What The Experts Say

 

WALLACE EPPERSON JR.

Analyst; senior vice-president, Wheat First Securities, Richmond. Specialist in contract furniture industry.

For starters, they're facing some real shifts in the industry -- some helpful, some not. After double-digit growth from 1975 to '85, the contract business hit something of its own recession, thanks mainly to tax reform. Uncertainty about how rules would end up for depreciation and investment tax credits meant buyers couldn't predict their real cost of product. There was a tremendous deferral of buying. So the industry saw a bit of a shakeout and the first signs of a serious consolidation as some of the players got weak and there were buying opportunities.

Consolidation resulted in the loss of lots of independent distribution avenues, making it much tougher to start up in this business today than it would have been three or four years ago.

On the other hand, business seems to have been picking up over the past 9 to 12 months, party due to deferred demand -- though there's still not enough business to go around.

Also helping the contract industry rebound is the well-publicized glut of office space. Because most of our country's metro areas are overbuilt, the logistics of office setup have been transformed. Back in the early '70s, people would get a contract from GM or GE or IBM, and it would be for two and a half years hence, because the building would have to be constructed. Today, with all the space that's out there, moves can take place immediately, putting speed and timeliness of delivery at a premium. It will be a big plus if K-B can be a flexible and fast as it promises.

Now the downside. Like any start-up in this business, K-B will be competing under one significant disadvantage: the inability to have control of its sales organization. The reps handling Keener-Blodee will have a number of products in their bags, which means that too often they'll be thinking about somebody else's product, not K-B's. One of the first things I'd recommend to these guys is to move as fast as possible either toward getting single-bag reps, captive reps, or working toward some form of captive distribution or alliance. Distribution is going to be much more of a key, much more important to the success of their company than they appear to believe. It'll be the single most difficult issue they'll face.

JUSTIN J. THOMPSON

Analyst; CEO of Business Products Consulting Group, Centerport, N.Y., consultants of the contract-furniture industry

This is not a growing market segment. For them to expect they're going to be able to whack 7,100 units out of somebody else's hide is a gross miscalculation. Not minor; gross. I think they've got a big problem with that number.

Other problems: 1) Blodee has done a nice job designing the chairs, but what he perhaps hasn't seen is the need for all the variations -- the whistles and bells -- that a designer will invariably require from a supplier. Unupholstered options, stain-color options, chairs with table arms or armrests. If you don't have a board offering within your product line you greatly reduce your ability to take the market share from somebody else. Keener-Blodee's competitors will be tough -- they can do all those things, and there are plenty of them. Probably 8 or 10 other manufacturers produce chairs that are visually similar, have similar construction systems, and carry about the same price.

2) They'll have a hard time holding "spec." Selling the architecture and design community is only half the job; designers don't order, they prescribe. Then the corporate client's purchasing department places the order. The designer will specify, for instance, "a chair by Keener-Blodee or equal," only to have the purchasing agent sub the job not to Keener-Blodee but to somebody else whose product is close enough.

So the art orientation that starts at the design level doesn't follow all the way down to the purchasing agent and the dealer. At the purchasing level there's a series of influential people that K-B's sales reps have to be sure they're contacting. The reps might sell designers on the beauty of this European design, the integrity and quality of its construction, only to see the hard-won specification slip through their hands when the order is made at the corporate level. It won't happen every time, but the potential is there.

3) Another red flag: why in god's name are they planning to hire an office manager? That's a manifestation of big-company myopia. A company like this needs the principals to be the office managers. It's the principals who need to maintain one-on-one contact with the reps, the designers, the specifiers. They need to communicate their vital interest. The last thing that should do is relegate the day in, day out operation to someone who takes a check at the end of the week and goes home.

Are they going to make it? They have a tough row to hoe. I strongly urge they rethink their sales projections based on the limited depth and breadth of their product line. Even if they do make it, it won't be at 7,100 units year.

CAROL GROH

Designer; founder of GN Associates, a New York City interior-design and graphic-design firm

Design quality has got to come first, and I think their stacking chair of bent wood is quite beautiful; I think it will sell well. The armchair, however, I find ugly. I don't think it's well designed. The stacker is cleaner, neater -- it has visual appeal and functional value. The armchair doesn't. The lacquered chair is interesting, but looks as though it might be uncomfortable because of the low back. Still, I think they've scored with the stacker.

They've done some other things right, too. I like the fact that they realize they've got to spend big bucks on marketing. If you're a new company in this industry, marketing is all you've got. And their approach is very good. You've got to spend to get your name out there initially, and you've go to get your product to the right market -- designers and architects. They seem to realize how important it is to get the right brochures, the right photographs, the right dealers to represent them. Their emphasis on the presentation of their image is smart.

They're overselling the Euro-influence, though. I don't think that many people care about the claimed European connection. Call the designs "bentwood." It's beautiful. Besides, designers can get European products. They're not that unusual. So Keener-Blodee won't make it on the European pitch alone.

If they can really perfect this whole bentwood approach, there's something else they should consider: bringing in well-known designers to do a design, in prescribed materials, for Keener-Blodee. I don't think Blodee himself is the answer to all the world's design needs. The sooner they realize that, the better. More and more companies are going to key designers to do this sort of work for them, and royalties are minimal, around 2% to 4%.

I think they'll do well. They've had experience, and there's no substitute for that.

VINCENT CAFIERO

Designers; principal in Vincent Cafiero Designs, Inc., an Irvington, N.Y., design and consulting firm

They suffer from what a lot of people suffer from: thinking big. It's a real interesting problem. In the process of starting up, a certain kind of thinking is encouraged; the bankers want to see big schedules, you push for big clients, and the tendency is to pump high top-end projections into your plans. Nowhere along the line is someone saying "back off," or that the most important thing in the first year is survival. And in this case I think that danger is increased by Keener's years of experience in a large, successful company. Large companies condition you -- force you, in fact -- to think big. Which is the opposite of what Keener-Blodee needs.

Keener-Blodee can make it, if they can keep things under control.