Shupei Chiao Interview

Bob Poole:  Hi everyone, this is Bob Poole and I’m here today with Shupei Chiao.  Shupei is the managing partner of two furniture companies, one in Arizona and one in California.  He also manages two real estate development companies and they are also located in both of those states.   Welcome, Shupei, to the Water Cooler.

Shupei Chiao:  Hey Bob.  Thanks for having me.

Bob:  I’m glad you’re here today.  I want to start off by just asking you a little bit about yourself and how did you get started in all these furniture businesses?

Shupei:  Well, you know for me it was a family business from when I was a young boy growing up in Pittsburgh, PA.  My dad and my uncles started their business back in 1981 and it’s still in business today.  We own and operate a three furniture stores in the Pittsburgh market.  Then I moved out to the West Coast in 1996 and started our business here in 1997.  And we’ve been in business now for fourteen years.

Bob:  Wow, so where did you start first; in California?

SHUPEI:  We started here in Arizona in the metro Phoenix area.  We opened stores in Scottsdale, Arizona, Glendale, Arizona, and Tempe, Arizona in the late nineties. Then we opened a store in Tucson, Arizona in 2003.  In 2003, we also started in California opening a store in San Marcos, California and a store in Mission Valley, which is a suburb of San Diego.

BOB:  So apparently you run all of these?

SHUPEI:  I do.  Our original six stores were opened are under the Thomasville banner.   We came back through in 2003 and 2006 and opened a couple of additional stores in Arizona under the Drexel Heritage banner.  Drexel Heritage is a very high end brand that we chose for two more units in our Arizona market to help promote our business and grow with these brands.

BOB: So, I’m wondering how many frequent flyer miles you must have?

SHUPEI:  My travel is actually quite manageable.   I only need to go to California on a once a month basis.  I’ll go out for two or three days a month.   You know, we have our heat here in Arizona in the summer so my family and I summer in San Diego.  But I fly back to Arizona three times a month for work.  So, it’s actually quite manageable.  It’s a very short flight, forty-five minutes in the air so it’s quite a nice commute.

BOB:  You must have some good employees though to help you; a good team.

SHUPEI:  I do.  I have quite a bit of great management and a great management team that’s been with us for a long time.  We’re big advocates on promoting from within and we try to find good talent from within.  We’ve been very lucky.  I’d say a good third of our managers were employees we hired  in the first couple of years we were in business that we were able to grow and develop them into great managers and quite a few of them are helping us manage stores, or managing warehouses, or managing customer service areas today.   That all started with us back in 1997 and 1998.

BOB:  So what’s your secret to finding good people and keeping them that long?

SHUPEI:  You know that’s a good question.  When we first started, I used to joke and say that we’ve got a good reputation because we haven’t been around long enough to develop a bad one yet.  I don’t think we can say that anymore.  We’ve been in business now for fourteen years.   So I think the answer today is just finding great people with great skill sets and then finding work that fits their skill sets.  I think too many times we’re caught up in finding people that have a ton of experience doing this or a ton of experience doing that.  Sometimes that can be helpful but sometimes that could be a little challenging because if they are used to a certain culture and a certain philosophy of how they do things and you want them to be absorbed in your culture and your philosophies, sometimes that can be difficult.  So, we’ve found that with finding smart people with good skill sets, we can teach them and they already know our culture and they already know our business philosophies.  We find it easier to teach them how to do certain tasks and certain jobs based on those skill sets.

BOB:  Makes sense. So, for you what’s an average workday like?

SHUPEI:  I am one of those people who’d rather work on things and try to hit them early in the process than let things sit.  I try to make myself very available to all of my managers and all of my employees pretty much 24/7.  My managers and my employees know that they can reach me just about any time.  They are very good about emailing me when it’s things I can get back to or they know when to call me when it’s an emergency.  They know how to get a hold of me.  But long and short of it, I have a very well rounded group and a very good team around me.  When they have questions, they might call one of their colleagues first before they call me.   But I still put in quite a few hours.  I’d say that on a weekly basis, I’m still in that sixty, seventy, eighty hour work week which is fine.  I do get quite a bit done, but I do also spend quite a bit of time with family.  I enjoy my time with my family.

BOB:  When you were growing up in Pittsburgh and your family was in that business, were you working in the stores then?

SHUPEI:  Oh, absolutely.  As a young boy, I’ve done pretty much every job that our company requires.  I obviously started in the warehouse, in the stock room and did work there for a number of years including deliveries and some of the menial work.  Then I worked in the office in our Pittsburgh operations for a number of years.  Then I worked on the sales floor for a number of years as well too, because the essence of our business is, of course, selling.  And you can’t teach and you can’t promote, and you can’t develop selling unless you have the selling skill sets that are necessary to help grow your business.  Selling is a vital part of our business.  It’s THE most important part of our business.  That’s where it all starts and being knowledgeable and experienced in that area is extremely important.

