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Constant reinvention works for Ethan Allen

    

One of the most memorable management meetings I ever had was with Nat Ancell, co-founder of Baumritter Corp. At the time, probably 1972, Baumritter was still based in New York City and had not yet changed its corporate name to Ethan Allen.

Furniture companies were hot investments then, thanks to record housing starts and a high profile public furniture retailer, Levitz Furniture. Levitz, the first furniture warehouse showroom, had many clones and had a lasting impact on U.S. retailing by creating the big box category-killer concept so popular today with Best Buy, Home Depot, Toys R Us and others.

Ethan Allen, founded in the early 1930s as a unionized northern manufacturer of maple furniture, had undergone a metamorphosis in the 1950s when it realized it could no longer compete with the growing non-union southern furniture manufacturers who were using nearby Appalachian hardwoods. It had diversified by acquiring Kenmar and Kling Colonial, but it still needed to differentiate itself from its competitors. The result was the birth of the independently owned Ethan Allen Showcase Gallery stores with the now-gone broken pediment facades.

Its freestanding, single-branded store concept is now 50 years old and continues to astonish the furniture industry with its high gross margins and stable sales and earnings. Ethan Allen's success has resulted in many clones, most of which have learned that the model is not as easy as it looks.

In early September, Farooq Kathwari, president and CEO, made a presentation to investors and it is clear that Ethan Allen is reinventing itself once again. In the past few years, it has introduced 85% of its line in seven new lifestyle categories; invested heavily in its facilities, including its domestic manufacturing plants where it makes 60+% of its products; moved most of its stores to better locations (who else is doing that?); has changed its business model to everyday low prices and is selling through teams; has a no-gimmick consumer financing option at 4.99%; and is about to reveal a new Web site that will allow consumers to get as much or as little help as they need.

Meanwhile, Ethan Allen is increasing its consumer advertising by 11%, has $75 million in cash, is maintaining its gross margins, and 95% of its dealers pay their bills in 15 days.

Because it still controls most of its production domestically, Ethan Allen has less of a worry with currency issues, transportation costs and rising costs in Asia. By the way, it just put in a 5% price increase.

Ethan Allen is not just selling furniture, it is selling solutions. Are you?

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