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Marketing Strategy of Ashley Furniture Industries

Marketing Strategy of Ashley Furniture Industries

Discuss Marketing Strategy of Ashley Furniture Industries within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Ashley Furniture Industries, Inc. is a furniture manufacturing company headquartered in Arcadia, Wisconsin. The company is owned by father and ...

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Anjali Khurana
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Marketing Strategy of Ashley Furniture Industries - December 10th, 2010

Ashley Furniture Industries, Inc. is a furniture manufacturing company headquartered in Arcadia, Wisconsin. The company is owned by father and son team Ron and Todd Wanek. Ashley Furniture manufactures and distributes home furniture products throughout the world.[1]

Ashley Furniture Industries sells home furnishings and accessories available through two distribution channels: independent furniture dealers and more than 400 Ashley Furniture HomeStore retail furniture stores, which are independently owned and operated by licensees in the United States, Canada, Mexico, Central America, and Japan. It is the leading furniture manufacturer and top selling brand of home furniture in the world [2] and maintains manufacturing and distribution facilities in Wisconsin, Mississippi, California, Pennsylvania, Florida, China, and Vietnam.


Statistics:
Private Company
Incorporated: 1945
Employees: 4,567
Sales: $816 million (1999)
NAIC: 337121 Upholstered Household Furniture Manufacturing; 337122 Nonupholstered Wood Household Furniture Manufacturing; 337211 Wood Office Furniture Manufacturing; 33791 Mattress Manufacturing


Company Perspectives:

Ashley has a rich history of success stories that illustrate its dramatic transition from a 'virtual unknown' to a significant force in the industry. For over half of a century, the company has remained committed to its Vision Statement, 'We Want To Be The Best Furniture Company.' Innovative marketing concepts, quality products and state-of-the-art manufacturing methods have always been driven by the demand for customer satisfaction. At Ashley the stream of satisfied customers continues to grow as Ashley continues to be creative and diversifies to expand business, and improve quality into the next millennium.


Company History:

Ashley Furniture Industries, Inc. is the fifth largest furniture manufacturer in the United States. It makes a full line of home furnishings, including upholstered living room sets, bedroom furniture and bedding, recliners and other so-called motion furniture with moving parts, and wood furniture. Its wood line is perhaps its best known. The company pioneered tough, shiny tables and cabinets laminated with a virtually indestructible polyester finish in the mid-1980s and stood out in the industry for the daring of its contemporary designs and colors. Ashley maintains manufacturing facilities in Arcadia, Wisconsin and in nearby Whitehall and Independence, Wisconsin, and has warehouses and distribution centers in New Jersey, Florida, and California. Ashley also owns an upholstery plant in Ecru, Mississippi and another facility in Ripley, Mississippi. The company manufactures approximately two-thirds of its products, with the remaining third imported from Asia. Ashley also licenses a chain of stores called Ashley Furniture Homestores, with close to 40 stores operated by independent dealers in areas where the company does not otherwise have strong distribution. Located in the west central portion of Wisconsin, Ashley is far from the hub of furniture manufacturing in the United States, which centers around North Carolina. The firm is privately held by Chief Executive Officer Ron Wanek, Vice-Chairman and co-founder Chuck Vogel, and their sons.

Early Years

Ashley Furniture began as a Chicago corporation, run by a man named Carlyle Weinberger. Weinberger started the company in 1945 as a furniture sales operation. Ashley's specialty was wooden occasional furniture. It bought up goods made by local companies and marketed them in Chicago, which at that time was the main arena of furniture sales. The firm later had a branch in Goshen, Indiana.

In 1970, Ashley Furniture invested in a small, start-up furniture company in Wisconsin. This was Arcadia Furniture, founded that year by Ron Wanek. Wanek grew up on a dairy farm in Winona, Minnesota, and he began his business career working in a furniture factory there. The factory was owned by Eugene Vogel, and wooden cabinetry for stereo speakers and televisions was made there. Wanek moved to Arcadia, a tiny town just across the Mississippi from Winona, to open his own factory. He took with him Eugene Vogel's son Chuck. The two of them began doing production work for Chicago's Ashley Furniture, principally making wooden occasional tables. Arcadia Furniture also produced stereo and television cabinetry, like the factory in Winona. The new company's first facility was a single 35,000-square-foot plant. Vogel was in charge of milling and production, while Wanek oversaw all the other business details. Soon the firm had 35 employees. Its first product line encompassed only 11 simple occasional tables, but the company made money immediately, bringing in $360,000 its first year.

