Verlo- A Retailer On A Mission. A Manufacturer On A Roll.

Admittedly this story is not just about futon furniture. What is it about then, and why are we presenting it to you? As you read on it will become evident that Verlo Mattress Factory Stores has been very successful with its futon furniture program by focusing on quality and the higher price points. But beyond that they are breaking new ground in their Craftsman Direct® concept, which is very similar, conceptually, to where many early futon mattress manufacturers and specialty retailers got their start. Simply put, this is a story about vertical marketing at its best. So hang on for the ride, and be aware that you probably shouldn’t try out some of the ideas described herein at home.— Editor

The Futon Part of the Adventure

In the world of futon retailing “Verlo Mattress Factory Stores” (VMFS) is typically not the first name that jumps into my mind. “We started selling futons about five years ago,” said Julia McCandless, the company’s Director of Communications, “and they have been a great addition to our mix on the sales floor.”

Julia picked me up at the Milwaukee International Airport for a full day of adventures in Whitewater, Wisconsin, the town the company calls home. The corporate offices and main manufacturing facilities are based here, along with a new quilting plant and company-owned flagship retail store, which are all part of what company CEO and resident visionary Dave Young calls “the compound”. Rural would be a good description of what the place looks like, but what goes on here could be described, in any business circle, as sophisticated, very sophisticated in fact.

Ted Zehelein, Director of Sales Education, joined Julia and I and took us on a tour of a Verlo “Craftsman Direct” factory retail operation. “Every one of our stores carries the same product mix and uses the same prescribed color scheme and basic merchandising tools,” Zehelein said. The VMFS 2005 Operations System defines the retail environment for every store. “Futon sofa sleepers fit in very nicely, and seems to work very well with the rest of what we are doing at retail,” he said.

Verlo Mattress Factory Stores carry products from three specific vendors. A five tier Gold Bond futon mattress program is teamed up with a twenty to twenty-five swatch SIS cover rack, all resting on an August Lotz frame grouping. “We wanted to maintain the same kind of feel and mix with our futon sofa sleeper program as we do with our traditional mattress program,” said Zehelein. Unlike some dealers who seem to offer variety at the expense of consumer understanding, the VMFS retail program is very focused and simple to understand. They have twelve looks on the mattress side with the three basic categories (good, better, best) as a foundation. The futon program expands or contracts based upon available floor space in any given retail store.

The Tipping Point

In his recent book, “The Tipping Point”, Malcolm Gladwell describes an event that is easily visualized. Fill a glass with water to the very top. Then, drop by drop, add more water to the glass. The level of water will begin to rise over the edge of the glass. The tension at the water’s surface holds everything together. Then you add that last drop and the water pours over the edge, hence the tipping point. Ron Passaglia’s addition could be the catalyst that helps push VMFS over the top.

“We have spent the last several years rebuilding, modifying, tweaking, testing systems, building on what was already in place so we could really launch out,” said VyMaC Corporation CEO, Dave Young. VyMaC is the parent company of Verlo Mattress Factory Stores.
“In fact that is why Ron (Passaglia) is coming on board.” Passaglia, who spent almost thirty years at Simmons, and who is a highly regarded industry player by colleagues and competitors alike, became President of Verlo Mattress Factory Stores in early June.
In a recent conversation Passaglia stated, “As I looked at the current environment regarding mattress retail channel distribution, and where the future growth would come from (when you consider what consumers are looking for… value, service and all the other issues too…) it begged the question, who is going to be in the best position to take advantage of this? Traditional furniture stores?, specialty sleep shops, etc.? Or a unique, consumer driven program such as Verlo Mattress Factory Stores? I concluded and really believe that VMFS has what it takes to meet this need.”

Passaglia pointed to Verlo’s nimbleness, growth mode culture, brand positioning, operating systems, and management team as the key factors in his making the decision to come aboard. “This is very exciting,” he said. “Dave Young and his management team are a focused, energetic and entrepreneurial group that has the discipline to develop the systems and have the platform ready for today’s consumer.”

Passaglia is no stranger to the futon furniture industry, having opened the Simmons futon license at United Sleep Products. “I believe there is a tremendous opportunity for growth in this category,” said Passaglia. “The futon furniture category is still an underdeveloped asset poised for growth. When you consider the demographic of the management team is the same as the consumer buying this product the potential is wide open,” he said.

