Krause’s to Launch Web Sites in Effort to Increase Sales
Krause’s Furniture Inc., struggling to turn around years of poor performance, said Thursday that it is launching wholesale and retail Web sites that will give consumers multiple ways to shop for its custom-crafted products.
The Brea company, which manufactures furniture and operates nearly 100 showrooms nationally, is making its shift as the weakening U.S. economy is softening sales of home furnishings. But thus far, the Internet has not provided the industry with much of a boost.
Other home furnishing companies such as Ethan Allen and Pottery Barn have eased into online sales, starting with smaller items that do not require custom- crafting. At the same time, several pure online furniture ventures such as UrbanDesign.com, Living.com and Furniture.com have bombed.
But Krause’s executives said their approach will be different, designed to complement, not replace, showrooms and leverage its excess manufacturing capacity.
“We don’t want to be a furniture dot-com,” Krause’s President Herb Friedman said Thursday. “We are trying to enhance our brick and mortar, not be an electronic store.”
Krause’s offers standard styles of sofas, sectionals and chairs that clients can customize. Krause’s new Web sites will enable customers to see a variety of fabrics and colors in three-dimensional form.
Krause’s has been in business for nearly three decades, but in recent years it has struggled as the robust economy and housing markets have boosted the fortunes of high-end furniture retailers and small shops that make craft-intensive, unique designs, analysts said.
Krause’s hovered near death before new management and investors arrived in 1996 with cash to upgrade products and remodel stores. Sales have improved as the chain expanded to 99 locations nationwide, but not at the same rate as rivals.
Krause’s has had losses totaling more than $8 million in first nine months of 2000. It also continues to receive a cold shoulder from investors. The chain’s shares lost 80% of their value last year. Its stock was unchanged at 50 cents on the American Stock Exchange at the close of trading Thursday.
Krause’s chose an online strategy fitted to its custom-made core products, intended to extend its client base, particularly for the contract-furniture division it created in September to win institutional business.
Its first Internet foray, expected by month’s end, is an electronic catalog for hotels, inns and other corporate clients. Customers will formulate their selections online, then work with sales representatives to negotiate prices, Friedman said.
Contract sales contributed just $578,000 to Krause’s revenue for last year’s first three quarters, compared with the $111 million pulled in by its retail stores, but the chain hopes the Web site will help the division ring up $12 million this year.
The chain’s consumer Web site, slated to launch in late March, is meant to work in tandem with in-store selling, Friedman said. Instead of laying swatches over chair backs, salespeople will use the site in showrooms to demonstrate what customized versions of products look like.
That combination of bricks and clicks, plus Krause’s established distribution network, may give its online initiative a better-than-average chance of success, analysts said. And it may help it avoid the hard lessons that pure online furniture sellers learned: Most people will not buy larger items such as chairs and sofas without at least a test-sit, and fulfilling and delivering furniture orders is expensive.
Krause’s is also looking at slower home-furnishings sales nationally as the economy and housing market show signs of contracting. Still, Forrester Research projects that online furniture sales will grow to $3 billion in 2005, from $378 million last year. Established, brand-name firms such as Krause’s that mix online convenience with the touch-it, feel-it appeal of showrooms have the best chance for success, analysts said.
