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DANBURY, Conn.-In the biggest push yet by an American home furnishings company, Ethan Allen announced last week it will open at least one store in China next year.

Ethan Allen is teaming with Markor Furniture, one of the largest Chinese case-goods manufacturers, in a two-pronged retail program that will feature products from both suppliers.

The first store is due to open in Beijing by the summer of 2002, with an unspecified number of units opening afterwards.

Farooq Kathwari, Ethan Allen's chairman, said he's aiming at China's fast-developing middle class.

"While as a percentage of the total population [the middle class] is small, in terms of numbers of households, it is increasing in a major way," Kathwari said.

"That is our target market."

Kathwari described the retail concept as "two stores in one." The two stores under one roof will be denoted independently as Ethan Allen and Markor.

"Both of them will be very distinctive and branded and marketed separately," Kathwari said.

The American furniture industry already has a presence in China with a Thomasville Furnishings store in Shanghai.

"Markor is one of the most respected of the Chinese furniture manufacturers," said Jerry Epperson, managing director of Mann, Armistead & Epperson, an investment firm based in Richmond, Va. "It's a bold move for Ethan Allen to align itself with Markor now as China strives to create a middle class. A retail presence in the wealthier Chinese cities is a natural for them."

Each Ethan Allen store will be stocked with a mix of furniture -- some made in the United States by Ethan Allen, some made by Markor to Ethan Allen's specifications. The rest will be outsourced to other plants in the Philippines and elsewhere.

"We will be using our best resources," Kathwari said. "But initially, a lot of it will be coming from the U.S."

The Markor store will carry furniture made by that company, but Ethan Allen will be involved in the development of the Markor brand and identity.

The Ethan Allen product marketed to the Chinese consumer will be basically the same that appears in the catalog, according to Kathwari.

"We have a fairly international program now, with all the changes we have made in the past few years," he said. "As we develop more products, it will represent the best of Ethan Allen, which we think makes sense in China."

Ethan Allen has stores in 12 countries outside the United States, including Taiwan and Japan, and sales are strong in the Asian market, he added.

"Styles have become fairly international," Kathwari said. "Clothing has become the same. If you go to Beijing, it is a very cosmopolitan city, and so is Shanghai. It's like Boston, New York and Philadelphia combined. There are a tremendous number of malls and shopping centers."

The Chinese live in notoriously compact living quarters, but Kathwari compares those living arrangements to those in major U.S. cities.

"We have three stores in Manhattan which are doing well," he said. "Most of our products in the past few years have been scaled smaller. In fact, we are one of the few people left in America that are making smaller-scaled furniture. Half of our business is now being done in the casual, contemporary lines.

"You just have to think of China as Manhattan or another urban area in the U.S. There will be product collections that make sense for the China market."

The Ethan Allen concept of targeting lifestyles will be a major draw, Kathwari predicted.

"Our concept is there to help consumers have beautiful homes," he said. "For that you need a good environment in the store, you need good people, you need good product, you need style and value. We have not found any difference in peoples' needs all over the world. They want value and service, and they don't want a tremendous amount of options. They want enough so that they can make a decision."

The service element provided by in-store designers will be an important part of Ethan Allen's strategy in China, just as it is in the United States, Kathwari emphasized.

"In the U.S., we have 3,000 designers at work in our stores, and they make house calls," he said. "That's what we are going to do in China."

Why the interest in Markor, though?

"Markor is a leading furniture manufacturer in China," Kathwari said. "Their interest is to be in retailing there, and to be somewhat vertically integrated, as we are. So from that perspective, we have that in common. They are a public company, and they have the resources and people to do it. With our knowledge and our programs, we thought it was a good mix."

Markor, with three plants in China, produces numerous lines of residential case goods that are exported to the United States and sold under private labels.

Michael Spece, vice president of the import division for Hooker Furniture and a frequent visitor to China, has high praise for the Markor operation and for Richard Feng, chairman and chief executive officer of Markor. He described Feng as a first-class entrepreneur who runs a top-notch operation.

One Markor factory is located in a remote part of China and is accessible only by flying over Mongolia.

"It's freezing cold in the winter, and how they can manufacture furniture in that climate without heat in the facility always amazed me," Spece said. "He took that particular factory public and made millions of dollars just two years ago."

What's up at Ethan Allen

The company is partnering with Markor Furniture, one of the largest case-goods manufacturers in China.

Stores will be stocked with furniture made by Ethan Allen and Markor.

China's developing middle class is being targeted.

Ethan Allen already has stores in 12 countries, including Taiwan and Japan.
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Author:Kunkel, Karl
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Date:Jun 4, 2001

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