Forty-odd years ago, two budding entrepreneurs – Stephen Gordon in Corte Madera, California, and John Gabbert in Minneapolis – found white space in the home market and set out to fill it. Starting from scratch, though Gabbert had a leg up from experience working in his parents’ furniture store, both men and their companies followed dramatically different paths.
Gordon took the high road, taking his company public for the first time in 1998 with 47 stores. Some good and bad years followed, with Gordon exiting the company in 2005 and leaving it in the very capable and wildly ambitious hands of Gary Friedman.
Today RH is a $2.6 billion company with 68 RH Galleries, including 22 mammoth-sized flagship Design Galleries. Venture to say, everyone has heard of Restoration Hardware, if not its new name, RH.
The same can’t be said for Room & Board. It’s big as privately-held furniture retailers go, ranking No. 25 in Furniture Today’s Top 100 U.S. Furniture Stores based on its $450+ million sales volume. But based on the number of stores – only 17 in 2019 – it is the second smallest among Furniture Today’s top 25.
By comparison, RH holds the No. 6 slot in that list, behind only Rooms To Go, Mattress Firm, Williams-Sonoma (where Friedman used to work), Ikea and Ashley HomeStore. However, it is the fastest growing (10.6%) among those top retailers.
For 40 years, Room & Board has grown largely under the radar, selling only modern and contemporary-styled furnishings with 90% crafted in America using natural, sustainable materials – it was a founding member of the Sustainable Furnishings Council. Now it is stepping out of the shadows and getting the attention it deserves.
Last year, Fast Company named Room & Board one of the most innovative companies in retail. And with the recent opening of its Pasadena Design Studio, a new scaled-down 5,000-square-foot shop, as opposed to its 35,000- t0 50,000-square-foot flagships, it’s got a retail business model ready to scale.
“We started as a regional furniture retailer,” says Gene Wilson, the company’s director of merchandising and vendor management, who’s been with the company for nearly 23 years.
“Then when we opened our Chicago store on Michigan Avenue in 1993, it exposed us to people visiting the city. That was the birth of our national business. Today we are in some of the largest, more progressive urban areas, like Washington, DC, New York, San Francisco, Los Angeles and Boston. Now we are looking to more moderate-sized cities, with the new Pasadena model appealing for that.”
Going DTC before anyone knew what it meant
Wilson credits its Shop At Home business as critical to the company’s success. “It all started when people visiting Chicago took our brochures home and called us to order. It was the 90s and we had to figure out how to serve those customers and deliver the product,” he recalls.
“First with just brochures, then within a few years, we started creating catalogs, one per year, for our existing customers. We weren’t using it for prospecting, but then everything just continued to blossom through word of mouth,” and also, he notes, long before social media.
“Our theory is if we really take care of customers, help them create a beautiful home and serve them extremely well, they are going to do our marketing for us. That was how this business grew,” Wilson continues.
The catalog-based Shop At Home business transitioned early to the internet, which today is a significant part of Room & Board’s business and its customer list is guiding selection for new retail locations.
Another factor that sets Room & Board apart from RH and most of its other competitors is its dedication to U.S. manufacturing.
Back when it started, U.S. furniture manufacturing was the norm, reports Jerry Epperson, managing director of Richmond-based investment firm Mann, Armistead & Epperson, who’s has been tracking the furniture industry for nearly 50 years. But today, imports represent over 70% of the furniture business.
“So many old-line furniture companies have been put out of business by imports,” Epperson says.
Room & Board wasn’t about to let that happen to it or its manufacturing partners. “When John Gabbert started, he took a bold step to create a brand and not rely on the product lines of furniture companies he had no control over,” Wilson explains.
“He went out and found small makers that could create the modern furnishings he loved and by cutting out the middlemen, he could provide better value. Essentially, he invested in quality with smaller makers that grew along with us,” he continues.
One of the small makers that came along for the ride was its Minneapolis neighbor Bell Manufacturing. Gabbert wanted to add steel legs to its tables and beds. So he turned to Bell, which were experts in steel manufacturing for gates and fencing, but never ventured into furniture.
The partnership prospered, so Bell Manufacturing, which now claims Room & Board its biggest customer, has over 100 employees to produce an expanding line of steel case goods and storage pieces for the stores, like the steel Slim-C-Table, which became an overnight best seller for the work-from-home crowd after the pandemic hit.
People-first business model
Room & Board is committed to causes that its customers, employees and makers are committed to.
It was an early adopter of sustainable business practices. And in 2019, it contributed $950,000 to community partners and non-profit organizations, such as Habitat for Humanity and the Urban Wood Project, organized by the USDA Forest Service with Humanim, a social services enterprise, and Room & Board, to reclaim wood that is turned into furniture in Baltimore, Sacramento, Detroit and Minneapolis.
Today, Room & Board employs nearly 900 people and with a company-wide livable minimum salary between $40,000 to $47,000, depending on region, it demonstrates its “people-first business model,” starting with its own staff and expanding out to an ever growing community of customers, makers and charitable organizations.
“We don’t create things just for the sake of creating something new to the market,” Wilson concludes. “There is always a sustainable element to everything we do, creating things that will last and that people will love. Our biggest challenge is finding the right partners to work with us, like Bell. It expands our makers’ capability, expands our communities and allows us all to hire more people. That is what we are committed to every day.”