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MERRILLVILLE, Ind. — DirectBuy, which acquired Z Gallerie assets through a bankruptcy auction this past month, will continue to operate the Top 100 company as a stand-alone business but sees an opportunity to promote its owns products and services at the brick-and-mortar stores, too.
Through its DirectBuy Home Improvement affiliate, the home furnishings buying club, backed by KKR Credit Advisors, was the winning bidder at a May auction, paying $20.3 million for the Gardena, Calif.-based retailer’s headquarters and at least 32 stores. Founded by the Zeiden family and later sold to an investment group, Z Gallerie filed for Chapter 11 bankruptcy in March citing a liquidity crunch and failure to invest enough in e-commerce, a costly distribution operation and store expansion that wasn’t meeting performance goals.
It simultaneously announced plans to close 17 locations, but more closings are planned. Z Gallerie was No. 46 on Furniture Today’s most recent Top 100 with 2018 estimated furniture, bedding and accessory sales of $175 million and 76 stores at yearend, before the filing. DirectBuy will be operating 40 Z Gallerie stores going forward, the company said.
the company will operate at least 32 Z Gallerie stores going forward and up to 34 locations depending on pending lease negations.
“It’s a beautiful brand,” DirectBuy Chief Operating Officer Dylan Astle told Furniture Today, adding customers are passionate about Z Gallerie in the same way DirectBuy customers are passionate about the brand.
“And it aligns nicely with what DirectBuy does,” Astle said, “allowing people to improve their lives and their home and lifestyles. We’re excited to continue to build the brand, improve the customer experience and grow Z Gallerie.
This is familiar territory for the owner of Merrillville, Ind.-based DirectBuy, which also was acquired out of bankruptcy in 2017 by CSC Generations. At the time, DirectBuy executives and court documents pointed to similar problems, including a too slow embrace of e-commerce.
Last year, CSC’s CEO and founder Justin Yoshimura told Furniture Today that the new DirectBuy would be swinging back into growth mode in the United States, with plans to open as many as two dozen DirectBuy home furnishings design centers in the United States over the next two years, even as the company’s emphasis would be on operating DirectBuy as a “digital first” company.
Following the bankruptcy and consolidation, the emerged DirectBuy operated six design centers in Canada and last year opened one scaled down design center in greater Houston, but additional expansion has stalled out as the retailer turned its attention largely to online.
A few months ago, DirectBuy launched a new e-commerce platform that has been gaining traction and making it tough to justify the brick-and-mortar expansion, Astle said. “With the (return on investment) we’ve seen on the Website, it hasn’t made a lot of sense to continue to invest in brick and mortar at this point.
“The beauty of Z Gallerie,” Astle added, “is it’s there. Customers are taking advantage of it, and we can leverage it to continue to support DirectBuy members. That would be a win on both fronts.”
Asked exactly how DirectBuy might go about this, Astle said, the club’s customers have missed the face-to-dace interaction they used to receive at the former buying club locations since the wind down. “Through these 32 to 34 stores, we would like to be able to support our DirectBuy customers with custom projects — through special-order kitchen cabinetry and possibly flooring, custom furniture, those types of things.”
And it could do this possibly through one of the store-within-a-store formats DirectBuy has developed.
“We definitely anticipate DirectBuy members benefiting from the Z Gallerie acquisition and vice versa,” he said.
Here’s a list of the Z Gallerie stores continuing under DirectBuy ownership:
