The Futon Shop... Vertical, and proud of it!

Survival in any business usually includes waves of success and failures and the history of The FUTON Shop, of San Francisco, is no exception. Peaking with twenty-two corporate and six franchise stores in 1995, this Bay area retailer was in an enviable position. As the industry leader in their area they developed into a vertically integrated manufacturing company, with the buying power to purchase containers direct, acting as the importer. As the company grew during the early nineties it became a major import player rivaling the volume of some of the industry’s top national players. But as the local market became saturated in 1995 and the furniture industry experienced a softer market, sales slowed for The FUTON Shop.

Suzanne and Art Diamond concluded that some major changes had to take place, and take place fast. “Suzanne was running the day to day operations, and we decided it was time for my role to change,” said company founder, Art Diamond. Years before, sometime in 1991, Suzanne Diamond had created a plan for the company that revolved around tight controls via a computer network that would tie all the stores together with inventory and production. She took the reins of the company in the darkest days of 1996 and with the help of a dynamic management team, things have been moving in a very positive direction ever since.

(Picture: Suzanne Diamond... at the controls)
I realized back then that we needed to have a much better handle on each store’s day to day operations and then bring that knowledge into sync with the company as a whole,” said Diamond. Long a proponent of computerized information tracking and inventory systems she orchestrated the installation of a computer telecommunications network that linked every store to a main server at the company’s headquarters in San Francisco. “It’s taken many years to work out all the bugs but now the system is running like a top.”

When we put this system together,” says Diamond, “we wanted nothing less than a complete overview of the day to day movement of product, orders, sales and inventory across the entire company.” Complete is the key word here. The system, based on a proprietary data base model, allows the main office to acquire a real-time profile of each store’s daily activity as well as determine a global overview for the entire company.

“From minute to minute we know inventory, dollars taken in, and merchandise committed for sale, all of which ties into our replenishment and manufacturing programs,” she said. The entire information gathering is designed to give the management team the ability to meet retail and manufacturing needs and provide the very best customer service possible.

Keep in mind (as you quietly sit and read this) that I am gathering all these facts on a whirlwind tour of the 70,000 square foot facility and Suzanne Diamond is moving; walking and talking me through her vision. Again, the key word is moving.

They have nine loading docks where they both receive containers, ship wholesale orders and load and deliver to an average of four of their own shops per day. Every Northern California store gets a truckload per week; the Southern California stores get a container every two weeks. “Some of the busier stores or those with less then a 1000 square feet of storage get a second truck,” Diamond said. Once again the system rules. “Every key department and each store is linked, with both real time inventory and a message board for updated information, so everyone can be aware of our position” said Steve Ray, the company’s General Manager. “The beauty of this system is that it allows us to know where product is and how much is available over the entire network. If we need a certain frame in a particular store, and that frame is in inventory in the warehouse or any other store, we can find it and move it to where it has to be,” Ray said.

“The system allows us to know precisely where we are minute by minute every day. This includes the stores, the warehouse, orders pending and custom orders. In addition, at the main office level, we always have a handle on issues like containers on the water; arrival schedules for cotton, wool and fabric shipments as well as production schedules at the mattress and American Oak frame factory. We are in control of the information and are, therefore, in control of the company,” Diamond said. “The entire system is focused on getting the customers what they want, when they want it.”

Production In A Vertical World

(Picture: Steve Ray... exploring new ground)
The characteristics of vertical integration are evident at every level at The FUTON Shop. As the company grew in the late eighties it discovered the many pitfalls of dealing with suppliers in a market that was experiencing projectile growth, i.e. a market that was selling more than the manufacturers could supply. Moreover, even when some products would arrive, quality control was spotty at best. Even though The FUTON Shop was a very important dealer to many of its suppliers they (The FUTON Shop) found themselves in the same position as many other retailers at crunch time, short of quality products. They learned early on to go vertical when it made sense.

At the present time The FUTON Shop imports frames for its stores and wholesale customers, manufactures a full line of its own American Oak frames, cuts and sews its entire cover line and even garnets its own cotton for its own mattress plant. “We also have a full custom order shop,” Diamond said. The custom shop has its own customer order form which outlines every aspect of a custom cover or cushion order. “Our fabric department makes over 30 covers a month from fabric provided by customers,” Ray continued. “Without a good system and well trained staff it could get pretty confusing with size, pattern orientation and tracking.”

The key word here is, once again, the system. “Every aspect of a customer’s order is tracked and is available over the system. That means when a customer orders a custom size cover in a particular fabric the store manager can go to the system and find out if the fabric is available. Before the customer leaves the store they have an good estimate of when the unit will arrive back in the stores for delivery,” Diamond said. Getting the products a customer wants when they want them is the company’s driving force, and is the essential benefit of the telecommunications network.

Futon Mattress Factory

“We make fifteen different mattresses by mixing various components of cotton, wool, high density foam, Latex, innersprings and even polyester now. The goal is to give our sales people and customers the ultimate in options. No matter what use or level the customer comes in looking for we have a range for them. Customers can come in saying they want inexpensive occasional use, or everyday sitting or every night sleeping; at each level we can offer a good, better, best choice for them to make sure they walk away educated and happy with our futons,” said Steve Ray.