Growth in the 1980s

Although Arcadia started out as a small production plant for Ashley's lines, the Wisconsin company soon became a major producer. In 1976, Wanek and other investors bought out Carlyle Weinberger and took control of Ashley Furniture. At first the two companies kept separate identities, with Arcadia the production arm and Ashley the sales arm. Later they merged officially, using the name Ashley Furniture Industries Inc. Under Wanek's direction, the merged company grew quickly. The firm spent $5.5 million in 1979 for a huge addition in Arcadia, enabling it to produce a more varied and sophisticated product line. By 1982, annual sales were $12 million and corporate headquarters moved from Chicago to Arcadia.

Ashley Furniture Industries was something of an anomaly within the furniture industry both for its location and its vigor. The furniture industry in the Midwest gradually moved south, and Ashley was left in a remote, small town in Wisconsin. This gave it high distribution costs, as it was far from major population centers. Ashley, however, had formidable leadership in Ron Wanek. He had a feel for furniture and markets and always approved new designs himself. Ashley's products were aimed at middle-income buyers. The company tried to provide high-quality, durable goods but at an affordable price. To give his company's products a special niche, Wanek moved away from the kind of furniture consumers considered 'heirloom pieces'--stodgy, enduring things that would furnish their homes forever--into stylish pieces that had more of an immediate appeal.

To make the kind of furniture Wanek was sure customers would like, Ashley needed to upgrade its technology and find a way to compete on price with imports. Imports began to be a significant factor in the American furniture market in the early 1980s. In 1983 alone, the percentage of imports increased almost 50 percent, according to a profile of Ashley in the April 1986 Wisconsin Business. Although the same article describes the furniture industry as a whole at that time as 'sleepy,' Wanek took notice, and in 1984 he traveled to Taiwan to investigate. He found what is by now a commonplace of the global market--low wages, low cost for facilities, and a tariff of less than three percent for Taiwanese furniture entering the United States. Ashley did begin importing inexpensive parts from Asia to keep its own costs down, but more important, the company moved quickly to build itself an unassailable domestic market.

One change was to branch out from living room furniture to bedroom sets. Company management fixed on the simple fact that American homes had only one living room, but typically three bedrooms. This unassailable logic seemed to dictate bigger markets just waiting for the company. To provide for the new bedroom line, the company invested $4.5 million in its assembly facility and in equipment to streamline its production process. The company started making bedroom furniture in 1983, and by 1986 this accounted for 40 percent of its total sales.

A more significant innovation came in 1986, when Ashley introduced its 'Millennium' line. Wanek and his designers had determined that consumers liked shiny furniture. So Ashley came up with a unique polyester finishing technique that gave its wood furniture an impeccable luster. The company produced very shiny black furniture in its occasional and bedroom lines, and then began adding colors like emerald green. These were seen as exciting pieces with contemporary flair. By the mid-1980s, Ashley had a line of approximately 350 different products, most aimed at middle-income consumers. The company had thousands of accounts, the biggest being the wholesaler Levitz Furniture Corporation, which bought $3.7 million worth of Ashley's occasional tables in 1985. Ashley also sold to major mass-market retailers such as Sears, K Mart, and Montgomery Ward, as well as to thousands of smaller stores. Sales climbed rapidly, from about $9 million in 1980 to more than $44 million in 1985.

Innovation in the 1990s

Ashley Furniture had grown from a simple table factory in 1970 to a design leader with huge nationwide sales in the 1980s. The company had worked hard to innovate, incorporating new technology to compete with cheap imports, designing eye-catching furniture that led with style, and moving into new market categories, such as bedroom furniture, to increase its options. Ashley continued to be a quick-moving, vital company in the 1990s, making changes to capture new markets and capitalize on cost-saving equipment. Its great success was its polyester laminate Millennium line, which alone accounted for sales of $100 million in the early 1990s. Although the company had bought expensive new equipment for laminating around 1989, by 1993 Ashley upgraded again, installing a state-of-the-art thermo-laminating press. CEO Wanek was eager to spend money to keep the company on the cutting edge technologically. By the early 1990s, Ashley's investment in equipment for its Millennium line had reached about $55 million.

