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Furniture stores struggle to adapt

Richard Sexton's small furniture store has survived the recession by focusing on online sales.
Richard Sexton
Richard Sexton, left, owner of Carolina Rustica, says his small furniture store has survived the recession by focusing to online sales.Chuck Burton / AP
/ Source: The Associated Press

Richard Sexton's small furniture store has survived the recession by focusing on online sales. Steve Travers, meanwhile, is still in business because he fired four employees and renegotiated his lease. And Tad Lanford is trying a no-frills approach to selling sofas.

For many like them, it's that or bust.

The cash cushions of the nation's furniture industry have been worn down by years of falling sales. Furniture stores were among the worst-performing types of retailers last year, with sales falling 11 percent, according to Sageworks Inc., which collects data on private companies.

About 10 percent of furniture retailers — most of them small family-run businesses — closed their doors for good last year, according to research firm IBIS World Inc.

"The time for having a 50-year business model has past," said Mary Frye, executive director of the Home Furnishings Independents Association, a Dallas-based trade group that caters to small owners.

Financially strapped consumers, tight credit, and higher manufacturing and shipping costs are forcing furniture retailers to change plans rapidly.

And that means finding new ways of reaching customers, fierce negotiations with landlords, and making gut-wrenching decisions about staffing.

In Concord, N.C., Richard Sexton says online sales now account for 90 percent of the $5 million in yearly sales for his store, Carolina Rustica.

Three of Sexton's employees are devoted to designing photos and text on his Website so it looks just right for the 4,000 or more potential buyers he said visit it daily. Many are pushed there by online ads Sexton places with Google that pop up when a shopper enters certain keywords in their Internet search, and Sexton never cut the $400,000 a year he spends on online marketing.

"We're just trying to grow the marketplace. I need to be better than the guy down the street to survive," he said.

And even that wasn't enough. He cut his own salary and laid off three employees while losing money in 2007 and 2008.

One thing is working in the industry's favor. Landlords also are reeling from the spike in business bankruptcies and are willing to wheel and deal to keep tenants.

In Rehoboth Beach, Del., Steve Travers moved his business, Seaside Interiors & Window Designs, from a 6,000-square-foot showroom into another almost twice that size and still cut his rent by about half.

He had seven employees before the recession, when his sales hit $2 million a year, but is now down to three workers and doubts revenue will reach $1 million this year.

"I guess we haven't adapted too well. We're struggling," Travers said.

Some retailers are trying a new business model.

Ashley Furniture, which has a nationwide network of licensed stores, is expanding what sales vice president Kerry Lebensburger calls the "Costco of furniture stores."

Beginning late last year, the company rolled out what it calls Furnish 123, where every sofa or dining room set is one price — $399 — and a sample is always in stock. That's accomplished by stacking more than two dozen combinations of sofas on racks rising up to the ceiling like a warehouse.

The stores are less than half the size of traditional stores, so that also helps cut down on rent, taxes, insurance, heating and cooling costs.

Tad Lanford is a believer. He owns Ashley Furniture Homestores in San Angelo, Abilene, and Wichita Falls, Texas. He's planning to open three of the Furnish 123 stores in West Texas, including one inside his current Wichita Falls store.

"You are able to operate for a lower margin," Lanford said. "You're dealing with the same amount of product that you would have in a 15,000-square-foot furniture store, so the consumer still has a lot of choice in it."