How often do buyers enter a splendidly appointed model home and say, “I want that,” but are frustrated because the cost of those furnishings would bust their budgets, or they have no way of purchasing the products? Apparently too often for D.R. Horton, which is why the industry's largest builder is marketing homes in its communities in North and South Carolina with models branded under well-known furniture labels or under familiar names of home-décor retailers whose products are showcased. Indeed, to offer customers affordable and accessible options, Horton is challenging outside designers to furnish some models for no more than $28,000 each, with merchandise that customers can buy at discounters such as Sam's Club and Target.
“We're attempting to create a feeling of acceptability,” says Noelle Trotter, whose Charlotte, N.C.–based Trotter Design Group has dressed many of Horton's branded models in that market. Richard Schwartz, president of Horton's Charlotte division, has other, basic goals: “to increase traffic and sales absorption,” and he's already seeing promising results from models featuring Restoration Hardware's lines.
The precedent for branding model homes with recognizable consumer names was established last year when KB Home signed a licensing agreement with Martha Stewart Living Omnimedia and opened communities in Raleigh, N.C., and Atlanta with homes where the décor doyenne had considerable control over the look of the houses and their furnishing selections. This year, KB is extending this program to other communities in Raleigh and Atlanta, as well as Perris, Calif., and Katy, Texas. Horton, in contrast, is juggling eight retailers among its 26 branded models in Charlotte (with eight more under development). This diversity is meant to appeal as much to buyers' design sensibilities as to their income levels, explains Demaree Clark, the Charlotte division's marketing director.
BRANDING ALLIANCE: D.R. Horton's model-home branding program has no more committed retail partner than Restoration Hardware, which offers Horton's buyers a 10 percent discount on its furnishings that's valid for 90 days after they close. The dealer also promoted the model in its catalog with a $1,000 incentive towards the purchase of furnishings for buyers who visit the home.
Two of the builder's more committed dealer-partners have been Crate & Barrel and Restoration Hardware, each represented in three models in Charlotte. Crate & Barrel even coordinated a store opening with the opening of one of Horton's models and has offered design suggestions for future models, says Clark. Restoration Hardware's catalog includes a $1,000 incentive towards the purchase of options to get buyers to visit Horton's models. That dealer also offers Horton's buyers a 10 percent discount on furnishings purchases, valid for 90 days after they close.
“We're starting to see some positive impact on our business,” says Bethany Naro, a design trade consultant for Restoration Hardware. Clark adds that traffic at the dealer's models in recent months has been 25 percent higher than other models in Horton's communities in the Rock Hill section of Charlotte.
SOME WARINESSFour years ago, when Schwartz ran Horton's Myrtle Beach, S.C., division, he tried out this branding concept with three dealers—Pier One, Pottery Barn, and Maine Cottage—only to find them somewhat indifferent toward providing design assistance or discounts, recalls Diane Hough, director of model homes for Horton's Charleston, S.C.–based Coastal Carolina region. Clark notes that most retailers don't have model-home merchandising arms within their operations, and therefore aren't prepared logistically to handle business stemming from new-home purchases. Another drawback is that Horton's design centers usually aren't large enough to display multiple room settings.
The program in Charlotte is working better, say Clark and Schwartz, because the retailers involved are more cooperative. In November, Horton promoted its branding effort with a 200,000-household mailing. It's also had good luck finding outside designers and suppliers who purchase and assemble the furnishings and handle the interior design. In several communities Horton is working with The McLamb Group, a Charlotte-based promotional firm that represents Thomasville, N.C.–based Lexington Home Brands, the furniture maker and dealer whose licensed brands include Tommy Bahama, Liz Claiborne, Nautica, Bob Timberlake, and Palmer Home.
Ed McLamb, its president, says his company attracted Horton through its Home Builder Buyer Incentive program. The program provides model merchandising and design expertise, a gift with their purchases to get home buyers started on furnishing their house, and a branded credit card through which owners can continue purchasing furniture from Lexington at discounts of up to 40 percent. This summer, three of Horton's communities in Charlotte—Lake Shore, Ayrsley, and The Vineyards—will have models featuring name-brand furniture supplied by Lexington.
Dressing a model home typically runs about $23 per square foot. But by furnishing models under one brand, Horton has reduced that to between $16 and $20. And through its “designer challenge” program, the builder is trying to lower the cost to $14 per square foot. “It can be done,” says Trotter, the design consultant, who is working on four models—under the brands Pier One and Wal-Mart (for single-family homes); and Crate & Barrel and Target (for townhouses)—that will be grouped on one block at Horton's Cedar Mill community in Charlotte. Trotter is dressing each for no more than $28,000 and is working with Crate & Barrel directly. The involvement of the other dealers is passive, but Trotter is purchasing virtually everything she needs from their Web sites.
Trotter is also developing a microsite for Horton, scheduled to go live in March, that lets buyers tour each model and order furnishings online, using an encrypted password they receive at closing. “There won't be a lot of choices, but we've found that many buyers want to buy the room exactly as they saw it.”
FAMILIAR NAMES: D.R. Horton's Parks at Eastview community in Charlotte, N.C., includes a model home that the builder has branded with Restoration Hardware, the home-de'cor retailer that provided the furnishings for that model. In Charlotte, Horton has 26 branded model homes under the names of eight retailers including Crate & Barrel, Pottery Barn, and Country Living.
Horton's rollout plans are sketchy, but Schwartz says the builder's divisions in Florida and New Jersey have expressed interest. Restoration Hardware is consulting with Horton's Raleigh division, and Naro sees no reason why this program couldn't be extended “up and down the East Coast,” McLamb says. “To grow our business, we need to be able to do this in volume, but we don't feel we [need to] be doing this with other builders.”
His company is working on four models in Horton's resort community in Myrtle Beach called Tuscany, which should be ready this spring. Hough says these models will take the Charlotte concept “one step farther” by letting buyers purchase “the entire package, a room, or just one product.” Schwartz also hints at a future TV tie-in to promote the branded models, which he anticipates would have a receptive audience. “So many people come into a model and ask where they can get those products. We don't want to lose customers after they close.”