US furniture giant to open first Australian store in December

The local home furniture market is set for a shake-up, with US furniture manufacturer Ashley Furniture reportedly set to open its first Australian store next month.

While Australian consumers can currently purchase Ashley Furniture products through Le Cornu, owned by ASX-listed Fantastic Holdings, Fairfax reports the first Australian standalone Ashley Furniture retail store will open in the Adelaide suburb of Gepps Cross in early December.

The store will be located in a homemaker centre that is already home to competitors Harvey Norman and Super Retail Group-owned BCF.

Ashley Furniture is owned by the Wanek family and is estimated to have a turnover of more than $US 3.5 billion ($4 billion) annually. The business was founded by 73-year-old billionaire Ronald Wanek, who is estimated to be worth $US1.97 billion by Forbes, and is currently led by son Todd Wanek.

Starting out as a sales company in 1945, Ashley Furniture merged with furniture manufacturer Arcadia Furniture in 1976. The first Ashley Furniture HomeStore retail outlet opened in Alaska in 1997 and by 2003, the company was operating 100 retail outlets in the US.

Ashley Furniture also operates stores in Canada, as well as South America and Asia, and according to Fairfax, is planning to open further stores around Australia.

The US company will be hoping to secure a sizeable slice of the Australian furniture retail market, which according to IBISWorld, is worth approximately $7.7 billion.

IBISWorld estimates some 4,364 business current operate in the local market, which includes retailers of household furniture, blinds, awnings and mattresses. Harvey Norman is estimated to hold the largest market share at 14%, followed by Steinhoff Asia Pacific Holdings, parent company of Freedom, Bay Leather Republic and Snooze, which controls 7.9%.

Senior IBISWorld analyst Stephen Gargano told SmartCompany existing players such as Harvey Norman and Freedom will likely be watching the movements of Ashley Furniture with a “keen eye” as the scale of the US company means it has the potential to “make a big splash” in the local market.

“There haven’t been any major new players enter the local market in the past five years, apart from Pottery Barn which has a very small operation,” Gargano says.

Growth in the local furniture market has been flat over the past five years, with IBISWorld research pegging annual growth in the sector at just 0.1% between 2010 and 2015.

“Furniture retailers have clearly faced some strain over the past five years,” Gregano says.

“While those at the cheaper end of the market such as IKEA have benefitted substantial from people opting to purchase cheaper products, some of the more expensive retailers have suffered as people have put off expenditure or found cheaper items.”

“In the face of those conditions, the entrance of Ashley Furniture does pose a potential threat in the future.”

IBISWorld predicts a modest uptick in annual growth for the industry of 1.7% between 2015 and 2020 and Gregano says Ashley Furniture is well-placed to take advantage of that return to growth.

“It is one of the largest furniture retailers in the world, it has a well-established business model that has been very successful wherever they have opened up, [and] they stock quite a big range,” he says.

And while Ashley Furniture appears to be starting off small with just one retail outlet in Adelaide, Gregano says the retailer has already “tested the waters” through its relationship with Le Cornu which “points to the fact there is some demand for their products”.

SmartCompany contacted Ashley Furniture but did not receive a response prior to publication.

This article first appeared on SmartCompany.