At Furniture|Today’s 2006 Leadership Conference two weeks ago, Century Furniture President Bob Maricich gave some compelling reasons to be optimistic about the growth of the luxury furniture market.
As part of a panel discussing the topic, he estimated that just 10% of the population controls half the disposable income. He also said that baby boomers increase their spending potential when their children become adults and leave the home. These empty nesters, a group whose number will grow from 16 million to day to 23 million in 10 years, make up a large segment of the affluent consumer base, he said.
“It’s a very ripe market and the affluent market is growing rapidly,” said Maricich.
All this is important to Century’s own business model, which is all about selling luxury furniture.
Maricich made similar comments this summer in a presentation at the 2006 Leadership Excellence Summit at the U.S. Naval Academy this past summer.
“The luxury niche is hot right now,” he told the audience in Annapolis in a talk titled “Leadership in the Global Economy: Tactical Principles for Success in a New World.”
“In 2005, Louis Vuitton, Lexus, Rolex, Manolo, Tiffany, Coach and Starbucks all had record years,” he said. “That tells me that Century’s target customer — the woman from the top 5% of all households earning more than $150,000 a year — is in a spending mood. We just have to convince that woman to spend her money on us. How do we do that? By providing not just a luxury product, but a luxury experience.”
But in catering to that market, Century has chosen what today is an unusual strategy: With seven plants and a work force of 1,200, the company still makes much of its wood and upholstery product mix domestically. In the Naval Academy presentation, Maricich explained the challenges and opportunities that go along with that business model.
Here is some of the strategic advice he gave, based on his experience:
* When you find yourself in a hole, stop digging. If what you are doing doesn’t add value in the eyes of your customer or make your operation more efficient, then stop doing it and change course.
* Take action. You cannot afford to wait for all the facts. In Maricich’s view, that means making decisions with confidence and without worry, because opportunities often pass quickly. Those who don’t take advantage can lose out to someone who does.
* Find your brilliance and leverage it relentlessly. This means find out what you do best and infuse that talent into the entire organization. For Century, Maricich said, this means providing a luxury experience to consumers through quality and customization, offering innovation in products, design and sales strategies, and getting furniture to the customer in an average of three weeks after the order is placed.
* Being all things to all people is the golden rule for failure. At one point, Century tried its hand building furniture for hotels and yachts. But when it realized it couldn’t be competitive in those areas, it simply walked away and focused on what it does best, which is high-end residential.
* Embrace globalization. In Century’s case, that means outsourcing on a selective basis. For instance, the company sources chair frames but handles the design and finishing elements domestically, which results in a highly customized product approach.
* Hire and retain the very best people. This is especially true when maintaining a domestic operation, Maricich said. It also means creating an environment where the best and brightest can thrive by working with the best materials, including exotic woods, imported stone, hand-hammered wrought iron and exquisite fabrics.
Other principles he mentioned include getting comfortable with ambiguity in the global economy, creating a lean manufacturing environment, creating a culture of trust, fostering a sense of ownership and entrepreneurial mindset among the employees, rewarding people for a job well done, choosing customers and giving them what they want, practicing perpetual optimism and avoiding, at all costs, the victim mentality.
These are sound approaches for any business. But like anything else, they require a sense of commitment and passion for what you do. In Century’s case, they appear to be making a difference for a niche company that has chosen to pursue a largely domestic strategy.
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