RTA furniture seeks a home in the workplace.

Having already made its ready-to-assemble mark on the home office, furniture manufacturers have their sights set on the traditional workplace.

More and more, ready-to-assemble furniture for the commercial office is blossoming as one of the hottest growth areas for manufacturers.

Small aggressive startups such as Altatech and BoxOffice By Design are standing toe-to-toe with traditional RTA companies such as Bush and Sauder as well as new RTA products made by such traditional case good manufacturers as Steelcase, Herman Miller, Hon, Haworth and La-Z-Boy.

While dollar estimates for this market category range wildly, a walk through the halls of NeoCon '99, the world's largest office furniture trade show, showed that furniture companies are taking this market seriously and are pushing a wide range of RTA-for-the-office products.

Targeting Small to Medium-Sized Companies

Small- to mid-sized companies are the targeted market for most of these new RTA products. This large but competitive market niche is enticing, because these are the companies that have done the most hiring - by percentage at least - throughout the '90s, says Thomas Reardon, executive director of the Business and Institutional Furniture Manufacturers Assn. - International.

"If you look at the Fortune 500, those companies are generally not adding staff, they are consolidating, downsizing or maintaining existing staff levels," Reardon says. "They may be refurnishing their offices, but we haven't seen incremental growth from them adding people. Where we are seeing growth in employment is in the small to medium size business."

Small businesses have limited budgets and their available capital is often earmarked for product development and technology, not "big fancy offices and office furniture," Reardon adds.

The growth potential of these small- to mid-sized companies is another major draw, especially for case goods manufacturers who have the wherewithal to offer products at many price points.

Steelcase's Turnstone Division is one example of the sales punch that RTA products is capable of throwing. Five years ago, Steelcase, the world's largest office furniture manufacturer, saw that its distributors were selling other company's products at the lower end of the market and decided to try to meet that $500 to $2,000 price point. Today, after what the company calls an experimental period, Turnstone is the fastest growing Steelcase division - growing by some 75-100 percent annually.

"We are looking at the emerging growth customer's who will become larger contract customers over time," says John Malnor, product manager for Grand Rapids, MI-based Turnstone.

Jamestown, NY-based Bush Business Furniture is another company that is aggressively eyeing this market. Bush Industries, the second largest RTA furniture manufacturer in the country, exhibited for just the second time at NeoCon '99 and introduced its Corsa 2000 modular office furniture collection - a line with a wide range of options at a relatively modest price.

"We think that there is a fundamental explosion taking place in small businesses and we think a lot of these guys continue to grow through the years," says Dave Messinger, senior vice president of sales and marketing at Bush Business Furniture.

It is not just these extremely large companies that are hunting for commercial office sales. Smaller concerns such as Altatech and BoxOffice by Design are jockeying for position in this market. Altatech has found that eight out of 10 sales of its wood and steel products are made for use in commercial applications and while Altatech is trying to appeal to the small- to mid-range market, the Ohio-based company's client roster includes IBM, Wrangler Jeans and the U.S. Army, says Jim Kandrac, president of Altatech of Brecksville, OH. "They like the fact they can spend $200 for our product and that it can survive a nuclear war," he says.

BoxOffice by Design, a 17-month-old Arlington, TX-based company, expected its product to appeal to the high-end home office user, but they have found that the office furniture market has become a major part of its sales. There is crossover, however, as commercial customers look to place this office furniture in its work-at-home employee's residences.

"We are also finding that companies are buying our furniture to place in their employee's homes," adds BoxOffice by Design president Jeff Nomi. "They find it more cost effective and cost efficient for some workers to work at home."

Steve Latondress, representative for La-Z-Boy Contract furniture, says that while 85 percent of its first RTA product is sold mostly for home offices, "the beauty of this product is it works as well in satellite offices, insurance companies, and businesses that hotel their workers."

Another sign of the growth of RTA office furniture is the amount of commercial office assembly work that is performed by We're Ready to Assemble, a national assembly company based in Atlanta that does half of its business in offices. "We are doing about 50 percent businesses and 50 percent residential," says William Boyce, chief operating officer for WRTA. "We are seeing more small businesses."

Improved Quality and Ease of Assembly

While cost is the most important factor for many corporate buyers and business owners, says Altatech's Kandrac, they are also drawn to the improved quality, easy assembly and increased options and styles that are available in today's RTA office furniture product.

Boyce says he sees fewer damaged shipments and fewer incomplete orders. "I've been in retail 18 years," Boyce says, "and the quality has really improved. I can remember some of the early KD products and there is just no comparison."

This improvement stems in part from better-made products, but also from a more demanding business consumer.

"As price points move up, more is demanded from the consumer," Messinger says. "We are selling some of our commercial office products that are up to the $2,000 range and when a consumer is spending $2,000, they expect a product that is going to perform for many years."

Additionally, today's products are easier to put together, a message that is not lost in the promotional literature distributed by these RTA companies. Altatech proudly proclaims that a single Allen key is the only thing needed to assemble and disassemble its products, and BoxOffice by Design says that no tools are required to assemble its products.

Steelcase, on the other end of the spectrum, also feels that its products' ease-of-assembly is a selling point, even though most of its products are assembled for customers by dealers and distributors.

"If you ask a dealer if he wants something shipped to them fully assembled or RTA, his first response would be fully assembled," says Malnor. "But if you told him his costs would be 10 percent less and it was easy to assemble, then the answer may just be 'RTA.' You have to make a business case of it."

New Styles/and Options

To continue to attract new customers, RTA-for-the-office companies are continually adding to their product lines.

At NeoCon, many companies introduced new options and looks, and that appears to be only the beginning. Altatech currently has 25 skus in its product line, but plans to introduce new items each quarter. Steelcase just came out with its new Payback collection, La-Z-Boy is in the processing of rolling out six new skus, Box Office by Design introduced a new credenza and Sauder just introduced many new options to its two already extensive collections of office furniture products.

"The personality of emerging growth companies has changed a bit and design is much more important," says Steelcase's Malnor.

Changes in Distribution

As businesses buy more and more RTA products, the face of distribution is starting to change - much as it has in the residential furniture industry.

Sales through retail channels such as office superstores and warehouse clubs have been on the rise, according to BIFMA statistics. From 1995 to 1996, sales through these office products "mega" dealers rose from 8.0 to 8.4 percent, while sales through superstores, warehouse clubs and other mass merchandisers rose from 5.9 percent to 6.3 percent. At the same time, sales from aligned contract office furniture dealers declined. Having said this, sales through these dealers still make up more than 50 percent of the total office furniture market.

Reardon says that this subtle shift has been a recent development. "Those office superstores didn't exist 12 to 15 years ago," he says. "These have been big distribution channels for some manufacturers."

Companies such as Sauder and Bush may benefit greatly from this move.

"Distribution is a big advantage for us over case good manufacturers," Messinger says, "because we can get our product in front of consumers in a way that pre-assembled case goods can't. We have a much broader base of distribution than they typically do."

However, companies such as Altatech do not have that advantage and so it has turned to the Internet, catalogs, and a second tier of stores as alternatives to sell its product.

"My biggest challenge as a manufacturer is to get my product to market," Kandrac says.