Passaglia’s experience lends itself to a strong partnership with Dave Young, the management team he has in place, and the company’s positioning advantage given the current consumer buying habits for mattresses and futon furniture. “We have a unique situation here,” said Passaglia, while commenting on his experience with corporate buy-outs and restructurings. “There is an aggressive desire on all parties (franchisor and franchisees alike) to be successful and move forward. And we are in control of our own destiny.” Conservative aggressiveness, a phrase coined by Passaglia, is the current platform from where the company will be diving into the future. I could hear the smile in his voice, “The timing is perfect,” he said.

Back To The Future

“The Verlo futon sofa sleeper program works very well in our retail store model,” said Young, “but as we move out this year into the ‘metro factory’ model we see our company becoming a national chain, with an even stronger futon furniture presence.” Others have planned a national strategy. Companies like New Moon of Boston in the mid-eighties, and Futons, Etc. of Tampa in the mid-nineties had the vision but failed in the execution. But the VMFS philosophy is different. “We are bringing something into the mix that currently doesn’t exist,” Young added. He is clearly sold on the futon concept and sees it as an integral part of the company’s growth plan. “The futon mattress, frame and cover, the whole product mix, can now be introduced to a consumer at a level that is currently not happening (on a national scale),” says Young, “Most sleep shops have taken on futon furniture have done it the way futon retailers have taken on beds. They have one or two over in the corner. On the other hand we have spooled up the futon category in the past three or four years as a big part of our plan to reach out to our consumer and add value to that relationship, successfully offering a product that does not necessarily go into the bedroom.”

Young’s team also includes the Advertising Services Group (ASG) headed up by Director Susan Lembo-Schutz. The ASG arm of the company produces all collateral and advertising for the retail stores. ASG also manages all the media buys for every retail market. “This system allows us the most consistency across the company and gives us group buying power,” said Lembo-Schutz. ASG has produced several fine collateral pieces for what they call their “Futon Sofa Sleeper Centers,” including a comprehensive take away brochure titled, “The furniture with a split personality. Your guide to futon buying.“

Customer Demographics- The Information That Drives Decisions

Today’s brand name mattress manufacturer can do consumer studies and assess the theoretical “typical” consumer demographic. VMFS, on the other hand, can tap into the demographics of their actual customers through sophisticated data collection systems. The difference is simple. Verlo’s information is real while the other is just good theory. Today, demographics help retailers develop highly targeted direct and general media marketing strategies. These numbers can also help them when they look for a location for a new retail store.

Pat Conley, Director of Information Technology & Retail Site Development, sat down with his iBook (I already like this guy) and proceeded to go on-line without wires via Apple’s Air-Port technology.

Conley uses his technology background and the most advanced information tools to review customer data and buying habits. He turns the statistics into valuable marketing, advertising and merchandising tools used buy the entire management team at VMFS.
Conley’s system has also found its way to a browser based “intranet,” a secure site accessible only to franchise owners which allow them to tap into sales analysis, local demographics, competitor information, and parallel numbers from other stores in the system with similar characteristics for comparison purposes. It also provides the latest company news, industry news and has a bulletin board for easy, quick communication among franchise owners.

“My goal is to provide our dealers with the best and most up to date information available so they can plan and execute a strategy for success that will work,” Conely said. “Information is the most valuable tool in today’s economy. Our statistics and findings are reliable and immediate. Our corporate staff and franchise owners benefit everyday from our information systems.”

Verlo, VyMaC and the Future of Craftsman Direct

To understand the way VMFS and VyMaC Corporation look at the world you will have learn to think in two different directions at the same time. Let me explain. In the ancient past mattresses were made by independent mattress manufacturers who catered to their local city or town. As the population of our fair land grew and spread across the country the mattress trade spread with it. Some of these independents became large companies, but they still remained local suppliers. Some of them retailed what they made (factory direct), while others supplied retail specialists who sold direct (traditional retail). Then, as the communication industry began to spread its wings and ”branding” became part of the strategic vision of many companies, several mattress brands emerged. Others know more about the specific details regarding who, what, when, where and the like, but suffice it to say the major brands evolved out of this independent soup to dominate the bedding market as we know it today. Now here’s where we start thinking in two different ways at the same time. Verlo is taking its lead from the past and spinning a new paradigm for the third millennium. Bottom line: the Verlo Mattress Factory Store, Craftsman Direct® concept is not something entirely new, but the way Young and his team are engineering it is.

Over the next few months, and years for that matter, the Verlo/VyMaC story will continue to unfold. If the foundation I saw in Whitewater is expanded upon in the same way it was created I can say without reservation that this is only the beginning of their success story.