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KITCHEN ETC. COOKS UP POWER CENTER EXPANSION

Kitchen Etc. has a warehouse feel to it, with spare decor and industrial lighting.

By Donna Mitchell

Housewares retailer Kitchen Etc. is planning an expansion that will place 300 new stores in power centers throughout different swaths of the United States, a result of efforts to focus its real estate strategy and make its mark in the business of selling fine kitchenware.

Kitchen Etc. peddles quality kitchenware, fine china and kitchen decorating goods through its Web site and 13 stores located mostly in New England. And it is armed with a relatively fresh management team to help carry out its expansion plan. Under the leadership of its chairman and CEO, Robert Camp, the company’s management is seeking investment capital to fund its expansion. If all goes well, the company might be able to open about half of the 300 new stores in the next five years.

“I think, realistically, we are ready and poised to go now,” said John Petrucelli, vice president of Exeter, N.H.-based Kitchen Etc.’s e-commerce division. “We have a new management team, and we have the [management] infrastructure in place to run a multiple-hundred store chain.” Petrucelli declined to give specifics about its capital-raising plan, except to note that the company is aiming to borrow what it can repay in a matter of two years.

Bob Coviello founded the chain 18 years ago with aims to furnish cooking enthusiasts with first-rate products that are attractively priced. He later brought on his brother, Al, to help run operations. The brothers parted ways when Bob Coviello left the company about four years ago to start another company called Housewares Tabletop International, a consulting group for manufacturers and retailers. Although Al stayed on and continued the company’s mission, Lechter’s coaxed him away with an offer to run its Web site project a little more than a year ago. Al Coviello now serves as chief merchandising officer for Lechter’s, which filed for Chapter 11 bankruptcy protection in May.

Close to the time of Al Coviello’s departure last spring, Kitchen Etc.’s management underwent an overhaul, which produced its current administrative team. Although without its founding fathers, Kitchen Etc. is not drifting rudderless through retail territory. Camp, an erstwhile board member and CEO of Pier 1, took over as CEO from Al Coviello.

In terms of sales, Kitchen Etc. seems to be doing well. While company officials declined to specify sales levels, Petrucelli noted that frequently the company is in good standing on Barnard’s Retail Trend Report, a retail sales gauge put together by analyst Kurt Barnard that appears monthly in The Wall Street Journal.

Kitchen Etc.’s management has chosen territory west of New England for its expansion, which will be a carefully carved area that takes in the Chicago, Detroit and Atlanta metropolitan areas. From there the company will consider two other new areas, specifically Dallas and north through the Plains states, or the West Coast of the United States, Petrucelli said. There is a store in Sterling, Va., a sign that perhaps the company might open more locations in the Mid-Atlantic area. Missing from its expansion strategy are intentions to open stores in the New York City area.

“We want to make sure we have the model and format down before we invest in expensive real estate,” he said. And considering the number of housewares sellers in that market, the company is cautious about its prospects there. Kitchen Etc. would prefer to make its name elsewhere first, and then “perhaps double back to the New York area.”

Kitchen Etc. is focused on selling kitchen and dining supplies. That leaves plenty of room in its huge warehouse stores for some 13,000 separate products — or SKUs — and combined with its Web site, kitchenetc.com, 33,000 SKUs overall. From the chain’s point of view, that vast selection allows it to exist without a direct national competitor, even considering high-profile housewares sellers like Crate & Barrel and Williams-Sonoma. Unlike those retailers that sell high-end, lifestyle-oriented products while focusing on national brands, Petrucelli says that Kitchen Etc. tries not to dictate trends. And its selection of china, which includes Lenox, Wedgewood and Villeroy & Boch is comparable to that found in department stores, Petrucelli said.

Its Web site is another source of confidence for Kitchen Etc., because the sales channel is completely integrated with the store operations. According to Petrucelli, the Web site is connected electronically to the cash registers inside the stores and a frequently used inventory-control software program called E3. The program harvests data from cash register and Web transactions about which products consumers grab up the most. Then it amasses the information to predict which products to buy next, Petrucelli said. Additionally, products purchased online can be returned at store locations. As helpful as the E3 program is — Petrucelli jokingly referred to it as a surrogate buyer — the tightest area of Web-and-store integration is the wedding registry service.

“A person could register on the Web, and in 30 minutes [a wedding guest] could go to any one of our stores to purchase the product,” he said. And if someone makes a purchase from the registry, then the change is made within 30 minutes, he added.

When it comes to the stores’ interior designs, the company prefers an industrial format. All of Kitchen Etc.’s products are arranged on shelves constructed with natural wood and stainless steel. They are set on wheels, which make the task of moving the merchandise around the store much easier, Petrucelli said. The interiors are illuminated with industrial, not fluorescent lighting, to project the message that the store is a warehouse of products.

“When customers walk in, they get the sense that they can find anything there. What we’re trying to do is make the shelving and lighting interesting, so that generally it does not look like a big stack-em-up store,” he said.

Up until the company decided that an expansion was in order, it hadn’t abided by any particular real estate plan. Kitchen Etc. stores were placed in all sorts of shopping center configurations, resulting in three different store types. For instance, the company operated its first store — an experimental model — inside the Natick Mall, a super-regional center in Natick, Mass. That store measured a mere 7,000 square feet, and was closed last February.

“That was way too small. Our merchandise needs to be in a large area because of the selection,” Petrucelli said. The Natick Mall store closure left the company with two store types: ones with square footage that ranges from 20,000 to 25,000 square feet, and 15,000-square-foot stores, which, going forward, will be the smallest store size. It’s the warehouse format that has got Kitchen Etc.’s management training its sights on well-connected power centers for future locations.

Kitchen Etc. operates a store in the Northshore Mall in Peabody, Mass. Mark Whiting, the mall manager there, said the super-regional center has benefited from a tremendous increase in upscale housing developments. Kitchen Etc. holds its own against retailers like Pottery Barn and Williams-Sonoma, he noted.

“They’ve become a destination location at Northshore,” Whiting said. “Their managers have always worked to develop a very specialized selling staff. Their staff follows through on uniquely requested items, which helps their bridal registry business.”

Whiting also said management would seriously consider asking Kitchen Etc. to expand its space in the mall.

The chain’s core audience is women in their 40s, plus cooking enthusiasts of the same age group — because the 40s tend to be peak income earning years — and empty nesters who like to entertain.

Petrucelli said the company has continued to turn in solid sales performances, even during recent economic uncertainty, referring to The Wall Street Journal retail report. On the other hand, he noted, when the economy is running strong, people sometimes buy a new home with a new kitchen that needs outfitting. “We love those people,” he said.

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