The Top 100 retailer of American-made modern home furnishings preps for growth beyond the pandemic rush
MINNEAPOLIS — While Room & Board has had to deal with unprecedented supply disruption just like every other furniture store in the country, booming business and a desire to better serve its consumer base has the Top 100 company playing the long game.
This year, the upscale retailer of modern home furnishings is looking to hire more than 200 people, primarily in delivery and warehouse positions. It’s expanding its distribution center in Newton, N.C. by 130,000 square feet, and has started planning for an expansion of its main Minneapolis-area facility, while also looking for some temporary space in the market.
While these moves could seem counterintuitive in an environment where product delays make headlines every day and where warehouses are nowhere near filled to capacity, Room & Board’s reasons for them are quite straight forward: business is booming and while it may eventually slow a bit, the company needs people and capacity to fulfill its mission and serve consumers who have likely changed their way of living and working for good.
“The demand has been significant,” Bruce Champeau, the company’s president and chief operating officer told Home News Now. “We’ve gained a significant amount of new customers, and so I look at this as a long-term investment. We need to increase our distribution space not only to deal with what’s going to be an influx of product coming in the near future but to be able to service customers for the next 10 years.”
With 19 stores in large metro markets in 11 states (a 20th is coming this fall in Bethesda, Md.,) Room & Board finished 2020 just shy of the $500 million sales mark, up 10% over the previous year despite Covid-related shutdowns,’ Champeau said.
It was like riding a rollercoaster to get there, he added. In January of 2020, for instance, sales totaled about $42 million. For April, they totaled $16 million, and then $55 million in September.
“And right now, sales are up over 35%,” he said. “We’re trending toward finishing the year around $675 million,” and it could be more.
To prepare, the retailer needs more good people, and it recognizes that’s easier said than done. That’s why Champeau qualifies the plan to add more than 200 people to its staff of 900 with, “if we can,” and called labor “our No. 1 challenge.” The positions would be offered across the country and mostly for workers in delivery and distribution roles.
Despite the challenge of filling these slots — the same challenge its vendor partners face today — Champeau said the retailer’s salary and benefits package should be attractive. Any full-time employee, regardless of position (it could be a maintenance worker or distribution center associate, he said) makes $40,000 at minimum, along with 401(k) contributions, profit sharing and full benefits.
“At the end of the day, our success is measured by how effective our staff is,” he said. “We’ve got a great group of people, so we’re just wanting to build upon that.”
On the warehouse front, Room & Board is adding 130,000 square feet to its North Carolina distribution center, which will bring it to 380,000 square feet when completed in November. And in Minnesota, the retailer’s main 485,000-square-foot facility also is slated for expansion. The company has just begun working through the process with its landlord, so Champeau didn’t offer an idea of the timing, but he did say there’s enough land available to boost it to 700,000 square feet if the company so chooses.
“In the meantime, we’re’ also looking at some temporary space to make sure we’ve got enough square footage to be able to absorb the additional product that will be coming in from our vendors,” he said.
Like many retailers, Room & Board is counting on a better cadence of product flow than what it has been seeing following the past-lockdown crush of demand and then the additional seizing up that happened after the Gulf Coast region winter storms temporary crippled the supply of foam used to make bedding and upholstery.
Earlier this month, Champeau sent a letter to the retailer’s email list, expressing gratitude for so many people “turning to us to help make their homes better during a difficult time,” while also explaining what it has been up against delivering on its end of the deal.
“Supply chains are strained across many industries due to Covid-19 and recent weather events in the South,” he wrote. “Material availability, staffing shortages and unprecedented demand is impacting our ability to fulfill orders quickly.”
He noted how the company works with its vendor partners to anticipate issues and communicate delivery times as accurately as possible, but “with the volatility of today’s climate, we have not been able to foresee delays as accurately as we once could.” For those experiencing delays, “we apologize for the wait and thank you for your patience.”
In the email, Champeau also discussed what the company is doing to meet the challenges — including adding delivery staff and increasing warehouse space, which he elaborated on with HNN, as well as moves to add new vendor partners, which he wouldn’t elaborate on, noting it’s too early in the process.
On Room & Board’s website, shoppers can see some products marked “new” and “new option,” along with the availability estimates reflecting the wait they may face on new orders. The Jasper sofa, ($1,599) for instance, is the first item on the sofas and loveseats page, listed as a new item. It’s made in North Carolina and available July 29.
