The Bombay Company, Inc. - Company Profile, Information, Business Description, History, Background Information on The Bombay Company, Inc.

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History of The Bombay Company, Inc.

The Bombay Company, Inc., is a retailer of small pieces of ready-to-assemble furniture and home accessories, which operates nearly 450 stores in malls across North America. The company runs two chains: its signature store, which sells traditional, dark stained English-styled wooden furniture, and Alex & Ivy, a much smaller chain of stores with a country theme. Founded as a mail-order outfit, the Bombay Company exploited the fact that its affordable furniture pieces came packed in flat boxes to introduce impulse buying and mall-oriented shopping to the furniture business.

The Bombay Company got its start in 1975 as a mail-order business based in New Orleans. The company sold mahogany stained reproductions of small 18th and 19th century English furniture pieces, such as plant stands, night stands, and butler's tables, which were manufactured in the Far East. After running advertisements in upscale magazines such as the New Yorker, the Bombay Company shipped its goods to customers in flat boxes, for assembly. Usually, all the customer had to do was screw the legs on. Entrepreneur Brad Harper, who founded the company with a partner, named the enterprise 'Bombay Company' in an effort to conjure up the glory of the British Empire at its height. However, most people missed the reference.

By the end of the 1970s, the Bombay Company was racking up annual sales of about $1.5 million, offering 12 different items of accent furniture through ads in magazines. Overall, however, the company was losing money. The quality of the products it sold was uneven, as its distant Asian manufacturers proved unreliable. Also, the Bombay Company's growth was also severely limited by its reliance on mail order.

In 1979, the Bombay Company signed an agreement with Canadian entrepreneur Robert E. M. Nourse to begin selling its products in Canada. For rights to the Canadian market, Nourse paid one dollar, plus a four percent royalty on sales. Since Canadian mail-order opportunities were extremely limited, Nourse set out to convert the Bombay Company into a successful retail property.

In April of 1980, Nourse's first Bombay Company store opened in Toronto's Eaton Centre mall. Nourse had concluded that the Bombay Company was able to offer customers three things that made location in a mall advantageous: value, fashion, and instant accessibility. Value was provided by the fact that the company's products, manufactured in Taiwan and other East Asian countries, were not high-priced.

Fashion, the hook to lure customers out of the mall and into the Bombay Company store, was provided by an elaborate store design. Under the watchful eye of a designer, the company's 2,000-square-foot space was transformed into a replica of England's Fountain Court, located at Henry VIII's palace, Hampton Court. In order to pay for this renovation, and other start-up expenses, Nourse invested $125,000 of his own money, and borrowed an equal amount from a bank.

To justify this expense, and the high rent of a mall space, the Bombay Company needed to attract impulse buyers. Since Bombay Company products came boxed flat, a large number of them could be kept in stock without taking up an excess amount of space for storage. Because of this, customers could take home their purchases right after deciding to buy them. In this way, the Bombay Company introduced an element of immediate gratification to the furniture market, in contrast to a traditional furniture store, where customers ordered items, and then waited six to twelve weeks for delivery. In the Bombay Company store, 35 styles of furniture were available to be carried out of the store at the time of purchase. With these elements of a successful retail operation in place, the Bombay Company store in the Eaton Centre mall was an immediate success.

Three months after the opening of the Toronto Bombay Company store, in July of 1980, Harper sold 80 percent of the U.S. operations of the Bombay Company to a Fort Worth-based holding company called Tandy Brands, Inc., for $26,000 plus assumption of the company's debts. The Bombay Company's new corporate parent was a miniconglomerate, spun off from the Tandy computer corporation in 1975. Five months later, in July of 1981, Tandy Corporation acquired the remaining 20 percent of the Bombay Company.

After a year of successful operation of the Eaton Centre Bombay Company outlet, Nourse was looking for additional financing to buy further inventory and expand his store. Since the general financial climate for borrowing money at that time was highly forbidding, he felt that he had no choice but to sell out to Tandy. In August of 1981, Tandy also bought out Nourse's Canadian operation. 'I had mixed feelings about [Tandy] buying me out,' Nourse later told Inc. magazine. 'If capital had been available at a reasonable cost, I never would have sold. But at the time it was the only way to grow the company.'

Under the terms of the sale, Nourse retained control of the Canadian operations of the Bombay Company. With the influx of money from Tandy, he was able to build 13 stores by 1983, all of which proved profitable.