(Picture: Marilyn Diamond... part of the office team)
As we move into the factory proper, the noise levels rises. The FUTON Shop has its own garneting machine. “We decided to be absolutely sure that we can consistently meet the requirements of both California Technical Bulletin 117 and the Federal FR cigarette test as well as control the quality and consistency of our futons and mattresses. Garneting our own batting was a logical solution,” Diamond said. The FUTON Shop put the machine in last year and it has been operational since August of 1997. Every week the company garnets around 50,000 lbs. of materials, which include gin motes and staple cotton, pure wool, and polyester. The FUTON Shop utilizes the NCBI Quality Assurance Testing method for testing the FR treated cotton so it will always pass Cal 117 and the cigarette test. GM Steve Ray is a member of the Futon Association Board of Directors, and heads up the Flammability Task Force committee. The company also spearheaded the first FAI Conference on Flammability Issues called FUTONS AND YOU, which took place last year at the Winter Market in San Francisco. Being a major manufacturer in California has given The FUTON Shop the opportunity to be a leader in establishing an open and professional dialogue with the California Bureau of Home Furnishings, which views futon furniture as an upholstered furniture product rather than a mattress.

People

The FUTON Shop carries that passion for quality control into their retail showrooms. The sales staff communicates pride in the products they offer because they appreciate all the effort it takes to produce a superior product. “Our Director of Retail Operations, Scott Soulman, started as a salesman with us, became the number one salesman, then a top store manager,” continued Ray. “He is the consummate professional, he communicates quality in his salesmanship, his store and inventory control were always pristine, and he now shares that with our other managers.” There is a two-week training booklet given to each new employee covering product knowledge, merchandise availability, the computer system and steps in the selling cycle. However, the key ingredient to help staff become professionals that can communicate sincere pride in the futons they promote is the pride they bring with them. Having long time managers (the company average is 4 years) like Karen Eldridge in Santa Rosa (5 years), Don Leyden in Sacramento (4 years), Rob Schwartz in San Mateo (5 years) Trent Garrison in San Jose (5 years) and most of the other managers help in keeping continuity. “These people know what it takes to make a shop work. They keep their shops looking great and well organized, offer great customer service and are good at developing a team atmosphere with their staff,” said Ray. The FUTON Shop compensates successful managers with a profit sharing bonus plan that promotes teamwork, store performance and inventory control. In the corporate office, Chief Controller Violeta Galang is a central figure for company moral. “She makes everyone feel like family even in a company of over 120 people,” said Diamond. “You can have all the systems in place, but you still need a motivated team to make it work,” she added.

Marketing

(Picture: Tina Slonek... crafting the look)
As I became familiar with the depth and breadth of the company’s manufacturing capabilities, my focus on the fact that The FUTON Shop was ultimately a retailer became a bit blurry. Here was a retail outfit with nineteen stores, nineteen store managers and staff, a fully integrated, real-time telecommunications system, and a self administered, GPS tracked, distribution fleet operating out of a very large, well stocked warehouse. Add to that a custom and standard cover manufacturing plant, a mattress factory being supplied by its own batting facility, and an off site American Oak futon frame factory. Running any one of these individual divisions would be a full-time job in and of itself, making the vertical integration model simple yet complex. The bottom line is you do everything yourself so you can internally control the quality and flow of goods. You can also offer your customers a better value because, as the manufacturer, you have eliminated the middleman. The hard part is doing all of the many different kinds of jobs well. The FUTON Shop does just that, and their marketing and advertising is no exception.

Tina Slonek is on the phone as we enter her office. “Tina does all our print, radio, and TV ads, brochures, point of purchase, and signage,” said Diamond. Tina’s office walls are covered with ads, newspaper insets, and point of sale collateral. “We all work together on marketing,” said Diamond. “We are making a major investment in promoting our stores, and Tina is the key creative.”

In principle, The FUTON Shop spends about 10 percent of their gross sales in advertising. “Our basic approach is that you promote price in print, image on radio, and do them both on TV.” Diamond said. The basic look is pure traditional furniture store. The company produces a catalog that features most of its products in full room vignettes and it maintains a fully interactive web site.

Another great tool that Slonek produces are large format (40” x 60”) printed posters. “These posters are a great way to feature vignettes of our best sellers. They are very dramatic,” Slonek said.

“Marketing, merchandising and advertising are vital to the image and volume of a retail store,” said Diamond. “If you ask anyone in the Bay area about futons they know about The FUTON Shop. We have made an impression in this market,” she said.

The Future is So Bright

The FUTON Shop is still expanding into new markets. With stores in LA and Sacramento, and with plans for more expansion in the future Diamond and her team are succeeding where many others have failed. They are also expanding their mind share with furniture buyers via an aggressive marketing plan that includes educating consumers that futon furniture is real furniture for the home. “In our mature markets, we are currently averaging about $210 for just the mattress,” said Steve Ray. “And that average includes all units sold at all sizes.” Diamond added that over sixty percent of total sales for frames are considered to be in the high-end portion of the market. “We want people to understand that we are in the contemporary furniture business,” said Diamond.

The system is in place, the stores are stocked, the sales staff is trained and ready to sell, the media—radio, newspapers, and TV —are telling The FUTON Shop story to the masses, and right now the future looks so bright they will have to wear shades.

This is the third retailer we have featured in our recent issues. If you are, or know of a retail dealer we should feature in an upcoming issue let us know who they are via mail or e-mail at jtatulli@rtppub.com— Editor.