Brick-and-mortar isn't dead. Just ask Lee Bird, the CEO of At Home Group Inc. (HOME) .
The Plano, Texas-based home goods store saw net sales grow 25% in the third quarter, and that's without an e-commerce platform. With 144 stores across the country now, the goal is to reach 600.
And as for evading the threat of Amazon, Bird said he isn't too concerned. For now, the retailer has no plans to shift to digital any time soon, just like its competitor Home Goods (owned by TJX Cos. (TJX) ). Read the full interview below, in which he talks Millennials, real estate and why he's such a big fan of Sears Holding Corp. (SHLD) .
The interview has been condensed and edited for clarity.
It seems like the entire home furnishing industry is thriving right now. What are some of the factors driving that?
People are disportionately spending toward their homes—especially Millennials. They love to entertain, they love to have people over, and they're the largest spending group out there right now and about a third of our core customers. But not everyone is on the same playing field. The value players are winning: us, Home Goods, and Wayfair Inc. (W) .
But isn't it that Millennials aren't buying homes?
We're agnostic about how Millennials live. They can have an apartment, they can live in a commune—however they live, they do like to decorate. They have a great eye, they love to have friends over, and they watch "HGTV." We've got an assortment that works with small space living, even small patio sets.
Your stores are sometimes 100,000 square feet or bigger. Have you thought about going small-format, which seems to be a huge trend right now for retailers?
Our brand is lowest prices, largest assortment. We have 50,000 items at any given time. That's 400 to 500 new items a week. We need a store big enough to carry all those styles, so when you and I shop together, we can bring our moms, too, and all of our tastes are represented. We keep the inside of our stores like a warehouse: bare-bone boxes, concrete floor, metal boxes. And we keep the rent low.
Tell me more about your real estate strategy.
We rent from all the big box players: Sears, Target Corp. (TGT) , Wal-Mart Stores Inc. (WMT) , Hope Depot Inc. (HD) , Lowe's Cos. (LOW) , Macy's Inc. (M) , Dillard's Inc. (DDS) and Kohl's Corp. (KSS) . Sears is our best landlord because they're closing so many stores. Some retailers don't want to be a landlord, so we buy from them.
Two-thirds of our real estate is second-generation retail. About a third we built ourselves. Our approach is two-step: We already mapped out where our first 600 stores across the country should be by identifying submarkets, as well as over 20,000 existing big-box locations across the country. Next, let's say Kmart calls us and says they've got a store for us in a certain area. We look at our plan and if it's in the right market, we take it.
It seems like real estate is an essential element of your business strategy.
Real estate is a core capability. We're really good at it. We also work with local brokers to get specific market intel. The best retailers are really good at real estate.
Are you concerned that At Homes won't be able to compete with the likes of Amazon.com Inc. (AMZN) without an e-commerce platform?
We have all our assortment online because we know everyone pre-shops, and our website is mobile-enabled. Our customers want to see, touch, and feel the products. We're a fashion player.Think of us as the Forever21 of home decor. But people feel safe coming into our stores, because if they're looking for a yellow pillow, that color is going to look different on your screen than mine.
We're also growing 20% percent without e-commerce. If we weren't, then we'd be looking at different commercial strategies.
So you're not worried about Amazon?
We're always mindful of Amazon. We're mindful of every player out there. But the industry is highly fragmented, and no one has more than 5%. If you add up Amazon and Wayfair combined, it's less than 5%. I would say we complement the online guys. Wayfair focuses on big furniture, so when a customer buys a big piece from them, they come to us and pick an accent color.
What's the biggest business development are you focused on now?
Geographic expansion. We don't have a store near you yet [in New York City], but we will next year. We want to be in at least 48 states. Our team wants to go to Hawaii but I don't think that'll happen soon. We're focused on driving a close relationship with our customer—we just launched a credit card and loyalty program. We're focused on improving our assortment. We're focused on direct sourcing. We're growing, budding retailer and we've got to create brand awareness.
What are some of your biggest product trends?
Right now, we're in the holiday season and we have a very large seasonal business. We have 118 styles of artificial Christmas trees right now. In the spring, it's patio furniture. People are into the contemporary style, that very industrial, studio loft look. Think steel-and-wood, like a rolling coffee table with a distressed top.
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