Hot Seat

Room Board built its business as carefully as it creates furniture. Now it's moving in on the competition--and taking a place at the table.

Not many people can create a Zen garden from the bones of an old Nash Rambler dealership, but John Gabbert is one of them.

The founder of Room & Board, a furniture company in Minneapolis, Gabbert connected the old showroom to another building via a glassed-in, atriumlike space--an ad hoc architectural assembly that transcends its mass-production roots. Sleek modern pieces, sold through Room & Board's catalog and nine U.S. stores, line the garden's perimeter. As he passes a classic Eames leather lounge chair, set near the company's own Eclipse cocktail table, Gabbert takes a moment to define his growth strategy: "We definitely believe that the turtle wins the race."

Lately, though, the turtle is looking downright rabbity. Last year, Room & Board (R&B), which is privately held, saw revenue rise by 32%, taking in, Gabbert says, $175 million. Almost defensively, he attributes the growth spurt to a real-estate snafu that led him to open stores in both New York and San Francisco within six months of each other. Contrast that with his competitor, Design Within Reach, which opened 21 new stores in 2005 and saw its stock fall 78%.

"I don't see any real advantages to being a billion-dollar company," Gabbert says, resembling, in his minimalist glasses, tweed jacket, and velvet pants, a MoMA curator more than the president of a company set to hit $200 million in sales this year. Reminded that that's a lot of money, he just chuckles. "We almost start out by asking, What is the conventional wisdom?, and then do the opposite and test that first," he says. "We're not adding any new stores in 2006. We want our employees and manufacturers to have a reasonable work life, and when you open two stores that close together--if you drive a business too hard--some don't."

Try that line at a public company's shareholder meeting.

Gabbert began his furniture apprenticeship working in the family firm (more Ethan Allen than Aalto), eventually opening R&B in 1980 as a some-assembly-required, Ikea-style operation. He eventually decided to scrap the pulpwood approach in favor of high-grade furniture he and his friends would want to buy. Always a fan of midcentury and Danish designers such as George Nelson, Hans Wegner, and Florence Knoll (the New York store in SoHo is housed in the former Knoll showroom), he drove R&B to focus on pieces with clean, uncluttered lines. R&B also teamed up with Herman Miller and others to sell reissues of archetypes by the likes of Saarinen, Mies van der Rohe, and Eames.

In the years since, not only has modern become a mass aesthetic but home decor in general has become an American obsession--an estimated $130 billion market. There's now an entire TV network, HGTV, and a growing list of new shelter magazines (Dwell, ReadyMade, and Domino) dedicated to hip domesticity. And much of the money goes to a softer, less-streamlined version of '50s and '60s style--a look R&B has made its signature. (Queer Eye for the Straight Guy and Oprah have both featured R&B's designs.) "Eight or nine years ago, we saw things evolving," Gabbert says, "but I think 'lucky' is the right word. The trend happened to be where my interest was."

There's no substitute for luck in business, of course, but it doesn't explain how R&B got this far. Beyond the highfalutin design talk, Gabbert and his crew run their business with a mix of instinct, focus, and humanity--and they're kicking the competition's teeth in. Just walking into R&B is a different experience. On a recent Sunday in New York, its sunny four-story store was awash with customers and salespeople. Tea and coffee were being served in glass mugs. Sales pitches are of the "Let me know if I can help" variety, the product of a no-commission sales structure. All prices are fixed in the once-yearly catalog (an idea Gabbert picked up from Ikea), and there are no sales--but no incentive for inflated "regular" prices, either.

"It's a cooler version of Crate & Barrel," says Jeannie Uyanik, a customer found lolling on a sofa with her husband. "The prices are worth it, and with the variety, you can build rooms and not look like it all came from the same place." She adds that R&B has "a great sense of service, and that to me is almost more important than the furniture itself."

Gabbert's aversion to groupthink is built into every part of his supply chain. "You have to make the customer experience hassle-free from point of sale to delivery," says Bruce Champeau, R&B's VP of operations. Most retail furniture makers treat delivery, for example, as the hind end of the business. R&B saw it as a soft spot. It invested in an exclusive partnership with a trucking company, so your club chair arrives in a new muted-gray rig, driven by nonfelonious "associates"; they know the products intimately and assemble them on-site as needed. And they'll deliver an unlimited number of items--as in, a truckload--for $199 coast to coast, $69 locally. (Go ahead, read that last sentence again.)

Champeau concedes that delivery drains some profits, but Uyanik, from her perch in SoHo, illustrates the upside of R&B's approach: "The delivery price is amazing. They're going to get five times the business from me because of that. It's an incentive beyond incentive." Building a delivery service in the center of the country also helps R&B avoid the fate of Design Within Reach. "Because DWR is in scattered, separate markets, they lose money tremendously every time they do a delivery," says Crystal Lanigan, a D.A. Davidson analyst.

R&B has institutionalized the use of alliances to eliminate the middleman, keep down prices and turnaround time, and reward customers and workers alike. For example, a Minneapolis outfit called Bell makes tables and beds to order--within days--exclusively for R&B and went from a mom-and-pop shop making steel radiator covers to a multimillion-dollar operation. There's no better way than that to get suppliers to feel the love.

Even the way the company selects (and rejects) store locations tends to reinforce a sense of clubby design smarts. Tucked down a cobblestone street, R&B certainly doesn't see the foot traffic Crate & Barrel enjoys just a few blocks away on one of Manhattan's busiest intersections. But, as Gabbert explains, "we like to let customers self-select, and then we end up with customers who appreciate what we do." Meaning, more sales to each customer, fewer returns, better word of mouth.

Meanwhile, as the R&B turtle shuffles to the bank, DWR, a public company, has hit a high-gloss, eggshell wall. After its growth bender (it now has 50-plus stores), the company's CEO abdicated in September. In November, it announced a yearly profit forecast of $800,000 (versus $3.7 million in 2004) and saw its stock knee-capped, to $4.20 from a yearly high of $19.45. DWR says it is addressing its problems. "They grew ahead of their infrastructure and it's painful," says analyst Lanigan. "But it seems to be a pretty hot category right now. If you're an organized retailer, the demand's out there."

If Gabbert's anything, he's organized. Asked whether DWR's plight spells trouble for him as well, he points out that while high-end reissues are DWR's lifeblood, R&B uses them sparingly--and strategically. Both offer the same iconic Noguchi cocktail table ($1,145) and Eames chair ($2,500) to accompany their sofas, for example, but a DWR sofa will typically run you $3,000 to $4,000, while R&B offers more than a dozen styles for about $1,300. When Gabbert sets the Eames chair alongside those unpedigreed pieces, however, it seems to canonize them, elevating them into the furniture pantheon. If he keeps on like this, he may end up there, too.

Mark Borden is a writer based in New York.

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