Toronto a nice surprise
Attitudes, orders better than expected
By Michael J. Knell -- Furniture Today, January 19, 2004
TORONTO — Buyers at last week's market here reacted enthusiastically to new products and programs, and were more aggressive than expected with their order books, exhibitors said.
Prior to market, retailers reported business had been at best inconsistent in 2003, so they weren't prepared to buy deep. But attitudes at market proved positive, perhaps due to recent upticks in business, and to the value story manufacturers told at market.
"It was better than we anticipated," said Roger Friesen, senior vice president of sales and marketing for Canadian powerhouse Palliser. "There was very good buying activity. Dealers were somewhat cautious but they seemed to be reasonably optimistic…. Business has been good since the beginning of the year."
Price remains an issue. Increases on established lines were modest at best, rarely more than 5%, as manufacturers choose to bring out new goods with new price lists that would give them the margins they need while meeting dealer demands for new and different goods.
"More than anything else, retailers were looking for good values," Friesen said. "Product with good design married to good value is going to be a winner."
"I came into this market a little worried," said Eric Abecassis, executive vice president of upholstery producer El Ran. "Retailers didn't have a really good year, but great things really did happen after the show started. They came in with a positive attitude. They bought the values we haven't offered them before."
"The market just seemed to open up again," said Ron Dennis, vice president of sales and marketing for bedding major Simmons Canada. "Although we think traffic was down, the people who came in were very optimistic.
"The first half promises to be good, and I wouldn't have said that two months ago."
Competitive pressures from cheaper imports, thanks in part to a strengthening Canadian dollar, were clearly evident throughout the market. Many exhibitors offered product not only from China but from other regions — particularly South America — that gave them a price-driven story.
El Ran, for example, has a joint venture in Argentina producing cut-and-sewn covers for its new line of promotional leather.
"Pricing remains an issue," Abecassis said. "We have to give real value."
"Traffic was higher than we expected," said Dominque Gadbout, vice president of sales and marketing for glider rocker and juvenile furniture producer Dutailier. "Our expectations were very conservative, but they seemed to have been exceeded."
Concerns about China
A year ago, people were looking at China with interest and didn't feel threatened. That has changed. This market, factory executives were openly concerned.
"I see China as a major competitive threat generally," said Mel Kemp, president of solid pine ready-to-assemble specialist Canwood. "They're going to continue to influence price points…. We're seeing prices decline rapidly."
"China is certainly something we're watching very closely," Simmon Canada's Dennis said. "The big issue is quality."
Most exhibitors were working overtime to convince buyers that if their top concerns were service, quality, flexibility and short replenishment times, they had to stay home and not venture across the Pacific.
The impact of the rising value of the Canadian dollar also was a hot topic on the show floor. Manufacturers are concerned about their ability to export, while retailers welcome the more affordable prices of imports.
But the issue is complex. Larger manufacturers buy currency futures, locking in exchange rates as far as three years in advance. Smaller producers don't have the cash-on-hand to do this. Since many buy materials and components in U.S. dollars — most notably leather, fabric covers and some important species of hardwoods — this means they have to raise prices for Canadian customers.
Some executives admitted they're taking the hit on margins now but know they can't do that indefinitely. On the other hand, retailers are strongly resisting price increases.
Rather than increase prices, Palliser decided to create new product that reflects the changes in the currency while giving retailers what they need to spur consumer buying.
"We're pricing and repricing based on that reality," said Art DeFehr, president and chief executive officer of Palliser. "If we can overcome a 20% currency change and survive, we've become better manufacturers. We have a choice of becoming 20% better or die."
"We have to find better ways of doing things," said Daniel Walker, president of casual dining producer Bermex. "We need to win with better designs and quality, not with price. Even though we increased our prices by about 6%, there's a margin impact and we're going to absorb most of it."
Factory executives said they're now more optimistic about 2004's first half than they were in the run-up to Christmas. They also acknowledge there are external forces at work that may dampen growth at retail.
"If the demand isn't there, you have to be realistic in terms of your expectations," Dutailier's Gadbout said. "By the time things really do get better, we'll be ready to take advantage of the opportunities."
