Dive Brief:

• Arhaus expects upholstery lead times to improve following the opening of a North Carolina facility that is expected to double the company's in-house manufacturing capabilities, co-founder and CEO John Reed said in a Q3 earnings call this month.
• The furniture company also is investing in additional outbound capacity with a 230,000-square-foot expansion of its Ohio distribution and corporate facilities, Reed told investors.
• For its inbound supply chain, Arhaus' vendors have scaled up their capacity amid ongoing high consumer demand. "At the same time, we are also expanding our vendor base and bringing in more new products," Reed said.

Dive Insight:

Arhaus managed to avoid some of the widespread issues with delayed orders and depleted inventories other furniture retailers encountered from disruptions in Vietnam. Factories in the country have worked to ramp up production to address a backlog of orders of furniture following months of coronavirus lockdowns this year.

Arhaus only sources from two or three vendors in Vietnam, Reed said. "So it hasn't impacted us much at all. We had pretty good inventory stock. … Whereas I'm sure if we had a lot more eggs in the Vietnam basket, it would be a whole different story."

Vietnam shutdowns pushed Pottery Barn parent company Williams-Sonoma and La-Z-Boy to shift manufacturing and sourcing to bypass transportation delays and other bottlenecks, executives said. La-Z-Boy is increasing production in plants in the U.S. and Mexico, while Williams-Sonoma is expanding its supplier base outside of Vietnam.

During a turbulent time for supply chains, Arhaus benefited from its in-house product design and longstanding, direct sourcing partnerships with vendors around the world, Reed said.

"By sourcing our own exclusive products, we control the design, we control the credible quality, the supply chain, and our costs," he said. "Through our vertical integration designs and sourcing model, we offer a globally curated assortment of handcrafted products that represent our livable luxury aesthetic."

With its distribution and manufacturing investments, Arhaus hopes to boost its e-commerce sales, which currently comprise about 18% of net revenue, Reed said.

The North Carolina warehouse will add 310,000 square feet of distribution capacity and 187,000 square feet of upholstery manufacturing space, he said. The third distribution facility is expected to open in the Western U.S., "where we have significant growth opportunities," in the second half of 2022, Reed said.

Arhaus isn't the only furniture retailer investing in its U.S. operations. Big Lots plans to open two more distribution centers to process palletized inventory and bulky items such as furniture, CEO Bruce Thorn said this month. Ashley Furniture, also focused on its West Coast capacity at a time of high demand and congestion, bolstered its trucking business in a deal with Wilson Logistics this month.