Brooke Watson built her business, SoHa Living, on importing teak and mahogany furniture, housewares and home decor from Southeast Asia.
But rising costs, longer shipping times and stagnant sales during a slowing economy have led her to look at importing from another country -- the United States. Items that have been slow to leave the shelves, and the warehouse, have caused her to streamline her product line.
Watson, who was known as Brooke Israel when she opened SoHa Living at Ward Centers with her sister, Shyrah Maurer, six years ago, designs every bed, chest, armoire, table and chair stocked in the store.
Furniture makers in Thailand, Indonesia and other Southeast Asian nations manufacture the pieces from Watson's designs, and then ship them to Hawaii. Watson also is able to do custom orders for customers who want a unique piece of furniture at a fraction of the price of a designer piece. Most large items in SoHa Living cost less than $2,000.
"When I started SoHa I really wanted to give customers a designer piece for a more affordable price," Watson said. "I want to continue that."
Times and strategies change
The business model of importing some 80 percent of the products in the store from Southeast Asia had been a profitable strategy. Watson said she has many repeat customers, including interior designers, and until the beginning of this year revenues had grown in the double digits each year.
But it takes a good six months for furniture to actually arrive at the store, including custom orders, which creates a long wait for the customer and ties up cash for the business. Watson said she typically would give those customers a 20 percent discount because of the wait. When sales began to slow earlier this year, she doubled the discount to 40 percent and saw results in the form of orders.
But despite that, sales have stayed flat this year, and Watson began to rethink her business model.
"I'm trying to be proactive rather than reactive," she said. "I have to watch out. I have to see the future and make sure the future's going to be OK."
SoHa's prime 2,600-square-foot corner retail spot at General Growth Properties' Ward Centre means much higher overhead than other stores that import furniture from Indonesia and Thailand, such as Bali Aga and The Container Warehouse, which are on side streets or in light industrial buildings.
A weaker U.S. dollar and skyrocketing oil prices also are taking big chunks out of the store's profit margins.
"Not only is the dollar weaker, but companies are raising prices, shipping is higher, customs is tighter," Watson said. "Trucking the container to the store is getting higher."
The U.S. Department of Homeland Security can delay containers for up to three weeks, costing Watson as much as $1,000 more per container .
Watson's sister Shyrah still is a partner in SoHa while she runs her own stores, Roxy and Quiksilver Youth at Ward Entertainment Center and the Up & Riding stores at Ala Moana and Pearlridge centers.
The two sisters got to do some planning during a recent family cruise to the Panama Canal. They mapped out the year and decided to develop some new strategies for staying profitable during the economic downturn.
For example, Watson analyzed product lines and vendors to see what was selling and what was lingering.
She found that dinnerware -- ceramic plates and serving pieces that she designed and had made in Thailand -- along with flatware were spending too much time on the shelf, so she decided to eliminate them.
Her strategy for the furniture line was to find U.S. manufacturers that can make the same-quality wood furniture from her designs, and ship it to Hawaii without the hassle of importing from a foreign country. She also plans to supplement her custom-made furniture with off-the-shelf products.
She expects the first new collections made in California, which will sell roughly in the same price range as the Southeast Asian furniture, to be at the store by late summer.
Watson estimates that she will cut her shipping costs in half by buying from California manufacturers.
She also will cut her lead time in half. Instead of the six months to import furniture from Asia, it will take 12 weeks to import similar pieces from the Mainland, she said.
Faster turnaround
Although the profit margins won't be as large as with the Asian products, Watson estimates she can turn the products around faster and improve cash flow.
"I'm willing to eat up a little bit of my margins to satisfy customers," she said. "And I'm bringing business back to the U.S."
Another area where she cut costs was in storage. Until recently, the store had an 1,800-square-foot warehouse that cost $3,600 per month in rent.
Now Watson uses three portable on-demand storage units from a company called P.O.D.S., which cost $200 per month each. She also was able to get rid of a company van since the units, which are stored in Kapolei, are delivered directly to the store's loading dock for loading and unloading.
A side benefit to importing from the Mainland could be doing more business across the United States, she said. The SoHa Living Web site currently gets about four orders per week from Mainland customers searching for furniture with a Hawaiiana flair.
Small-business issue
Staying profitable in retail in the changing economy.
Strategies
Don't be afraid to completely redo your business model.
Consider other suppliers to save time and hassle.
Analyze what's selling, what's not, and eliminate unproductive lines.
Explore creative ways to warehouse inventory, such as portable on-demand storage.