Other items HNN pulled up offered shorter delivery estimates, but they still didn’t reflect what many furniture shoppers had come to expect pre-pandemic. The Andre sofa, the second item on the page, is available June 30, while a 72-inch Ventura dining table in white oak ($2,699) is available May 22.
Champeau said Room & Board is a “people-first organization,” and just as when the pandemic started closing things down, and the retailer “communicated effectively to our customers to let them know where we’re at, we felt it was appropriate to do it now, too,” given the latest foam supply disruption. The retailer is broadcasting an explanation of the foam issue and how it could impact deliveries at the top of each website product page, even the case goods pages.
“The whole thing about this for me is leading with a level of transparency,” Champeau said.
Asked if customers may nevertheless be growing impatient and whether the retailer has had to deal with many cancellations, Champeau indicated the opposite was more the norm. He said he’s been touched by all the positive messages from the (the majority) of customers posting on social media as well as contacting him by email.
That said, Champeau also understands some customers may be upset when a purchase is taking longer to receive than what they’re used to from the retailer. Room & Board used to have a 90% in-stock position; a customer could expect delivery back then within a week to 10 days.
Some goods, of course, are still in stock, and that speed is still the case in some cases — but for now, there’s generally a significantly longer waiting period and Champeau said he gets the frustration and understands why some want a refund and say they’re going to look somewhere else.
“And the thing that we tell them is: before you cancel the order, and we respect it if you want to do it, but before you do, go out and see what our competition is doing. Make sure you can find what you want before you cancel your order.”
And most likely they won’t, he contended, because this is an industry-wide challenge, “and I would argue that our competition is probably in a more challenging spot than we are.”
Champeau believes that because 90% of Room & Board’s assortment is made in America, while 88% of wood furniture and 45% of upholstery sold by all U.S. retailers these days is imported. Yes, Room & Board is up against foam supply issues, and some of its domestic sources may face components problems, but it’s somewhat insulated from bigger headaches with the international supply chain today.
“You’ve read it just as I’ve read it,” he said. “The challenges in the ports, the challenge of even getting containers to be able to ship product in through the ports is a significant issue.”
So instead, what Room & Board is finding is that the consumer mulling a cancellation does a little research and ends up changing her mind about walking away.
“The reason we tell them to go take a look first is because if we cancel it right away, they’re going to end up at the end of the line,” he said. “If they’ve been waiting for four weeks and they’ve got another four weeks to go, that other four weeks is a heck of a lot better than what some other (companies) can offer if you go and place an order today. (For a similar take, but from a significant importer, that doesn’t directly compete with Room & Board, competitor, see this interview with Rooms To Go CEO Jeff Seaman).
The good news is, Champeau said the supply chain woes are improving. The retail monitors this by comparing the amount of inbound inventory to its written business every week, “And we have turned that corner,” he said.
“As long as we continue to do that, which we will, we are going to find ourselves in a much better spot with each and every passing week,” Champeau said. “I think if you fast forward (four or six months from now) we are going to be in far better shape than we are today.”
And when that time finally arrives, will the consumer still be there to greet it? Will the appetite for home furnishing still be as strong as it is today?
Champeau predicted there will be some degree of softening. That 35% sales increase the retailer is on track to do, may not hold all year, but he added that the world and the consumer have changed since the pandemic and there is no sharp turn back to the old way of doing things.
Going forward, many businesses, including Room & Board, will have a hybrid work model, he said, letting employees split their work time between the office and home. Even before the pandemic, the retailer’s own customer care team, the voices on the 1-800 number, were set up to do this — work from home and even host virtual and free design appointments from their homes.
“So when Covid hit, we were already there,” he said. “We were able to transition very smoothly, very easily. I think the consumer is going to do the same thing. They’re going to continue to work from home, maybe not as much as they do today.”
As the world opens up, Champeau believes they will, indeed, shift more of their dollars into experiences, such as travel, and entertainment and dinners out. But they’ll also be looking to entertain at home more, too. Some will say, “Let’s remodel our outdoor space and create a beautiful outdoor barbecue area with comfortable seating,” he said.
“Sales are up over 35%. I don’t think we’re going to see that continue, but I do think people realize the importance of home and investing in home. I think there is a lasting change here in how we live and how we work. I really do.”