Steinhafels is one of the most recognized names for furniture in Wisconsin, but the 80-year-old company isn’t resting on its legacy.
The company emerged from the recession in growth mode including three new locations in former American TV buildings that have been or will be completely renovated at a cost of about $4 million each. The Appleton store opened in time for Black Friday, the Oak Creek store opened in February while the former American on the Madison’s East Side likely won’t reopen as a Steinhafels until late 2016 or 2017.
The company plans to relocate its Greenfield store and in the last year has completed a $1.5 million renovation of its West Side Madison store and a $1 million remodel of its Kenosha store.
Steinhafels also opened a 101,000-square-foot store in Vernon Hills, Illinois, and a mattress-only store in Rockford, Illinois.
Gary Steinhafel is president of the company based on a 60-acre parcel that is home to its corporate headquarters, a warehouse and distribution center, and a 120,000-square-foot store at Interstate 94 and Highway F in Waukesha.
Q: How did the American stores purchases come about?
A: We were contacted by American in early January (2014) prior to their announcement on Feb. 17 that they were closing. We signed confidentiality agreements and they shared with us their plans to close their stores. Doug Ruehl really wanted to protect as many of his employees as he could so he offered us the opportunity to purchase his appliance business. We evaluated that and he also shared with us that they would be selling their existing locations. So for about three weeks, we really analyzed the investment of either purchasing the appliance business and/or the real estate and we decided we wanted to stay focused on what we were best at and that was retail furniture.
Q: What does each store add to your company?
A: In the case of Appleton, it represented a market that we were not in. In the case of the East Side of Madison, we have been planning to build a store for the past 10 years. We currently own a 14-acre site near East Towne Mall, and we’ve been approved by the city for a 100,000-foot furniture store, but when the economy tanked in 2008 we put our expansion plans on hold and fortunately we had a lease in the East Towne Mall. We have extended a lease (on the 20,000-square-foot space) numerous times. In Oak Creek, we didn’t really have an interstate presence. All three locations appealed to us because they were very successful long-term American stores. They were destination stores over many years. They had high visibility, and they were great locations.
Q: Is Madison a good market in which to sell furniture?
A: Madison is really the best market in Wisconsin. Wisconsin is a $1.8 billion furniture market that is expected to grow 15 percent over the next five years. Madison, however, ranks third among the top Midwest cities in projected sales growth for furniture and mattresses with a projected growth of 16.7 percent over the next five years. Last year, among our eight furniture stores, Madison was significantly the No. 1 store in sales growth at well north of 10 percent.
Q: What will a larger East Side store do for your Madison sales?
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A: That will be a significant increase both in terms of our footprint and obviously sales. We’re building steadily a good customer base on the East Side, but it does not represent the true Steinhafel Furniture superstore experience. Because we currently own the 14-acre site, we thought it would be financially prudent to put the land we own on the market and in a perfect world we hope to sell it in the next year and take the proceeds from the sale of the land and re-purpose them in the store we purchased from American.
Q: So patience has paid off?
A: We’ve always had a very strategic and steady growth plan. We’ve never extended ourselves. We’ve always been debt averse so when the economy softened in late 2007 and certainly in 2008 and 2009, there was a (35 percent) contraction in our industry. We had no debt and cash in the bank when the economy hit so we were opportunistic. When the economy softened that was an opportunity for us to open mattress specialty stores. Lease rates dropped by 30 to 40 percent so we started leasing 4,000- to 5,000-square-foot locations in strip centers and freestanding buildings at very favorable lease rates. We used the recession as a springboard for future growth.
Q: Not all family members stick with the family business. Why did you choose to return?
A: We never were put under pressure to join the family business. There were five equal partners in the second generation and there were 23 third-generation members and we knew it would be a very complicated process of determining who would end up in the business. So, I think as we went through our educational process, most of us did not really plan on going into the furniture business.
Q: So what was different for you?
A: In my case, I was getting an MBA at the University of Minnesota and I loved the (Twin) Cities so I took a summer job at Wickes Furniture selling furniture and enjoyed both the selling and working for Wickes. I was promoted to sales management and then transferred to Chicago where I spent another two years. I left Wickes in 1981 to become an independent furniture rep. From 1981 to 1991, I lived in Chicago, met my wife and had a very successful rep business and we really enjoyed living in the city. It gave me an incredible opportunity to network and learn about retail with major retailers in the Upper Midwest. When the second generation decided they wanted the third generation to come in, I was probably a pretty obvious choice. I’ve been here now for 23 years.
Q: How valuable is the Steinhafel name?
A: We are a company that has benefited from the fact that we’ve been serving customers for 80 years. When my grandfather started the business, he relied solely on word of mouth to get his message across. Today, in a very fragmented marketing and advertising industry, word of mouth, we believe has really come back. We’re recommended by a lot of people. We hold our reputation very high. It’s critical for us.
Q: In the next 10 years, how many stores would you anticipate opening?
A: We will be cautious and careful and we will see what opportunities present themselves. We do know there are many retail channels that are struggling because of the Internet and so I anticipate there will be continuous store closings (of chain stores) so we will be opportunistic and we’ll wait to see what presents itself.