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A U.S. Furniture Maker Shifts Gears from Manufacturing to Selling in China

Ashley Furniture's flagship store in Shanghai

Photograph by Imaginechina via AP Photo

Ashley Furniture's flagship store in Shanghai

Last month, Wisconsin-based Ashley Furniture opened its second retail store in China. The showroom in the southern city of Suzhou displays furniture made for compact Chinese apartments, including dining room tables measuring 1.5 meters (4.9 feet) in length—as opposed to the standard length of 2 meters to 3 meters popular in the company’s U.S. stores. The Suzhou outlet also features glossy furniture sets marketed under the new label King’s Wear, a product line that is more luxurious and pricier than Ashley’s standard offerings. It is designed specifically for Chinese customers.

The family-owned, 69-year-old furniture company that was founded in 1945 built its multibillion-dollar business selling bedroom sets and upholstered sofas to Midwestern baby boomers, working with such mass retailers as Sears (SHLD) and Kmart and catering to middle-class American tastes. Now Ashley Furniture is figuring out how to adapt its product lines to Chinese preferences as mass urbanization fuels a fast-expanding market for home furnishings in China.

“When you come to China, the middle class is very different from middle class in the U.S.,” says Paul Dotta, Ashley’s vice president of international business, who lives in Shenzhen and has worked in Asia since 1997. Customers want compact furniture that uses space efficiently. “In China, apartments are built with standardized plans that include very small dining rooms, so everybody wants a dining table to be a certain size—and one that we don’t offer in the U.S.,” says Dotta.

Once families move away from rural hometowns and settle in large and midsize Chinese cities, they’re less likely to move around the country than highly mobile Americans, and they are thus more willing to invest in furniture that will last for decades. The new King’s Wear label caters to a desire for solid, durable furniture, with more varied fabrics and wood finishes.

“The Ashley Furniture identity we’ve building now in China will be different than the one we’ve built in the U.S.,” says Dotta. “Your product has to change—and not just your physical product.” Customers in China typically expect to know more about the company’s history and reputation than American shoppers. And they’re more responsive to marketing through social media, especially Weixin (700:HK) and Weibo (SINA).

The furniture company is no stranger to China; it began moving manufacturing here two decades ago to save on labor costs. (More recently, it has moved some fabric cutting and sewing to Vietnam, where wages are lower.) Only in the past three years has Ashley made a concerted effort to sell furniture in China. Dotta’s strategy is still a work in progress as his team searches to balance the company’s existing identity with where it thinks the Chinese market is headed.

Larson is a Bloomberg Businessweek contributor.

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