BOB:  Do you still get a chance to get out on the sales floor and talk to customers?

SHUPEI:  Absolutely.   We have quite a few managers covering our stores and we have a general manager covering as well.  But what I like to do is to try to hit at least one of each of our stores every month or two.  I’m also looking for days where I can spend a day here or a day there at different stores.   I try to hit all the stores within a two month period.   Sometimes I’m there and the manager is there.  Sometimes I’m there covering for a day off for a manager.  I actually enjoy covering days off for managers more than I like being there when the manager is there.  I think when the manager is there I see some of what’s going on but not all of it.  When I’m actually there managing a store myself for the day, I tend to see a lot more and I tend to see good habits and some habits that we need to work on.  I think my premise is I’m always looking for good habits and trying to share those habits with all of our stores.  And then, of course, I’m always looking for challenging situations and making sure that these challenging situations don’t happen in any of our stores.

BOB:  When you say you look to share what you see with the other stores, you’re so spread out geographically, how do you do that?  Do you have a company newsletter or something like that?

SHUPEI:  We have a weekly conference call with all of our managers, of course.   We do a lot of what we call “highlights of the week” where we share good practices at all of our stores.  Many of our good practices have to do with initiative, follow through, good leadership skills, and good technical skills.  But a lot of it is follow through.  Sometimes relationship selling takes days or hours.  Sometimes it takes months.  And sometimes, it takes years.  So, some of the best stories are about being persistent and working on projects.   One of our design consultants over in our San Diego store where I was last week, just closed on a deal with the US Military on doing some hospitality suites for them.  Working with the US Government can take a long, long time. This is a project that he’s been working on for over a year.   He was just able to close this pretty substantial sized deal last week.  So, once again, it’s being persistent, being professional, over communicating rather than under communicating.  Those are all skill sets we share and we look for.  And, of course he’s a good, positive highlight to share with the rest of the staff.

BOB:  Yes, that’s a great story and congratulations on that sale.  You know, I’m thinking about retail; people coming into your stores.  I wouldn’t have even thought about the commercial side where you can sell to the government, so that’s great.

SHUPEI:  Yes. Most of our business is residential there’s no doubt.  But there are commercial applications of residential furniture that we can get involved in and that’s another part of our business that we like to see and like to grow because it’s a great application.  It is a great use of residential furniture.

BOB:  Sure, especially I would think in this marketplace that would be nice to have other lines that you could turn to.  Speaking of marketplace, how has your market changed in the last few years?

SHUPEI:  There’s no doubt the Arizona and California markets are probably two of the hardest hit by the downturn of the economy starting in 2007 and moving forward.   I think overall we’ve been very lucky.  Our business was off in ’07, ’08, and ’09.  But we didn’t get the huge dips that a lot of other furniture stores received and had to deal with.  We had modest declines in those three years and then in the last couple of years, we’ve been able to grow our business back up again, so we’ve been very, very lucky.  One of the other reasons why I think our model works better is because we own all of our real estate locations so we are our own landlords.   I think if anybody opened a store during the peak years of ’04, ’05, ’06, and signed a lease that was a top of the market lease, in our business that real estate cost is a huge part of our costs.   And if you are not in that equation properly, there’s a good chance that you’re not going to make it through this downturn.  So we’re very lucky that we didn’t open any stores during the peak.  All of our stores were pretty much opened, pre-peak.  And we’re also very lucky that we own all of real estate so we control one of the biggest costs that we have which is occupancy.

BOB:  You know that’s a great story.  And you’re actually the second person that’s told me that story in the last week.  I was talking to a friend last week who owns a chain of grocery stores; supermarkets.  And they were saying they’re extremely busy and I asked why.  They said that what’s happened is that a lot of their competition has had to close down in a number of the markets that they serve. And the reason why is exactly what you just said.  The competition had opened new stores and they didn’t own their property.  My friend owned all of their real estate, same as you, and they don’t have that problem.  Whereas their competition is now closing store after store because they just can’t stay in business and afford the cost of that lease right now with the downturn.

SHUPEI:  I also have friends that own stores but they bought during the peak and they can’t stay in business right now as well.  So it’s all about the luck of, or maybe the situation of, when you decided to get into the business.  If you decided to get into pre-peak, I think you’re fine.  If anybody either bought or leased during the peak, I think it’s very challenging for them right now.

BOB:  So, returning to sales and marketing just a little bit, what’s been some of your most effective marketing tactics or techniques?

