Rooms To Go Inc. History

Address:

11540 Highway 92 East
Seffner, Florida 33584
U.S.A.

Telephone: (813) 623-5400
Fax: (813) 621-7766

Private Company
Incorporated: 1990
Employees: 3,310
Sales: $650 million (1998 est.)
NAIC:: 44211 Furniture Stores

Company History:

Rooms To Go Inc., a low- to mid-priced furniture store chain, has rapidly expanded to more than 60 stores since opening in 1990. Furniture/Today ranked Rooms To Go as one of the top four furniture stores in the United States, where in terms of sales the company is the fastest-growing furniture retailer. The privately owned company markets its products primarily in the southeastern United States and in 14 foreign countries. The company is organized around the concept of convenience, as implied by the "Rooms To Go" name. Company designers coordinate complete room sets, choosing colors, fabrics, styles, and furniture groupings, which are priced at a significant discount when purchased as a set. Rooms To Go promises customers the convenience of delivery within one week (typically), appealing to buyers who would rather not wait the many weeks or months it sometimes takes the competition to deliver. Chief competitors include Levitz, Kane's, Rhodes, and Roberds.

The company was founded by Jeffrey Seaman and his father, Morty Seaman. Both had worked in the retail furniture store of Jeffrey's grandfather, Julius Seaman, who founded a Woodbury, New York-based home furnishings company in 1934. While still in school, Jeffrey spent ten summers working for his grandfather, and after graduating from college he continued with the family business, becoming vice-president by the time he was 23. His father, Morty, an astute entrepreneur, was president of Seaman's at that time. In 1988 Seaman's Home Furnishings was taken over in a leveraged buyout by Kohlberg Kravis Roberts & Co. for $350 million, burdening the company with substantial debt. Jeffrey was only 28 at the time, but shouldered a large portion of the buying duties for the company, and along with his father developed an overseas program during Seaman's restructuring phase. According to Deena Van Steenburgh of Furniture Retailer, "Father and son stayed on board briefly as chief executive officer and president. But in February 1989, four months after a major financial restructuring designed to reduce the company's debt burden, Kohlberg Kravis Roberts replaced the Seamans with Matthew D. Serra, former president and CEO of the G. Fox division of May Department Stores." The company was crippled by debt until it emerged from bankruptcy in 1992.

1990: Fast Furniture

By then, Jeffrey Seaman had decided that it was time that he establish his own business. He envisioned a different merchandising approach and was anxious to combine his past experience in the furniture business with a new concept for a retail operation. Before he began developing his ideas he spent a significant amount of time researching various retail outlets across the country. He told Van Steenburgh: "I visited not only furniture retailers, but clothing retailers, toy retailers, and department stores. I was really impressed with The Limited and The Gap. I wanted my stores to look very 'Gappish'--uniform, colorful, interesting and open." He decided to adopt a slogan: "Buy a piece, save a little. Buy the room, save a lot!"

Seaman knew that he wanted to run at least a medium-sized business and would need a team of experienced help to do so. Comfortable with sharing authority and information, Seaman put together an impressive executive management team which included Gerard Benatar, former vice-president of furniture fashion at Macy's in New York and Barker Brothers in California; Jeff Finkel, former vice-president of real estate at Toys 'R' Us; and Harmon Jones, former director of construction for Bally Health Club and Spas. Seaman's impressive reputation within the industry persuaded the seasoned executives to accept the risk involved in starting up a new business. Morty Seaman, although not involved with the day-to-day operations of the business, assumed the role of advisor to his son, helping with strategic decisions, marketing, and some of the buying and planning. The elder Seaman told Van Steenburgh that Rooms To Go will succeed because his son is a "born merchant" with a simple business philosophy: "work." For his part, Jeffrey Seaman has stated that the almost immediate success of the company could not have been possible without his father's input, according to an interview with Young Mi Kim in High Points.

Although the Florida market was intensely competitive, Jeffrey Seaman decided to locate his headquarters and first stores there because of the availability of good, affordable locations--and the desirable living environment. He knew that he wanted to open a lot of stores quickly, and planned to begin with approximately 18 in west and central Florida. Seaman hired Jeff Finkle to head the demographic searches and real estate acquisitions. Finkle was on the lookout for land or vacant stand-alone buildings near malls or areas with heavy shopping traffic, preferably in areas near other major retailers. Fourteen locations were targeted for 1991, including those in Tampa, Lakeland, Ft. Myers, Orlando, and Sarasota. The first store opened in Tampa in May 1991, and by the end of the year 13 more stores had opened, all located no more than 125 miles from the Lakeland warehouse, making prompt deliveries possible. Sales quickly met expectations, with the company netting $30 million in the first year.

