Excerpted from a presentation by Farooq Kathwari, President and Chief Executive Officer of Ethan Allen, to the Raymond James Insitutional Investment conference, March 3, 2015.

Ethan Allen is in the midst of a reinvention, and it impacts every element of our business.

From last fall to this fall, we will have changed about 70% of our product offerings. We have 300 Design Centers worldwide, 200 in North America, and we are freshening all and relocating many. We are adding to our professional staff of 1,500 interior designers in North America. To this level of personal service we are also bringing a lot of new technology, from tablets in the hands of our designers to touchscreens at the fingertips of our shoppers.

And then, very importantly, we are very focused on increasing – not only maintaining, but increasing – our commitment to manufacturing in the United States and North America.

Today globalization and commoditization have created two kinds of consumers. We call them users and owners. Users view products as disposable, and owners value quality and permanence. Obviously, Ethan Allen’s focus is on the owners.

Competition surrounds us, from the so-called lifestyle brands to traditional mass merchants. Even the Internet has become our competition. In order to succeed, we have got to make sure that we are not caught in the middle. So our focus is on delivering great quality, great style and great service, at great value. This is our story and it makes us unlike any other brand in the world.

Since 1932, we have been creating and crafting original, authentic, timeless designs in our own workshops. Today, we offer our clients everything for the beautifully designed home, including lighting, rugs, drapery, collectible artwork, décor and more. We are an American brand, and just as diversity is the story of America, diversity of design is the story of Ethan Allen.

We take inspiration from all over the world; and again in a uniquely American manner, modify it, change it, and then give it back to the world. We are a showcase of different international aspirations and influences. We have endless customization possibilities. In fact, 80%-plus of all the products that we make are custom. Custom means fabrics; custom means finishes. And custom also means making it in our North American facilities and shipping 80% of this in about four weeks' time.

Last fall, we began this reinvention with hundreds of all new designs we called The Next Classics. And our focus then was on what I call the modern side of The Next Classics. This May we'll begin to introduce hundreds more. This is our second phase, and more of what I call the romantic side of the Next Classics.

Two years back, we would have thought of making a lot of this new product offshore. But we have made the decision to make it right here in North America – in Vermont and North Carolina. With some of the new products, for instance those that included gilding, our associates first said we can't do it here because this is easier to do overseas. Instead, we said let’s hire 30 or 40 artists. And today, we have been able to bring this product back, to make it in our own American workshops, and now we are shipping it internationally, and especially to China.

A few years back, we would have not have thought of making so much product in America. There is a difference in margins between what we are making here and possibly what we could have made overseas. But I think in the longer term it makes more sense to be in control of your own destiny. It also makes sense because so many of our products are so customized. That's hard to achieve overseas, with inventory issues and transportation issues.

One of the key differences between Ethan Allen and our competitors is that we are not just a retailer, we are also a maker. In a world of mass-produced mediocrity, we build products mostly one at time, with a lot of hand craftsmanship, as well as with a tremendous amount of technology.

We are one of the few remaining companies in our category committed to making products in North America. We had to and we continue to make substantial investments in new equipment and technology throughout the system. Because it’s a self-fulfilling prophecy: if you do not invest and are not current, you will fall behind and never catch up.

Much of our manufacturing technology is new, although our eighty-year-old Skinner steam engine still produces enough electricity to keep our facility in Beecher Falls, Vermont, heated, even on days when it’s -40°F.

Today, we have consolidated our manufacturing to major operations in Vermont, North Carolina and New Jersey. In the last six to seven years we also established a major operation in Mexico, which employs almost 800 associates, and in the last two-and-a-half years we have established a wood manufacturing facility in Honduras.

Our vertically integrated business model creates extraordinary advantages. It guarantees authenticity and originality of designs. It gives us an ability to bring new products to market faster. It allows us to give our clients extraordinary value, what I call affordable luxury.

Most of all, it allows us to be in charge of our own destiny, to continue our commitment to North American manufacturing and to keep bringing our clients the kind of quality, style and value that they can only get from America’s classic design brand.

 

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