SHUPEI:  For us at our business, it’s still a sale period business.  It seems like Americans are even more so today, pre-tuned to sales in our industry.  So it is still a sales and promotion driven business and the holidays are still very big days for us.  Memorial Day and Labor Day are typically two of our biggest sale days of the year or weekends of the years.  Columbus Day’s becoming a bigger holiday.  President’s Day is always a big holiday as well.  So it’s wrapped around a lot of holidays where people have time to get in the stores, shop, and make their purchases.  So part of our situation is less item selling and more relationship selling.  There’s less selling of one item in a room and more decorating and designing the complete room or perhaps multiple rooms or in the best case scenario, the entire home.  Once again, that really starts with selling your services first and selling products second.  If you’re in our stores looking for a particular product and you’re looking for the cheapest version of that product, you’re probably not going to find it in our store.  For our sales and design consultants, it’s really important for them to connect with the customers and sell them on the fact that our service is here; our brands are both over a hundred years old and they’ve been here for a long period of time and we’ll be here to service you for years to come.  We’re always here to help you out.   We can send our design consultants into your home to make sure that the sizes fit, the scale fits, and that the color scheme works.  But none of that can start unless our design consultants and our sales consultants connect with the customers walking in the front door and make sure that they understand that we are selling our services before  trying to sell any products to them.

BOB:  I’m just curious; beside the people who are walking through the front door, do you have any other ways where your design people or the sales people make contacts and start relationships?

SHUPEI:  Right now, aside from the traffic walking in the door, our second best way of connecting with customers is through our website.  We have two websites, thomasville.com and drexelheritage.com.  Thomasville.com is actually one of the most visited websites in the home furnishings industry.  On our site we have talked a lot about design.  This past month, we’ve just launched a room designer or room planner that is in 3-D for the first time.   We’ve been doing room planning for years and years and years.  When I first started in this business, room planning was done with magnetic templates on graph paper and then slowly moved to an online digital type of room planning.  Now we’re doing 3-D room planning.  Once again if you go to our site, it’s not about product and items, it’s more about how to plan your room, how to plan your colors, how to get the entire house decorated to fit your needs and fit your tastes.  Thomasville.com drives a lot of traffic to our store.  In fact, our Internet site traffic per store is typically two to three times our foot traffic walking in the door.  We can track that based on customers logging in and telling us where they live.  Then we can tell them where the closest store is and so forth.  Many consumers of our industry have gone to Thomasville.com or have gone to DrexelHeritage.com, looked at what’s available at our stores, looked at product lines, looked at perhaps some initial beginnings of some room planning that they can do on their own before they make the visit into our retail locations. This tells you how powerful the web is and how powerful your website can be.

BOB:  Yes, and you know it’s funny.  I’m in the process of writing another book on selling and one area that I’ve just written about is the change you’ve just talked about.  Consumers are much more knowledgeable today.  They’ve already done their homework.  It isn’t like you’re going to teach them everything and have them ask a million questions.  They come in with some questions of their own; they already have an idea of what’s going on, what things cost.  It’s amazing how educated they are today.  And that’s a big change for salespeople who are not used to dealing with people that way.

SHUPEI:  You’re exactly right.  The consumers today are much more educated consumers.  But you know what though?  When they come in and they’re already educated it’s a beautiful thing because they’re already half way down the process and you just have to cultivate it and nurture it and make sure that you’re saving them the time.  Because they’ve already done the work; save them the time and effort of going through some of those things already and just create the relationship, create the development of the relationship in a more advanced way.

BOB: Yes, I love it.  It is great they are educated that way.  So, just to wrap this up a little bit, what’s some advice you’d give someone starting out today if you were doing it all over?

SHUPEI:  I think the time is pretty good right now to expand your business or to start a new business.  I mean, we’re looking at adding stores and adding retail units in both of our geographic areas.  We just feel like the market is obviously very soft right now and it’s a good time to invest in more real estate, invest in some more stores.   I think right now from a real estate side, we’re looking at prices that are probably pre 1999 prices, so we’re talking like mid 90’s, maybe even late 90’s pricing right now on quite a bit of real estate out there.  So, I find it to be a good opportunity right now to at least get started doing searches and perhaps looking at opening stores in the next couple years.

BOB:  That’s fantastic.  Are you looking at any other geographic areas besides the two you have?

SHUPEI:  Right now what we’d like to do is probably get more business going through both of our distribution centers.  We have a large distribution center in Phoenix, Arizona and one in North County, San Diego that we’d like to flow more goods through.  That will help our capacity utilization which will help our bottom line.   So, right now, we’re just looking at adding more units and more stores within the markets that we’re in.

BOB:  It’s been great talking with you today.  Thank you very much for taking the time to join us.  We will put info about your two websites on our site.  And is there any last thing you’d like to say to the people who are listening?

SHUPEI:  Thanks for having me today and it’s been a lot of fun and best of luck to everybody.

BOB:  Ok, thank you very much.