South of the Canadian border, however, the situation looked very different. Tandy had built 36 Bombay Company stores since taking over the company, and the business was hemorrhaging money, having racked up $3 million in losses in just three years. By the end of 1983, the situation had become desperate. In an effort to revive its American operation, Tandy's chief executive officer moved to merge the company's successful Canadian operations into its money losing American operations, and put Nourse in charge of both.

Nourse took control of the consolidated Bombay Company operations at the start of 1984. His strategy for renovating the company's ailing American operations was to implement the profitable store model which he had developed in Canada in the Bombay Company's American locations. To do so, however, it was necessary to close a number of unprofitable American stores in weak locations. Within three months of Nourse's arrival, nine of the company's 36 stores had been shut down. 'We saw our concept as selling home decor in malls and other high-traffic locations,' Nourse later told HFD--The Weekly Home Furnishings Magazine, an industry journal. 'A number of the stores were in bad locations; that first year we closed more stores than we opened.'

In addition to pruning unprofitable stores, the Bombay Company revamped its product line, under the direction of Nourse's wife, Alexandra 'Aagje' Nourse, an advertising executive who had taken responsibility for the company's design operations. Under her direction, the company shifted away from masculine, military style furniture, that looked like it might have been used in a British military campaign of the previous century, toward more feminine and traditional Chippendale, Hepplewhite, and Queen Anne styles. In addition, the company began to market more home accessories, such as mirrors and lamps, and also started to offer printed fabrics for decorating. To keep customers interested, a constant flow of new products was moved through the store, and seven different catalogues a year alerted customers to the presence of new items.

In 1984, the Bombay Company began to open additional stores, relying on the other subsidiaries of Tandy Brands for financing. At the end of the fiscal year, the company posted a loss of $3 million, but by the middle of 1985, the Bombay Company was back in the black, turning a profit of $500,000. With these gains, the Bombay Company began to step up its plans for expansion. Its first targets for growth were areas of the United States where traditional furniture was best accepted: the mid-Atlantic states, the Southeast, the Midwest, and the Pacific Northwest. By 1986, the company was operating stores in 75 different locations, and earnings had hit $2 million. In 1987, the number of Bombay Company stores reached 114.

In 1988 and 1989, the Bombay Company moved its expansion into the Sunbelt for the first time, opening stores in Los Angeles and South Florida, with exterior architecture carefully calibrated to blend with other surrounding structures. 'We have to be careful,' Nourse told HFD in 1989. 'We always wondered about the Sunbelt. But our Southern California stores and our store in Palm Beach are going gangbusters.'

By April of 1989, the Bombay Company had opened 190 mall stores, and the company's revenues had reached $79 million, up from $55 million the year before. The company had introduced a line of products with neoclassical styling, to complement its other Georgian and Victorian offerings. In September of 1989, the Bombay Company opened a flagship East Coast store on Madison Avenue in Manhattan, which soon began turning in record sales.

While the Bombay Company was steadily growing, its corporate parent, Tandy, was gradually streamlining its operations, shedding other properties and companies that were smaller and less profitable than the Bombay Company. In 1984, it closed two chains of retail stores, Western World and Ryon's, and two years later, Tandy sold its Tex Tan Western Leather division for about $3 million. In March of 1987, the company sold its Grate Home and Fireplace Company for $1.6 million. By the end of the decade, it had effectively centered its operations on the Bombay Company. Accordingly, on November 9, 1990, the company changed its name to The Bombay Company, Inc., and two months later, it completed the final transfer of its other accessories operations to its shareholders.

In the midst of this consolidation and concentration on the home furnishings market, the Bombay Company also moved to expand its franchise in this area. In the fall of 1990, the company opened three new concept test stores in Southern California. Called Alex & Ivy, these outlets offered the same type of merchandise as Bombay Company stores, but with a more relaxed, country theme. Nourse characterized Alex & Ivy merchandise in a 1990 HFD article as 'more casual, yet traditional stylings. They will include European country, Italian Renaissance, French country and some traditional Swedish country ... lots of painted finishes ... a little more whimsical than Bombay.'

The stores were opened in areas where the Bombay Company did not already have retail outlets. A second test of another three stores was planned for locations right next door to Bombay Company stores, to measure how much their success would come at the expense of their older retail sibling. Both store chains were planned to take advantage of the same structure for manufacturing and distribution, and to appeal to the same demographic group of customers: well-educated women, with higher than average incomes.

