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New strategies driving Palliser's growth PDF Print E-mail
Written by Michael J. Knell   

WINNIPEG, Manitoba - Becoming smaller and more focused has proven to be a winning growth strategy for Palliser Upholstery, according to its owner and president, Art DeFehr.

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The urban-retro inspired Aviva is part of Palliser Upholstery's new product development strategy. The slim arm and thick-set seating make for elegant proportions, while giving its condo-sized scale a look larger than life. The tight back creates a clean and contemporary look, while the optional lumbar cushions in a choice of accent colors offer both comfort and style.

In August 2006, DeFehr broke up Palliser Furniture, then Canada's largest full-line furniture manufacturer and importer, into five smaller units.

Four of the five - Palliser Upholstery, Casana, EQ3 and Arconas - were unified by a common shareholder, DeFehr himself. The former company's domestic case goods operations were spun off to DeFehr Furniture, owned and operated by his siblings and their children.

The restructuring came in the face of a changing competitive landscape, driven by the rise of the Canadian dollar and the emergence of Asia as a furniture-producing power. Shortly thereafter, the retail environment began to soften, first in the United States and now across North America. 

Palliser had produced upholstery for the mass market. "Today, Palliser Upholstery has become an important supplier of custom leather and fabric upholstery in Canada, the United States and Mexico," DeFehr said. "We have entered a growth period because, during this time, retailers began to recognize the value of a customized domestic supplier."

Although he didn't give volumes, DeFehr said Palliser Upholstery's shipments in this year's second quarter were 12 per cent higher than in 2007's comparable quarter. "July saw a 35 per cent increase," he added.

New retail partnerships

"The switch from a volume supplier to a custom supplier has radically altered our account base," DeFehr said. "Our current account base represents a combination of specialty stores like (the Toronto-based) Chesterfield Shop, and midsized retailers with larger stores such as Jordan's in Boston and HOM in Minneapolis."

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Art DeFehr
He added that Palliser Upholstery also does a lot of custom business with many larger retailers in Canada and the United States, including Sears Canada, The Brick, Haverty's and RoomStore.

"We are finding that some of the majors are experimenting with domestic suppliers again to hedge their China bets," DeFehr said.

Evolving the product

The company has launched key product development initiatives, including a return to its roots with the re-introduction of fabric upholstery in late 2006, which has become one of its fastest-growing categories. Fabric shipments surged 129 per cent during first four months ending 31 July 2008 over the same period in 2007, DeFehr said.

Palliser also expanded its motion offerings from simple three-piece groups offering the basic sofa, loveseat and chair to more complex multi-feature designs offering as many as 20 SKUs in a single grouping. Modular sectionals also were added. This effort was evident at this spring's High Point market with the launch of Great Rooms, a broad offering of sectionals and sofas with a variety of functions and motion features.

Also unveiled was the INSTOCK inventory program, with over 150 SKUs of the most popular styles and colours available for immediate shipment.

John Philips, senior vice president of sales and marketing for Palliser Upholstery, said, "As retailers seek to reduce their inventory risk and consolidate suppliers, they respond well to inventory programs that are good values but still offer custom color choices."

To round out its custom program, the company introduced an import program focused on labour-intensive traditional, premium motion and promotional product.

Rationalizing production

Palliser Upholstery also has adjusted manufacturing, consolidating Canadian production into two plants in Winnipeg, which also house the head office and product development team.

The company currently operates four facilities in Mexico, including one dedicated to supplying cut-and-sew covers to its Canadian plants. The other Mexican facilities serve U.S. retailers, minimizing the impact of the strong Canadian dollar, currently nearly on par with the U.S. greenback.

"Our choice to expand production in Mexico rather than Asia nearly a decade ago is proving to be increasingly effective," DeFehr said, pointing to the long, increasingly costly Asian supply chain. "Mexican production ... is ideally suited to our growing custom-order business with retailers looking for quick delivery, no inventory and limited associated risks."

On the right track

Although Palliser Upholstery downsized its Canadian operations, it still has enough capacity to increase production by up to 40 percent simply by hiring more people. Currently, about 2,000 people are employed in upholstery production in North America.

DeFehr said he's very pleased with the restructuring and repositioning of all the ex-Palliser companies, noting they have strategies "that allow each of them to feel positive about their future."

"The current economy in North America is a challenge for every producer and importer," he said. "However, the economy will eventually become more supportive, and at this time the highly focused individual companies, plus our real estate portfolio, are poised to both survive and prosper."

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