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Legacy was a pickup by Samson. Photo: Samson

WOODEN FURNITURE manufacturer, retailer and distributor Samson Holding (HK: 531) has its financial house in order, and hopes to make yours more liveable as well with its growing offering of upscale tables, chairs, bedsets and cabinets.

The Hong Kong-listed firm believes in running a tight ship – literally -- when it comes to cost controls.

Samson manages to save on shipping and delivery costs by transporting its China-made bedroom, living room and dining room sets to retailers in the US using its “Consolidated Direct Container” model.

It mixes seaborne freight specifically for each awaiting customer, which is one of its competitive advantages compared to its Asian peer group
s.
  
Samson HoldingJan-Jun 09Jan-Jun 08% change
Revenue (USD)177.5 mln217.4 mln(-18.4%)
Net profit16.3 mln19.3 mln(-15.9%)
Margins9.18%9.00---
  
The company was able to keep its head above water simultaneous with the challenging consumer story in the US – its major client country – that is all the more impressive, as NextInsight, Aries Consulting and a group of Greater China fund managers recently learned in a meeting with a senior executive.

Rearranging the Furniture

Most consumers are unaware of the complexities that go into shipping very different pieces of furniture to different retailers at different ports of call.

That’s where Samson comes in.

The furniture designer, manufacturer, distributor and retailer has learned how to save on shipping and delivery costs and share
s this better margin with its customers. And when we are talking about a Chinese-based firm shipping its products by sea to the depressed North American market, this cost-cutting strategy represents a significant advantage over the competition.

“For container vessels shipping 4,000 containers, our 40-foot equivalent containers are part of our Automated Storage and Retrieval System (ASRS), and we use our Consolidated Direct Container (CDC) model, where orders are specifically mixed for each customer. On top of that, our US warehouses provide added flexibility,” the executive
said.

Saving money was the best way for a company targeting the tentative US consumer furniture market to make more money, and get ahead in a very competitive
industry.

And Samson had no plans to shift this target market anytime soon.

“We aim to be a leading wholesaler in the US residential furniture market, and one of the key players in the global furniture industry.”

Samson has built up its self-owned branded business in a hurry, acquiring several established global names in the space of just a few years.

Some include Universal Furniture, Willis & Gambier, Pennsylvania House and Craftmaster Furniture Inc, besides its self developed brands, Legacy Classic Furniture and LC Kids.

“But there is plenty of room for expansion in the US, as it's still a very fragmented market, given that
the top 10 manufacturers account for only 18% of the market, according to the latest available data. We only have a less than 1% market share in a marketplace with a scale of 42 billion usd on the manufacturing side, or 85 billion usd on the retail side,” he said.

Yet even with this less than single digit market share, which still represented around the eighth biggest market share at last count in the US – the world’s biggest furniture market -- Samson and its umbrella of brands only commanded a less than single-digit market share.

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Setting the Table: Samson is keen on both cutting costs and boosting market share. Photo: www.samsonholding.com

And although Samson was eager to boost its brand name recognition and increase the number of names in its group, it still realized that for the meantime, Original Equipment Manufacturer operations still enjoyed bread-and-butter status for the company.

“We are still essentially an OEM firm for US and European brands.”

And this was a substantial accomplishment in itself, as Samson still produces high quality furniture for the US market that eventually sports established names.

The company also enjoyed close distribution channel relationships with heavyweight US retailers.

“We have both own-brand and OEM business operations. And we plan to increase our market share for both,” he said.

The long-term goal was to become
the favorite and most-preferred OEM for high-end customers while promoting brand popularity.

We have clearly defined and focused brands that aim to be complementary to that of our OEM customers. As a major player in China, we do benefit from scale when sourcing our components, which we think will continue to be one of our core competencies since outsourcing is getting more and more important in today’s market. Both our OEM customers and our brand operations will continue benefiting from this.”

The executive said the company was currently No.1 in the Taiwan market, and was one of the top three wooden furniture exporters from China.

It was also well positioned on the capacity side to meet any demand surges.

“We have plants in both Guangdong and Zhejiang provinces (in China), with total production floorspace of 1.4 million square meters employing over 7,000 workers.”

As for the target demographic, currently it was still the US middle class – with enough spending power wiggle room – and living space – to accommodate Samson’s product line.

“Our OEM product sets (dining room, living room, bedroom) sell for between 999 usd to 4,999 usd. And we expect our end customers to have a living space of, ideally, 150 square meters. So we realize not everyone can afford our products,” he said.

And in mainland China, its home market, as far as target consumers were concerned – space, as well as expendable income – were equally limiting factors, as homes and apartments in China were much smaller on average than their western counterparts.

“We therefore consider introducing new brands with smaller versions catering to the higher-end market,” he said.

Warring States Period

With low-cost production facilities and enviable labor costs all located in the world’s most populous country, why didn’t Samson take the Chinese domestic furniture market more seriously?

“We are aggressively evaluating China
’s domestic marketwith new brands,” the executive said.

But he said China was a very volatile and fragmented market at this point, and Samson was taking every step cautiously.

He said Samson currently saw three engines of growth.

The first was
a stabilizing US housing market, which had carried the firm so far.

“We see a slow and bumpy recovery in the housing market, and most
is from government’s stimulus program .”

The second engine of growth was mergers and acquisitions.

“In this global environment, there are alot of cheap assets we can acquire. But our acquisition strategy is to acquire brands, not to simply boost capacity.”

Finally, he said that eventually Samson could not ignore China, but timing was ever important in terms of full market entry.

“What is happening now in the China wooden furniture market is like the Warring States Period. There are no major established domestic names and some players are looking to boost market share at any cost – including quality compromises. That is not for us,” the executive said.

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