As might be expected of a young businessman of the 1990s, Seaman knew from his prior experience at Seaman's that the design and implementation of an efficient computer system would be integral to the success of his new business. After presenting his business plan, Seaman hired a small Cambridge, Massachusetts software firm to help design and build a complex system that could adapt to a fast-growing business with a fast inventory flow, specifically designed to accommodate the delivery of complete rooms. The system took a year to write, "but it was worth it," Seaman told Young Mi Kim, adding, "Where the computer system at Seaman's cost millions, ours is more efficient and powerful and cost us a few hundred thousand."

Recognizing that his talents in merchandising did not assure that he would make appropriate image and fashion decisions, Seaman turned to Gerard Benetar for fashion and design sense. Benatar and his team concentrated on the selection of stylish contemporary and transitional upholstery, case goods, accessories and lamps, and finally, the occasional pieces which are all combined to form room settings. Rooms To go purchased from High Point, Alexvale, Barclay, Bassett, Florida Furniture, Klaussner, Natuzzi, Palliser, Pilliod, and San Giacomo, among other domestic as well as international vendors. More than half of the company's case goods were designed by Seaman and his buyers on paper, involving them in a watchful attitude toward consumer trends. Working with short margins, Rooms To Go could offer savings to those customers who chose to buy rooms in packages. The company bought and sold large quantities of a few items, but offered rugs and other accessories to completely furnish a room. Rather than present a great variety of styles--or special orders&mdash most furniture retailers did, the company offered options on popular styles&mdash-ough to satisfy roughly 75 percent of customers who shopped in the mid-priced range.

The stores were designed so that customers could easily view all of the merchandise from any vantage point in the store. The interior architecture was well-lit, clean, and designed with mirrors and other elements that accentuated the feeling of bright, contemporary openness. Seaman and Benatar were aiming for an ambiance that appeared like a cross between Ikea and The Gap: lots of glass and an airy environment. They also focused on the arrangement of their displays, hiring display coordinators and teams assigned to particular stores. According to Young Mi Kim, Seaman wanted customers to enter a Rooms To Go store and avoid what he termed "the shark attack." He explained: "When a customer walks into a furniture store, she'll see six guys with ties that are too tight, ready to pounce." Seaman decided to concentrate efforts on making customers comfortable, including his policy of having staff members attired in colorful, casual golf shirts.

Innovative advertising was produced in-house to reflect the company's goals. Seaman deplored the strategy of fake sales (marking up prices, then advertising that furniture was marked down for sale) that he believed gave the industry a credibility problem. He contended that consumers feel "ripped off" by furniture retailers, some of whom have perpetual "sales." He also recognized that consumers have come to expect buying at a bargain price. With that in mind, he decided to make it a company goal to convince customers that they would get great value from day one, and coined the motto,"no fake sales, no phony discounts, no delivery fairy tale--and assistance, not persistence, from the sales staff."

1993: Rooms To Go Needed Room to Grow

By 1993 Rooms To Go had outgrown its 480,000-square-foot distribution center and headquarters in Seffner, Florida. The company added another 105,000 square feet to the center and hired 100 more employees to run it. They planned expansion of its 27 stores to reach 35 by the end of 1994. Seaman told Katherine Smith of the Tampa Bay Business Journal that "he was somewhat surprised that the company already needs more room," acknowledging that Rooms To Go had been too conservative when it built the distribution center. Although the company image targeted a youthful audience, the prepackaged room concept had proven popular among snowbirds in Florida who apparently had better things to do than shop at numerous locations for furniture. The company succeeded in merchandising where competitors such as Dayton, Ohio-based Roberds, Inc. (offering a similar prepackaged concept) began reporting dropping profits. In preparation for more inventory to supply more stores, in 1995 Rooms To Go added an additional 185,000-square-feet of warehouse space to its Tampa International Center industrial building in Ybor City. By the early part of 1996, Rooms To Go had mushroomed into Florida's fastest-growing furniture retailer, and Seaman felt that the company had saturated that market. A new distribution center was opened in Atlanta to support the 25 new stores opening in the surrounding areas. While expanding into Atlanta, Georgia; Charlotte, North Carolina; and Chattanooga and Nashville, Tennessee, management also planned to expand its international sales operations.

