Korean Furniture Maker Building Southland Plant to Aid U.S. Growth : BIF Chief Says He Hopes to Fulfill Big Demand in Offices and Homes
While his compatriots at Hyundai and Samsung take aim at the U.S. automobile and consumer electronics markets, one of South Korea’s most creative entrepreneurs, Sang Sik Wee, has selected Southern California as a beachhead to take on a decidedly more fragmented industry: office and home furniture.
Wee, the 58-year-old founder and president of Borneo International Furniture Co., has opened 18 BIF showrooms in Southern California since first entering the market in 1981 and plans to break ground this summer on a $20-million, 250,000-square-foot manufacturing plant in Moreno Valley in Riverside County.
“I want my company to become the Toyota of furniture,” said Wee, who was interviewed by telephone in South Korea. “Just like the car industry is dominated by a few big names that sell in different countries, I believe one kind of furniture can be sold in any market.”
Wee exemplifies the smaller-scale entrepreneur on whom South Korea is counting to create thousands of new jobs each year to reduce the nation’s economic dependence on a few huge conglomerates such as Hyundai, an auto maker, and Samsung, an electronics concern. Yet, in pushing Borneo International--already South Korea’s largest furniture maker--to become a global leader, Wee admits that he will have to increase BIF’s name recognition as well as overcome his company’s reputation for producing poor-quality products.
“I admit, in the past our furniture quality did not meet American standards,” Wee said. “But now I can sell a higher-quality furniture because our (domestic) market can afford to buy a better product. I’m not aiming for the big profit right now. I’m trying to build brand image.”
Borneo International today produces contemporary, Italian-designed furniture in an automated factory in Inchon, a city about 30 miles north of Seoul, South Korea. Office furniture produced by the factory represents about 75% of BIF’s sales while home furnishings make up the balance.
Last year, the company reported it earned $3.9 million on sales of $143 million. The company anticipates 1990 sales of about $250 million.
Borneo International is already the market leader in South Korea and in Hong Kong, where it first expanded to test how its products would be received by the large Western business community in that nation. Borneo International now has five showrooms in Hong Kong. It opened its first showroom in Tokyo last year and has 40 company-owned and franchised showroom across the United States, including 18 in Southern California.
Joon Sung Wee, the 27-year-old son of the founder who works as BIF’s controller in City of Commerce, said he believes that office furniture will account for most of BIF’s short-term growth but hopes to eventually have its sales split evenly between home and office furniture.
Advertising Heavily
“The U.S. furniture market is the biggest market in the world . . . and we want to make high-end furniture products affordable to the middle class,” the younger Wee said. To that end, he added, BIF is doing “a tremendous amount of advertising” on billboards, magazines and local newspapers emphasizing how comparatively inexpensive BIF’s furniture is.
Yet the Wees face plenty of competition in trying to poke their heads above the crowd, experts say. The office and home furniture markets are extremely fragmented, with about 2,000 companies vying for some $20 billion in annual household and office furniture sales, and price cutting is already a hallmark of the industry.
“The furniture market has been very much up and down in recent years,” said Kay Norwood, a furniture analyst at the Greensboro, N.C., investment house Interstate Securities Corp. “It remains a promotional industry. You bring people in with sales (because) demand is not there on a consistent basis.”
Leading office furniture makers, such as Steelcase Inc. of Grand Rapids, Mich., and Herman Miller Inc. of Zeeland, Mich., have been trying to squeeze out upstarts and expand their market shares as technological changes in the workplace create new opportunities to sell furniture. Meanwhile, demographic changes in the home have fueled interest from acquisition-minded home furnishing concerns such as Masco Corp. of Taylor, Mich.
A March, 1989, Merrill Lynch Capital Markets investment report, for instance, forecasts that over the next few years “maturing baby boomers (will) exhibit a pronounced tendency to significantly upgrade their living circumstances both by moving into larger housing units and by improving the quality of their . . . home furnishings.” Likewise, the office furniture market continues to grow as computers spawn wholesale redesign and refurnishing of offices, analysts say.
Richard Ruch, chief executive of Herman Miller, said his company has ridden the shift in American society from the “age of work for blue collars to the white-collar era. And now that the office is being upgraded with computers, workstations and telecommunications advances, there is a whole new development taking place.”
But Wee says BIFs will place more emphasis on the mass market than Miller, which for the nine months ended March 4, saw net income increase 7.5% to $10.9 million on sales of $192.6 million.
“Herman Miller sells to Wall Street and IBM but that’s not where the biggest sales are,” said Wee. He added that because his company controls its product from the raw material stage to retail outlet, BIF can control costs better and offer lower prices than competitors. BIF can also offer quicker delivery and other services features, said Wee, who learned to speak fluent English and Japanese while growing up in Korea and later as an interpreter for the U.S. Army, interrogating prisoners of war.
Wee founded his company in 1969 and shortly thereafter revolutionized the furniture industry in Korea when he became the first to mass-produce products such as chairs, tables, sofas and wall units. But the innovation was ahead of its time.
“The Korean people were not ready for our products then,” Wee said. “They thought furniture had to be handmade by craftsman.”
In 1972, with BIF sliding into bankruptcy, the Korea Exchange Bank assumed management of Wee’s company. The bank tried to sell BIF, but there were no takers.
Five years later, South Korea’s minister of finance gave Wee permission to retake control of BIF. The timing was fortuitous: Wee returned as South Korean consumers, who had once struggled just to buy necessities, were growing richer and more cosmopolitan because of the country’s economic growth. A vast new market had appeared for BIF’s home and office furniture.
BIF began exporting furniture in 1979. Yet after a promising start in Hong Kong, disaster nearly struck in the United States because of poor product quality and marketing efforts.
Expanded Too Fast
Wee said he initially selected Los Angeles to enter the U.S. market because of the city’s large Korean community. But Wee said the plan backfired because he expanded too fast and sold franchises to inexperienced Korean nationals.
Having spent the past several months consolidating its retail operations, BIF now wants to expand its manufacturing capacity by building a $20-million factory in Riverside County. Although labor costs could be more than double the rate in Inchon, Wee said Borneo will save money on transportation costs and import duties.
“In America, furniture is very expensive because of dealers and middle men,” Wee said. Furniture “manufacturing costs account for less than 40% of what the customer pays at retail. I think when the customer sees our better quality (and) . . . lower prices, he will buy from us.”
Times staff writer Tom Redburn in Washington contributed to this story.
