What sold Warren Buffett, the nation's preeminent investor, on Barry and Eliot Tatelman and their furniture business? The brothers' fun-loving spirit wasn't the only thing, but it didn't hurt.
What sold Warren Buffett, the nation's preeminent investor, on Barry and Eliot Tatelman and their furniture business? The brothers' fun-loving spirit wasn't the only thing they had going for them, but it definitely didn't hurt.
Who could deny that buying a new couch or bedroom ensemble ranks high on the list of life's unpleasant chores? Even those in the home furnishings business gripe about it. Shopping for furniture is "like buying a used car," says Gerald Birnbach, chairman of the Rowe Cos., a large manufacturer based in McLean, Va. Hershel Alpert, a successful furniture retailer in Seekonk, Mass., says it's like "going to the dentist." To appreciate what Barry and Eliot Tatelman have accomplished at Jordan's in metropolitan Boston, you have to remember that they are selling furniture. How can they be making so much money -- and having so much fun?
By breaking every rule of the business. In the extremely price-sensitive furniture industry, customers are typically wheedled into opening their wallets during "one day only!" or (the soft-sell) "this week only!" sales. But Jordan's Furniture maintains a single-price policy and never holds sales. Instead of running the standard newspaper ads for a "year-end clearance!" with "an additional 10% off our lowest tagged price!" Jordan's eschews newspapers and relies solely on tongue-in-cheek radio and TV commercials, which never mention an item's cost. Indeed, inventory items are never named in the Jordan's Furniture advertising. Instead, the Tatelman brothers -- who are known throughout metro Boston simply as "Barry and Eliot" -- are selling an image of their stores and themselves as honest, reliable, and amusing.
Their pitch is working. Although the Tatelmans say they spend only 1% to 2% of their gross revenues on advertising (far below the industry norm of 6%), just about everyone in their market area knows who they are -- and, what's more, seems to like them and to find their prices fair. "The number one reason for their success is that people believe in the company," says Britt Beemer, an industry analyst with America's Research Group, in Charleston, S.C. "The more you get people to believe in the company, the less you have to keep lowering and lowering and lowering your prices to get people to buy from you." Gross revenues at the four Jordan's stores were close to $250 million last year, and with sales of almost $1,000 per square foot, Jordan's led an industry in which the average store racks up between $150 and $200 per square foot.
In October the Tatelmans received the furniture retailer's ultimate accolade: a buyout by Warren Buffett's Berkshire Hathaway, in a complicated deal said by an inside source to be worth about $225 million, all in cash. Since Buffett's financial acumen is unrivaled and his reputation for friendly, hands-off management is unblemished, other retailers viewed the news with a touch of envy. As Alpert says, "Everyone's dream in life is to be bought by Warren Buffett."
So why doesn't everyone simply copy Barry and Eliot? Because the Jordan's stores so strongly reflect the brothers' personalities, the Tatelmans' strategy can't be reduced to a formula. "Their philosophy has permeated every crack, crevice, and corner of their operation," says Brian Carroll, online editor of Furniture/Today, a leading trade publication. Like the brothers, Jordan's Furniture is unconventional, fun-loving, and ever changing. "They are constantly looking for ways to improve the business," Alpert says. "If you try to chase them, you find you have to go in 20 different directions."
Turning the mouth-drying prospect of furniture shopping into a source of entertainment is what the Tatelmans are famous for. Last fall, when they walked me through their newest store, in Natick, customers were being waylaid at the entrance not, as you might expect, by a fast-talking salesman itching to close a deal but by a friendly young woman handing out strands of beads. The necklaces were Mardi Gras attire, in keeping with the decor of the central hall of the 130,000-square-foot store, which is a theme-park version of Bourbon Street. As often as every quarter of an hour, animatronic versions of the Beatles, Elvis Presley, the Supremes, and the Village People pop out of shuttered rooms onto balustraded balconies to serenade real-life shoppers and an animatronic Barry and Eliot. On a busy day throngs of parents walk through the store, wheeling children tucked into strollers that resemble taxis. The shoppers peer at the re-creation of an old-time movie house, watch the lace curtains blow in the simulated Gulf Coast breeze, laugh at the animatronic fortune-teller, and maybe (or maybe not) buy a piece of furniture from one of the lovingly detailed and "accessorized" display rooms.