1996: Global Expansion

Jeff Knott, former vice-president of Johnson & Johnson, and president of Jim Walter International Corporation of Tampa, was hired by Seaman to head the Rooms To Go international operations. Through licensing agreements with individuals or businesses, the company was soon selling its furniture in Turkey, Costa Rica, Honduras, Guatemala, and Columbia. Plans for a new venture into the Bahamas were realized in mid-1996. Seaman felt that there was a tremendous call for American products in the overseas market and anticipated a huge success abroad. A growing middle class in the Latin American region was contributing to a rise in home ownership and the demand for affordable furnishings&mdash′eferably American styles and labels. New trade opportunities with eastern Europe were also fueling a growing middle class in Turkey. Rooms To Go sponsored its licensees by helping them locate a space and laying out the stores for them, using tested company blueprints. Most of the international stores averaged 8,000 to 10,000 square feet, compared to the domestic scale of 18,000 to 25,000 square feet, which helped the new businesses keep overhead low. The company also helped with advertising abroad. Seaman explained to Carole Cancy of the Tampa Bay Business Journal that "We're letting them use our whole process," adding, "It's similar to franchising, [but] in franchising you have a little more control. We're assisting them, not commanding them."

1997: New Kids' Room Concept

Fort Lauderdale was chosen as the new testing ground for a spinoff concept that would exclusively handle children's furniture, including low-end, custom orders, and high-end brands such as Stanley. Since no other large chain was offering stores just for children's furniture, Rooms To Go was hoping to lure everyone who had children. Seaman explained: "What really convinced me we should do this was when I went shopping in GapKids, and I saw that there were three times as many people there as in the regular Gap next door," according to Cheryl Kane Heimlich of the South Florida Business Journal. At that time the only South Florida competitor specializing in that segment was the Miami-based retailer Falls Leather Gallery, who changed the name of their children's outlet to Kids & Teens Rooms. Falls Leather Gallery owner Eric Salem told Heimlich that "The Rooms To Go people are clever folks." He added, "They've watched the demographic studies and trends, and they know the youth market is a good market." Critics of the Rooms To Go expansion into the youth segment had misgivings concerning the company's ability to maintain its price point, suggesting that the quality of furniture sold at value prices would not stand up to the wear and tear of active children.

The first of the youth specialty stores, called Rooms To Go Kids, was opened in the Atlanta suburb of Marietta, Georgia. Making the most of its established customer base, the 8,000-square-foot youth store was attached to the existing Rooms To Go store, but was designed with a separate entrance. The stand-alone prototype featured 20 displays of bedroom sets, play tables, and other colorful pieces, accented by bright wallpapers, paint schemes, and complex curves and angles. Two more pilot stores were scheduled to open in Fort Lauderdale, Florida, and Duluth, Georgia, by the end of 1997. Noting that "selling" was probably the biggest difference between offering furniture for adult versus child use, the company concentrated on special training for its youth store salespeople. It was understood that more time would be needed in order to work with an entire family, explaining safety issues and home-assembly processes. The interiors focused on a comfortable environment with televisions strategically placed throughout the store, featuring movies, news shows hosted by kids, and video games. Suppliers for the youth line included Stanley, Catalina, Lehigh, Sunny Mfg., and Rosalco, and the prices carried a broader range than in the adult furniture lines--package deals were also offered as in the adult category. By the time that plans were being made for an additional eight youth stores in the Florida market, Seaman and his managers had decided to increase the kids-store floor space to approximately 10,000 square feet. With the 1990s rise in the baby population the company expected the youth business to continue climbing for another decade or more.

Rooms To Go signed a 1997 joint venture agreement with Jusco Company, Ltd., a Japanese operator of department stores, supermarkets, and other businesses. The first Rooms To Go Kids store opened in Tokyo in 1998, with plans for full-line stores to open in the following year. Under the agreement Rooms To Go received royalties on sales and a buying fee. For its part, Rooms To Go helped Jusco develop its merchandise, 60 percent of which came from U.S. suppliers. If the venture proved successful enough, the company planned to expand throughout locations in Japan. According to Clint Engel of Furniture Today, "The Japanese stores will focus primarily on the middle to upper end of the Rooms To Go price spectrum," adding, "Japanese families live in much smaller houses than Americans but tend to spend more on individual pieces of furniture."

Expanding westward, Rooms To Go launched plans for a large store and youth store in Dallas, Texas, scheduled to open in 1999. A distribution center was on the drawing board to serve that market, which was expected to grow into several stores. The year 1998 was another good one for Rooms To Go, showing overall growth of 20 percent over 1997 revenues.

Poised for the next century, Seaman had a firm grip on the importance of brand building within the trade. He told Kimberley Wray of HFN that in the furniture industry, "the retailer has more opportunity than in almost any other business to build a brand because brands at the manufacturing level are virtually nonexistent. Think of Crate & Barrel on a busy day," he continued. "Do you think the customers recognize a single brand that Crate & Barrel carries? Can anybody in this room name one? Of course not. The customer is buying Crate & Barrel. That's the brand."

Rooms To Go Inc. History

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