhaps,
no one else has. I recognize this as a great advantage, but
I also view it as a major responsibility. As I see the industry,
there are several unresolved issues that will effect future
growth. Issue one: Component vs. Conventional Concept. This
is still an industry where component parts make up the whole.
Even with suppliers offering a full mattress, frame and cover
program, there is still a sense that this isn't your father's
sofa-bed. Even the best retailers with the best packaging
are still dealing with selling parts. Consumers, looking for
a sofa-bed, have a hard time dealing with this fact. Even
traditional retail salespeople have a hard time with it. It's
a different concept than they are familiar with. How this
component issue will play out is one piece of the puzzle.
Issue two: Stepchild vs. Mother's Son. The only "older"
companies (in business forty or more years) that have any
long-term, deep commitment to this category right now are
mattress people. Gold Bond and Wolf Corporation come from
an industry that was once ruled by independents. They have
remained so, and are only now being challenged by the brand
label companies. (It should be noted that Simmons, with their
Beautyrest ® Futon mattress, has only made a licensing
agreement. They have not made a financial commitment to market
this product to the consumer, a commitment they have obviously
made with their innerspring line.) There is not a single "older"
company that manufactures futon frames here in the United
States. Yes, August Lotz has been around forever, but the
futon frame is their first foray into a direct link to the
retailer. WinsLoew, New West's parent company, is the closest
thing to an established, major furniture manufacturer out
there, and they are still in the process of rebuilding. These
facts suggest two arresting possibilities: either that established
furniture manufacturers, and their well-oiled distribution
networks, have written futon furniture off as a low-end stepchild,
unworthy of their attention, or that they just haven't caught
the wave yet. Feature three: Marketing Value vs. Marketing
Price. With a clear majority (55-85%) of the futon frames
currently on the market being imports, any good, better, best
product and pricing programs may start at a number that is
just too low for many main stream retailers. As good as these
products are, promotional programs still seem to dominate.
With only a handful of domestic manufacturers in the middle-to-higher-end
business, and the promotionally priced products dominating
the scene, how can we ever expect the price point to get better?
Feature four: Knowledge vs. Ignorance. The biggest advantage
a specialty store has over the local mass merchant or conventional
furniture store is product knowledge. Add to that knowledge
a commitment to the category and a firm handle on the business
side of things, and most specialty stores thrive. When you
look at traditional furniture and bedding stores &emdash;
the supposed future focus of the main-streaming process for
futon furniture &emdash; it must be accepted that their choices
will determine their success or failure. If these retailers
take a serious position and show the products properly, if
they train and educate their sales people and think of futon
furniture as a legitimate category, then they should succeed.
The fact, though, is that many new
retailers are not developing the category in that way. Some
are putting a frame on the floor so they can say they have
a futon when a consumer calls or comes in. Some are choosing
the promotional only route, displaying two or three cheap,
unfinished frames and calling it their "futon department."
Some are going with an import only, good-better-best, test
program, so they can gauge whether or not to go full tilt
with a bigger commitment in the future.
Conclusions
First of all, the simple fact that
futon furniture actually delivers what it promises when the
consumer gets it home insures the category's overall success.
Futons will be around for a while, no matter what happens
at Manufacturer A or at Retailer B. Our initial discussion,
though, was about the growth curve. As long as new retailers
are coming on board, business levels at existing futon dealers
may be off. More competition means a tougher business climate,
where only the best survive. If the larger (Top 100) retailers
succeed, and the category becomes part of the "main stream"
mix, then the overall curve will continue to soar. These larger
retailers have ad budgets, and they will expose the category
to an even wider consumer audience. Mattress manufacturers,
because they have a shorter learning curve, will be able to
keep up with the pace. Offshore, lower to mid-priced frame
manufacturers should be able to keep up their end of the flow.
This imported product does keep the retail price points much
lower than what people are used to spending on a conventional
sofa-bed. I would also question the long term wisdom of selling
a frame, mattress, and cover that retails at $249. Domestic
producers of oak and other hardwood furniture, because of
their size and production limitations, may not be able to
consistently deliver the quantities needed by national chains.
This fact may keep the price points lower than they could
be. The domestic manufacturers, if they can consistently deliver
quality and value, albeit, at higher prices, will help hold
up the top of the price pyramid. Without the higher end producers,
average retail prices will tend to drop below the level where
better, high-margin retailers want to be. As a consequence,
promotional to low-end points will dominate pricing in the
conventional stores that stick with the category. whether
the national, larger retailers succeed or not the specialty
stores will continue to hold on to the middle to higher end.
