Clint Engel
NAPLES, Fla. — At Furniture/Today’s first Leadership

Conference in 1997, Ethan Allen Chairman and CEO Farooq Kathwari was honored as Leader of the Year for taking the vertically integrated retailer-manufacturer to new heights.

A sweeping reinvention, begun some six years earlier, had transformed Ethan Allen into a fresh face earning increasing profits. By the end of 1997, nearly 90% of its stores had been replaced or overhauled with a new contemporary facade, and over 85% of its line had been remerchandised with more casual looks.
The cupola-topped, Early American-style Ethan Allen was no more.

Nine years later, Kathwari told the latest Leadership Conference that the 75-year-old company, with annual sales of over $1 billion, is just getting started.

Reinvention is a constant at Ethan Allen, he said, as he described some of the company’s latest moves.
Retail goes to extremes

Some say the world has changed more in the past 10 years than in the prior 50, Kathwari said.
He called today’s retailing world one of extremes, with big-box operators and smaller “solutions-based” specialty stores getting the lion’s share of business. Manufacturing, meanwhile, has gone global, and a technology explosion is changing consumer attitudes, he said.

Luxury brands are becoming more available and attainable by more consumers. In such a world, change is “something which we have to embrace,” he said.

The latest manifestation of reinvention at Ethan Allen is a focus on building and promoting the chain as the place to go for design solutions. Stores are now “design centers,” and such emphasis has been placed on hiring design talent that Kathwari has recast himself as “chief recruitment officer,” signing off on each of the 1,200 designers hired over the past 15 months.

He said he spends at least one day a week on recruiting, helping to attract and retain the most qualified people, empowering them with the knowledge they are important enough to receive his personal authorization.

That, he said, has helped Ethan Allen cut its turnover — typically among retailers’ highest costs — in half.
Kathwari said thousands of people who study design graduate each year, only to find few good opportunities to work in their field. “They’re passionate,” he said, and the company decided, “We will create a structure that encourages these people to work at Ethan Allen.”

They’ll love their jobs, he said, and that will build business for the 306-store chain.

A few years ago, Ethan Allen reintroduced an “everyday best price” strategy in a world of no-no-no promotions and deep discounting. Kathwari said the move is paying dividends, creating a framework for providing solutions and services without focusing on price.

Second, he said, it fostered an environment for attracting the right employees — the creative types who want to work in design but don’t like the credibility issues that come with constant price changes.

80% of line new

Meanwhile, Ethan Allen has changed about 80% of its line over the past three and a half years to reflect its design emphasis, offering even more modern and “classic furniture with a modern perspective,” he said.
Design details have been added and quality raised, moves that wouldn’t make sense if the company hadn’t developed the design team to go with them, he said.

Ethan Allen continues to open more stores, with roughly half its stores now corporately owned, accounting for about 60% of total volume. Ten years ago, 90% of the network was operated by independent retailers.
The company will continue to migrate existing stores to the new design center format — 18,000- to 20,000-square-foot units in better locations.

“Today, you’re either in the right place with the right structure or you’re out of business,” Kathwari said.