The company also branched out into new product lines in the early 1990s. Wanek was convinced that Ashley needed to produce furniture that looked totally new and different, to entice customers to give up their old stuff and start fresh with an expensive purchase. In 1993 the company introduced a line of so-called motion furniture--tables with tops and shelves that slide or elevate, beds with nightstands sliding on tracks along each side or heads that moved up to make it more comfortable to watch television. These added features made the Ashley line stand out. At the same time, the company added a line of ready-to-assemble furniture, a market niche where Wanek sensed an opening. Much ready-to-assemble stuff was low-end, and Ashley made more expensive, higher quality goods such as computer desks and hutches. These were meant principally for customers with a home office, a growing demographic. In the mid-1990s the company also introduced its first line of youth bedroom furniture, which included a full range, from bunk beds to computer tables, highlighted with molding in the company's signature polyester finish.

In another major move, Ashley began a new upholstered furniture line in 1994. Because Ashley did not have the equipment in Arcadia to produce upholstered goods, the company bought an existing plant in Ecru, Mississippi from a subsidiary

1945:Ashley Furniture founded in Chicago.

1970:Arcadia Furniture founded in Arcadia, Wisconsin.

1976:Arcadia owners buy out Ashley.

1986:Introduction of best-selling Millennium line.

1994:Ashley acquires upholstery manufacturer from Sklar-Pepplar.

More Successes into the New Millennium

By the late 1990s and into the next century, Ashley showed few signs of slowing down. The company acquired a large plant near Pomona, California, giving it a West Coast presence, and continued to expand in Arcadia and nearby. Ashley also operated assembly and distribution plants in Seattle, Washington, in New Brunswick, New Jersey, and in Orlando, Florida. These plants, in addition to offering distribution to major East and West Coast population centers, took in imported parts from Asia, mainly for tables, and assembled them. With the success of its bedroom line, Ashley decided in the late 1990s to begin to make mattresses and box springs as well. Dealers often sold bedroom furniture sets complete with mattress and box springs, so Ashley believed it could use its existing strength to get in on this market. Its sleep products line was a quick success, as it managed to make something that looked like an old-fashioned mattress but that boasted high-tech construction.

To strengthen its position in motion furniture, Ashley acquired another Mississippi company in 1999. This was Gentry Furniture, of Ripley, Mississippi, a leading maker of reclining sofas and sectionals. Ashley gambled that motion furniture was still a strong growth area. It continued and expanded Gentry's lines and used its plant solely for motion furniture. Its other Mississippi upholstery plant, in Ecru, devoted itself exclusively to stationary furniture. In 1999 the company also branched out into retailing, licensing stores to independent dealers. These were called Ashley Furniture HomeStores and sold only Ashley goods. The chain grew in its first year to roughly 40 stores.

By the year 2000, Ashley Furniture Industries employed more people in Arcadia than the town's total population of slightly more than 2,100. It had plants in the East, West, and South, and operated several factories in Pacific Rim countries. The plant in Arcadia had grown from 35,000 square feet in 1970 to 1.5 million square feet. Ron Wanek still ran the company, with Chuck Vogel. Wanek's son Todd was a co-owner and chief operating officer, while Vogel's son Ben was another co-owner and vice-president. The company had received offers to take the company public, but its owners preferred to keep it under local control. Ashley continued to offer innovative designs. Its design teams scoured the country for ideas and came up with new products every six months. Its designers tended to look for excitement. For example, the company had pushed its motion furniture since the early 1990s, and by 2000 it had bought up a patented design to allow it to produce elaborate 'command center' chairs. The arm of the chair opened up to reveal a telephone, controls for a chair vibrator, and even a small refrigerator. The company's almost restless approach to marketing had paid off. Sales pushed steadily upward. In 1998, Ashley brought in approximately $652 million. By the next year, it had expanded that to more than $800 million. The fifth largest furniture maker in the United States, the company continued to pour out new ideas in the early 21st century.

Principal Competitors: La-Z-Boy Chair Co.; LifeStyle Furnishings International.
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