Business issues  



What are the Secrets to Profitability?

From Supplier To Manufactuer To Retailer To Consumer, Profitability Has Very Often Been Perceived As The Best Deal Or Great Discounts. Is That All It Is?

By Joseph Carroll

We live in a discount world. Everyone likes to think they are ‘getting a deal’ when they purchase something. But what is profitability really about?

We most definitely live in a discount world. Everyone likes to think they are “getting a deal” when they purchase something. Manufacturers squeeze suppliers for lower prices, retailers demand lower prices from their vendors in the name of obtaining certain price points and the end user, the consumer, has been conditioned to only buy furniture when there is a sale or the promise of a discount.

Is it possible that there are manufacturers who have learned the secret of how to sell their product without discounting and still grow their business while maintaining strong profit margins?

The answer is yes. It is indeed possible and we can learn from two of the best: a Norwegian manufacturer and an American manufacturer-importer.

Ekornes is a manufacturer of reclining chairs and motion furniture. Stickley is a manufacturer of high-end quality furniture, best known for its iconic mission-style furniture. There is a connection between the two companies. Stickley has a chain of retail stores that carry the Ekornes Stressless chair. Both companies are highly successful and, most importantly in this economy, profitable. I asked both companies how they had achieved their success and what lessons we could learn from them. Their answers were almost identical.

1. FOCUS.
Don’t try to do anything that someone else has done before and keep improving what you are already good at.

2. FIND A NICHE.
Find a niche and be the best at it. Ekornes doesn’t try to compete with the entire recliner market. It builds one basic chair, called the “Stressless”. It sells the comfort of the chair, not the price. They position their product so that people can understand how its best feature, such as comfort, is different from the competition.

Price then becomes secondary. Stickley’s niche is its name and reputation. They realize that even though their product has many imitators there will always be customers who want the original because they perceive it to be the best. Stickley believes that once you find your niche you will always be protected as long as you continue to deliver quality, value and service.

3. A GOOD MARKETING PLAN.

Provide lots of support for your dealers. Make available good product literature and visually pleasing displays. Understand your customer’s needs. Consumer taste is changing all the time so you have to include that in your product development.

4. GOOD MANAGEMENT.
This is more critical today than ever before. Amini Audi, Stickley’s owner, is a talented businesswoman and a strong leader. Her now deceased husband, Alfred, was strong in finance and design. Their son, Edward, who was recently named company president, is a graduate of North Carolina State University’s School of Furniture & Design. Ekornes uses the latest in robotic technology to achieve precisely-made furniture and manages with the “open door” approach. Any worker can visit any manager anytime without an appointment.

5. GOOD PEOPLE.
Education is not the only important requirement. Behave in a humane way with your fellow employees (all Ekornes managers take psychological tests), let your managers hire the people who work directly for them, and then share part of the annual profits with everyone in the company. Stickley also believes in rewarding employees with public praise as well. “Raise the bar and people will reach for it.”

6. INVEST IN TECHNOLOGY.
Ekornes uses more than 50 robots in its factory, costing between US$100,000 and $250,000 each. Each robot is programmed to do multiple tasks more efficiently than any human can do on an assembly line. Has this cost the workers their jobs? No, not at all!

7. BUILD RELATIONSHIPS WITH CUSTOMERS.
Both companies believe it is important for their customers to trust them and to have as much knowledge of their product as possible. Both bring dealers to their factories several times throughout the year.

8. THINK LONG-TERM.
Ekornes’ philosophy is “In 10 years, every Ekornes dealer will have a better product, with more functions, more features and in the latest styles.” Our designers realise that people have different tastes and incomes; we design for what we believe will be their future needs.

9. TAKE RISKS.
Both companies recommend that manufacturers should make sure they have streamlined their businesses, invested in technology, reduced overhead and learned to operate with a leaner management. The most important thing is to define your goals, decide who you want to be and then surround yourself with people who can help you get to where you want to go.

Understand your customer’s needs. Consumer taste is changing all the time so you have to include that in your product developments


Joseph F Carroll, former publisher of Furniture/Today, is now president of McNeill Communications, a High Point based agency specialising in marketing, advertising and public relations.