MARKET
MANIA
by Patricia Rempen
Someday, I'll wonder what it was we did at those frantic
trade shows! We planned. Booked space. Ordered electrical,
filled in Tambra's forms, and sent our checks. Drew diagrams
of how the space should look. Booked hotel rooms and flights.
Packed brochures, business cards, clipboards, sales orders,
invoices, pricelists, tools, a stapler, pens, and a Swiss
Army knife.
New city. Taxi to the show site. A bored security guard slaps
a badge on us, and we get to work.
"Hey, Robin, good to see you. Yes, I think our space
is somewhere around here. What number are you?"
The hall is a mess. Boxes and frames and pallets are everywhere.
Someone's radio is playing Taj Majal.
"Did you hear? They shipped all Bill's stuff to his
hotel instead of to the show! He had to cart it over by hand."
"My stuff hasn't arrived yet. They say it's in Philadelphia."
Bits of conversations whirl around your ears.
"Do you think Ron will ever get finished on time?"
"Don't know. I saw him in the restaurant just a few
minutes ago with a glass of wine &emdash; he didn't look too
worried."
"Hey, this blue cover is missing two buttons!"
"Here, take these off my shirt &emdash; I have a needle
and thread."
Amazingly, by morning, a chaotic, hammering hall &emdash;
filled with cardboard boxes, ladders, electricians, and piles
of bubble wrap &emdash; is transformed into a clean, organized
display of futons, frames, and accessories. Carpeting has
been vacuumed, and the people are at the registration booths,
ready to write name badges and hand out show directories.
Work clothes have replaced jeans. Fresh order forms are attached
to clipboards. Tables polished, futons adjusted. Pens in hand,
we take a deep breath. Ready.
"Tell me about your rugs," one customer asks.
"What sort of delivery times are we looking at?"
another wants to know.
"How are your price points?"
"Who else do you sell to in Calgary?"
"Are these wool?"
"What's your top-end cover?"
"Does it come with a three-sided
zipper?"
"Which is your best seller?"
"Does this frame have a kicker?"
"Any discount for quantities?"
"Where do you ship out of?"
"What's your capacity?"
"You got a rep in my area?"
Another exhibitor wanders by with a futon cover sample. "For
my bedroom," she explains, comparing the fabric to the
rugs.
"Are you the one I talked to on the phone last week?"
"I remember these from last market. We're ready to write
up an order."
"What sort of terms do you have?"
"Let's write down some numbers."
The buzz of conversation in the hall grows louder as we answer
questions, explain differences in quality and price, discuss
shipments and delivery times, grab a quick cup of styrofoam
coffee and a Danish wrapped in plastic.
"Albuquerque? You know John? I've always wanted to do
business with him &emdash; he's such a nice guy."
"Yea, the whole front of the hall upstairs is Stewart's
territory."
Have you seen the New West display? Pretty exclusive, I guess."
"I hear they're doing better these days."
"I'm getting a sandwich &emdash; can I get you something?"
"Absolutely. I'm starving. Thanks."
"Karen told us we need to talk to you about designs."
"Sure, I know Dave. He's working with you? Everyone
in the business knows Dave!"
"Matt, how's your new store in Las Vegas doing?"
Customers begin to look the same. Names fade, badges are
forgotten. Was he from Lexington? Louisville? Somewhere south.
Don't they have a bunch of stores down in Florida? Feet hurt.
Wish I had a drink of water...or a beer. Where's that order?
Did I get his card? These guys are opening three new stores.
Can we deliver in August? Sure. Do they pay well? Make a note
to have them checked out on Monday. Three o'clock already?
I'm sinking. Wish I was wearing sneakers. Wasn't that Futon
Factory? Are they coming back? Jim told me to talk to them.
Scan Design? Didn't they close about 30 stores a few years
back? Yes, that's really one of the best designs we've ever
had. Is C.O.D. okay? Good. Should go out next week.
A quarter to closing time. Guess that's it for the day. One
of our reps brings in a new customer. Forty-five minutes after
closing, we're still there choosing the right designs, working
out terms. Signature on the sales order, shake hands. Glad
you finally made the decision to go with the line &emdash;
I think you'll be happy with it...look forward to doing business
with you...
Can we get out of here now?
Pack it up. Are you going to Joe's tonight? He's putting
on a reception &emdash; should be good. Which hotel are you
staying at? I'm there, too. I'll walk you over. Who's interested
in a cold beer? There's a great micro-brewery across the street
&emdash; Lois was telling me about it. Want to join us? I'm
ready! See if John and Katherine are interested. Shari, are
you up for it? I'm exhausted! Let's go!
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