'We constantly had comments from Bombay customers who said, 'I love your stores, but it isn't exactly our kind of furnishings,' Aagje Nourse told HFD in 1994. 'We ... had hopes we could do something that was the other side of Bombay's lifestyle.' Each Alex & Ivy store was slated to look exactly like all the others, arranged according to elaborate plans from the company headquarters, and the merchandise mix was set at half furniture, half accessories, such as quilts, pillows, lamps, and wall art.

Despite the recession of the early 1990s, which flattened the Bombay Company's earnings somewhat, the company continued to post strong growth in sales. By mid-1990, sales had reached $112 million, and earnings were at $12.3 million. By the middle of 1991, 43 more stores had been opened, nudging revenues up by a quarter to $140 million, but earnings had remained flat.

By the start of 1992, the Bombay Company's steady stream of new products had started to produce stores that were cramped with merchandise. In an effort to alleviate this problem, and to shake up the company's entrenched retail formula, the company opened a superstore in lower Manhattan as an experiment. The new store had about 3,500 square feet of space, instead of the usual 1,700. When this concept showed promise, the Bombay Company converted two more stores to the new, larger format.

In February of 1993, the Bombay Company decided to convert almost all of its retail outlets to superstores. 'I believe a business, and certainly a retail business that changes so quickly, has to keep reinventing itself or it will whither and die,' Nourse told Inc., in explaining the chain's decision to leave its original store concept behind.

By the end of 1993, the Bombay Company had opened 100 superstores, and plans were on the board to add 50 more each year. In November of that year, the company marked the opening of its 400th store. In its Alex & Ivy operation, the Bombay Company had opened 26 stores, in California, Texas, Connecticut, Delaware, Georgia, Maryland, New Hampshire, New York, and New Jersey. Revenues from these combined operations reached $232 million, and earnings were at $16 million.

This pattern of strong growth continued in 1994, after the Bombay Company reported a strong holiday sales season at the end of the previous year. With these results, the company decided to expand its program to double the size of its stores in its fledgling Alex & Ivy chain as well. Tests of the 'international country' concept had demonstrated that it appealed to a different set of customers within the company's basic demographic target, and that sales lost in the Bombay Company stores to Alex & Ivy outlets equaled only five percent of business.

In January of 1994, the company began to install a new merchandising computer system, to speed up customer transactions and upgrade inventory controls. In addition, the company laid plans to open a fourth distribution center in Altanta to provide goods to its newly enlarged stores. This facility joined three other distribution sites located in Texas, Pennsylvania, and Canada.

One month later, the Bombay Company announced that it would also take part in another distribution scheme, when it announced that it would participate in a television shopping network called 'Catalog 1,' to be produced as a joint venture of Time Warner Entertainment TV and Spiegel Inc. Despite exceptionally poor weather across the United States during the first months of 1994, the Bombay Company continued to post strong financial returns and to open new stores at a brisk pace. With a well-tested retail formula, and a second retail concept providing ample room for expansion, it appeared that the Bombay Company was well-positioned to continue its dramatic growth throughout the 1990s.

Principal Subsidiaries: The Bombay Furniture Company of Canada; Alex & Ivy.

Additional Details

Further Reference

Chakravarty, Subrata N., 'Queen Anne at the Mall,' Forbes, June 24, 1991.Finegan, Jay, 'Survival of the Smartest,' Inc., December, 1993.Gilbert, Les, 'Bombay Company Sets Alex & Ivy Test,' HFD--The Weekly Home Furnishings Magazine, February 19, 1990.------, 'Three Fundamentals Fuel Bombay Company,' HFD--The Weekly Home Furnishings Magazine, February 26, 1990.Jones, John A., 'Bombay Company's Furniture Sales Still Growing Strongly,' Investor's Business Daily, February 7, 1994.Santorelli, Dina, 'Country Road, Take Me Home,' HFD--The Weekly Home Furnishings Magazine, March 21, 1994.Seymour, Liz, 'Bombay Company Breaks with Convention,' HFD--The Weekly Home Furnishings Magazine, April 17, 1989.Spence, Rick, 'Local Boy Makes Good Down South,' Profit, spring, 1994.

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