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San Francisco Business Times - September 2, 2002

http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2002/09/02/smallb1.html

From the August 30, 2002 print edition

STRETCHING OUT

Chic customers, entertainment studios power Oakland furniture retailer's expansion

David Goll

Gaining success through catalogs and the web, modern furniture purveyor Design Within Reach created a desire among customers across the country for retail stores.

Now the 3-year-old Oakland-based business has ambitious plans to fulfill those brick-and-mortar dreams.

"Customers just insisted we open physical locations so they could see the furniture in person," said Wayne Badovinus, CEO of Design Within Reach.

The company opened a 2,500-square-foot showroom studio adjacent to its 27,000-square-foot headquarters office near Jack London Square in July and another in Santa Monica this month. The firm's first main office, in the Jackson Square design district of San Francisco, was converted into a store when DWR moved its headquarters to the East Bay in 2000, and the company opened a second shop in Palo Alto.

Now, things are really revving up as the company ventures into Southern California, where its client list includes Universal Studios, Walt Disney Studios and set designers for the NBC sitcom "Will & Grace." Fifth and sixth Design Within Reach locations are scheduled to debut in those meccas of upscale retail - Beverly Hills and Newport Beach - by October or November.

"Next year, we are planning to open 10 to 12 new studios in the West," Badovinus said, adding most will be about 3,000 to 4,000 square feet in size, set in existing buildings. "By 2004, we may be opening locations on the East Coast."

Chicago, New York and Washington, D.C., are all possible markets east of the Rockies for Design Within Reach, according to Carrie Leber, a company spokeswoman. She said additional new stores may be built in Napa and Marin counties, as well as other parts of the East Bay.

What's fueling Design Within Reach's rapid retail growth is the popularity of its contemporary furniture, created by such well-known designers as Mies van der Rohe, Phillipe Starck, Ron Arad, Ray and Charles Eames, Alvar Aalto, George Nelson, Marcel Breuer, Rodolfo Dordoni and Enrico Franzolini. Their sofas, beds, tables, chairs, lighting, bathroom fixtures, desks and work lamps - made of wood, steel, plastic and other materials - are geared to both the residential and commercial markets, according to Badovinus.

Prices range from moderate to pricey. The privately held company, founded by Badovinus' business partner Rob Forbes three years ago, hit approximately $40 million in revenue in 2001.

It will be extremely important for Design Within Reach officials to place contemporary items in locations easily accessible to the affluent, 21st-century consumers who will buy their stuff, according to at least one industry observer.

"Finding good locations for their stores will be crucial to their success," said Keven Wilder, a partner affiliate with Chicago-based retail strategy firm McMillan-Doolittle. "It's a fragmented market they're in, but a very competitive one.

"Timely order fulfillment will also be very important," Wilder said. Logistics in the furniture business can be a nightmare because delivering late or broken merchandise to customers will make you a lot of enemies. Problems in that area killed off Furniture.com and other companies."

Design Within Reach's retail locations serve as "3-D catalogs" where pieces can be ordered and customers receive their products within a few days, depending on the item, Leber said.

"Typically, the furniture industry has not been very responsive to fulfilling customers' needs quickly, so we really want to stand out in that regard," Badovinus said.

If Design Within Reach does move east, it will face stiff competition from similar companies, Wilder said. Nationally, it competes with the likes of IKEA - though the Swedish furniture giant sells far less expensive merchandise - and the more upscale Crate & Barrel.

Finding spots for new stores is a time-consuming task, Badovinus said, since each one will be located in a distinctive existing structure modified into a furniture showroom. Throwing up a concrete tilt-up on a piece of vacant land near a freeway is not Design Within Reach's style, he said.

In Oakland, Design Within Reach's headquarters and studio are located in a brick manufacturing plant once occupied by Allied Paper Co., situated in the once industrial, now chic Jack London Square district.

"We're looking for unique buildings and feel strongly we need to respect the architectural integrity of the original structure," Badovinus said.

David Goll is a reporter for the East Bay Business Times, an affiliated newspaper.

2002 American City Business Journals Inc.