In The Shadow Of The `Big Box' -- It's Do Or Die For Small Furniture Chains

Tony McClure saw the handwriting on the wall as far back as the fall of 1994.

That's when Incredible Universe moved into town. Then came Future Shop, followed by The Good Guys, joining other home-electronics and computer superstores such as Circuit City and Computer City.

What concerned McClure wasn't so much what these "big box" chains were selling, since they didn't directly compete against Abodio, the Puget Sound home-furnishings chain he runs. Rather, it was how they were selling their goods. And the success they were having.

"A lot of these stores were advertising six to 12 months free financing," said McClure, who founded Abodio 16 years ago. "People went on a buying binge, lured into buying the computer or the big-screen TV of their dreams for no money down, figuring they'll pay later.

"Six months later, they come to realize that they owe $3,000 or more at 18 percent interest," he added. "It was amazing to see the impact on our business.

"It was like a spigot turning off."

Long considered "category killers" within their own industries, "big box" computer and home-electronics chains - boasting lower prices, larger selections and aggressive sales - appear to be on the verge of threatening another category in the Puget Sound area: home furnishings.

For McClure, the arrival of these chains meant having to close

five company-owned Abodio stores in Bellevue, Georgetown, Lynnwood, Southcenter and Tacoma.

Left standing is a single franchised store in downtown Seattle, which McClure hopes will become the prototype for new franchises, primarily in other markets throughout the West Coast. He said the Puget Sound area probably has room for only one more Abodio, which sells contemporary upscale home furnishings.

Abodio isn't the only company that's been affected.

Greenbaum Home Furnishings, a 37-year-old mainstay in the Puget Sound area, was recently forced to close three stores in Lynnwood, Tacoma and Tukwila. The company is now back to being more of a mom-and-pop operation with a single store and a clearance center in Bellevue.

Greenbaum's closures came a few months after Portland-based Smith's Home Furnishings, facing bankruptcy, cash-flow problems and increased competition, closed eight Washington stores.

In this environment, store owner Ken Greenbaum said he could better serve his customers - and his own financial interests - by operating a single store.

"There's just more competition for disposable income," Greenbaum said. "Today, people spend money on computers, renting videos, upgrading all forms of electronics. When they're done with that, there's little left for furniture."

Indeed, home-furnishing stores throughout the nation find themselves in a precarious situation.

Household-furniture shipments to retailers, which jumped significantly in 1992 when the housing market rebounded, have flattened out, according to the National Home Furnishings Association in High Point, N.C.

Consumer spending on bedding and furniture is increasing by less than 10 percent a year, while sales of computers and video equipment are growing by more than twice that rate.

Locally, in the Seattle-Bellevue-Everett market, sales of furniture and bedding hit $563.3 million in 1994. That figure is expected to increase to $690.8 million by 1999, according to Furniture Today, a North Carolina trade publication. But that represents annual increases of less than 5 percent.

Some of that can be blamed on the overall sluggish retail environment. Consumer spending in the U.S. took its steepest drop in 3 1/2 years in January.

But furniture stores face other, more unique obstacles.

Unlike apparel and some other retail goods, home furnishings tend to be relatively expensive, which could deter consumers who are already burdended with record levels of debt. Furniture also tends to last longer than computers and stereo systems.

And let's face it: Sofas and end-tables aren't as sexy as state-of-the-art computer equipment.

"The industry has done a very poor job selling itself and its products as necessary and desirable," said Jerry Epperson, an industry analyst and managing partner with the investment firm Mann, Armistead & Epperson. "Its ads tend to look the same. Companies tend to focus too much on price and not on the benefits or the styles. Plus there are fewer brand names than in other industries."

That lack of excitement, combined with the continued fascination with high-tech gadgetry, is likely to hurt small to midsize chains the most, according to industry analysts.

Big players, such as Levitz and department-store chains, have enough financial muscle to survive the slowdown while mom-and-pop operations - which comprise the majority of furniture retailers - can generally find enough of a local niche to survive, industry observers said.

Now, midsize companies like Abodio are looking to regroup.

Abodio's downtown Seattle store is installing a new computer kiosk in the middle of its store.

The kiosk, with touch-screen technology, will allow shoppers to visualize what their homes would look like if decorated with other styles and pieces of furniture.

Greenbaum's is doing something similar. It opened a new design center that will allow customers to design their own home furnishings - and see what they will actually look like - by mixing and matching 3,000 fabrics and 5,000 frames in a computer database.

On the entertainment side, many point to what Ikea has done with its new store in Renton. The Swedish company - with stores in Newark, N.J.; Philadelphia; Washington, D.C.; and Los Angeles - has created an environment geared toward keeping consumers in the store for hours.

The 150,000-square-foot Renton store, for instance, includes a sit-down restaurant and an indoor play area where parents can drop off their toddlers. The store also sells housewares, picture frames, tableware, linens, towels, lamps and just about anything else needed to furnish a home.

Though the store probably added extra pressure on Abodio's Southcenter location, industry observers don't believe Ikea will do in local retailers since its furniture tends to be less expensive than what Dania or Abodio carry.

But some fear that the arrival of Ikea is a sign of other things to come.

"There are ominous signs for small retail businesses like ours," said Gary Stueckle, co-owner of Tiegland's Interiors of Lynnwood, which just closed its store.

While Stueckle said he and his family had a good year and are closing simply to spend more time with their growing children, he said he could envision the arrival of big-box furniture stores in the future - stores the size of Ikea that would compete more directly with them.

Others are more hopeful.

Sales of furniture and household goods actually increased in February, according to Mitsubishi Bank/Shroder Wertheim's weekly sales report. So, too, did retail sales for the month, though the jump was modest.

"I think almost all the shaking out that's going to happen has happened," said Dennis Duryea, a manufacturer's representative for Lexington Furniture, which makes traditional home furnishings.